Divorce case exposes struggles of a NASCAR race series
10/06/2013 7:35 AM
10/06/2013 9:32 PM
To attract participants in a lesser-known sports car racing series, one of NASCAR’s leaders helped pay a team’s startup costs and guaranteed a profit, according to a deposition in a contentious divorce case in Charlotte.
A motion filed last month in team owner Felix Sabates’ divorce provides a window into the financial condition of Grand-Am Racing, a race circuit started by NASCAR’s France family in 1999 and acquired by the racing organization in 2008. It also shines a light on the little-known practice of promoters sometimes financing teams that compete in their races.
The court filing raises questions about possible conflicts of interest in a sport that is already under scrutiny over ethics. Last month, NASCAR penalized Michael Waltrip Racing for trying to manipulate the outcome of a key race.
It’s not unheard of in other sports for the league to step in and take ownership of a struggling team for an interim period. But in most sports, it would be unusual for a league official to contribute personally to a team.
In a deposition included with the filing, Felix Sabates testified that the late Bill France Jr., NASCAR’s former CEO, offered him and partner Chip Ganassi $1 million “out of his own pocket” to start a team and said he would also guarantee $400,000 in annual profits. Ganassi and Sabates entered Grand-Am racing in 2004.
In his testimony, Sabates said Bill France’s son, current NASCAR chief executive Brian France, kept up the payments when his father later became sick, but that the payments stopped when Bill France died in 2007.
Carolyn Sabates, Felix Sabates’ ex-wife, says in the filing that it would look bad for Brian France to have financial ties to a championship-winning team. Scott Pruett, a driver for the Chip Ganassi Racing with Felix Sabates team, has won the Grand-Am’s Rolex series five times. The sports car circuit, far smaller than NASCAR’s Sprint Cup series, features sleek sports cars rather than traditional stock cars.
Jon Ackley, a professor in Virginia Commonwealth University’s business school who studies NASCAR, said he hadn’t heard of the organization financing any teams before and noted that there have been cases where other race teams have closed or run partial schedules due to lack of money.
Having a league official back a team “really stirs up some muddy waters,” Ackley said.
One potential conflict could come when the sanctioning body has to enforce rules, he said. “How do you fine a race team for a violation,” he asked, “when you’re giving them money?”
Former Charlotte Motor Speedway President H.A. “Humpy” Wheeler said it’s a little-known but common practice for race promoters to help finance teams.
“It’s been going on forever,” Wheeler said. “When you’ve got a startup series like Grand-Am, you’ve got to have cars.”
Wheeler said he doesn’t have a problem with the practice, but promoters have to be careful that the teams they support don’t just “win, win, win.”
NASCAR spokesman David Higdon said it was inappropriate to comment on ongoing personal litigation. John Olguin, a spokesman for the Ganassi racing organization, also declined to comment, citing pending litigation.
Charlotte attorney Bill Diehl, who is representing Sabates in the divorce case, said there is no news in the motion by Carolyn Sabates, who is acting as her own attorney in the legal battle with her ex-husband. The couple divorced in 2008 after more than 40 years of marriage.
“She is just grabbing at straws to try to hurt Mr. Sabates,” Diehl said.
The value of the team is at issue in the divorce because Carolyn Sabates wants the team independently appraised, according to testimony at a hearing in 2010. In the motion, Carolyn Sabates is asking a judge to throw out a distribution of assets agreement entered in May. A hearing is scheduled Monday in Mecklenburg County Superior Court.
“Her file is littered with court orders and rulings against her,” Diehl said.
The Grand-Am team is a “collateral issue” in the case, he said, adding: “It’s an asset that doesn’t have any value.”
Rare look at NASCAR finances
The dispute provides a rare glimpse into the finances of NASCAR, a privately held company that is tight-lipped about how much money it makes. Occasionally information slips out in legal filings, such as a divorce case this year that divulged details about the France family’s wealth and Chief Executive Brian France’s income.
NASCAR is based in Daytona Beach, Fla., but has operations in Charlotte. Many of its teams are based in the Charlotte area.
Felix Sabates, in his early 70s, is a well-known Charlotte businessman whose career has spanned racing, car dealerships, a yacht-building company and investments in sports teams such as the Charlotte Bobcats, according to a biography on his team’s website.
Carolyn Sabates, 70, claims that the couple’s lifestyle once came with an annual cost of $2 million per year but that she now has no money to pay an attorney, according to a filing in the case. The filing says she has had no income for seven years and has suffered health problems because of the case.
Felix Sabates, a Cuban-American who has made Charlotte his home since 1963, first entered racing in 1987 when he bought a research and development team from Charlotte businessman Rick Hendrick, according to the biography. He ran his own team on NASCAR’s top circuit before merging operations with Ganassi and later Dale Earnhardt Inc.
Grand-Am racing features sports cars racing on road courses and some speedways. In 2012, Grand-Am announced a merger with the American Le Mans series, and the combined circuit will be called United SportsCar Racing starting next year.
The better-known Sprint Cup series runs more than double the number of races as Grand-Am, and its events are broadcast on top networks such as ABC, Fox and ESPN. Grand-Am races have recently run on the Fox Sports 1 and Fox Sports 2 cable channels.
‘There is no money’
According to testimony by Felix Sabates in a 2010 deposition included with last month’s filing, Sabates said he and Ganassi started the Grand-Am team after accepting Bill France’s offer to defray the startup costs and guarantee an annual profit. Sabates also testified that Mexican billionaire Carlos Slim was a partner.
In his testimony, Sabates said the money that he and Ganassi were receiving stopped when Bill France died. The Grand-Am team is still competing in the series, but Sabates paints it as a money loser.
“We’re trying to close the doors without embarrassing ourselves, the France family and embarrassing (the) Grand American Series,” he said in the deposition. “There is no money. There is no purse. There’s nothing.”
Sabates’ ownership role in the team is unclear.
At a 2010 hearing, Diehl, Sabates’ attorney, said his client’s ownership was at 20 percent. In 2012, Sabates testified that he had no ownership, although he said he had received an $80,000 consulting fee from the team over a three-year period.
In an interview, Diehl said he thought his client’s role with the team was “very minimal.”
“It’s Ganassi’s company,” he said. “He runs the ship for better or worse. Felix goes to the races and sits in the pits. I don’t think he put much into it, and he didn’t get much out of it.”
Wheeler, the former Charlotte Motor Speedway president, said it’s not surprising to hear that a Grand-Am team would struggle to make money. Road racing is popular in Europe but has never been a hit in the United States.
“It’s a very difficult sell in America,” Wheeler said.
Craig Depken, an economics professor at UNC Charlotte who studies sports, said road racing is overshadowed by other racing options in the United States and is a challenge financially because there are fewer seats to sell.
NASCAR has also faced problems with declining TV viewership of its stock car races, a drop in ticket sales at tracks and a transition from national corporate sponsors to regional ones, Depken said.
“We do have market signals that NASCAR may have peaked relative to other sports leagues,” Depken said. “But that remains to be seen.”
As for any concerns fans should have about a NASCAR official supporting a team financially, Depken said other sports have seen cases where the league was forced to step in and take over teams in financial trouble without experiencing problems. “The leagues haven’t done bad by fans,” he said. “They’re looking at their long-range reputations.”
Once other teams know about the practice, “they will watch you like a hawk,” said Wheeler, the former speedway president.
“You have to be extra careful,” he said, “and make sure the operations being financed don’t receive any special treatment.”
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