Two out of Three Ain't Bad: Branch Rickey, Walter O'Malley, and the Man in the Middle of the Dodger Owners' Partnership
McCue, Andy, Nine
Walter F. O'Malley, 47-year-old Brooklyn lawyer, and Mrs. John L. Smith, widow of the partner of O'Malley and Branch Rickey, will become joint owners of seventy-five per cent of the Brooklyn Baseball Club stock through the purchase of Rickey's twenty-five percent.
Roscoe McGowen in the New York Times, October 25, 1950
"Walter O'Malley, Brooklyn attorney, and Mrs. John L. Smith, widow of former penicillin manufacturer and treasurer of the Brooklyn Baseball Club, announced jointly yesterday that they will "exercise their prior rights" and will purchase Branch Rickey's 25 percent holdings in the Dodgers.
Harold Rosenthal in the New York Herald-Tribune, October 25, 1950
The Lady has bought more stock in the Dodgers. President Branch Rickey has two strikes against him with the purchase of the Mahatma's 25 percent holdings in the ball club yesterday by the widow of John L. Smith and Walter F. O'Malley.
Harold Burr in the Brooklyn Eagle, October 25, 1950
When the transfer of Rickey's stock is completed ... the Dodger stock setup will be as follows: 37.5 percent held by O'Malley, 37.5 percent held by Mrs. Smith and 25 percent held by Mrs. Jim Mulvey, daughter of the late Steve McKeever.
Gus Steiger in the New York Daily Mirror, October 25, 1950
Although you'd never know it from these news stories, Walter O'Malley had taken over the Dodgers, beginning fifty years of family ownership of one of baseball's most financially successful franchises. Today only the most die-hard Dodger fans have heard of Mary Louise Smith. Her appearance in the ownership ranks would be fleeting.
But misunderstandings based on the reporting of the day would continue to becloud the historians who tried to write the second rough draft of history. There would be stories that O'Malley had outfoxed Branch Rickey, or vice versa. It would be neither the first time nor the last that Walter O'Malley's careful use of words--as well as contemporary sports reporters' lack of familiarity with contracts and business issues--would leave a misleading impression. At the time, none of these reporters had access to a partnership agreement that Rickey, John L. Smith, and O'Malley had signed five years earlier, a contract that defined the terms of the chess match played out in the summer and fall of 1950. The reporters, and therefore the public, saw only the end game of that match, for the contract set the parameters that ordained the moves of both players. (1) To understand that contract some context is necessary.
By 1912 Charles H. Ebbets had gained full ownership of the Brooklyn Dodgers, having risen from bookkeeper to magnate over thirty years. Ebbets had also embarked on the construction of the stadium that would be named after him. During the summer of that year, it became apparent that Ebbets didn't have the financial wherewithal to complete construction. Thus he traded half his ownership to two brothers, Edwin and Steve McKeever, Brooklyn natives who had prospered in, among other things, the construction business. The brothers provided the cash and the construction expertise to finish the job. Each brother took 25 percent of the stock. (2)
All went well until Ebbets died in 1925. An elaborate funeral was held on a cold, rainy afternoon in Brooklyn's Greenwood Cemetery, and Ebbets's casket proved too large for the hole. The crowd stood in the weather for over an hour while gravediggers were summoned and the hole was widened. Ed McKeever caught pneumonia and died eleven days later, leaving 75 percent of the team's stock in the control of his and Ebbets's estates.
Ebbets's heirs were numerous and clamorous. The McKeever heirs were merely numerous. They were also naturally allied with Steve McKeever. Front office relations quickly deteriorated into two head-butting factions, each controlling 50 percent of the stock. Manager Wilbert Robinson and other team presidents of the era found the split impossible to mend. It quickly became personal, and the indecision was soon multiplied by the Great Depression. The team, thought to be one of the most financially stable at the time of Ebbets's death, deteriorated rapidly. (3) The stadium wasn't maintained; players couldn't be purchased from the minors. The team lost $129,140 in 1937, had last shown a profit in 1930, and was $700,000 in debt to the Brooklyn Trust Company. (4)
George V. McLaughlin, the president of Brooklyn Trust, was also, effectively, the man who controlled the Dodgers. The team, and the related company that owned Ebbets Field, owed the bank money. The bank was the trustee for both the Ebbets and the Ed McKeever estate, and a number of the heirs in both estates had borrowed further money against the (declining) value of their shares in the team. Everybody was beholden to McLaughlin, for whom the relationships set up a tangle of conflicts. As trustee he had a legal responsibility to act in the best interests of the estates; as a banker he had a responsibility to get his money back. And, because the Dodgers were one of the largest institutions in Brooklyn, he faced a public relations swamp if he was perceived as harming the team that served as the core of the borough's identity.
Finally, pushed by National League president Ford Frick, McLaughlin stepped in. (5) Steve McKeever died in 1938, and his shares passed to his daughter, Dearie Mulvey. McLaughlin pressured Dearie's husband, Jim, to lead the board to hire a capable leader who could revive the team's fortunes. Mulvey tried to hire St. Louis Cardinals executive Branch Rickey. Rickey turned him down but recommended Larry MacPhail, who had revived the Cincinnati Reds franchise just a few years before. MacPhail took the job, organized the team that won the 1941 National League pennant, and made substantial progress in repairing the team's finances. Then, in late 1942, MacPhail went off to serve in World War II. Mulvey turned to Rickey again, who accepted this time. Rickey finished the job of putting the team back into solid financial shape. At McLaughlin's recommendation, Rickey also brought in a financially savvy lawyer named Walter O'Malley to clean up the team's books and operations.
Within a year Rickey and O'Malley had recognized the financial potential of the team and wanted to enter ownership. The key was McLaughlin, who needed to cut a fair deal for his trust clients, get the bank's money back, and ensure good management for the team. Several offers for the Dodgers surfaced as others also perceived the opportunity, but McLaughlin passed on them. (6) McLaughlin was perfectly happy to have a competent baseball man and O'Malley, who was a McLaughlin protege, control the team, but he knew that neither had the financial resources to make the purchases. McLaughlin brought two other Brooklyn Trust clients--Andrew Schmitz, a Brooklyn insurance man, and John L. Smith, president of Brooklyn-based Pfizer Chemical--into the picture. Pfizer had pioneered the mass production of penicillin during World War II, with Smith reaping the rewards. In late 1944 the partners agreed to buy the Ed McKeever heirs' 25 percent, and after Schmitz dropped out, the three remaining partners bought the Ebbets' 50 percent in August 1945. (7)
McLaughlin and the three partners, however, had vivid memories of the divided Brooklyn front office of the 1930s and of its effect on the team's performance and finances. Rickey had competed with, and taken advantage of, the Dodgers' leadership during that era. O'Malley, through his work for McLaughlin, fully understood the problems of split ownership. Smith, as a major client and baseball fan, socialized with McLaughlin. McLaughlin, as trustee for the two estates, not only knew of the problems caused by the fractured board but had the ability to ensure it didn't happen. He would sell only to those who would guarantee there would be no split votes to paralyze the front office.
NO FIFTY-FIFTY VOTES
Thus the partnership agreement was created to ensure that ownership would not have fifty-fifty votes in the boardroom. With 75 percent of the stock, the partners knew they could exercise control if they stuck together. For this reason, while the agreement carefully specified that each partner owned 25 percent of the stock, it also said they had bought the stock "as a group." (8) This seemingly innocuous phrasing was the key, for it meant that the partnership's holdings would be voted as a unit, eliminating the possibility that one of the partners would side with Dearie and Jim Mulvey and split the board again. With personalities as strong as Branch Rickey's and Walter O'Malley's, it quickly became apparent that John L. Smith was the swing vote. Whoever convinced Smith on an issue won on that issue.
There were plenty of issues for the board to worry over in the late 1940s. Rickey wanted to set up a massive spring training camp at a former Navy pilot training facility outside Vero Beach, Florida. The land was free, but O'Malley expressed concern at the cost of converting the base to baseball. Rickey persuaded Smith. O'Malley wanted to take the money offered for television rights to Dodger home games. Rickey worried it would cut down attendance. O'Malley persuaded Smith. Rickey wanted to present convertibles to members of the 1946 team, which tied the St. Louis Cardinals in the regular season and lost a playoff. Detroit was retooling to make cars rather than tanks, and autos were scarce and expensive. O'Malley persuaded Smith.
Rickey moved into football, taking a franchise in the All American Football Conference. From that conference the San Francisco 49ers and Cleveland Browns would enter the National Football League. The Brooklyn (football) Dodgers would be merged with the New York (football) Yankees and leave a puddle of red ink, $300,000 in 1947 alone, a loss that was covered by the sale of prospects. Irv Noren, Sam Jethro, and Alfonso Carresquel all went on to decent Major League careers, but the revenue from their sales was eaten by the football venture rather than falling to the bottom line. (9)
The pattern was becoming clear. John Smith was happy operating in the background, but when he did give his first major interview, he expressed some surprise that sportswriters criticized Branch Rickey for parsimony. "I have read that Rickey is cheap. As treasurer of the Brooklyn club, I think that he is extravagant," Smith told Michael Gaven of the The Sporting News. (10) With that word "extravagant" hanging in the air, Rickey turned once again to his main concern, his own future as a team executive.
In late 1942, when Rickey had joined the Dodgers, he had received a five-year contract. In 1946 that contract had been extended to October 1950. (11) But, as the 1940s came to a close, Rickey couldn't convince O'Malley and Smith to extend further. The problem was the amount of Rickey's compensation. He received a $50,000 annual salary plus 10 percent of the pretax profits. (12) To put this in perspective, the Major League minimum salary was $5,000, and the salaries of the Dodger players of the late 1940s topped out at $23,500. (13) The bonus provision was also troublesome for, as chief executive, Rickey could make decisions that affected how big those profits were. For example, he could sell players if he needed cash. In fact, the pretax profits were substantial. From 1947 through 1949 the team's net income before taxes fell just short of $2.7 million, or close to $90,000 a year for Rickey. (14)
By 1950 Rickey realized that his contract would not be renewed. The issue became even more obvious when John Smith died in July of that year. His widow, Mary Louise Smith, was clearly taking her cues from O'Malley. If Rickey were to take employment elsewhere in baseball, he would have to sell his Dodger stock. The inexorable provisions of the partnership agreement came into play.
Rickey, as the agreement required, offered his shares to his partners. In effect that meant to O'Malley. Even if Mrs. Smith had had an interest in owning more of the team, the complications of settling her husband's sizable estate removed her financial flexibility. O'Malley made a tactical mistake by offering Rickey what he'd paid for his shares back in the late years of World War II. With the ensuing success of the team, that was clearly below market value.
The partnership agreement gave Ricky an alternative. He had been approached by Pirates owner John Galbreath to run his team, and so he asked Galbreath for help finding a buyer. Galbreath connected Rickey with William Zeckendorf, a New York real estate developer. Zeckendorf offered $1 million (plus a $50,000 fee for himself). Rickey took Zeckendorf's offer to O'Malley, who, as the partnership agreement set out, could then match Zeckendorf's offer or let Zeckendorf enter the partnership. O'Malley paid.
It was a clear-cut victory for neither man. Rickey was out of the Dodgers but was financially set for life and was soon running the Pirates. O'Malley had paid far more than he wanted but was in control of the Dodgers. He would buy out Mrs. Smith just before leaving for Los Angeles after the 1957 season, as well as the Mulvey interests in the 1970s.
1. "Memorandum of Understanding, entered into as of the 21st day of September, 1945, between John L. Smith, Walter F. O'Malley and Branch Rickey," carbon copy in Branch Rickey Papers, Library of Congress, Manuscript Division (hereafter BRP).
2. Andy McCue, "A History of Dodger Ownership," National Pastime 13 (1993): 34-42.
3. New York Times, May 1, 1925, p. 21.
4. The profit figures are from "Study of Monopoly Power: Hearings before the Subcommittee on the Study of Monopoly Power of the Committee on the Judiciary, House of Representatives, Eighty-Second Congress, First Session, Serial No. 1, Part 6, Organized Baseball," 1952, p. 1600. The amount of debt is from "Record of Loan Transactions: Brooklyn National League Baseball Club, Inc." (4/18/25 to 6/11/42), in the Arthur Mann papers, Manuscript Division, Library of Congress.
5. Three decades later Walter O'Malley said that Frick had shown up at the Dodger camp to take the franchise back for unpaid bills. That's when McLaughlin moved. The Sporting News, May 28, 1966, p. 14.
6. Letter, Branch Rickey to Roscoe (Hobbs), November 29, 1944, BRP.
7. New York Times, November 2, 1944, p. 24; and New York Times, August 14, 1945, p. 24.
8. "Memorandum of Understanding," BRP.
9. Murray Polner, Branch Rickey (New York: Atheneum, 1982), pp. 217-20. See also Bob Addie, "Did Dodgers Lose Flag on Gridiron?" Baseball Digest, November 1950, p. 19.
10. Quoted in The Sporting News, March 10, 1948, p. 6.
11. Minutes, Board of Directors, Brooklyn National League Baseball Club, November 8, 1945, BRP.
12. Letter from Brooklyn National League Baseball Club Inc., to Branch Rickey dated October 28, 1942, BRP.
13. "Salaries, 1949" sheet in the Allan Roth papers, Western Reserve University. Pee Wee Reese made $23,500 that year, and Jackie Robinson $21,000. The next highest was Ralph Branca at $15,000.
14. Inter-Club Communication from Donald E. Beech to Arthur Mann, October 17, 1949, Arthur Mann papers, Manuscript Division, Library of Congress. Beech was the team's accountant, and Mann was Rickey's top personal assistant. The memo shows net income before taxes of $962,947.23 in 1947, $856,183.55 in 1948, and $873,410.68 in 1949.…
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Publication information: Article title: Two out of Three Ain't Bad: Branch Rickey, Walter O'Malley, and the Man in the Middle of the Dodger Owners' Partnership. Contributors: McCue, Andy - Author. Journal title: Nine. Volume: 14. Issue: 1 Publication date: Fall 2005. Page number: 41+. © 2009 University of Nebraska Press. COPYRIGHT 2005 Gale Group.