John Spano

John A. Spano, Jr. (born May 31, 1964) is a businessman and swindler who briefly bought control of the NHL's New York Islanders in 1997 before he was exposed as a fraud. Due to the NHL spending a minimal amount in checking his background and an abandonment of usual banking safeguards, he was able to make it appear that he was worth several times more than he actually was.

Becoming an NHL owner

Spano was originally from the Upper East Side, but spent most of his life in Madison, Ohio, a suburb of Cleveland. He graduated from Duquesne University with a degree in business administration in 1986. After working several sales jobs in Pittsburgh and Dallas, he founded the Bison Group in 1990.Wolff, Alexander. [http://vault.sportsillustrated.cnn.com/vault/article/magazine/MAG1010487/index.htm Busted] . "Sports Illustrated", 1997-08-04.] It was a Dallas-based company that primarily leased aircraft.

In 1993, he reached a tentative agreement to buy a 50 percent interest in the Dallas Stars, but the date for the closing was pushed back several times, during which Spano began making what owner Norman Green called unreasonable demands, and Green backed out of the deal in November. He also made an abortive bid for the Florida Panthers that year. Mullen, Holly. [http://www.dallasobserver.com/1997-07-31/news/meltdown-man Meltdown man] . Dallas Observer, 1997-07-31. ] Years later, Stars president Jim Lites said that among the "laughable" excuses Spano offered were a written agreement with the team's top minor league affiliate, the Kalamazoo Wings and a request to have his South African partners meet with Stars officials. Lites also said that Spano insisted that Lites pick up the check for their dinners--something Lites said he'd never seen in all of his years as a sports executive

In October 1996, Spano agreed to buy the Islanders from longtime owner John Pickett for $165 million: $80 million for Pickett's 90 percent stake in the team and $85 million for its lucrative cable television contract with SportsChannel New York, which at the time earned the Islanders $13 million a year. He later agreed to buy the remaining 10 percent of the team held by the management group that had been running the Islanders' day-to-day operations since 1989.

Spano billed himself as the owner of a leasing operation that he'd built from one company with four employees to a group of 10 companies with 6,000 employees worldwide in just six years.cite book |title=Cracked Ice: An Insider's Look at the NHL |last=Fischler |first=Stan |authorlink=Stan Fischler |coauthors= |year=1999 |publisher= Masters Press|location=Lincolnwood, Illinois |isbn=1570282196 ] He claimed to be worth $230 million largely based on money inherited from his wealthy grandfather Angelo. [ [http://vault.sportsillustrated.cnn.com/vault/article/magazine/MAG1010447/2/index.htm Ex-Cal Coach Sanctioned...Father Holyfield...Who Will Own - 07.28.97 - SI Vault ] ] He claimed to own free and clear a $3 million house in University Park, a wealthy suburb of Dallas.

Pickett and NHL Commissioner Gary Bettman thought that Spano would be a lifesaver for the Islanders. The once-proud franchise, best known for their meteoric rise from also-ran to four-time Stanley Cup champions, had missed the playoffs in five of the last eight years. They had also been suffering at the gate, and rumors abounded that they were about to move to Atlanta, Nashville or Houston. Spano promised to keep the team in Long Island and either renovate, rebuild or replace the aging Nassau Coliseum. He paid for the team at signing with a loan from a syndicate of banks headed by Fleet Bank. He and Pickett agreed to a five-year installment package for the cable rights, and the league's other owners approved the sale in February 1997.

The first $16.5 million payment on the cable rights was due on April 7. The money wasn't there that day, but Spano promised Pickett it would be made, showing him a letter from Lloyds Bank in London promising that the money would be wired out. This was enough to satisfy Pickett, and he closed the deal.

Even before the deal closed, Spano pumped $2.5 million into the team's payroll [cite news |first=Robert |last=Lipsyte |authorlink=Robert Lipsyte |coauthors= |title=Spano Reflects on Deal Gone Awry, but There Is a Bright Side |url= |work=New York Times |date=1997-10-05 |accessdate=2008-01-17 ] and forced head coach/general manager Mike Milbury to give his coach's role to Rick Bowness. [cite news |first=Jason |last=Diamos |authorlink= |coauthors= |title= Isles' Owner Prevails and Milbury Steps Down |url= |work=New York Times |publisher= |date=1997-01-25 |accessdate=2008-01-17 ] He also let it be known that he intended to be a major player in the free-agent market.

Revealed as a fraud

However, when the NHL's Board of Governors met in June 1997, Spano was conspicuously absent. Instead, the Islanders were represented by two men from the Pickett regime. It emerged that Spano had only paid a total of $26,200 to Pickett for the cable rights after five attempts. For instance, he'd wired Pickett only $5,000 instead of the $5 million originally agreed upon. On another occasion, a $17 million check bounced. The final straw for Pickett was when Spano was supposed to send the $17 million, and only sent $1,000.Pickett asked Bettman to mediate. The commissioner ordered Spano to remove himself from day-to-day control of the Islanders and not use any team assets until the dispute could be settled.

On July 9, "Newsday" published a story that exposed Spano as a complete fraud who didn't have even a fraction of the money required to complete the Islanders deal. Among other things, the "Newsday" investigation revealed:

* He had grossly misrepresented his net worth: he was worth only $2 million.
* His Bison Group had 22 employees and assets of $3 million.
* He had lied about numerous items on his resume. For instance, he had claimed to have graduated from an exclusive prep school in Ohio, but had actually graduated from a small Catholic school in suburban Cleveland.
* He was facing two lawsuits at the time of the Islanders deal. One was from a Dallas law firm that hadn't been paid for legal work done during Spano's abortive deal for the Stars; another was from a South African cookware maker that claimed Spano had misled them into thinking he'd won them a partnership with Nordstrom.
* His "inherited wealth" did not exist; neither of his grandfathers had an estate valued at more than $246,000.
* He had a $1.8 million mortgage on his house.

Under the terms of a mediation brokered by Bettman, Spano relinquished control of the Islanders to Pickett on July 11. In return, Pickett agreed not to sue Spano for breach of contract. Spano later told "Sports Illustrated" that a "significant" capital call and a payment on a note blew apart his plans to pay Pickett. However, he claimed that once Pickett asked Bettman to intervene and the story broke in the press, it was impossible for him to resolve the dispute.

Immediately after the Islanders deal fell apart, it emerged that Spano owed $85,000 in back property taxes on his home.cite news |first=Richard |last=Sandomir |authorlink= |coauthors= |title= Fraud in Spano's Isles Deal, Prosecutors Say |url= |work=New York Times |publisher= |date=1997-07-24 |accessdate=2008-01-17 ]

There had been some questions about Spano even before the Islanders deal came unraveled. He'd reportedly rubbed some of the other owners the wrong way, which held up formal approval of his purchase of the team. New Jersey Devils owner John McMullen, for instance, told Stan Fischler (a longtime television analyst for both the Devils and Islanders) that he wasn't sure if Spano was using his own money to buy the team. Fischler also learned that Spano had promised the leader of an Islanders fan club a post as his "special advisor," but apparently didn't tell anyone with the Islanders about it. Spano had offered the team presidency to former Islanders great Denis Potvin (who'd reportedly planned to fire Milbury altogether), but negotiations collapsed after Spano apparently told Potvin that he was running out of money. Potvin later said that Spano had almost no staff, which was unusual for a multimillionaire.

Not long after Spano's cover was blown, it emerged that he was being sued by South African cookware maker Lenco Holdings. Spano had reached a deal with Lenco to sell its pots and pans to American buyers at Nordstrom. However, Nordstrom, then as now, doesn't sell cookware, and the department code on the purported Nordstrom purchase order was for women's coats. Spano borrowed against the venture to secure a $1 million loan from Comerica. Had this emerged sooner, it is likely Spano's pursuit of the Islanders would have been over before it started.

Arrest and incarceration

The "Newsday" report revealed that a federal investigation into Spano's affairs was well underway. On July 23, federal prosecutors on Long Island charged Spano with multiple counts of bank fraud, wire fraud and forgery. On August 14, federal prosecutors in Fort Worth indicted Spano with additional unrelated charges of bank fraud and wire fraud, and prosecutors in Boston (home to Fleet) were investigating Spano regarding the $80 million loan.

Prosecutors obtained evidence that Spano had forged numerous letters from bank officials in his business dealings from 1995 onward. After Spano bounced the $17 million check, his bank, Comerica, reportedly sent a letter to Pickett's attorneys saying he had funds to cover the overdraft. However, the executive who purportedly signed it denied ever writing it. Moreover, the letter was written in two different fonts, one on the body and another on the signature block. A postal inspector found that the fax machine mark at the top of the page was an exact match to the one used by Spano's Bison Group. The fax machine mark on a letter purportedly from Donaldson, Lufkin & Jenrette that claimed Spano owned Treasury bills worth $27 million was also an exact match to the one used by Bison Group.

It also emerged that many of the banks who gave money to Spano had abandoned their traditional safeguards. Fleet had relied on a letter from a Comerica senior vice president saying that Spano was worth over $100 million. This figure was based on what were later described as "unverified documents" provided by Spano. Additionally, a Dallas attorney claimed as trustee of a $107 million trust later told prosecutors he couldn't verify the trust's existence because Spano wouldn't document the funds. The Fleet loan officer who approved the $80 million deal was forced to resign.

Spano initially fled to the Cayman Islands, but eventually agreed to return to the United States. On October 8, he pleaded guilty to the charges lodged by prosecutors in Long Island and Texas. He admitted that he'd planned to defraud the Islanders and Pickett, and to forging documents.

The plea deal called for him to plead guilty to bank fraud charges in Boston a week later, but several deadlines came and went, and Spano began making noises in late November about withdrawing his plea. As a result, a Boston grand jury indicted him for bank fraud, and federal prosecutors there made plans to file a superseding indictment that could have sent him to prison for 60 years. However, Spano's new attorneys resigned out of fears they wouldn't be paid, and Spano had no choice but to accept the original offer. He pleaded guilty to bank fraud on January 13 1998.

During 1999, his wife divorced him and sold their house, and he moved to a Philadelphia condo where he had tried to pay the rent with an expired credit card, $10,000 in bad checks and wire transfers. This led to his arrest in February, and he lost his bail.

On January 28, 2000, he was sentenced to 71 months in federal prison and ordered to pay restitution of $11.9 million to his victims, including the Islanders ($3.4 million), two Dallas businesses ($4.4 million), and Mario Lemieux ($1.25 million).

Aftermath

Spano was released in June 2004 on five years' supervised release and moved to a Cleveland suburb. However, he was arrested again in February 2005 for defrauding numerous companies by promising to obtain loans for them and pocketing the fees without getting the loans. He faces an additional 2 years 5 months in addition to any sentence for violating the conditions of his release.

The Spano fiasco was highly embarrassing to the NHL, which was still reeling from revelations that former NHLPA head Alan Eagleson had lied to his clients and enriched himself by skimming off the union's pension fund. It was particularly shaken after it was revealed that it spent well under $1,000 evaluating Spano's credentials (estimates range from $525 to $750); most leagues spend well over $30,000 to evaluate prospective team owners. Prospective owners are now vetted by Ernst and Young and a prestigious New York law firm. When Spano bid for the Stars, the team was satisfied by a letter supposedly from Comerica attesting to his net worth.

References

External links

* [http://www.dallasobserver.com/1997-07-31/news/meltdown-man Meltdown man] (1997 Dallas Observer feature on Spano)
* [http://topics.nytimes.com/top/reference/timestopics/people/s/john_spano/index.html New York Times archive of stories on Spano case]
* [http://www.leasingnews.org/Conscious-Top%20Stories/Lease_Broker_arrested_again.htm Lease broker arrested again] (2005 arrest)
* [http://www.bop.gov/iloc2/InmateFinderServlet?Transaction=NameSearch&needingMoreList=false&LastName=spano&Middle=&FirstName=john&Race=U&Sex=U&Age=&x=30&y=31 Federal Inmate Locator: John Spano] (Projected Release Date from Elkton FCI: 04-05-2009)