An amended sub-lease that might have been purposefully and illegally withheld from the city of Detroit two years ago might have cost the city as much as $74.8 million in Detroit Red Wings TV revenue.
The story begins in 1978, when the Olympia Stadium Corporation and the city agreed to a lease of the then newly-constructed Joe Louis Arena. The National Hockey League‘s Detroit Red Wings then entered into a sublease with Olympia to make the arena the home of the Red Wings for the entire life of the lease, 30 years at that point.
In 1980, an amendment to the lease was made requiring Olympia to pay the city 25 percent of television revenue over $1 million on an annual basis. In 1982, the Ilitch family purchased both Olympia and the Red Wings, though the two entities were and remain separate. Things then progressed quietly on this front for the next 17 years.
In 1999, there was another amendment made to the sublease between Olympia and the Red Wings, which has been obtained by the Detroit Free Press. Language in that sub-lease requires the Red Wings to pay the portion of Olympia’s television revenues which are owed to the city. Despite legal requirements to file the new sub-lease including the amendment with the city, the sub-lease was not filed.
In the 17 years since, the Red Wings haven’t paid any TV revenue to the city. Neither has Olympia. When the city inquired about payments in 2007, Olympia’s response was that it had received no TV revenue. The broadcast contracts were between the Red Wings and their broadcasting partners, and Olympia had nothing to do with them.
Move forward seven years, through Detroit’s bankruptcy proceedings in 2014, when the city and Olympia settled on Olympia’s obligations regarding Joe Louis Arena for a figure of $5.2 million. As far as Olympia was concerned, that concluded the matter.
Since the Free Press obtained the sub-lease, new questions have been raised, however. The failure to file the 1999 amended sub-lease could void the settlement between Detroit and Olympia, meaning that the issue of whether the city is owed back payments for TV revenue could be revisited. Documents which were part of the settlement estimated that the city’s cut of TV revenues could be as much as $80 million, $74.8 million more than the settlement amount.
Now as Little Caesar’s Arena is being built to house the Red Wings for the foreseeable future, the city’s legal counsel is working to see if the possibility of recovering any of the delinquent revenue exists. The likelihood isn’t favorable for the city, but this could act as a very expensive lesson to keep a closer eye on legal transactions between the Red Wings and Olympia.
Main Photo: TAMPA, FL – APRIL 25: Goaltender Petr Mrazek #34 of the Detroit Red Wings is congratulated by his teammates after the game against the Tampa Bay Lightning in Game Five of the Eastern Conference Quarterfinals during the 2015 NHL Stanley Cup Playoffs at the Amalie Arena on April 25, 2015 in Tampa, Florida. The Red Wings defeated the Lightning 4-0. (Photo by Joel Auerbach/Getty Images)
