By: Jim Bailey
The USFL is off to a fresh new start. We completed a transaction last week in which the organization was restructured to be owned by a new entity called Touchdown Management, LLC. It is owned and managed by a group selected because of their extensive football managerial experience at the NFL, arena and college levels, as well as general managerial, legal and financial expertise. That transaction finally removed all vestiges of a management program that had been doomed to failure.
While we are virtually starting over in some respects, the new management team has been hard at work over the past six months conducting research, concentrating on developing and articulating the vision and concept for the operation of the league, establishing the best internal structure for operating the league, creating realistic financial forecasts for the league and developing realistic financial and business plans as well as a plan of capitalization. Also, the fundamental principles and organizational details for the football operations of the league have been developed and documented, including extensive legal research and documentation. For reasons that will become apparent as you read on, much of this work has had to be conducted quietly behind the scenes so as not to interfere with an ongoing federal investigation.
So what was the problem? Simply stated, mismanagement followed by (or perhaps attributable to) criminal embezzlement and tax fraud. Many of our followers have expressed concern about the slow progress of the USFL. We did not find it appropriate to disclose these issues and their impact on the league until the criminal investigation had run its course and we had been successful in removing the culprit from our midst. That time has come and we think those who have been following us deserve to know the whole story.
Jaime Cuadra, the founder and leader of the enterprise, was responsible for these devastating actions. Late in 2011, Mr. Cuadra formed two entities, EndZone Sports Management, LLC and United States Football League, LLC (USFL). USFL acquired the intangible property rights to its name, and EndZone was the sole owner of the USFL. Although Mr. Cuadra gave ownership interests in EndZone to a few others, he retained a greater ownership interest than any of the others and relied on the fact that he was the sole source of funding to establish unilateral control.
That funding source evaporated when the other USFL owners learned in February 2013 that Mr. Cuadra had admitted to embezzling funds from his outside employer, a part of which had been used to support USFL activities. The other owners demanded that Mr. Cuadra resign immediately as an officer and manager of EndZone and USFL and surrender all his voting rights. He promptly complied as an FBI investigation ensued over the next several months that resulted in Mr. Cuadra entering a plea of guilty to embezzling more than $1,000,000 and tax fraud on June 24, 2013. The U.S District Court accepted that plea on July 10.
Throughout 2012 (prior to the disclosure of his embezzlement), Mr. Cuadra’s regime had been hallmarked by inconsistency of purpose, mismanagement and wasteful spending. He focused prematurely and disproportionately on matters such as public relations, branding and an ill-fated attempt at merchandising in lieu of focusing on the quality of the football product. Continually crippled by the lack of funding, he always seemed to come up with the money needed to indulge in these ancillary aspects of the operation.
Mr. Cuadra also developed and pursued a flawed (and failed) capitalization plan, attempting to attract funding both from team owners and from passive investors in the league. Criteria had been developed to determine optimum cities for the placement of teams. But those criteria were quickly abandoned whenever a prospective team owner in a non-qualifying city appeared to have capital to invest. Few efforts were made to attract passive investment in the league, but those that were attempted failed.
And so, much of the time Mr. Cuadra had management control of USFL was wasted and much of what he spent was wasted. Fortunately, he had little interest in football operations and therefore didn’t interfere with the football operations expertise available. As a result the fundamental principles and organizational details for the football operations of the league were established and remain viable.
Following Mr. Cuadra’s resignation, the new management team realized that in order to be successful, it must completely sever all connections of any kind with Mr. Cuadra. To that end Touchdown Management, LLC was formed, which will own a new United States Football League, LLC, (the entity previously known by that name having been required to change its name and consent to the new entity bearing the same name). Touchdown and the new USFL have acquired the intangible property rights and all other assets (but not the liabilities) of EndZone and the old USFL.
With the closing of that transaction on Aug. 1, the United States Football League is open for business under new management, and ready to move this exciting new league forward. The next order of business is to attract sufficient investment in the USFL to fund operations. Of necessity, much of the fundraising effort will be conducted behind the scenes. We ask for your continued patience as we pursue this vital next step. We will report what we can when we can. Once we attract the first wave of funding, we will be in a position to begin selecting team cities, hiring local management and staffing up to put teams together and commence operations.
The USFL has hit its fair share of stumbling blocks over the course of the last year and a half. But we are confident we now have the right team and the right concept at the right time to establish the United States Football League and make it a success.