Find us on Google+

Nashville Predators Checked by Tax Woes

January 13, 2010 · 4 comments

This season, the Nashville Predators are having a pretty good run on the ice. According to NHL.com, they’re ranked sixth in the league, well ahead of my husband’s perennial favorites, the Philadelphia Flyers.

But off the ice? It’s not so good.

The Nashville Predators recently filed a lawsuit against a company called the Sommet Group for failure to pay arena naming rights fees that they claimed were due. It turns out, not surprisingly, that the Sommet Group isn’t doing so well. According to the lawsuit (you can read it here as a pdf), the Sommet Group of Tennessee, LLC, formerly known as Sommet Group, LLC, has more than just a little bit of ties with a group known as The Personnel Department Group, LLC. The Personnel Department LLC amended its organizational docs with the Tennessee Secretary of State last year to be know as Sommet Group, LLC. Just prior to the change, the Nashville Business Journal reported that a federal tax lien has been filed against The Personnel Group, LLC, in the amount of $337,161.

In response to the lawsuit, Brian Whitfield, the CEO of the Sommet Group, took a public shot at Nashville Predators part-owner David Freeman, noting that the IRS had placed a $3.3-million federal tax lien on Freeman’s house for failure to pay his 2007 personal income taxes (the same year that Freeman came on board with the Predators). Kind of a “your lien is bigger than my lien” thing.

Freeman, for his part, claims that the cash flow issues were due to a loan in the amount of several million dollars to the team in order to complete the purchase. He says that he’s cooperating with the IRS and expects to have the issue with the IRS resolved this month. So, a non-issue? Maybe not.

Freeman’s tax troubles are playing a key part in Sommet Center lease agreement with the city of Nashville. Meeting were held this week to see if the owners are in default on that agreement. Part of the agreement states that the owners must give notice of any material adverse change in financial condition, something that Freeman did not do when the tax lien was placed on his home. Additionally, the owners agreed that all taxes would be paid on time, again, something that Freeman did not do and did not advise had not been done.

It would be difficult for Freeman to argue that he just didn’t know what he agreed to. As an attorney, he spent a few years doing mergers and acquisitions. My guess is that he’s seen one or two of these agreements before.

Freeman, for his part, continues to maintain that everything will work out for the Predators, a team that he bought into having never owned season tickets. He’s also pledged to keep the Predators in Nashville, despite their woeful attendance record. The team is currently under the threshold it must reach in order to get a share of NHL revenues and ranks 26th out of 30 teams in attendance for the year. If that doesn’t turn around, the team could leave the city.

The parties involved in this mess (well, except for the IRS, which does not comment on private, civil taxpayer matters) have seemed to indicate that they’re willing to do what it takes to do what it takes to wrap this up quickly. I’m sure the team hopes so. It’s January and there’s still a lot of hockey to play.

Similar Posts:

{ 2 comments… read them below or add one }

1 AJ in Nashville January 15, 2010 at 2:23 pm

Excellent, well-balanced post; much more so than anything written by The Tennessean, or the Canadian media on the subject.

I would correct you on one point…well, maybe a point and an an inference.

Unless the attendance figures you researched were several weeks old, the Predators are NOT in arrears of the requirement for the NHL profit-sharing qualification. While still 26th in the league and perilously close to the cutoff of 14,000, they are currently averaging 14,223, and have been over 14K for at least the past two weeks.

A rise in attendance after the first of the year has been a recurring theme with the Preds for years, notably in its conjunction with the end of the NFL season.

Furthermore, the Predators escape clause you alluded to, in addition to the 14K attendance threshold, also includes the necessity of the team losing more than $20 million in a single season. Since the Predators are at a comfortable salary cap limit, in the thick of the playoff race, attendance is actually on the rise, and any resultant nosedive in profitability is nowhere on the horizon, I think it’s safe to assume that the team is in no imminent danger of meeting ‘escape’ conditions.

I only say this because it’s ALWAYS brought up as if it’s a genuine likelihood, but it just isn’t. It’s alarmist and by no means warranted as part of the conversation unless realistically stated.

But all that aside, I really DID like the way you presented the situation…honest! :)

2 Kelly January 15, 2010 at 8:42 pm

Thanks for the comment. Mid-December, The Tennessean was reporting a home average of 12,913. I just checked and according to Sports Network, the attendance average hit over 14,000 at Game 21 – which if my math is correct, based on the Predators’ web site, would mean the Jan 2 game against the Ducks (which Nashville won).

And thanks for the clarification re escape clause.

Leave a Comment

{ 2 trackbacks }

Previous post:

Next post: