The Internal Revenue Service placed a $36 million tax lien again
CINCINNATI (AP) _ The Internal Revenue Service placed a $36 million tax lien against the estate of Cincinnati Bengals founder Paul Brown, and that could force the team to seek a more lucrative deal in another city, The Cincinnati Enquirer reported today.
Business leaders have been fighting to keep the Bengals in Cincinnati since president and general manger Mike Brown said he would consider other offers if the team did not get a new stadium.
``Does it play into our thinking? Yes, it does,″ Brown told the Enquirer. ``It has been a difficult situation for us, put a great deal of pressure and anxiety on our family. It was completely unexpected, and we think it is groundless. We will contest it all the way.″
Brown said he does not have sufficient cash to pay the lien, and is reluctant to sell part of the franchise to raise the money.
``It happened in Chicago, and the IRS backed off,″ Brown said. ``It happened in Miami, and the IRS wrung out the Robbie family and forced them to sell.″
Brown said the dispute involves shares purchased by himself and his brother, Pete, in exercise of a stock option negotiated with former Bengals president John Sawyer.
Shortly after Paul Brown’s death in August 1991, Sawyer sold the Brown brothers all but one of his shares in the franchise, raising the family’s stake to between 56 percent and 57 percent of the 586 outstanding shares, the Enquirer said.
Brown said the terms were negotiated 10 years earlier, that Sawyer received dividends on his shares throughout that period, and that fair market value was paid based on the team’s worth at the time of the negotiations.
The government contends the deal was a sham and should have been taxed as part of Paul Brown’s estate.
``My dad held a very small interest in the club for 10 years prior to his death,″ Brown said. ``He and John Sawyer were two experienced businessmen who made an arm’s-length agreement.
``My brother and I had an option to purchase shares from John Sawyer, which we exercised. But it was quite possible that we could have elected to not exercise the option. If the U.S. Football League had been successful in its lawsuit (against the NFL), we may well have elected not to exercise the option.″
Brown said he received written notice of the lien _ $29 million in back taxes and $7 million in interest _ within the past few weeks, and that he had not yet attempted to discuss the matter with tax authorities.
He has 90 days to respond.
``I can’t tell you how soon it will be resolved,″ Brown said. ``It could be as long as three years. ... But you have to realize that the interest over time is like an avalanche. It just keeps on going.″
John Moag Jr., director of the stadium authority in Baltimore, which is wooing the Bengals with the promise of a new stadium, said the $36 million debt had not been mentioned during discussions with Brown.
``His family affairs should be off-bounds,″ Moag said. ``I know nothing about them, nor should I know anything about them.″