Clippers sale trial: Sterling may need team sale to pay debts, CFO says

File photo: Donald Sterling, the owner of the NBA's Los Angeles Clippers, is involved in a probate trial over whether a deal negotiated by his estranged wife to sell the team for $2 billion is authorized under a Sterling family trust.
File photo: Donald Sterling, the owner of the NBA's Los Angeles Clippers, is involved in a probate trial over whether a deal negotiated by his estranged wife to sell the team for $2 billion is authorized under a Sterling family trust. Mark J. Terrill/AP

The chief financial officer of Donald Sterling's properties said Monday that the billionaire may be forced to sell a large portion of his real estate empire to cover $500 million in loans if he persists in refusing to sell the Los Angeles Clippers for $2 billion.

Darren Schield, who oversees the finances of The Sterling Family Trust, testified Monday that three banks are ready to recall their loans to Sterling because of his decision to dissolve the trust. His move was designed to rescind his signed agreement for the sale of the Clippers, a team he bought for $12 million.

Schield said if Sterling has to dump $500 million worth of apartment buildings he could destabilize the Los Angeles real estate market.

Sterling attorney Maxwell Blecher suggested that Sterling could take the company public in order to raise funds.

But Shelly Sterling's lawyer, Pierce O'Donnell asked if it would be easy to go public "with Donald Sterling's reputation."

Schield responded: "There's huge reputation issues. I don't know if anyone would want to go into partnership with him."

The NBA banned Donald Sterling for life for making racist statements after the release of recorded conversations. Sterling has denied he is a racist from the witness stand.

Schield testified in the probate trial that if Sterling's loans go into default and he needs to refinance, banks would be reluctant to give him that much money at the low rate he has now.

"I know the bank looks at this as a higher credit risk with all this going on," he said. "The rate would go up considerably."

Sterling, the volatile owner of the team, agreed to the sale but then dissolved the family trust in an effort to stop it.

Schield, testifying at the trial that will decide the future of a $2 billion deal to sell the Clippers to former Microsoft CEO Steve Ballmer, said he warned Sterling not to revoke the trust last month.

"I told him a revocation of the trust would be a breach of the loan covenants and would result in defaults," Schield said.

He said he also discussed it with Sterling's lawyer, Bobby Samini.

"I told him this revocation would open up a Pandora's box and trigger defaults," Schield said.

"Does the company have $500 million to pay off the loans?" asked O'Donnell.

"We do not," Schield answered.

Asked what the recourse would be, he said, "We would have to start selling real estate. If we have to sell $500 million in apartment buildings, it would have an impact on the Los Angeles real estate market. "

Donald Sterling's lawyers who had said they planned to call six witnesses Monday produced none of them and court was recessed early.

Shelly Sterling, Donald Sterling's wife who had been listed as a witness, was in court but was not called to the stand. She was scheduled to return Tuesday.

Her lawyers said their witnesses on Tuesday will include Richard Parsons, CEO of the Clippers. Outside court, Balmer's lawyer, Adam Streisand, said he believes the judge will rule in favor of Shelly Sterling.

"Do I think the trust will be reinstated after that?" he said. "You bet it will."

If the sale doesn't go through by Sept. 15, the NBA can seize the team and sell it at auction, Streisand said.

Previously: Clippers' future on line as probate trial resumes

The future of the Los Angeles Clippers is closer to decision as testimony resumes Monday in a probate trial over whether a deal negotiated by Donald Sterling's estranged wife to sell the team for $2 billion is authorized under a Sterling family trust.

Sterling, the volatile owner of the team, agreed to the sale but then tried to revoke consent in spite of a signed letter instructing his wife Shelly Sterling to sell for the highest price she could get.

A probate trial to resolve the matter has been underway since last month but was in recess for a week. With three days of hearings ahead, Donald Sterling's lawyers suggested they would call the battling couple back to the witness stand separately to address unanswered questions.

Superior Court Judge Michael Levanas was ambivalent about the need for more testimony from the pair but said he would permit it only if lawyers show that they are raising matters not covered during lengthy testimony by bothSterlings.

"This is a case that has many unusual twists and turns," said the judge, noting that Donald Sterling's lawyers had suddenly come up with "witnesses we've never heard of."

The judge firmly refused to allow Sterling's lawyers to call opposing counsel to testify. He also rejected a bid to strike the testimony and reports of two doctors who found the 80-year-old has Alzheimer's disease and is incapable of acting as administrator of the family trust that owned the Clippers.

The judge's rulings Friday shortened the list of witnesses planned by Sterling's lawyers and both sides were juggling schedules of other witnesses.

The lawyer for the man who wants to buy the Clippers, former Microsoft CEO Steve Ballmer, stressed that time is running out on the contractual deadline for the sale which was supposed to be completed by Aug. 15. Attorney Adam Streisand urged the judge to make a quick decision once testimony ends, anticipating lengthy appeals if ShellySterling wins.

If the sale doesn't go through by Sept. 15, the NBA can seize the team and sell it at auction, Streisand said.

Donald Sterling has vowed he'll never sell the team and is suing to block his wife's single-handed deal to do so after the NBA banned him for life for making racist statements. He has denied he is a racist from the witness stand and claims he is the victim of illegally recorded conversations that invaded his privacy.

Outside court, Streisand said Donald Sterling's refusal to sell the team is "a suicide mission by a madman."

Attorney Bert Fields, who cross-examined Sterling, said he revealed himself as "a mean, nasty man who doesn't give a damn about his own family. For his ego, he's willing to give up benefits to his children and grandchildren from this sale."

Outside court, Donald Sterling's lawyer, Bobby Samini, echoed his client's wishes. "We're going to do everything in our power to stop the team from being sold," he said.

"It's not about his ego," Samini said. "He's made it clear he believes his privacy rights were violated and what the league did wasn't legal."

This story has been updated.

blog comments powered by Disqus