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Sunday, September 05, 1999 By Ann Belser, Post-Gazette Staff Writer
On Aug. 26, the day after an 11-hour negotiating session between Mario Lemieux's representatives and SMG, Lemieux's attorney Doug Campbell was in a good mood.
He sat in his office in the Grant Building overlooking the Monongahela River, laughing with Leonard LoBiondo, Lemieux's financial adviser, as both men celebrated the agreement Lemieux had reached with SMG, the company that controls the Civic Arena.
"We're done," they both said.
Lemieux and his team of lawyers, accountants, agents and various other dealmakers had finally managed to pull together the agreement that would give the former Penguins superstar ownership of his former team -- something no other professional athlete had ever done.
But the celebration in Campbell's office was short-lived.
By the end of that weekend SMG had raised more questions about the deal. In addition, lawyers for three insurance companies that were owed millions of dollars by the hockey team had raised their own new questions about the pending deal that would bring the team out of bankruptcy.
By the middle of Monday last week, Campbell was glum. He had lunch in the basement of the USX Tower that day with another of Lemieux's attorneys, Lisa Jacobs, during a break in the negotiations. The deal was in trouble, he said. It was a familiar scenario.
Lemieux's effort to buy the team dated to Oct. 13, when former Penguins co-owner Roger Marino sought protection for the debt-racked team in U.S. Bankruptcy Court. One of the biggest creditors was Lemieux, who filed a claim against the team for $32.5 million in salary and penalties.
Lemieux said early and often that buying the team was the best deal for him, and the best opportunity to keep the Penguins in Pittsburgh. Yet the process was contentious. Over the next several months, his efforts would ebb and flow as he and his associates worked to find investors, placate creditors and smooth over simmering animosities.
When the deal finally looked sealed on Aug. 26, Campbell would say later he knew it was too good to be true.
"We came to call it Ground Hog Day," Campbell said. "Every day I'd get up and say, 'I thought we solved this problem' and then, it's like, 'We've got to do this again.'"
But the last problem Campbell faced would be by far the toughest. Last week, at 8 p.m. Monday, a U.S. bankruptcy judge set a deadline. He gave everyone involved in the bankruptcy 15 hours to reach an agreement on all critical issues. Otherwise, he said, he would push to have the team liquidated. And he meant it.
He never lacked for work.
Banks, insurance companies, the players association, Fox Sports Net Pittsburgh, SMG and Lemieux's representatives came to him to try to settle disputes that seemed impossible in face-to-face negotiations.
McCullough used some tactics over and over again. He would separate the parties, leaving one side, then the other, in the small windowless conference room that opened to the hallway leading to his Bankruptcy Court chambers in the USX Building. He would then call the various groups to his office one at a time to try to reach a compromise.
Those sessions would often run into the evenings. Sometimes they lasted late into the night.
Some issues were solved in a day. Others took much longer. But gradually key issues got resolved.
McCullough helped resolve the question of who would run the team's practice facility at Southpointe, which has been taken over by Morris Belzberg, one of Lemieux's investors.
He mediated another key dispute that resulted in an agreement whereby the team's former owners paid unsecured creditors $2.5 million.
He resolved the deal between Fox Sports Net Pittsburgh and Lemieux regarding the team's television agreement -- and also hammered out the agreement between Fox and insurance companies owed $22 million by the team. Money from broadcasts will help repay that debt.
After those sessions, Eric A. Schaffer, the attorney for Fox, would be asked if the issues had been resolved. "I'm drafting," he'd answer, meaning that he was heading back to his office to once again rewrite a section of the contract between Fox and the lenders.
"I can't tell you how many times people would show up here and they had no idea what to do next and it was pretty clear they wanted me to figure it out," he said.
SMG had agreed to take millions less in lease payments and to invest $5 million in the team, which placed it in the awkward position of being both the landlord and an investor in the tenant.
Lemieux spokesman John Brabender said SMG was concerned about how the company would be treated as an investor in the team.
By Monday the negotiations had gotten so heated that McCullough prepared to call a press conference Tuesday morning to announce that the negotiations with Lemieux, SMG, Fox and the insurance companies had failed and the Penguins would have to be liquidated.
McCullough said he had gotten the league's approval to end the negotiations and dissolve the franchise if the deal wasn't done by 11 a.m. on Tuesday.
"From my experience, people have to have a real deadline to get serious," he said. "Painful as it was going to be to blow it up, if it didn't get done, I was going to blow it up."
That Monday night, however, U.S. Sen. Rick Santorum made a telephone call to Joseph Neubauer, the chairman of Aramark, one of SMG's sister companies. Neubauer is also the boss of Wes Westley, president of SMG.
Santorum had been called by Brabender, who had worked with the senator during his political campaigns. Brabender said he had been told McCullough was close to killing the deal.
"I was looking for somebody who had both the local interest and the clout to intervene," Brabender said. "I called the governor's office as well and they also were interested in seeing if there was any way they could help."
On Tuesday morning at 7:30 a.m. Santorum was on the phone again. Joining him were Westley, Neubauer, McCullough and a representative from Gov. Ridge's office. During that conference call SMG explained its position and started another long day of negotiations. McCullough never called the press conference he had threatened.
Later Tuesday, both sides had come to an agreement in principal but it wasn't until 1 a.m. Wednesday morning, after more than 16 hours of negotiations, that they agreed on the final language in the contracts. It included an agreement that SMG would invest $5 million in the team, but would receive a $1.5 million payment when the deal closed. In addition, SMG gave up some of its partnership interest in the team and agreed not to sue the team.
McCullough estimated that he put as much time into the mediations as any of the lawyers put into the case.
Even Friday, after U.S. Bankruptcy Judge Bernard Markovitz signed the final orders allowing Lemieux to take over the team, McCullough was mediating a side dispute between the two former team owners, Howard Baldwin and Roger Marino, in which Baldwin is claiming that Marino owes him money because of the financial failure of the team.
McCullough was not successful Friday in resolving that dispute, which may be heard later in another court. Other disputes over claims filed by unsecured creditors still have to be resolved by Markovitz.
When asked who the heroes were who saved hockey in Pittsburgh, most of the attorneys agreed there were three names: Lemieux, McCullough and Campbell, with McCullough pointing to Campbell and Campbell pointing to the judge.
"Judge McCullough was a tireless advocate for the success of the reorganization and Doug performed a small miracle," Schaffer said. "He managed to convince a tremendous number of disparate interests to compromise while remaining on good terms with all of them."
Harry L. Manion III, who represented Marino, said Lemieux and Campbell "had the temperament, character and tenacity to withstand the onslaught of issues and problems thrown at them over the last two months."
Then, as an aside, he added, "and the fact that Roger Marino kept them here for two years at the cost of $50 million and walked away without a peep."
McCullough said he felt fairly sure his work to resolve the issues in the bankruptcy were completed at 2 p.m. Friday, when the $51 million in Lemieux's escrow account was sent by wire to pay off the team's bills. Once it left escrow, the deal was done.
"You can't unscramble the eggs," he said.
But he added that complete closure won't come until 7:30 p.m. Oct. 1. That's when the puck hits the ice in Dallas when the Penguins play their first regular season game.
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