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Jan 25, 2010

AMA President Rob Dingman Interview Part One: Answering The Question, How Much Money Did The AMA Get From DMG For AMA Pro Racing?

By David Swarts

Rob Dingman took control of the American Motorcyclist Association (AMA) as President and CEO in March of 2007. Since then, Dingman says he has worked to make the AMA financially viable for the long term and to focus the AMA on its core mission--protecting the rights of motorcyclists and the future of the sport. He's also had to spend time and energy dealing with long-time AMA employees who fought his reorganization of the association, attacks from bloggers and other media outlets, legal battles the AMA was indirectly drawn into and the controversial sale of AMA Pro Racing's properties to Daytona Motorsports Group (DMG).

Dingman granted my request for an interview on his way to round three of the Monster Energy AMA Supercross Championship at Anaheim, California, stopping by the offices in Lake Elsinore, California on January 21.

My recorded interview with Dingman lasted for over 90 minutes and 10,000 words, so I've broken it up into three parts covering three major topics: AMA's sale of AMA Pro Racing to Daytona Motorsports Group; AMA's involvement in the dispute between AHRMA and its founder Rob Iannucci; and the current state of the AMA.

Here is the first part of the transcribed interview, covering AMA's sale of AMA Pro Racing to Daytona Motorsports Group.

Roadracing World: It seems that there is quite a bit of controversy surrounding AMA's sale of AMA Pro Racing to DMG, especially calls for disclosure of the amount of the sale.

Rob Dingman: I don't like that the argument stems from two publications stirring the pot and getting people to call to us and write to us, but I think it's a fair contention that people ought to know, which is why it was important that we work with DMG [Daytona Motorsports Group] to try and disclose more of the deal.

We couldn't disclose the deal initially because they were still trying to do deals with commercial partners that they work with, and they didn't want disclosure of the overall deal to impact negotiations with their contractors and people they might work with to do the individual disciplines.

Given that they've had it for a year or so I think it's appropriate for us now to disclose it. We talked to DMG, and they said yes. We entered into an agreement to disclose financial terms in broad terms of what it is. We just finished that yesterday [January 19].

RW: What made you decide to disclose it now?

Dingman: Primarily because, like I said, I couldn't do it before because it was going to impact their deals. There was enough interest from the membership -- we've gotten a number of pieces of correspondence that [we decided] it's time.

People talk about the membership's right to know and confidentiality, but the reality is as an organization you have to have the ability to enter into agreements and some agreements are going to have confidentiality clauses. You can't prevent yourself from doing business by not being willing to enter into a confidentiality clause. But there becomes a point to where [you ask] what is the value of the confidentiality clause? You get to a point where it's not necessary to hold certain things confidential anymore, then it's up to the parties to work with each other to try clarify or release what they can, which is what we did with DMG.

We're getting pressure from our membership to release more of the details of the deal. We want to do this, and they've agreed to let us do that.

RW: You said they just agreed to do this?

Dingman: Yeah.

RW: So things are changing with Daytona Motorsports Group ?

Dingman: They are. You know, I've taken a wait-and-see approach with them. We've not been pleased with the way DMG ran the operation last year. Clearly, their operation of road race left a great deal to be desired. But on the other hand it wasn't all negative.

If you look at motocross they entered into an agreement with MX Sports, and motocross did well last year. They had a good series. They had good TV coverage. By all accounts it was a good deal, and we didn't hear all the negatives about motocross that we heard about road racing. It's primarily road racing, and that was the one discipline that they claimed to have some expertise in, and we thought they were going to be able to be successful there.

The thing that I really want to get across is there's no way the AMA Board ever would have entered into a deal with Roger Edmondson alone given the history between AMA and Roger Edmondson. The reason AMA entered into the deal is because of Jim France's involvement.

What we discovered over the last year is that Jim France wasn't as involved as he needed to be. He has since become a lot more involved, and I think that's the reason why we're starting to see some changes down there.

I think they've got a long way to go to restore credibility. They did a great deal of damage to the AMA brand over the last year, and we're not happy about it. For those that say, 'the AMA just took the money and disappeared,' that couldn't be further from the truth. I'm spending as much time on professional racing issues now as I did before trying to work with these guys and help them, and work with the FIM.

Our goal was to put professional racing in the hands of some people who could grow it, because the AMA wasn't capable of growing it to the extent that it needed to. And professional racing had begun to detract from the AMA's ability to perform its core mission, which is to protect the future of motorcycling and promote the motorcycling lifestyle.

RW: Given your comments at the press conference announcing the deal two years ago at Daytona, why wouldn't you have done the deal just with Roger Edmondson alone?

Dingman: Just given the history. There was a lot of animosity between the AMA and Roger Edmondson over the lawsuit. Most of the people who were involved with the AMA Board at that time are no longer on the Board, but there was still some hangover effect. It was a very public dispute. Clearly it was something that would be very difficult to explain to people that, 'yeah, we just did a deal with the guy who sued us and won this huge award.'

Again, it goes back to we thought we were turning professional racing over to an entity that was affiliated with NASCAR, which is a very prestigious racing brand. We believed that they had the capability to grow the sport. What we got in reality was there was no affiliation really with NASCAR other than being located there in Daytona. And now we're starting to see some more attention from Mr. France and some of the other partners. The thing is there were other partners involved with DMG as well, and now we're starting to see some involvement from the other partners as well.

RW: I think one of the other reasons you cited in that press conference for making the sale was racing by nature is a controversial business and AMA didn't want to be distracted by the controversy. I think you addressed it a little already, but how do you feel that turned out?

Dingman: Great question, because we haven't really gotten out of the controversy. In fact, we probably got deeper in controversy given the fact that we've allowed DMG to do business as AMA Pro Racing under the license agreement. You're absolutely right. Our goal was to get away from the controversies associated with professional racing.

Again you have to remember that our Board is made up of corporate interests that have an interest in racing, and we have largely removed that element from Board discussions. So our Board meetings now are more productive, and we can talk more about the needs of the motorcycle community rather than get mired in racing controversy.

So that part has worked real well, but as far as the other side of it, I think two years ago, if you think back, everybody said 'Anybody but the AMA. We want somebody else to run professional racing and certainly road racing. It can't be much worse than the AMA.'

I remember reading that from people. And here we are two years later and guess what? It was a lot harder than people thought it was. Here we have an entity that should be perfectly capable and they've struggled out of the box.

RW: How much did AMA get from DMG for the rights to AMA Pro Racing?

Dingman: We got roughly $10 million to be paid over about a decade. And it also includes the payment by DMG of memberships for all of the professional racers, crew and mechanics, in perpetuity. So with the current number of racers there are that's about $180,000 a year. If it grows that could be more. Even after the payment of the initial amount that will continue in perpetuity.

RW: So the AMA membership that participants buy with their AMA Pro Racing license goes to AMA and not DMG?

Dingman: The way it was set up before the dynamic was kind of backwards. Everybody perceived as joining the AMA as the tax to go race, and to me that is just completely the wrong approach. It's a negative response. What DMG was supposed to do they were supposed to provide an AMA membership with the purchase of a license, so it wasn't that negative of you have to be an AMA member to race. It was a value added to the license. That was the thinking behind it.

Going forward in the future, when they get their house in order that will be perceived, hopefully, as value added, a membership in the AMA is an added value of getting your license.

RW: What about guys like Chris Carr, who is a life member and he's paying the same amount to get an AMA Pro Racing license and AMA membership even though he's already a life member? Is DMG still sending the money for his membership or are they keeping it?

Dingman: They're not sending us the money for life members, [just] anybody they add to their roles or anybody that needs to be current. So life members, I believe they are keeping that money.

RW: Why is that fair?

Dingman: It's not. I don't think it is fair.

RW: Are you going to do anything about that?

Dingman: Yeah, I think that's something we need to talk to DMG about for sure.

RW: So do you think it's possible that every AMA life member who had to buy something from DMG is going to get a $39 refund per year?

Dingman: I don't know. I think that's a business decision that DMG will have to make because it's something"¦remember they created a DMG membership of sorts. So they have a membership that includes membership in the AMA.

RW: Theoretically they are supposed to be passing that money along and they're keeping it?

Dingman: For life members, I believe they have been keeping it, yes.

RW: You talked about the disclosure situation with the amount of the sale, but is there anything in the laws for non-profit organizations that require this information to be released or is there a fiduciary duty to the members? What governs this situation?

Dingman: There's two questions there -- one, is whether the law requires disclosure, and two, whether there's fiduciary duty. Clearly there's fiduciary duty to ensure that we protect the assets of the AMA and spend the members' money wisely.

And then as far as the duty to disclose, it's unclear in my mind what that obligation is. There is a requirement that members be allowed to come and look at the books and records of the AMA. It's unclear whether that extends to contracts where there may be a confidentiality requirement, because as I said before I think it's unrealistic to think that an organization the size of the AMA wouldn't have contracts that had provisions that are subject to confidentiality requirements. It would be very difficult to find people to do business with if they couldn't include a confidentiality requirement. It's a very competitive marketplace, and it's a fact of doing business, particularly in the racing business.

RW: If you could go back before the sale was made would you do it again?

Dingman: I think yes, although I think knowing what I know today we might have included some more safeguards to ensure a greater involvement of all of the DMG partners, including Jim France. Because, again, I go back to we wouldn't have done this deal if Mr. France wasn't involved, and our expectation was that he was going to be involved and resources that he brought to the table would be involved, and that's not what we saw. We saw the organization led largely by one individual without the checks and balances of the other partners being involved.

RW: Did you become concerned at any point of the treatment of AMA members who were racers by DMG?

Dingman: Absolutely. The operational aspect of road racing, how they managed things were kind of appalling. Clearly there was selective enforcement, and the Johnny Rock Page situation was a perfect example. I am still scratching my head trying to figure out how [AMA Technical Director] Al Ludington still has a job after he caused as much damage to the AMA brand as he has.

I have raised that issue with DMG repeatedly, and they say that Al has a technical expertise and it would be difficult for them to replace [him]. While I understand that I also have a real issue with a guy who is wearing an AMA-logoed uniform berating one of our members all over the Internet. That single issue has done as much damage to the AMA brand as anything DMG did.

And then there were other issues with selective enforcement, the whole jump start issue that you guys have talked a lot about on your website already. That is ridiculous. That was the old AMA. That was exactly why we looked to sell, because we had those operational issues ourselves and we believed that by selling to another entity that would bring more professionalism to their operations that it would repair that situation, that it would resolve that situation. What we saw was, frankly, a situation where there was perhaps more selective enforcement, which that's not good for anybody.

RW: Are there any clauses in the agreement with DMG under which AMA could take back the rights to AMA Pro Racing?

Dingman: There's not necessarily a provision for us to take it back. As I said before there's a license agreement that's part of the arrangement to allow them to do business as AMA Pro Racing. When we were doing the sale one of the things going back and forth that they kept saying was, 'Well, are you selling the car? Are you going to continue to tell us what to do? Do you tell people what to do when you sell a car? What if we want to paint the car?'

The difference for us has been, yes, we sold the car, metaphorically, but they're driving around with our license plates on it still. We're not going to be able to allow them to continue to run our brand down without providing input to get them to change it, and that's clearly what we've done.

There are provisions if they decide to walk away from any discipline. There are provisions that address that and cover that. But there's not a provision necessarily for AMA to take back any discipline.

RW: At what point during the last year or two did you feel DMG had gone too far and that you would start giving them input?

Dingman: We began giving input kind of all along. I had said from the beginning if we want to reap the rewards of AMA being associated with professional racing when they become wildly successful -- and at that point I was talking about when they become wildly successful and not if they become wildly successful, because I had every confidence they would be successful -- we had to be there while they stumbled through their first year or two, while they got their bearings and they figured out what they wanted to do. I, at some point during the season, started to question whether that confidence in their ability to do that was well founded.

It began with Daytona (2009). I was watching the 200 with the Chairman of our Board, Stan Simpson. The beginning of that race, if you remember, was incredibly competitive. It was a close race, which is something that we hadn't seen recently, and I was excited. Then all of a sudden the pace car came out, and the pace car seemingly never left. That right there is when I began to have some concerns, but I believed they would iron those things out.

Then they had the incident at Laguna with the pace car. They didn't seem to manage to learn from their mistakes and be nimble enough to change when they needed to. Operationally, there's no doubt they stumbled. My hope is that David Atlas, who is now in charge of DMG,"¦he's a listener. He listens more than the other folks that have been involved in the past. If he's able to take what he hears and turn that into operational policy I think they have a chance to be effective. But it's a challenge for them. Clearly it's a challenge because they lost a great deal of credibility over the last year. They've got a lot to prove to regain that credibility.

You know, as I said, they did a tremendous amount of damage to the AMA brand, which damaged the credibility of the AMA and called into question the wisdom of doing the deal. I still believe that selling the rights of professional racing was the right thing to do because we have a tremendous challenge ahead of us to make sure a bright future for motorcycling.

RW: Can you attribute any tangible benefits AMA members have seen as a result of the sale of AMA Pro Racing?

Dingman: Absolutely. One of the other things, there's been this focus on how much did the AMA get? Well, you need to keep in mind that [AMA] Pro Racing was not profitable. It was up and down. Some years we would lose money. Some years we would make a little bit of money. Some years we would barely break even. But for the most part it was very unpredictable, and it's very hard to continue to grow the revenue in that situation.

So one of the things we were able to do was relieve the AMA of these operational expenses that we couldn't pay for. We had a couple of professional disciplines that the AMA, for quite a few years, would budget for six-figure losses. It wasn't that we were surprised by these losses. We actually budgeted for six-figure losses.

To me it didn't make sense to spend our members' money in that way. So to me that is a tangible benefit that we were able to get out from under these things. There's this unrealistic notion out there that AMA was making all of this money in professional racing. That was never the case. It's just not true.

I think there was this grandiose vision at one time when they created Paradama (the for-profit AMA subsibiary that did business as AMA Pro Racing) that the AMA was gonna be NASCAR and the AMA was gonna be taking in all this money, and that just never panned out. Paradama, for a variety of reasons, was a failed experiment in Year Two. And rather than acknowledge that it was a failed experiment they kept going. It was a drain on the organization.

RW: Can you say which disciplines were budgeting for six-figure losses?

Dingman: Absolutely. Flat track and Supermoto were two examples. I think flat track was $350,000 and Supermoto, I don't remember the amount off the top of my head, but they actually lost more than they budgeted to lose.

Supermoto was one of those deals where instead of starting at the grassroots and growing it up, it started at the top and they expected it to trickle down to the grassroots. And that's just not sustainable. Unless you build it from the grassroots and the amateur level and grow a following it's very difficult to grow. And they were, 'we need to have this race series with 10 or 12 venues,' I can't remember exactly how many it was, rather than start small. If you look at the endurocross they started with three venues and grew it gradually, and that's become successful. They've done the appropriate thing and done well with it.

RW: How much money did AMA piss away on Paradama?

Dingman: Well, the AMA probably lost about $1.8 million during the life of Paradama. Now that doesn't take into account Paradama did pay the AMA some money for administrative costs.

This is another issue that there's a lot of misinformation out there about, people saying Paradama would have been wildly profitable but for the fact that AMA siphoned off this exorbitant allocation. The allocation was to pay for administrative services: Human resources, accounting, IT services, building space, heat, lights, you name it.

So there was an allocation to the AMA that Pro Racing paid to pay for their share of the cost of this. If you take that allocation out, even if Paradama was somewhat profitable or broke even unless you're making a ton of money off it it doesn't make a whole lot of sense to continue in an endeavor that can't compete in the marketplace. We clearly lost money.

RW: Are there other tangible benefits for members that came out of the sale of AMA Pro Racing to DMG?

Dingman: The other thing is we've rededicated ourselves to government relations activities. We've expanded the size of our government relations office, and part of that is because we are now able to allocate resources to government relations that before went to racing activities.

We've set up three endowments last year, one for the Hall of Fame Museum, one for amateur racing and one for government relations activities. Essentially, we set aside $1 million for each of those activities, and the spool-off from those million dollar set-asides will go into the budgets each year for each of those categories. Our hope is that we will continue to grow that, and that more money will be available to those other things.

We've been able to begin to revitalize our amateur activities because before professional racing was kind of overshadowing everything we did in amateur racing. So we've been able to focus more on that.

We've been able to grow our menu of member benefits. We have substantially more member benefits today than we had just two years ago, and part of that is because we're able to go out and develop partnerships that we weren't able to develop before.

RW: Was there something associated with professional racing that was preventing you from developing those partnerships?

Dingman: Part of it is the negativity and the controversy associated with racing, because who wants to identify their brand with something that is mired in controversy? So that enables us to go out and do that.

RW: But isn't your name, your brand still mired in controversy?

Dingman: It is, but it's easier to explain, 'Hey, that's another entity.' We're working with them to try and do that, to get our brand out of the controversy.

RW: Are those endowments money straight from DMG?

Dingman: No, and I'm glad you asked that question, because that's not the case. Essentially, the DMG sale gave us the confidence to take set-aside money from our reserves for that specific purpose because we didn't have to worry about the unpredictability of revenue from racing, because we have a set amount we know we're going to get from racing. So it's not from that at all. It just enabled us to spend resources we already had in that manner.

RW: Could you talk briefly about what type of stuff AMA did to try to push DMG towards solving some of the problems that came up last year?

Dingman: Absolutely. As I said before I think there's this perception that the AMA just kind of went away and hid. I've chosen to do things behind the scenes and work with the folks who were going to make the changes as opposed to going to the press and trying to create a debate in a public forum to get DMG to change. My efforts to get DMG to change were directly with DMG.

So throughout the course of the season we had a number of conversations with DMG personnel expressing our dissatisfaction with one aspect or another, but toward the end of the season it became obvious to me that we needed to do more and take a harder line with them. I discussed it with our corporate counsel, who advised me, saying, 'Put all the things you have in a memo to me so we can figure out exactly what the extent of the problem is.'

I did that. I drafted a 10-page memo that I gave to our attorney that said, 'Here are the items where I think DMG is either not adhering to the contract or they're damaging our brand or they're not treating our members fairly.' And I shared that with our counsel, who shared it with DMG.

As a result of that, DMG began to take notice and take a look at the things because there were items in there that they just couldn't refute. The Johnny Rock Page incident [at Mid-Ohio] was a good example. There were just irrefutable things in there that they had to explain what they were going to do to fix it. That began a dialogue.

We had meetings with the DMG partners, including Jim France. A member of our Board, myself and our attorney all participated in meetings with them, and we told them that they really needed to make some changes. I believe that the changes that we have seen were brought about largely by our bringing some of these things to their attention.

I think that they, that some of the partners were beginning to discover some of these things on their own. They now realize that they need to ensure that the AMA is happy because they realize that the professional racing assets that they have acquired are of little value if they can't do business as AMA Pro Racing. And if we are displeased with how they are detracting from our brand, that's going to be a real problem for them in the long run.

So we clearly have their attention. And I will say that David Atlas has been incredibly responsive. They have asked us to designate somebody to be an official liaison from the AMA to them, and I have asked John Ulrich to do that. John has regular communication with them, and John has had a significant impact on them as well, both on behalf of the AMA but also because of his standing in the racing community, the racing community as a whole and not just road racing. And I think that they recognize that.

One of the big complaints that I had was Roger Edmondson's alienation of John Ulrich. I didn't think it was appropriate that [Edmondson] was on a WERA message board trying to marginalize John instead of addressing one of his very legitimate complaints. That to me was one of the straws that broke the camel's back. It was obvious to me that some more significant changes needed to take place at DMG as a result of that.

RW: What was the time frame of that 10-page memo?

Dingman: I think it was September.

RW: And when you first started communicating your concerns with DMG who were you communicating them to?

Dingman: We were communicating, at that point, with David Atlas through our attorney. David Atlas also served as DMG's attorney through the negotiation and contract writing phase. So our corporate counsel had been communicating with him regularly. I had been communicating with Roger and David, principally, throughout the year, but when it got to the point we had to convey more strenuously our displeasure we decided that it was appropriate to go from counsel to counsel, and that was before David was named Chief Operating Officer. And he was named Chief Operating Officer shortly after that.

RW: You didn't have any problems with the racing under DMG last year, just the administration and officiating was terrible?

Dingman: The racing's been great. The other thing that they [DMG] did positively was taking the rules that were developed by the AMA. I chaired a road racing rules committee that was made up of representatives of manufacturers and teams, and we came up with a pretty good rules package that DMG took and added spec tires and spec fuel to. And the racing was pretty good. If we get beyond the operational failures that they had, the racing was good. And that was something that was developed by the AMA before it went to DMG. So that was positive.

The other thing that I think it's important to keep in mind, we should know by Daytona (this year) whether DMG is going to have a successful year or not. If they can't manage to run a race effectively with minimal operational issues in their own backyard what hope do they have to do it anywhere else?

To be continued...