Minority Rays owners sue Sternberg again, claiming team withheld income records

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For the second time in a year, a group of minority Tampa Bay Rays owners has sued companies owned by principal owner Stuart Sternberg, alleging they withheld documents critical to a review of the team’s finances.

Five limited partners who collectively own about 9.6% of the Rays say the team withheld records related to Sternberg’s gradual consolidation of control over the franchise, along with documents relating to “half a billion dollars in taxable income.” from 2017 to 2019, much of it through a broadcast deal with what is now Bally Sports Sun.

The partners claim that this agreement resulted in them paying $3.85 million in taxable income, although they received no payout or distribution benefit. As they sought to review the team’s financial records, the partners said they received documents that were “incomplete” and with “obviously altered dates, or…no dates at all.”

The company that owns Sternberg, according to the lawsuit, gave the partners several reasons for refusing to issue distribution payments. Among them: “Major League Baseball didn’t like teams making distributions” and “it could reduce or eliminate MLB revenue sharing to the team.” The Rays were also building up financial reserves “for a new ballpark,” the suit says.

Two limited liability companies owned by Sternberg are listed as defendants, as is a partnership managed by Rays’ general counsel and senior vice president of administration, John Higgins.

Sternberg’s attorneys filed a notice in Pinellas-Pasco Circuit Court Thursday saying they intend to formally respond within 60 days of the new lawsuit, which was filed Feb. 25.

Related: Tampa Bay Rays minority owners sue Sternberg, say he secretly negotiated Montreal deal

The suit follows a similar complaint filed last May, in which the same five limited partners – Robert Kleinert, Gary Markel, the MacDougald family limited partnership, Stephen M. Waters and a trust in the name of Waters – alleged that Sternberg was engaged in a “relentless plan” to squeeze out the partners by expanding his stake in the team, which had risen from 49% in 2004 to 85% in 2020.

Last week, a Pinellas-Pasco Circuit Court judge ruled that the minority owners could sue part of their lawsuit to evict Sternberg as a general partner. The partnership agreement that governs the team states that a general partner can only be kicked out by a majority vote of the other general partners – but in this case, Sternberg is the sole general partner, having bought up other general partner shares over the years. years. The judge ruled that a trial might be needed to deport him.

Related: Pinellas judge rules part of Rays’ ownership lawsuit can continue in court

The other counts in the original lawsuit, dealing with fraud and breach of fiduciary duty, are to be settled by arbitration, the judge said.

In the new lawsuit, the sponsors are seeking an array of legal and financial documents, including bank statements, executive compensation agreements and tax returns from Rays Baseball Club, LLC, Sternberg’s company that governs the team. .

Without the documents, the sponsors say, they only have “an overview of the partnership’s activities and financial situation, which raises more questions than it answers and exposes major problems with operations, asset protection and significant tax issues”.

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A Rays spokesperson said Sternberg and the team declined to comment.

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