It’s Good To Be Zygi

In 2011, taxpayers gave billionaire Minnesota Vikings owner Zygmunt “Zygi” Wilf quite a gift, an even bigger gift than some realized at the time.

Taxpayers invested about half a billion public dollars to help Mr. Wilf construct his $1.1 billion business headquarters, U.S. Bank Stadium.  The State contributed $348 million, and another $150 million came from a Minneapolis hospitality tax. (While it’s often reported that Mr. Wilf paid the remainder, much of the remainder was paid by private interests — the NFL, personal seat license holders, and U.S. Bank.)

This was an extraordinary taxpayer subsidy for any business owner, much less a controversial one worth $5.3 billion who has been found liable by a New Jersey court for breaking civil state racketeering laws.

But Mr. Wilf’s gift from taxpayers went well beyond that $498 million.  State leaders also allowed the billionaire to keep 100% of the increased business value that he has realized since his publicly subsidized business headquarters was authorized.  It turns out, that’s quite an increase.  According to a Forbes magazine estimate, in 2011, the year before the approval of the stadium, Wilf’s business was worth $796 million.  The most recent Forbes estimate puts the value at a breathtaking $2.2 billion.

That’s a tidy little increase of about $1.4 billion, with a “b,” over just six years.

Not all of that $1.4 billion gain is due to the new $1.1 billion stadium and its income-generating capacity, but much of it is.  It’s now clear that if the billionaire owner had financed his business’s building the old fashioned way — without taxpayers footing half of his bill — he would easily have recouped the full amount of his business investment, and then some.  Clearly, Mr. Wilf did not need us.

In 2011, many predicted that Minnesota taxpayers would be making a very rich man substantially richer.  But it’s still breathtaking to watch the money flooding in.  Skol Zygi.

Wilf’s Minnesota Partners Should Seek Advice From Their New Jersey Partners

Josef_Halpern_Wilf_business_partner_photo_credit_New_Jersey_Star-LedgerMinnesotans are about to become business partners with Zygi Wilf, to the tune of half a billion dollars.  To get the partnership structured correctly, part of our due diligence process should be to ask past Mr. Wilf’s past business partners what they would do if they were us.

For instance, we should consult with Josef Halpern and his sister Ada Reichman, who the court says were defrauded by their business partner Zygi Wilf.  What advice would Halpern and Reichman give Minnesotans on the eve of our business partnership with the Wilfs?

My guess is that Halpern and Reichman wouldn’t be at all focused on ability-to-pay, which seems to be the primary, if not sole, concern of the Minnesota Sports Facitilies Authority (MSFA) and the reporters covering this issue.  Minnesotans seem to be learning the wrong lesson from the New Jersey case.  After all, ability-to-pay falsification wasn’t the flavor of fraud the Wilfs served up to Halpern.  Having money wasn’t the Wilf’s problem in the New Jersey case; sharing it was.

As  Judge Deanne Wilson said, Mr. Wilf’s own testimony showed that he had “reneged” on the agreement with Reichmann and Halpern because he decided that they got “too good a deal.”  The judge also said “I do not believe I have seen one single financial statement that is true and accurate.”

So, what if the Wilf’s decide Minnesotans got “too good a deal?”  Will Minnesotans get the Halpern-Reichman treatment?

Given the Halpern-Reichman experience, I doubt very much that their advice to us would be “make sure they have enough money.”  It would more likely be “protect yourself.”

You can bet that Halpern and Reichman wish they had written a stronger accountability provisions into their contract, and regular audits reinforced with stiff fines for falsification.  You can bet that they wish they had made the Wilfs regularly disclose everything about the operation of the partnership, so that the financial funny business could have been discovered sooner rather than later.

Actually, what Halpern and Reichman probably would advise Minnesotans is to avoid partnering with the Wilf’s at all costs.  But since that doesn’t seem to be in the political winds at this stage, the MSFA should do what the Wilf-defrauded partners would surely do if they had it to do over again:  Don’t trust, verify.

– Loveland

Zygigate Headlines I Hope To Read

WilfMinnesota Vikings owner Zygi Wilf has announced that he refuses to negotiate with stadium officials until they finish looking into his finances.  In the Star Tribune coverage of this development, Team Wilf strikes a rather bratty tone:

The Minnesota Vikings said Friday there is “no point” in negotiating the user and development agreements for a new stadium while the state agency responsible for it is conducting an investigation of the team’s owners.

“Until the authority has the confidence in our organization there’s no point in moving forward with negotiations,” said Lester Bagley, the Vikings’ vice president of public affairs and stadium development.

In an interview with Politics in Minnesota’s Weekly Report, Chair of Metropolitan Sports Facility Authority (MFSA) Michelle Kelm-Helgen sounded baffled by the Vikings ownership’s snit:

In news accounts, they said we were not good partners at this point. Here’s what I would like to say: They’ve been very clear that they will not talk about these agreements anymore until the due diligence is done. I try to interpret what they mean by that, and I’m not sure I fully understand it. Does the fact that we’re doing this due diligence make us bad partners? We need to reassure the people of Minnesota before the agreement is signed and the bonds are sold that there are no further problems or liabilities out there. If that makes us bad partners, I don’t understand that.

Again, all of this comes a few days after Wilf was found guilty of reneging on a multi-million dollar business partnership deal.  Wilf justified these illegal actions by saying he felt another Wilf family member gave the partner too good of a deal, so Zygi took it upon himself to unilaterally right the perceived wrong in a manner that apparently was outside of, let’s just say, generally accepted accounting practices.  The judge in the case said Wilf had an “evil” motive.

At the very moment this judgement came down, Minnesota taxpayers were about to go into a $975 million business partnership with the Wilfs, with taxpayers paying around half of the cost.  And Team Wilf acts as if the Governor and his appointees have no right to ask questions on taxpayers’ behalf?

Just from a pure entertainment standpoint, the headline of news coverage of this latest melodrama could become interesting:

Perp Pride: Convicted Vikings Owner Claims Victimhood?

Lone Wilf Howls From Negotiation Sidelines

 Limber Wilf:  Owner Who Defrauded Partner Calls State A Bad Partner

Zygi A Victim, Or Wilf In Sheep’s Clothing?

Dayton:  No More Wilf Guarding The Chicken Coop

– Loveland

 

Note:  This post also appeared in Politics in Minnesota’s Best of the Blogs.