Disputed loan at center of Commanders probe
DANIEL SNYDER’S FINAL breakup from his longtime minority partners in Washington’s NFL franchise began with a footnote in an April 2020 financial report.
The note revealed a $55 million credit line the team had taken out 16 months earlier without the knowledge and required approval of Snyder’s minority partners — the three billionaires who owned 40% of the franchise, according to documents obtained by ESPN.
The secret $55 million loan has become a primary focus of federal prosecutors in Virginia who are investigating allegations of financial misconduct by Snyder and the Washington Commanders, multiple sources with firsthand knowledge of the inquiry told ESPN.
A federal grand jury has issued subpoenas for a cache of documents related to the team’s finances, including the loan. Prosecutors acquired the partners’ NFL arbitration petition and other supporting materials, including emails and letters between team executives and bank lawyers, documents show. The criminal inquiry is being led by a team of FBI and IRS agents, sources said.
During a confidential arbitration, the former partners demanded that the NFL investigate the origin of Snyder’s loan. But neither NFL commissioner Roger Goodell, whose signature granted league approval for the team to take on the new debt, nor the NFL arbitrator investigated the partners’ allegation of financial wrongdoing, according to hundreds of pages of confidential NFL arbitration documents obtained by ESPN and more than a dozen interviews.
Loans and lines of credit obtained without the approval of Washington’s board of directors violate the team’s shareholder agreement, according to the documents. The documents also show Bank of America officials asked team executives repeatedly for proof that the board had approved the loan. But the team executives never turned over a copy of the board approval before the loan closed, and one team lawyer later acknowledged in a letter that the board approval doesn’t exist, documents show.
Four days after the partners pressed the NFL arbitrator to seek proof that the loan was legally obtained, the documents show, the NFL moved to shut down arbitration proceedings. The partners begrudgingly agreed to mediation, led by Goodell, sources familiar with the matter told ESPN. The mediation resulted in the partners selling their shares, and it silenced their complaints against Snyder, the sources said. The NFL never conducted the partners’ requested investigation of the loan, and the league levied no sanctions against Snyder related to the allegations of financial misconduct.
One source with firsthand knowledge of the proceedings told ESPN the partners believed Goodell and NFL general counsel Jeffrey Pash sided with Snyder over them.
“Three billionaires — not a few whistleblowers — alleged to the NFL arbitrator that their partner had possibly committed bank fraud,” the source said. “This is jail time type of fraud. The NFL owes them as much of a fair shake as it owes Snyder. And the league had no interest in finding out what happened. They buried it and didn’t investigate it and covered it up.”
The documents obtained by ESPN show that minority partners Robert Rothman, Dwight Schar and Frederick W. Smith protested the loan after they discovered it in a financial report’s fine print. They then started looking closely into the team’s finances and found Snyder was using the team as his “personal piggy bank,” including charging the team $4.5 million to put its logo on his private jet, they alleged in the arbitration petition filed with the NFL.
John Brownlee, counsel for the Commanders, and a spokeswoman for the team declined to answer any questions about the $55 million credit line. In a statement, Brownlee said: “The team has been fully cooperating with the Eastern District of Virginia since it received a request for records last year. The requested records only relate to customer security deposits and the team’s ticket sales and revenue. The team will continue to cooperate with this investigation.”
A spokesman for the U.S. Attorney’s Office for the Eastern District of Virginia declined comment to ESPN.
The NFL did not make Goodell available for an interview. In a statement, NFL spokesman Brian McCarthy said: “The parties had a series of disputes, which were certified to the Commissioner for arbitration as required by league rules. The Commissioner appointed a highly-respected attorney as the arbitrator and none of the parties objected to that appointment.”
“After several months, the parties were asked if they would be interested in participating in a confidential mediation with the Commissioner, which they agreed to do,” McCarthy continued in the statement. “The mediation lasted for two days and the parties subsequently reached an agreement whereby the three limited partners sold all of their interests in the team to Mr. Snyder at an agreed-upon price and other terms. Everyone was represented by very sophisticated legal and financial advisors. The agreement included full releases of all claims that were or could have been asserted by any party in the arbitration proceeding.”
McCarthy declined to answer further questions, including whether the NFL has received any subpoenas connected to the criminal inquiry.
Bank of America, which routinely extends loans to NFL teams, declined to comment through spokesman William P. Halldin.
None of the three minority partners, or lawyers at the law firm that represented them in the dispute, responded to interview requests from ESPN. Smith is the founder and executive chairman of FedEx, Rothman is CEO of Black Diamond Capital and Schar is chairman of NVR Inc., a publicly traded home construction company. They made up half of the team’s six-member board of directors; under the bylaws, they needed to approve all major financial decisions.
Snyder’s undisclosed loan — and how he obtained it — became the most contentious issue in his bitter, yearlong clash with the three men who had been his partners in the Commanders since 2003.
Their dispute was fought in sealed motions filed in a federal lawsuit in Maryland before landing in confidential proceedings led by an NFL arbitrator and, eventually, the closed-door mediation overseen by Goodell and NFL lawyers.
In spring 2021, the mediation resulted in Snyder paying his partners $875 million for their 40% stake. Nearly two years later, Snyder is seeking to sell the team for up to $7 billion. At that price, the former partners’ stake in the team would be worth $2.8 billion.
THE PROVENANCE OF Snyder’s Bank of America credit line was destined to remain a private, unresolved dispute in a high-stakes clash of billionaires if not for the current criminal investigation.
The minority partners’ list of allegations — from the misuse of team funds to staff Snyder’s yachts and private jets to the abuse of corporate bylaws — are laid out in rich detail in their 61-page arbitration petition, filed confidentially with the NFL on June 26, 2020, and obtained by ESPN.
More than two years before they spotted that footnote buried in an audit, the partners had begun considering selling some or all of their stakes in the team. They were frustrated with Snyder’s stewardship. However, Snyder made it almost impossible for them to sell, according to the documents.
In 2018, Smith received an offer to purchase his 10% stake in the team. But Snyder blocked the sale, telling Smith that “the proposed buyer would not be acceptable to the NFL,” the documents show. The proposed buyer was Alan Kestenbaum, the chairman and CEO of Canadian steel company Stelco. A year later, Kestenbaum bought a minority stake in Arthur Blank’s Atlanta Falcons after he was approved by the full membership of NFL owners. Kestenbaum did not return messages from ESPN.
In their arbitration petition, the partners alleged that Snyder blocked the sale to Kestenbaum because the due diligence required by a new limited partner “would have revealed the misconduct.”
All three partners retained consultants to pursue selling their stakes in August 2019. While exploring the sale, the partners received financial information that Snyder had “mismanaged” the team’s “assets and had engaged in self-dealing and other misconduct,” according to documents. The partners alleged that Snyder kept them in the dark about the team’s financial decisions.
In April 2020, the same month that the partners discovered the $55 million credit line, Snyder had, for the first time, failed to pay his partners their quarterly share of team profits, the arbitration filing alleged. The partners said they already knew the team’s local revenues — those derived apart from NFL media rights deals — had dropped by one-third over the previous decade, from $241 million in fiscal year 2009 to $160 million in fiscal year 2020.
The partners confronted Snyder about the missed quarterly payment in May 2020 and asked why he had secured the credit line. They also demanded an explanation for what they called “self-dealing transactions.” Snyder ignored their questions, the partners allege in the documents, except to eventually tell them the team had borrowed more than $20 million under the credit line.
When Rothman complained that the team’s board had not met in years, Snyder responded, “What the f— do I need a board meeting for?” according to the documents.
In a June 5, 2020, letter, Snyder’s lawyer told the partners that Snyder planned to expense more than $7 million in “unreimbursed business expenses” for fiscal years 2017 through 2020. Snyder also revealed that he was seeking $1 million in reimbursements for vehicle costs “and extra security required during foreign travel (due to his high-profile position as Owner).”
In the letter, Snyder revealed that the expenses included a July 2018 yacht party in the south of France, where he hosted fellow owners Jerry Jones of the Dallas Cowboys, Robert Kraft of the New England Patriots and Terry Pegula of the Buffalo Bills.
“This included ‘world-class cuisine prepared by some of the top personal chefs in the world and the highest quality wine/beverages,'” the partners said in their petition. And Snyder told the partners he had hired the accounting firm PwC to “perform a detailed accounting of all business expenses for the entire 17-year investment period of the partners.”
Late on the evening of June 17, 2020, Snyder informed his partners he had removed them from the team’s six-member board. In their petition to the NFL, the partners alleged that Snyder’s removal violated their stockholders’ agreement and continued “a pattern of gross disregard of both his contractual and fiduciary duties.” Snyder immediately replaced the three men with two new directors, Eran Broshy and Gregory Owens. The partners said the two men had worked for Snyder in the past and were “beholden to Snyder.”
The three limited partners’ arbitration petition was filed with the NFL several months before they sued Snyder in Maryland federal court. The arbitration filing flatly declared that Snyder was using team cash “to support his lavish lifestyle.” They said Snyder’s “brazen actions have the obvious purpose of protecting Snyder’s self-dealing and other unauthorized conduct from being further exposed, questioned or restrained by the Board — and of enabling him to continue using [the team] as a personal piggy bank.”
With the benefit of the financial report and their own digging, the partners alleged that Snyder had used team funds to help pay for his two “personal yachts, multiple residences, the services of more than 60 members of his personal staff, multiple vehicles in the U.S. and Europe and countless meals, wine/beverages [and] entertainment.”
The partners said they discovered Snyder had leased his personal jets back to the team. Besides Snyder paying himself a salary of $10 million a year, he also had arranged for the franchise to pay him a total of $4.5 million for having the team logo emblazoned on his personal jet. “An advertising fee,” Snyder had called it, documents show.
But the partners said the logo on Snyder’s private jet “provides little or no advertising value.” And besides, they said, they never approved the millions per year Snyder paid himself.
The partners also told the NFL that the Bank of America credit line had potentially been secured fraudulently and that “Snyder or his agents misrepresented to the bank” that the partners had approved the loan.
“Snyder used the proceeds from the Credit Agreement to disguise [the team’s] poor operating performance and cash flow problems, and, at least in part, to enrich himself improperly at the expense of [the team] … and other stockholders,” the petition alleged.
The partners asked Goodell to suspend or remove Snyder as the owner.
“Snyder’s wrongful conduct, self-dealing, mismanagement and brazen disregard of his duties also manifest more generally his lack of fitness to continue serving as the principal stockholder and CEO” of the Washington NFL franchise, the partners wrote in the NFL arbitration petition.
“His conduct has harmed not only Claimants and [the team], but also the Washington … franchise as a whole (and thus both Washington … fans and supporters, and the NFL itself).”
While declining specific questions, a Commanders spokesperson issued a statement to ESPN disputing that the former partners were harmed, saying the team regularly paid them “on a pro rata basis.”
“As is the case for any NFL franchise, we are audited annually,” the spokesperson said in the statement, “and we are completely transparent in sharing all financials with the League for their review and oversight.”
GOODELL WAS HARDLY a bystander to Snyder’s Bank of America loan. The commissioner’s signature appears in a confirmation agreement that approves the team’s new credit line on the day it was approved: Dec. 13, 2018.
The NFL guarantees all debt taken out by teams. If a franchise wants to take on a new loan beyond strict set limits, it usually must get the permission of the league’s finance committee and 24 of 32 owners. McCarthy, the NFL spokesman, did not answer a question about whether the finance committee and the 32 owners had approved Washington’s new credit line. A franchise owner and a senior executive said Goodell is not responsible for scrutinizing the terms and conditions of loans. However, a team cannot assume fresh debt, which is guaranteed by the NFL, without Goodell’s approval.
“Goodell knew about the loan,” said a source with firsthand knowledge of the matter, “but the partners didn’t.”
Copies of emails reviewed by ESPN show bank officials repeatedly asked the team to provide the board resolution — a document showing the team’s board of directors had approved the loan — before finalizing the credit line and even in the weeks afterward. Without the resolution, the loan could not presumably close.
On Nov. 29, 2018, Kevin A. McGinnis, an outside lawyer for Bank of America, emailed Stephen Choi, the team’s then-chief financial officer, asking if he was “all set on the remaining closing document required … such as … authorizing resolutions.” Choi replied that “our legal dept is in the process of finalizing drafts.”
On Dec. 13, 2018, Eric Schaffer, then the senior vice president for Washington’s football operations and general counsel, wrote to the bank saying, “we have examined and relied upon the following … resolutions of the board of directors of the Borrower authorizing the transactions.” Neither Choi nor Schaffer responded to questions from ESPN.
On that same date, McGinnis, the bank lawyer, again asked the team for the board resolution authorizing the loan because it needed to be attached to the bank officers’ closing certificate.
However, no board resolution was provided to Bank of America before the credit line was closed, according to the documents and sources. Nearly a month later, on Jan. 8, 2019, McGinnis again emailed Choi to request an original copy of the resolution. The bank received none, the documents show.
Nearly two years later, on Dec. 31, 2020, the partners’ lawyer asked Brad Karp, the NFL arbitrator, to send a summons to Bank of America for a key piece of evidence — the board resolution.
“Claimants further allege that Snyder or his agents misrepresented to the bank that appropriate board approval had been obtained” and that the team “did not obtain the requisite board authority,” attorneys wrote to Karp.
According to documents, two attorneys representing Snyder eventually acknowledged that no board resolution could be found and that, to the team’s knowledge, “no formal resolutions from 2018 exist.”
“It’s possible the bank never required the resolution, but then the question is, why?” said the source with firsthand knowledge of the matter. “The partners wanted the NFL to find out, and they had zero interest in figuring this out.”
On Jan. 4, 2021 — four days after the partners asked Karp to seek the loan documents from Bank of America — Karp emailed the partners’ lawyers to propose that the arbitration be moved to a mediation overseen by Goodell.
The next day, NFL general counsel Pash wrote to both sides, laying out the mediation rules and indicating that the confidential session was “for the purpose of facilitating … a possible buyout” by Snyder of the partners’ stake in the team, according to the letter.
The partners reluctantly went along with mediation, sources told ESPN, in part because Smith worried that holding out would hurt his son’s career. Arthur Smith was the Tennessee Titans’ offensive coordinator at the time. He is now the Falcons’ head coach.
It didn’t take long for the mediation to occur. On Jan. 13, 2021, the NFL-led session began, via Zoom, at the height of the pandemic.
During the two-day mediation, the partners’ lawyers were primed to demand that the NFL investigate the secret credit line, according to a source with firsthand knowledge. Despite lawyers raising the issue several times, Goodell and Pash said they would not consider it. The source said Goodell told the partners they had only one option: Reach an agreement to sell their shares to Snyder.
“Goodell and Pash were not interested in talking about those allegations or any allegations between the parties,” the source said. The partners were furious that Goodell and Pash had blocked their request that the arbitrator seek bank records from Bank of America, the source added.
Within a month of the session, they struck a deal: Snyder agreed to buy out his three partners’ 40% share for a total of $875 million. But Snyder was cash poor. He needed the NFL’s permission to finance the buyout. By a 32-0 vote on March 31, 2021, NFL owners granted Snyder a new debt-limit waiver. And Snyder borrowed an additional $450 million from Bank of America.
AT THE SAME time the minority partners’ complaints about Snyder were being shut down, the NFL was awaiting a report from Washington lawyer Beth Wilkinson on alleged sexual misconduct by Snyder and the team’s toxic workplace culture. Wilkinson was conducting the investigation on behalf of the league, but in September 2020, the NFL and Snyder had quietly struck a “common interest agreement” that let both sides share any information she developed.
Wilkinson never filed an official investigative report with the NFL, even though an engagement letter with Wilkinson said she would “complete a written report of its findings.”
Instead, at the league’s behest, Wilkinson delivered an oral report. The league summarized her findings against Snyder in a July 1, 2021, news release. The NFL fined the Commanders $10 million and forced Snyder to temporarily step away from actively running the team. His wife, Tanya, became the team’s acting CEO.
The league’s handling of the investigation drew harsh criticism in a 14-month probe by the U.S. House of Representatives Committee on Oversight and Reform. In its final report in December, the committee said the NFL “chose to bury Ms. Wilkinson’s findings and whitewash the misconduct it uncovered.”
“Rather than seek real accountability, the NFL aligned its legal interests with Mr. Snyder’s, failed to curtail his abusive tactics, and buried the investigation’s findings,” the report concluded. The committee also detailed multiple allegations of financial wrongdoing, including that the team kept two sets of accounting books that hid revenues from other NFL teams. Another investigation into the Commanders’ workplace and Snyder’s personal behavior, led by former Securities and Exchange Commission chairperson Mary Jo White, is ongoing. This time, the league has said, it will release a written report publicly.
Meanwhile, the U.S. Attorney’s Office for the Eastern District of Virginia is investigating an array of alleged financial improprieties by Snyder and the Commanders. The criminal inquiry began last year, after the House committee sent a letter to the Federal Trade Commission.
The House committee said in its letter to the FTC that it had found evidence of deceptive business practices over the span of more than a decade, including withholding ticket revenue from visiting teams and refundable deposits from fans. One former employee, longtime vice president of sales and customer service Jason Friedman, testified before Congress, saying the team had two separate financial books: one with underreported ticket revenue that went to the NFL and one with the full, complete picture. Sources told ESPN the allegations made by the limited partners about financial misconduct, including the credit line, have become a central focus of prosecutors. Sources said Friedman and the three former partners have not been subpoenaed to testify before the grand jury.
Snyder is moving forward with his plans to sell the Commanders, accepting sealed bids from several interested groups. Managing the sale on Snyder’s behalf: Bank of America.
ESPN researcher John Mastroberardino contributed to this report.
Don Van Natta Jr. is a senior writer for ESPN. Reach him at Don.VanNatta@espn.com. On Twitter, find him at @DVNJr.