Behind the Net
Penguin's Bankruptcy Revisited
As the curtain of bankruptcy crashed down upon the Penguins last month, Tad Potter felt a familiar twinge in the pit of his stomach. Financial distress may be new to this generation of Pittsburgh hockey fans, but as the red ink poured forth from the Civic Arena, Potter shook his head with equal parts familiarity and disbelief. "Bankruptcy and Penguin hockey. For some ungodly reason," he said, "they’ve almost become synonymous in the sports pages."
Potter’s been here before.
He was owner of the Penguins on June 12, 1975, when IRS agents walked into the Arena and ended his dream job. He had been negotiating a plan to keep the team while beginning to pay $532,000 in overdue withholding taxes, but he hadn’t figured on a local management change in the agency.
"They got a new district director, and this new guy came in and decided he was going to make a name for himself," recalls Potter. "An agent who was working down there told me later – and I can still remember him saying this to me – the new guy said, ‘Shut them down now. Make some noise.’ So they came into my office and said, ‘Don’t touch a thing. Just get up from your desk and leave.’ "
While Potter did what he was told, other employees remembered team officials frantically stashing documents in Arena offices. The day ended with padlocks on some Arena doors, new locks on others and Potter on the street – literally and figuratively.
The Penguins, having just suffered the ignominy of losing a Stanley Cup quarterfinal playoff series to the New York Islanders despite winning the first three games, were $6.5 million in debt when they were placed in receivership. Not only had the IRS placed a tax lien against them, but Equibank, the Penguins’ largest creditor, had filed a $5 million suit. Pens’ GM Jack Button was appointed receiver by the courts and began to entertain offers. Potter spent most of the next month searching for investors. He even talked to New York Yankees’ owner George Steinbrenner, whose principle interest seemed to be the prospect of moving the team, Potter recalled.
The Penguins were eventually sold for a mere $3.8 million to a group that included Wren Blair, owner of the IHL’s Saginaw Gears. Potter recalled Blair’s novel way of trimming payroll: he sold minor-league contracts to the Gears. "Talk about letting the fox in the hen house," Potter said.
Potter didn’t have the luxury of reorganizing under bankruptcy laws like owners Roger Marino and Howard Baldwin. They are fighting some of the same battles – Potter also lacked control of the Arena – albeit with much more money on the line. Some say the team’s debt could reach about $100 million.
"If he went into this with open eyes... if I was losing that kind of money, I don’t know if I would have gotten involved in the first place," Potter said of Marino, who became Baldwin’s partner in May, 1997. "But I’m really surprised the NHL hasn’t taken the team over. This guy Marino must have told (NHL commissioner Gary) Bettman, ‘I’ve got plenty of money to run this club right. It’s up to you to make a decision. Say it’s mine and I can go ahead and run it right, or I’m taking my marbles and going home.’ "
The Penguins remain an emotional issue for Potter. The same goes for Peter Block, a management official under Potter who originally had the idea for an NHL expansion team in Pittsburgh. Both hope the Pens are rescued.
"It’s very, very scary to see this happening to the Penguins again," says Block. "After all, it was my idea and I want to see it succeed forever."