The Washington Commanders on Monday strongly disputed claims of financial improprieties in a letter to the Federal Trade Commission, laying out the case for why there should be no investigation by the government institution.
The 22-page letter, written by team attorney Jordan Siev and addressed to FTC chair Lina M. Khan and obtained by ESPN, rebutted allegations by former team employee Jason Friedman that the team had engaged in nefarious financial practices, impacting consumers and the NFL, to increase their revenue. In addition to the letter, there were 83 pages of signed affidavits, emails and texts.
Paul Szczenski, the team’s former director of finance for more than eight years, said in a signed affidavit that, “I can state unequivocally that I never helped maintain, or saw anyone else maintain, a ‘second set’ of books.” He was one of three former high-ranking team officials who submitted signed affidavits.
Those points were made by the House Committee on Oversight and Reform in a letter to the FTC last week, highlighting allegations made by Friedman, who spent 24 years in the organization’s ticket department as the vice president of sales and customer service. He was fired in October 2020, two months after Jason Wright took over as team president.
The FTC acknowledged receiving the letter, but typically does not state whether or not it will investigate the matter. It could also be turned over to the attorney generals in Maryland, Washington, DC, and Virginia; all were copied on the letter to the FTC.
Washington’s letter called Friedman’s claims “baseless” as well as “false and reckless” and based on “pure speculation,” according to Mitch Gershman, Washington’s former chief operating officer, who left the team in 2015 but five years later was accused by former employees of sexual harassment in a Washington Post article. Gershman and others said Friedman was out of the loop because he did not work in the accounting department and was therefore not privy to all financial discussions. Friedman worked at the team’s stadium in Landover, Maryland, which is approximately one hour from the practice facilities in Ashburn, Virginia, where according to the letter the finance and accounting departments worked.
Also, the letter said the committee never gave the team a chance to respond to Friedman’s charges. It also painted Friedman as a disgruntled former employee who, until recently, had lobbied several people in the organization – including Wright – via email and by text to allow him to return, while also sending a letter to owner Dan Snyder after his firing in October 2020 praising him.
In January, he told Wright via email, “I’ve had a year to reflect on my past shortcomings. I’ve learned, and I am remorseful for these shortcomings. If you welcomed me, I’d be back there to help at a moments notice. “
Friedman claimed the organization had knowingly categorized revenue from standing-room only tickets to Washington games as revenue collected from college games and concerts, thereby allowing them to pocket the money and not share a portion with the NFL. He also stated that they failed to refund security deposits on season tickets, alleging it affected 2,000 customers at a cost of $ 5 million.
But Washington’s letter says it has proof that it did not divert revenue from NFL games to other events. Friedman had produced a May 6, 2014, email with Stephen Choi, then Washington’s chief accounting officer, that requested help on processing additional ticket sales and revenue.
The email stated that Friedman was charging $ 55 per ticket, but they were priced at $ 44 in the system. The difference would be written off as bogus licensing fees. According to the email, Choi directed him to apply the “juice” from that extra $ 11 per ticket to the Navy-Notre Dame game to be held that same year. Friedman said “juice” was a term for hidden revenue for the team. Washington’s letter stated that “juice” was slang for “an upside in revenue.”
Teams are required to share 40% of their revenue with the other 31 teams. But the college game was considered non-shareable revenue, which means that Washington would receive an additional $ 162,360 without losing a portion to the revenue-sharing pool.
Washington’s letter stated that Choi forwarded this email to accountants, dropping Friedman from the chain. In an August email, Trey Flythe, then listed as a manager in the team’s ticket finance department, told Choi and Szczenski that the “Navy licensing fee has been switched to a 14RedRev.” That meant it was now considered 2014 Redskins revenue; the email included a screen shot of the accounting for the amount of $ 162,360 listed under 14RedRev.
The team’s letter also pointed out that they are subjected to annual audits by an outside firm, BDO, and every several years by an NFL auditor, Ernst & Young. Friedman alleged that revenue from non-NFL events at FedEx Field were not subjected to those audits. Washington’s letter says that’s not true.
In his affidavit, Szczenski said, “there were no categories of events that were ‘excluded’ from external audits; concerts, college football games, and soccer matches were all part of the Team’s audited financial statements, and all could be subjected to scrutiny by the auditors. ” Former general counsel David Donovan said the same in his affidavit.
The letter also says the Committee should not have relied on Friedman’s testimony regarding when the alleged revenue-sharing scheme occurred. Friedman said it occurred “primarily from 2010 to 2015.” Washington’s letter says the team had a $ 27 million waiver from the NFL that limited revenue sharing because it was paying for projects approved in 2013 and finished two years later. The letter says this waiver was known in the team’s accounting and finance department, but “unbeknownst to Friedman.” Before that, Washington had a 15-year waiver that ended in 2012 because it had paid for the stadium itself.
The letter also says Friedman was wrong about how the team handled security deposits. He claimed after Snyder bought the team in 1999 that the team created artificial barriers to make it difficult for consumers to collect security deposits. Or they would target deposits from people who had forgotten they made one, or those who inherited seats and didn’t know one existed. They said with corporate accounts, the name on the agreement might change over time and, once again, the new person might not know about the initial deposit. Friedman said team executives told employees to make it difficult for customers to receive their deposits by increasing the steps needed to receive the money. Some deposits did get returned.
Also, Friedman noted to the Committee that the team stopped charging security deposits a year after Snyder became owner. Donovan, who left the team in 2011, said Friedman never brought these allegations to him. In his affidavit, Szczenski said the only deposits converted to revenue occurred when a customer defaulted on their contract. They got in a 10-year span that resulted in an extra $ 200,000 in revenue.
The letter also included a copy of the letter the organization sent to customers in 2014, informing them that they might be entitled to a refund based on their remaining balance. It included boxes to check whether the name and address on the account were correct. It also contained an address to send the letter back to collect the refund as well as an email address they could send instead.
Additionally, the letter states that the team’s unclaimed property, including security deposits, were reviewed in 2014 by the Unclaimed Property Division of Virginia’s Department of the Treasury, which had full access to the team’s security deposit information. After the review, the department did not recommend further action but instead demanded they pay $ 7,330.15 in unclaimed funds to the state as “abandoned property.”
Finally, the letter said the team did not approve of Friedman’s practice of selling general admission tickets to brokers in 2009.
Friedman had alleged to the Committee that he had made the fall guy for this practice, telling them Choi and Gershman told him to misrepresent their ticket situation. Friedman said they would tell potential customers that no general admission tickets were available and push them toward buying club level seats. According to the letter, there was no NFL policy against selling to ticket brokers in 2009. It also stated that none of the contracts entered into by Friedman were approved by the team’s finance or legal department. The letter alleged that Friedman used a rubber stamp of Gershman’s signature, allowing him to “keep the agreements secret.”
“When [Snyder] was informed, he was not happy, “Gershman said in his affidavit.” He directed me and other senior executives to cancel the contracts immediately, and we spent months negotiating with brokers to undo the deals insofar as we could. It would have made no sense for Mr. Snyder to have directed these broker sales only to turn around and cancel them later, with substantial financial cost to the Team. “
Donovan said in his affidavit he recommended to Snyder that Friedman be fired after this incident. Friedman alleged that instead of being fired, he received a raise.