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Originally published October 6, 2011 at 10:00 PM | Page modified October 7, 2011 at 12:32 PM

Key owner's fortunes sink along with M's

Mariners minority owner Chris Larson has been cast as a savior by some long-suffering Northwest baseball fans.

Seattle Times staff reporter

Graphic: Mariners ownership (click for full PDF)

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Mariners minority owner Chris Larson has been cast as a savior by some long-suffering Northwest baseball fans.

They envisioned the former Microsoft star programmer, a media-shy multimillionaire, swooping in and rescuing the last-place team by buying out majority owner Hiroshi Yamauchi, the Japanese billionaire whose absentee status and seeming indifference has been a sore spot locally.

But that plan relied entirely on Larson's wealth, which he is now struggling to hold on to. A complex, occasionally acrimonious divorce between Larson and his wife of 24 years, Julia Calhoun, reveals serious financial struggles that raise doubts about his ability to fund the Mariners and remain their largest owner this side of the Pacific.

Court documents show the Microsoft stock portfolio used to build Larson's fortune and finance a lavish lifestyle has been largely depleted.

"During the current recession, our net worth has been severely impacted by the decline in the stock market and other factors and we have had to sell assets to pay down debt," Larson states in documents from the divorce, slated for trial in November. They have five children.

Larson, 52, owns nine homes in Seattle, Hawaii and London and 35 additional properties, plus exotic cars and a $6 million baseball-memorabilia collection. But he estimates personal and joint debts with his wife at $225 million.

When Microsoft stock began plummeting in 2008, it left Larson so debt-plagued that he attempted to sell a third of his Mariners stake to fellow team owner John Stanton to raise cash to repay a bank loan.

Larson later abandoned the sale and remains the largest minority owner at 30.63 percent, according to the documents.

M's payroll cut

Word of his struggles comes at a time the Mariners had another losing season with declining attendance, while rivals increased spending. A significant payroll hike appears needed, but Mariners owners haven't added any new money — through what is known as a capital call — in more than a decade.

Larson would be on the hook for just more than 30 percent of any capital call, but the team instead has cut payroll since 2008 without saying why owners aren't putting in more. The divorce documents not only dampen the idea Larson can afford to take over the Mariners, they raise questions about whether he'll need to sell his stake to pay down debt and finalize a settlement with his wife.

Mariners CEO Howard Lincoln won't comment on owners' personal issues, but said: "Chris Larson is a minority owner of the Mariners. This situation has no impact on our operations and there is no connection to our player payroll."

But that payroll dropped decisively after the 2008 stock-market plunge, from $117.6 million to about $93.5 million this season. Larson owns a bigger stake of the Mariners than the 15 other minority owners combined and sits on the team's seven-member board, with voting rights on decisions that include finances — though Yamauchi has final say.

Kept the M's here

Larson joined the Yamauchi-led ownership group in 1992 when it bought the Mariners for $100 million, later adding $112 million to cover yearly losses and Safeco Field construction costs. In a deposition, Larson said he paid his 30.63 owner's percentage of those costs — roughly $65 million — to have a "plaything" for "enjoyment" and "pleasure" and to keep the Mariners from relocating to Florida, which at that time had no major-league team.

"There's two people who, if they didn't participate in this thing, there would be no Seattle Mariners today," Larson stated in a deposition from August 2010. "One is Hiroshi Yamauchi, and myself. If neither of us had stepped up, this thing would be gone."

In a February 2009 interview, Lincoln said the 2008 financial crisis caused the Mariners to not go after even cheaper-than-expected free agents because "you've got to go with what [money] you've got."

He added: "The most important thing right now is that you have to assume we're not immune from this economic crisis — at all. No team is. I don't think the Yankees are."

But the Yankees and Seattle's division rivals resumed spending. The American League West champion Texas Rangers spent $92 million this year and should top $100 million next season, while the second-place Los Angeles Angels were at $141 million.

The Mariners were a roughly $70 million team by June because of money spent on players already traded, released, or benched. Seattle finished with the third-worst record in baseball this season and second-worst in 2010, while its offense was one of the worst in 40 years both seasons.

Murky future

Other than longtime Nintendo patriarch Yamauchi — who owns just more than 50 percent of the Mariners — Larson would owe the most if owners were subjected to a capital call. The team has avoided capital calls since Safeco Field opened in 1999, instead basing payroll largely on projected attendance.

That produced operating surpluses in all but one Safeco Field season, with owners allowing the team to keep the money rather than taking the profit themselves. The surpluses funded several payroll increases the past decade and covered the only loss — $4.5 million in 2008.

The team expects to lose money this year, as attendance for its 81 home games dropped 9 percent to just less than 1.9 million, down from a high of 3.5 million in 2002.

While the team this year shifted toward younger, cheaper players, many fans anticipate $100 million payrolls again once that young core is ready to contend. But given ongoing attendance declines, funding future payroll increases with past surpluses alone might not be enough to make the Mariners competitive.

Sports business specialist Michael Cramer, a former president of the Texas Rangers and Dallas Stars of the NHL, said Larson's share size makes his struggles an issue if the Mariners choose to seek new money. If Larson couldn't meet a capital call, other owners would have to fund the difference — reducing Larson's stake — or loan his portion.

"The fact that one person can't pay in doesn't automatically mean that that's a death sentence to that team," said Cramer, who runs the Sports and Media program in the College of Communication at the University of Texas. "But it becomes a problem if you don't have willing co-owners who'll loan it, or put in money and dilute the owner who isn't putting in."

Yamauchi is worth an estimated $4.6 billion, but had his own stock setbacks in July, reportedly losing $300 million in one day on falling Nintendo shares. And Cramer said the battered economy makes minority owners — who already have little or no say in teams' operations — less willing in general to invest more money.

Whether Mariners owners would meet a capital call in the post-2008 economy, the fact remains — for whatever reason — they aren't being asked.

Array of assets, debts

Larson did not respond to requests for comment. A court order bars Larson and Calhoun from discussing some Mariners issues in public.

Documents show Larson joined Microsoft in 1975 as a high-school summer intern to Bill Gates and Paul Allen, then full time after graduating from Princeton University in 1981. He received 56,600 shares of stock that split 10 times (including once before Microsoft went public in 1986) into 19 million shares by 2003.

Larson borrowed against the shares to accumulate property, including two commercial office buildings, rental homes and undeveloped real estate. His estate in The Highlands, just north of Seattle, includes a 25,000-square-foot home, adjacent 8,400-square-foot gatehouse, 24-car underground garage, 6,200-square-foot "office" home and nearby homes of 4,700 and 2,500 square feet.

Court filings show Larson owns a car collection that his wife says includes a $500,000 Rolls-Royce, a $200,000 Bentley and an Aston Martin. The couple donates $6 million annually to charity and spends $150,000 to $250,000 annually on Mariners tickets.

A court order prevents Larson from selling most assets or making new investments without his wife's consent. Larson claims in filings their holdings "have lost considerable value" and it will take years to sell enough assets to make debts more manageable.

Documents show Larson listing $50 million in personal debt from a loan with JP Morgan Chase and $175 million in joint debt with his wife. He'd also pledged $30 million to three business ventures he expects to make capital calls on him.

Larson took the JP Morgan Chase loan to avoid selling stock to cover mounting debt, but that backfired when markets tanked. By late last year, Larson claimed in court filings he'd sold more than 80 percent of his previous 19 million Microsoft shares and had monthly expenses (including charitable contributions) of $1,046,770 against net income of $266,371.

He also claimed he had been paying $130,000 in monthly interest alone on the JP Morgan Chase loan, which he'd hoped to clear by selling some Mariners shares to Stanton in 2009.

In a deposition, Larson said the 10 percent share he considered selling appraised at only $34 million. Forbes magazine valued the Mariners at $439 million that year and Larson — hoping for a higher appraisal — opted not to sell.

"I didn't want to conduct a fire sale," Larson said.

Larson's full stake is being appraised for the divorce. Calhoun declined through her lawyer — who cited the ban on discussing Mariners issues — to comment on whether Larson might have to sell team shares.

Yamauchi transferred his stake in the M's to Redmond-based Nintendo of America in 2004 for estate-planning purposes, but retains control of the team.

There has been speculation about how long Yamauchi will remain an owner. He turns 84 next month, has never been to a game and his favorite player, Ichiro, is under contract just one more season. Many assumed Larson would be his successor.

Even at the lower-than-expected appraised rate from when he considered selling to Stanton, Larson's stake would be worth roughly $104 million — a return of $39 million on his investment. Larson said in a deposition he initially figured the team would be a poor investment, but it has turned out "OK," with the pleasure he expected.

And so far, it's a pleasure he has held onto while other acquisitions are relinquished. What remains to be seen is how much longer that lasts for the one-time anointed savior of a team now facing uncertainty both on and off the field.

Geoff Baker: 206-464-8286 or gbaker@seattletimes.com.

Seattle Times researcher David Turim contributed to this article.

Payroll and performance
After rising until 2008, the Mariners' player payroll has dropped, with mixed results on the field and in home attendance:
Year Payroll W-L Att.
2011 $93.5M 67-95 1.9M
2010 $93.5M 61-101 2.1M
2009 $98.9M 85-77 2.2M
2008 $117.6M 61-101 2.3M
2007 $106.4M 88-74 2.7M
2006 $87.9M 78-84 2.5M
2005 $87.7M 69-93 2.7M
2004 $81.5M 63-99 2.9M
Sources: Cot's baseball contracts website and Mariners team sources

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