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Sep 22, 2008

The Cost Of An Alternate Road Racing Series: Who Will Pay, And How Much?

FIRST PERSON/OPINION

By John Ulrich

The idea of an alternative series in racing is nothing new.

If recent history is any guide, the issues are always control and/or money, and when it's over there's always a big tab somebody has to pay.

In the mid-1990s, it was AMA versus Roger Edmondson, Part 1. Edmondson had brought his Supersport classes to the AMA, and ran AMA Pro road racing as a joint venture with the AMA. During his tenure, the program made money for the first time, and the net was split 50/50 between Edmondson and the AMA. According to sworn testimony and an exhibit submitted in a subsequent lawsuit, at one point when the net was $600,000 and the 50/50 split was $300,000 each, AMA staffer Patti DiPietro pointed out that AMA could keep all the money if Edmondson was cut out of the deal.

Again, according to sworn testimony at trial, American Honda's Ray Blank (then a sitting member of the AMA Board of Directors), told Edmondson, "We can take this from you and there's nothing you can do about it."

Edmondson was shown the door. He then started the NASB and signed up most of the same tracks where he had been running AMA Nationals. In response the AMA, a non-profit membership organization, established a for-profit subsidiary known as "Paradama Inc." (its new Board of Directors included Ray Blank) and scheduled races conflicting with already announced NASB races.

(Despite being a "for profit" subsidiary and Blank's stated hope that profits from Paradama's AMA Pro Racing would support the AMA's government relations and other programs, what Paradama actually did was burn AMA money that could have been put to better use. In the first nine years of Paradama's existence, the AMA wasted about $6.2 million of members' money propping up Paradama itself and mopping up its misadventures.)

To quote from the decision rendered by the Fourth Circuit Court of Appeal in the case, "After Edmondson had secured commitments from these three (Mid-Ohio, Road America and Brainerd) track owners and several lesser tracks to run his new series, Paradama's Chairman of the Board, Cary Agajanian, directly contacted the marketing manager for Mid-Ohio Race Track (sic), John Szymanski, and threatened to cancel other important contracts between the defendants and the track if the track honored its commitment to Edmondson. The Mid-Ohio track canceled its contract with Edmondson in response to the threat. The Mid-Ohio Track's (sic) cancellation in turn caused cancellations by the Road America Race Track (sic) and Brainerd Race Track (sic). As a result of these events, Edmondson's new business never got off the ground."

The Circuit Court decision also stated, "Somewhere along the way, the AMA decided it wanted to assume control of Edmondson's interest in the 1994 joint venture without compensating him"¦Tom Mueller, a vice president of the AMA, directed Roy Janson, the then head of the AMA's racing department, to prepare a memorandum (Exhibit 223) regarding how the AMA could effect a secret takeover of Edmondson's interest in the 1994 joint venture"¦In early April 1994, the AMA implemented the secret takeover plan outlined in Janson's memorandum with a few revisions."

It was then--among other things done in the battle to motivate tracks to break their contracts with Edmondson and NASB--that Paradama scheduled its conflicting events (albeit at second-string tracks) on the same dates as the NASB Nationals scheduled at the original tracks.

The end result? The litigation mentioned earlier. AMA finally settled with Edmondson by paying him $3 million--after spending a few more millions of members' dollars on defense.

Less than a decade after AMA versus Roger Edmondson, it was AMA vs. Clear Channel, with an outfit known as Jam Sports used for leverage.

This time, the Board of Directors of Paradama--including, as fate would have it, American Honda's Ray Blank--decided it would be a good idea to solve an ongoing series of disputes with Supercross promoters Clear Channel (which had virtually every suitable venue) by cutting the company out of AMA Supercross completely and replacing it with Jam Sports, a group of concert promoters with no motorsports experience and an apparent belief that they could just walk in and take over existing events because they had been annointed by Paradama.

AMA Pro Racing, the dba of Paradama, went so far as to announce that the deal was done. In response, Clear Channel locked up multi-year exclusive rights to promote motorsports events at its venues (leaving Jam Sports to cobble together a schedule at second-string stadiums), did a deal with the World Supercross rights holder Dorna, sanctioned its series with the FIM (instead of the AMA) and declared it the Supercross World Championship. At the 11th hour, when the deal cut by the Paradama Board went to the Board of Directors of the AMA (aka, The Mother Ship) for final approval, Blank switched sides and supported renewing the Supercross contract with Clear Channel. Which is why the Supercross Championship is now sanctioned by both FIM and AMA, and includes a round in Canada.

It later turned out that Mel Harris, another member of the AMA Board of Directors and a Vice President of American Suzuki Motor Corp., had been working behind the scenes to keep the AMA and Clear Channel deal alive despite a signed Letter of Intent with Jam Sports that granted an exclusive negotiating period. What that means is, nobody from the AMA could be talking to Clear Channel during the time period in which Jam Sports was granted exclusive negotiating rights. Davey Coombs, another AMA Director and the man behind Racer X and Road Racer X magazines, was doing the same thing. My personal belief was that Ray Blank was also talking to Clear Channel, but the two AMA Directors who did their dealing in a way which could easily be discovered and documented were Harris and Coombs, and they were both forced off the AMA Board of Directors. (In all honestly, who can blame them for what they did? Neither of them was on the Paradama Board, and neither wanted a CART/IRL type split in AMA Supercross. Davey told me he did what he did out of concern for the good of the sport, and I believe him. I just wish Ray Blank--who somehow escaped the fate of Harris and Coombs--and his fellow Paradama Directors had figured that out in the first place.) The bottom line? The AMA Board rejected the Paradama/Jam Sports deal and Jam Sports sued. A jury later awarded Jam Sports a $90 million judgement against Clear Channel (later set aside with the case ultimately settling for an undisclosed amount rumored to be between $7 million and $40 million depending upon who you believe) while AMA had to pay another $168,000 or so of the members' money to Jam Sports, plus plenty more in legal fees.

Fast forward to present day. The non-profit Motorcycle Industry Council (MIC), under the guidance of a Board of Directors that includes an American Honda employee who reports to Ray Blank, has announced that it has launched its own for-profit subsidiary and will run its own road racing series, USSB. Maybe the MIC Board figures the new subsidiary will make money the MIC can use for its Discover Today's Motorcycling (DTM) PR programs run by Ty van Hooydonk, also known as the new USSB Managing Director.

Maybe it's just leverage, a way to negotiate for control by prying away racetracks that have signed on with Roger Edmondson and the new version of AMA Pro Racing presented by Daytona Motorsports Group (DMG) after its purchase of Paradama assets from the AMA earlier this year.

That would kind of suck for anybody involved in the charade who thinks they're working on something real vs. something that can, in the words of MIC President Tim Buche, be put "on the shelf if we get some resolution," i.e., control. On the other hand, when the Supercross battle was all over, Jam Sports did OK on the financial end.

What would be funny if it was not tragic, is the apparent willingingness of seasoned motorcycle industry executives who opposed (and ultimately prevented) splitting Supercross into a CART/IRL battle a handful of years ago, to support just that scenario in AMA Pro road racing now.

All that's really left is settling who will pay, when they will pay, and how much they will pay.
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