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Betting The Mortgage

So feel free to respond to todays news in BOTH this thread and the below thread. There are some different points and I expect to have a busy day.

ESPN article on Schultz's lawsuit having some teeth.

I am so sad that I can't get myself to talk NBA Playoffs. Dwight Howard with 29 and 20. Sheesh. The kid is an absolute animal. I love watching him play.

I will tell people that I am yet again in the "scheduled to testify" camp and as such have to maintain some discretion on this stuff. The BCS suit obviously is gaining steam and there is a lot of positive momentum behind it. We're going to have a busy job gathering together our paper trail of communication with Bennett and I can tell you I am stunned at how far back this things goes and how much SOS has put into it. You wouldn't believe the number of e-mails that went back and forth in 2007. Its a wonder I've held my company together throughout.

So here is the question, and it goes back in some ways to the question yesterday of whether we should go all in or take a potential expansion team.

At what point do the consequences of failure become so great even the remote chance of it becomes something you must avoid?

In the case of the team my theory is that, a complete loss of basketball is something that I cannot bear. Feeling the weight of all these kids, all these fans, and my own judgment if we woke up one morning and there were no Sonics at all would be a loss which to me is unacceptable, just a letdown for everybody involved. It is something that has to be avoided at all costs. I have to look at it and say, if I think I have an 80-20 chance of winning, but that 20% chance has dramatically increased stakes then I have to really weigh whether I want to play the game.

It's betting the mortgage. If you were in Vegas and someone offered you 80-20 odds to double your money with a $2000 bet you would probably take it. You have way more chance of winning than losing. If however the only money you had in your checking account was the $2,000 you intended to spend on your mortgage you have to look at the upside and downside. The upside is a extra 2 days in Vegas, maybe a TV. The downside is default of your house, your wife potentially leaving you because you're so damn irresponsible, and in some ways your life falling apart. At that point you look and say "I don't care if it were 90-10. I can't risk this.

So the question is, at what point does this become "betting the mortgage" for Bennett and Stern? Obviously the finances are not the big issue, rather the credibility and the precedent. Even to this day Clay Bennett could quit this plan and in the future laugh and joke about how "I would have done anything to bring basketball to my home town. I went to the yards boys but it didn't work out." There would be people who would judge him but most would simply think he was a ballsy guy who made a move for his hometown. That changes if he suffers a legal defeat.

If Bennett feels like Schultz has a 20% chance of winning he risks having an asterisk beside his name forever as the man found guilty of committing fraud. He runs the risk of setting a historical precedent in the highly visible world of professional sports and of soiling his name in a crooked transaction. This corporate and legal news would cross from ESPN to the Wall Street Journal. It would be analyzed on Fox News and CNN. It would essentially define him.

Keep in mind that Bennett, as the CEO of Dorchester Capital does, for a living(not that he needs it) a couple of things. First he gets investors to give him their money because they trust his ability to make sound business decisions and invest it. Second he takes that money, finds ideas and ventures to buy into, and convinces those people that they should allow him to buy significant shares of their company, again because not only does he have the money, but that he is a guy they want to be associated with as they build their business. He tells them that he will be more supportive, more hands off, hands on, whatever if they go with his investment VS another capital firm.

How is he affected if a court actually rules that he committed fraud and breach of good faith in a $360 Million transaction? It is one thing to have people say you are crooked in another city, while you are a hero in your own. It is another to have a judge actually find it that way.

Another issue which will almost assuredly come up is that of perjury and contempt of court. Bennett and Stern are scheduled for court depositions in very short order. If they thought Chris Daniels applied some pressure in their press conference then they will have to consider whether they want to testify to good faith in a case against the city attorney, only to risk being found guilty of fraud and bad faith in another case. I would be interested to know from our internet legal advisers what the potential consequences of this will be. Could he be found guilty of a crime? How heavily does 10 days in jail weigh on a billionaire? Regardless I can tell you that Bennett has a very short window in which to weigh these consequences.

This is the way in which Howard Schultz suit is infinitely different than the City's case. In the case of the city, even if a judge rules against Bennett there is only the definition of the lease at stake. He contested a point and the judge ruled in his favor. He could recover from that with only the financial hardship. In the case of Schultz, even if he views his odds of winning at better than even he must be keenly aware of the high risk of failure.