Copyright 2001, Roadracing World Publishing, Inc.
Apparently fearing public exposure of AMA dealings now hidden from the membership, AMA officials and Trustees made the first move in an attempt to disqualify the Take Back The AMA reform slate of candidates for AMA Trustee, John Ulrich, Jeff Nash and Kevin Schwantz.
Ulrich, Nash and Schwantz have built their campaign on promises to serve with "Honesty. Integrity. Action."; improve the AMA's work to defend the right of all motorcyclists to fair treatment on and off-road with full access to public lands; increase accountability to the membership, including full disclosure of the true cost of the Edmondson vs. AMA debacle settled earlier this year by the incumbent board voting to pay Roger Edmondson $3 million in members' funds; and restore AMA Pro Racing--run in the recent past as a heavily-subsidized for-profit (yet rarely profitable) subsidiary of the AMA--to the direct control of the Association.
In nomination balloting concluded October 8, the three reform candidates overwhelmed their incumbent Trustee opponents, Ulrich drawing 165 votes to incumbent Ellis Robertson's 74, Nash drawing 59 votes to incumbent Ron Widman's 29, and Schwantz drawing 190 votes to incumbent Carl Reynolds' 32.
In a letter addressed to Ulrich, Nash and Schwantz, AMA President Rob Rasor outlined the AMA's case for disqualifying the reform candidates, based on a new interpretation of Article VII, Section 1 of the Code of Regulations for the AMA.
It appears that the new interpretation of the section of the Code, if upheld, would actually disqualify about half the current Trustees from serving on the Board, including employees of Honda, Kawasaki, Suzuki, Harley-Davidson and Dunlop, as well as a Harley-Davidson/Suzuki dealer--unless the new interpretation is only applied selectively.
Interestingly, former Trustee candidate Jerry Wood, who was nominated but lost in the subsequent Northeast Region election to AMA Chairman Rick Gray, said last week that he did not receive such a letter when he was nominated in 2000, despite owning and operating a racing school that has been sponsored by Kawasaki for 20 years.
Ulrich owns a company which operates a race team and a riding school that includes Suzuki among its sponsors and former 500cc World Champion Schwantz operates a riding school which uses Suzuki motorcycles provided by American Suzuki Motor Corporation. Schwantz also provided riding coaching services under contract to American Suzuki in the 2000 and 2001 racing seasons, although he has said that he does not plan to seek renewal of that contract with American Suzuki in the future; the contract expires prior to the start of the new Trustee terms. Nash won the 2000 AMA Pro Thunder Championship and is currently racing in the 2001 AMA Pro Thunder Championship with Dunlop as one of his team's sponsors.
Interestingly, Rasor, as President, is a hired hand. Under the Code he is under the "controlling surveillance" of the Board and thus has no authority to interpret the Code, only to carry out the Board's policies. Moreover, any interpretation, even if sanctioned by the Board, that varies from or extends the text, would arguably constitute an amendment which would have to be made under Article XVI.
The text of Rasor's letter follows:
Congratulations on your having completed the first phase of the nomination process. I want to take this opportunity to share with you the final results of the nomination process that have been audited and reported to us by the independent accounting firm of Ernst & Young. A copy of Ernst & Young's report is enclosed for your reference.
Based upon Article VII of the Code of Regulations of the American Motorcyclist Association (the "Code") and the results of the nominating process as certified by Ernst & Young, the following individuals have been nominated:
Southwest Region--Ellis Robertson and John Ulrich have received sufficient nominations to appear on a ballot in the January 2002 issue of American Motorcyclist which is published early in December 2001.
Southeast Region--Carl Reynolds and Kevin Schwantz have received sufficient nominations to appear on a ballot in the January 2002 issue of American Motorcyclist which is published early in December 2001.
South Central Region--Ron Widman and Jeffrey Nash have received sufficient nominations to appear on a ballot in the January 2002 issue of American Motorcyclist which is published early in December 2001.
At this point in the process, the Association must ensure that the successful nominees meet all of the eligibility requirements that are set forth either in the enlosed "Guide for Governance: Directorship in the American Motorcyclist Association" or the Code that is contained in the enclosed "Manual for Volunteer Leaders" in order to actually appear on the ballot in the January 2002 issue of American Motorcyclist.
Although the vast majority of the eligibility requirements contained in the above-referenced documents and the enclosed Confidentiality Agreement are self-explanatory, those contained in Article VII, Section 1 of the Code require more explanation. Specifically, Article VII, Section 1 states the following:
...A person shall not be eligible for election as a Trustee if such a person is employed or affiliated with the same business entity, or another business entity related thereto by common control, as another person who would be serving as a Trustee at the same time. A Trustee may not be an employee of the Association. An Individual Member Trustee may not be an employee of any Corporate Member who has a designated Member Trustee presently serving on the Board of Trustees...
The purpose of this eligibility requirement is to ensure that the Board consists of 12 independent decision-makers who are not economically or otherwise subordinate to another Board Member. Accordingly, any successful nominee who is either: (i) employed by the AMA; (ii) employed by or affiliated with a Corporate Member that is currently represented on the Board (i.e., American Honda Motor Co., American Suzuki Motor Corp., Dunlop Tire Corp., Filter Publications LLC, Harley-Davidson Motor Co., or Kawasaki Motors Corp.); (iii) employed by or affiliated with any current Individual Member not standing for reelection as a Director (i.e. J. Richard Gray, Dal Smilie, or Jeff Smith); or (iv) employed by or affiliated with an Individual Member Director Nominee as set forth above is not eligible to become a Director.
In order to make a final determination about the elgibility of a Nominee to become a Director, I must ask you to disclose in writing to me any employment or other affiliation that you have with either a Corporate Board Member, Individual Board Member, or current Nominee. I must receive that written disclosure on or before October 19, 2001, and it must fully describe the identity and type of any such employment or affiliation. After review of the written disclosures, if any, it may be necessary to require further information from a Nominee including, without limitation, the agreement(s) between the nominees and Board members of other nominees.
Additionally, in order to create the election ballot, we will need a black-and-white head shot of you along with your background and platform (200 words or less) by Thursday, November 1. Please feel free to use the self-addressed, postage-paid envelope which is enclosed.
Thank you in advance for your cooperation in this matter. If you have any further questions about this process, please feel free to contact me or our general counsel, Timothy J. Owens, at Owens & Krivda, 471 E. Broad St., Suite 2001, Columbus, Ohio 43215 or (614) 228-8995.
Robert Rasor, President
American Motorcyclist Association
(Owens was the architect of the legal strategy which ultimately led the AMA to settle with Edmondson for $3 million last summer.)
In a letter responding to Rasor, Ulrich wrote:
Dear Mr. Rasor:
I am in receipt of your letter dated October 11.
The question you pose regards my meeting eligibility requirements to become a Trustee of the AMA. You quote Article VII, Section 1 of the applicable Code: "A person shall not be eligible for election as a Trustee if such person is employed or affiliated with the same business entity, or another business entity related thereto by common control, as another person who would be serving as a Trustee at the same time. A Trustee may not be an employee of the Association. An Individual Member Trustee may not be an employee of any Corporate Member who has a designated Member Trustee presently serving on the Board of Trustees…"
I can assure you that I am not "employed or affiliated with the same business entity, or another business entity related thereto by common control, as another person who would be serving as a Trustee at the same time."
The meaning and purpose of the quoted section of the Code is clear. However, while I find that the interpretation of the Code as further explained in your letter is not supported by the Code itself, and is a "reach" of monumental political proportions, I can also assure you that I am eligible to be a Trustee using the definition of "affiliated" in common use in this country.
From The American Heritage Dictionary of The English Language: "1. To adopt or accept as a member, subordinate associate or branch. 2. To associate (oneself) as a subordinate, subsidiary, employee, or member: affiliated herself with a new law firm. 3. To assign the origin of.---intr. To become closely connected or associated: The two unions voted to affiliate. –affiliate n. A person, an organization, or an establishment associated with another as a subordinate, subsidiary, or member: network affiliates."
I am not employed by any company with an employee on the Board, nor am I employed by any company which is affiliated, i.e., subordinate, to any company with an employee on the Board.
Even if you are attempting to use a broader definition of the word "affiliated," despite your statement that "The purpose of this eligibility requirement is to ensure that the Board consists of 12 independent decision-makers who are not economically or otherwise subordinate to another Board Member," I still have no such relationship which would disqualify me.
However, if you are attempting to use a broader definition of the word "affliated," I am curious as to how the following current Trustees escape such a broader definition of "affiliated" and are eligible to serve:
Ray Blank, American Honda, and Mike Buckley, Dunlop, given that Honda is a major buyer of OEM tires from Dunlop, and given that Dunlop is a major sponsor of American Honda's racing teams. Given that Dunlop's motorcycle tire business greatly depends upon OEM tire purchases, it would seem that Mr. Blank would have great influence over Mr. Buckley. The same can be said for Kawasaki's John Hoover, Suzuki's Mel Harris and Harley-Davidson's Clyde Fessler vis a vis Dunlop's Mr. Buckley. Combined, Honda, Kawasaki, Suzuki and Harley-Davidson represent a huge portion of Dunlop's OEM tire business, and Dunlop supplies hundreds of thousands of dollars worth of free tires and other support to AMA road racing teams fielded by Honda, Kawasaki and Suzuki (and formerly, Harley-Davidson).
Mel Harris of Suzuki and John Hoover of Kawasaki, two companies which recently announced an affiliation, using your apparent broader definition.
Ron Widman, a Suzuki and Harley-Davidson franchised dealer, and Mel Harris of Suzuki and Clyde Fessler of Harley-Davidson, given that allocations of machines can literally make or break a motorcycle dealer, and given that Mr. Harris has ultimate personal control over allocation of machines to franchised Suzuki dealers (I am not certain of Mr. Fessler's position at Harley-Davidson, although the Motor Company itself certainly has the ability to manipulate Mr. Widman's product allocations and thus determine his profitability and ultimate success as a dealer.)
Jeff Smith, a Trustee of AHRMA, which operates events under AMA sanction and specifically conducts AMA Vintage events at Mid-Ohio and Sears Point in what appears to be some sort of joint venture or promotion. This situation would appear to leave the smaller of the two organizations, AHRMA, and its representative, Mr. Smith, in a position to be unduly influenced by other Trustees as a group.
In the recent past, Paul Dean and, before him, Jim Hansen served as Trustees, representing Cycle World magazine, which depends largely on ad sales to OEMs for its profitability and even survival, ad buys which are currently controlled or ultimately overseen by Honda's Mr. Blank, Suzuki's Mr. Harris and Kawasaki's Mr. Hoover. (Again, I am not sure of Mr. Fessler's position, although Harley-Davidson advertising is a big factor for Cycle World.). Of course, Mr. Buckley controls Dunlop's aftermarket advertising, also widely seen in Cycle World. All of which would lead one to believe, if one subscribed to your apparent broader definition of "affiliated," that any magazine representative would be greatly subordinate to any OE representative, or tire representative. Yet Mr. Dean and Mr. Hansen somehow were allowed to serve as Trustees.
Given the past and current make-up of the Board, it is clear that a precedent has been set utilizing the strict guidelines of the actual Code wording: "related thereto by common control". (If you have a different interpretation, then I assume you will be immediately disqualifying Mr. Blank, Mr. Harris, Mr. Hoover, Mr. Widman, Mr. Smith, Mr. Fessler and Mr. Buckley.)
All of which means that, even with any new interpretation of the guidelines, I am eligible to serve as a Trustee.
In anticipation of your next question, I have had and currently have business dealings with Honda, Kawasaki, Suzuki and a subsidiary of Harley-Davidson. However, these business dealings are arms-length transactions and do not involve control.
One of my companies, Roadracing World Publishing, Inc., produces a magazine and website and sells ads to the above referenced companies, although I have on two occasions happily invited two of those companies to keep their ads when persons working for said companies attempted to exert control on my publication's editorial content or business policies. I am subordinate to no one, and I do what I believe to be right.
Another company I substantially own, Team Hammer, Inc., operates a road racing team, Team Valvoline EMGO Suzuki, in AMA Pro Racing. The team has as its primary sponsor an outside-the-industry company and, as a secondary sponsor, American Suzuki Motor Corporation. The team has about 20 sponsors in all. The contract between Team Hammer, Inc. and American Suzuki clearly states that American Suzuki has no control over how Team Hammer operates its racing programs, and furthermore contains language clearly stating that American Suzuki has no control over what I personally say or do. The business relationship between Team Hammer Inc. and American Suzuki is no different than the business relationship between Dunlop and American Suzuki, Dunlop and Honda, and Dunlop and Kawasaki, that of a contracted supplier, although Dunlop supplies tires and Team Hammer supplies racing activities.
My primary source of income is Roadracing World Publishing, Inc., although I do hold stock in Harley-Davidson Motor Co., purchased in 1986 at the IPO. I have also done some freelance writing and consulting but at this time have no outstanding projects and/or contractual obligations.
Lastly, I would like to know if the AMA sent this same letter to candidates standing for election in 2000 and to candidates standing for election in 1998. I look forward to your reply.
If you have any further questions, please don't hesitate to contact me or my attorney, Arthur C. Chambers, at (415) 441-0169.
John D. Ulrich