Bloomberg News

Sterling Accuses Wife, NBA of Fraud in Clippers Sale

July 23, 2014

Clippers Co-Owner Shelly Sterling

Shelly Sterling is seen at Los Angeles Superior Court on July 08, 2014 in Los Angeles, California. Photographer: Axelle/Bauer-Griffin/GC Images via Getty Images

Donald Sterling accused his wife and the National Basketball Association of fraud in a new lawsuit over the proposed $2 billion sale of the Los Angeles Clippers to former Microsoft Corp. (MSFT:US) Chief Executive Officer Steve Ballmer.

Sterling alleges in a complaint filed yesterday that he’s the sole shareholder of LAC Basketball Club Inc., the corporation that owns the Clippers, and that his wife can’t sell the team to Ballmer without his consent. He asked for a judge to “freeze” the sale as well as for unspecified damages.

Shelly Sterling’s “deliberate collaboration and collusion with the NBA, Commissioner Adam Silver, and Steve Ballmer was extreme and outrageous conduct,” the real-estate billionaire said in the complaint in Los Angeles Superior Court.

The lawsuit comes as a probate judge is holding a trial over whether Shelly Sterling can complete the sale to Ballmer. She used the reports of two doctors who in May found her husband mentally incapacitated to have him removed as co-trustee of the family trust and to make a deal with Ballmer before the NBA could proceed with a forced sale of the team.

In trial testimony yesterday, Dick Parsons, appointed interim head of the Clippers in May amid an outcry over Donald Sterling’s racist comments, said Ballmer’s offer is a “knock-out” price that probably won’t be matched in a forced sale.

It will be “tough to get this price again,” Parsons, the former chairman of Citigroup Inc. (C:US) and Time Warner Inc. (TWX:US), told California Superior Court Judge Michael Levanas.

Players, Coaches

Players, coaches and sponsors are ready to abandon the team if Sterling isn’t gone by the start of the new season, Parsons said. Kia Motors Corp. (000270) is one of the advertisers that will only return as a sponsor if Sterling leaves, and coach Doc Rivers will quit if he doesn’t, Parsons said.

“If Doc were to leave that would be a disaster,” Parsons said. “Doc is the father figure.”

Anwar Zakkour, a Bank of America Corp. (BAC:US) investment banker who advised the Sterling Family Trust on the Clippers sale, testified yesterday there were three bids for the team -- one for $1.2 billion, another for $1.6 billion and Ballmer’s offer.

“We did back flips,” Zakkour said about the Ballmer bid when asked about it by Shelly Sterling’s lawyer, Pierce O’Donnell.

Zakkour also testified that there’s a “significant risk” the Clippers wouldn’t sell for as much as $2 billion if the NBA were to auction it.

Dean Bonham, an expert witness for Donald Sterling, disagreed, saying there’s a “chance” the team would sell for more if the NBA were to conduct the sale.

Magic Johnson

The final trial witness, a neurologist, was called today by Sterling’s side to testify whether the circumstances under which Sterling was examined in May might have influenced the result of the exams. Jeffrey Cummings, the doctor, said that the presence of Shelly Sterling might have created a more stressful situation given the conflict between the couple.

Under cross-examination by a lawyer for Shelly Sterling, Cummings said he wasn’t aware that Donald Sterling had asked his wife to be in the room for the exams. The judge wouldn’t let Cummings discuss his own evaluation of Sterling, saying the case wasn’t about Sterling’s capacity but about whether Shelly Sterling followed the proper procedures as governed by the trust to have him removed.

Closing arguments are scheduled for July 28, after which the judge will issue a ruling.

Recorded Conversations

The NBA fined Sterling $2.5 million and banned Donald Sterling for life after TMZ.com in April posted secretly recorded conversations in which he told a girlfriend that he didn’t want her to bring black people to Clippers games or post photos online of herself with former NBA All-Star Earvin “Magic” Johnson.

Sterling last month filed an antitrust lawsuit in federal court to block the sale. That case was premised on the league seizing the team and selling it, not on the voluntary sale agreement Shelly Sterling reached with Ballmer. The NBA has said if the sale to Ballmer isn’t completed by Sept. 15, it may resume with a forced sale.

“Donald’s latest lawsuit is a frivolous, last ditch act of desperation by a delusional, bitter man,” O’Donnell said in an e-mailed statement “This action shows once more how obsessed he is with ruining a record-setting $2 billion sale of the Los Angeles Clippers -- a sale that would solve the problems his racist rant started three months ago.”

Mike Bass, an NBA spokesman, declined to comment on yesterday’s lawsuit.

New Complaint

In the new complaint, Sterling argues that he holds sole title to the team even if it was part of the family trust. He revoked the trust last month after his wife filed the petition in probate court to confirm her authority to complete the sale.

Sterling testified in the probate case that he would never sell the team he bought in 1981 and that he would sue the NBA until the day he dies.

The new case is Sterling v. Sterling, BC552470, Los Angeles County Superior Court. The probate case is In the Matter of the Sterling Family Trust, BP152858, California Superior Court, Los Angeles County (Los Angeles).

To contact the reporter on this story: Edvard Pettersson in state court in Los Angeles at

epettersson@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg


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