By all accounts, Premium a net loss

August 13, 2003

BY GREG COUCH

Here's some good news for the Major League Baseball team owners and CEOs who have accused the Cubs of trying to cheat them as part of their ticket-scalping scam. The complaint from two unnamed CEOs two weeks ago was that the Cubs might not be reporting their scalping revenues as a way to skirt the league's revenue-sharing plan.

But now we know that the Cubs did, in fact, report their revenues from Wrigley Field Premium Ticket Services Inc., their scalping office.

One problem: They also reported that costs offset those revenues. They are claiming that their scalping business actually lost money, which is a pretty neat trick.

Whatever, it means that the Cubs don't think they have any scalping revenues to share.

The Cubs' magic accounting strikes again.

''Revenue sharing is supposed to be based on the amount of local revenues you generate, not the costs,'' one of the irate CEOs said. ''If everybody tried to offset their costs ... oh ...

''It's not profit sharing, it's revenue sharing. You can't just say your expenses are greater than your revenues, therefore I don't have to share my revenues. That's not the process.''

It is in Cubland. But those CEOs apparently were wrong about something. They complained that the league office was in bed with the Cubs on this, helping them to hide their revenues.

In fact, the league isn't happy with the Cubs on this one, either. They have written to the Cubs saying that they don't agree with the team's take on this.

Apparently, teams are able to offset some of their costs. But the league thinks the Cubs are counting far too many things.

''We've included for revenue-sharing purposes ... the operation of Premium,'' said Cubs VP Mark McGuire, the director of Premium. ''It's in the process of being determined as to how the calculation would work.''

There are two main elements to the scam. First, under state scalping laws, if you're putting on an event, you can't sell tickets to that event over face value. So the Cubs set up Premium, saying it's a separate company. That way, the Cubs can say they're not the ones scalping, Premium is. Also, for tickets to be brokered legally, they have to be on the resale market. So the Cubs sell the tickets to Premium--to themselves--and then Premium can put them out at prices well above what is printed on the tickets.

In other words, the only people who can buy these tickets at the price the Cubs advertise them for are the Cubs themselves.

At one point, the Cubs had sold themselves front-row Yankees tickets at face value, $45. Then, Premium tried to sell them for $1,500. What the CEOs suspected was that the Cubs were sharing revenues off the $45, not the $1,500. After all, the Cubs aren't the ones selling for $1,500.

Premium is.

Anyway, the trial in a class- action suit started Tuesday, and the Cubs have an interesting take here. McGuire took the stand and said there was ''no question'' that the Cubs and Premium are related parties. Then he said they were separate.

Cubs attorney Jim Klenk said that Premium is a subsidiary of the Cubs or of Tribune Co. I can't keep them straight. And then he said Premium is ''a totally separate business.''

Totally separate subsidiaries, I guess. But that's all legal wranglings and technicalities.

The thing to focus on here is how the Cubs are trying to steal their cake and eat it, too.

After the column here two weeks ago detailing the concerns of the CEOs, the attorneys opposing the Cubs, Paul Bauch and Ken Michaels, filed a motion with the judge to get the Cubs to hand over revenue-sharing information. And that does seem important because if the Cubs are sharing Premium's revenues with other teams, then it is sort of tough for the Cubs to claim they are ''a totally separate business'' from Premium.

It's pretty interesting. On the revenue-sharing worksheet, there is a category headed ''Other baseball-related revenue.''

In 2001, the Cubs reported $137,000 there.

Last year, because of Premium, the Cubs put under that column that they had lost $63,786. Next to that entry, it says, ''For operating losses ...''

Baseball apparently doesn't agree that those losses should count. But some of them seem a little funny, anyway.

I mean, does is really count as a loss when you're paying the bills to yourself? In some cases, that is what's happening here.

Premium is paying $1,000 a month to the Cubs' accounting department to do its books. Is that an operating loss? It pays rent to a company called Diana-Quentin Inc., which owns the building Premium is in.

The Cubs own Diana-Quentin Inc.

Guess who is the president of Diana-Quentin? It's McGuire. That makes him a Cubs vice president, Premium's director and Diana-Quentin's president. He was Premium's president, but resigned that position a few months ago.

Asked Tuesday if he was the director of Diana-Quentin, he said, ''Yes, I believe I am.''

He believes. He's not sure?

Well, either way, it's an improvement over what he said a few months ago, when he said he wasn't sure if he was the president of Diana-Quentin.

On Tuesday, he was more certain. He thinks he is the president.

The Cubs are willing to admit to that one right now.

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