THE WASHINGTON REDSKINS: EVEN MORE AWFUL THAN YOU THOUGHT.

• Author: Nocera, Joe
• Position: 50TH ANNIVERSARY

In 1978, shortly after landing at the Washington Monthly, I got an assignment that combined two subjects that would one day become my bread and butter: sports and business. My new boss, editor in chief Charlie Peters, a passionate Washington Redskins fan, had an instinct that Redskins ticket holders were being taken advantage of financially--"screwed" was the word he used-by the team's owners. He wanted me to figure out why. What I discovered, though I didn't realize it at the time, was that the Redskins' owners had devised a kind of financial engineering that Wall Street would soon adapt to transform the country.

Here was the story. A company called Pro Football, Inc., a holding entity that controlled the Redskins, had two principal shareholders: the famed criminal defense attorney Edward Bennett Williams (who also served as the team's president) and businessman Jack Kent Cooke. When Williams originally bought his stock in the early 1960s for between $50,000 and $100,000, it amounted to 5 percent of the company. Cooke, meanwhile, paid $350,000 for 25 percent of the team around the same time.

Over the subsequent decade-plus, Cooke had come to control close to 75 percent of the stock--which by 1978 was worth around $20 million--while Williams's stake had grown to 15 percent, valued at around $4 million. Their dirty little secret (to borrow a phrase we used in virtually every Washington Monthly story) was that they had increased their stakes, and their wealth, without spending another penny of their own money.

Instead, they had Pro Football buy back shares from other shareholders as they became available. Whenever a sale took place, the people who still had shares suddenly owned a larger percentage of the team. That's because the stock Pro Football bought back wasn't sold to anyone else. It was "retired." In other words, Williams and Cooke gained control of the team not by buying more shares, but by shrinking the number of total shares.

But Pro Football didn't have the cash to buy all those shares, so the company had to get bank loans--$8.8 million in all. And it was the company that had to pay the annual debt service, not Williams and Cooke personally. The debt service, according to a former Redskins head coach, amounted to about $600,000 a year.

One consequence of this financial maneuver was that the Redskins lost money. Though Williams tended to blame the losses on such factors as excessive player contracts, it was actually the debt...