After the Alliance of American Football collapsed before the end of its first season, Tom Dundon is trying to pick through the ruble to get his $70 million back. The Carolina Hurricanes owner and majority investor in the league, filed as an unsecured creditor in bankruptcy court, according to a story in the Athletic.
Dundon, who pledged a $250 million investment over a period of years, claimed AAF officials made “misrepresentations†when he agreed to supply the struggling league with cash.
“Even though AAF executives told DCP (Dundon Capital Partners) its contribution would get the AAF through the first season, those executives knew at the time of the execution of the Term Sheet that the AAF would likely need an additional $50,000,000 (including League revenue) on top of DCP’s investment of up to $70,000,000 to get through the first season,†according to the legal filing made Monday. “The AAF and its executives never disclosed this information to DCP.â€
Additional Charges
Dundon’s group also alleged that the AAF said it was solvent, and that his investment would be sufficient for the first season. Dundon charged that was not true.
“The AAF further represented that it could survive the season with only $55,000,000, leaving substantial capital to prepare for the following season,†Dundon’s filing charges state. “During the weeks following the execution of the Term Sheet, DCP learned a number of alarming facts that revealed that the AAF was not forthcoming with Dundon and DCP. DCP learned that, in addition to not having the funds to pay salaries after the first week of the League’s games, the AAF also had accumulated more than $13,000,000 in unpaid debts and commitments. The AAF did not disclose these unpaid debts or commitments to DCP prior to the execution of the February 14, 2019 Term Sheet.â€
Charlie Ebersol, co-founder of the AAF, brought in Dundon after the first week, and sold him a controlling interest. After two months, however, Dundon pulled the rest of his money and the league folded.
Doomed From Start?
When Dundon got involved with the AAF he said the league needed developmental players from the NFL in order to survive. It was his hope that the organization could become a minor league for the NFL.
The NFL Players Association, though, pushed back on that plan, saying that they were concerned that their athletes playing in AAF games would violate the collective bargaining agreement, which limits the amount of practice and workouts players can participate in during the offseason.
“If the players’ union is not going to give us young players, we can’t be a development league,†Dundon told USA Today. “We are looking at our options, one of which is discontinuing the league.â€
He made good on that threat, closing down the AAF before the ninth week.