When Jack Nicklaus was sued by the Nicklaus Corporation earlier this year, most people were asking: Why?
The 83-year-old legend has 18 major titles and 73 PGA Tour victories in a career that may never be replicated inside the ropes.
In his second career, Nicklaus’s success with his design business is key to a lawsuit with his partner Howard Milstein, who is pushing for a May 13 filing in New York State Supreme Court. lawsuit.
As part of the process, each party seeks information to support its case through discovery.
On Sept. 28, Nicklaus was ousted, and in an affidavit provided a rare glimpse into Nicklaus and its relationship with Milstein as part of the discovery process. (You can read the full 31-page affidavit here.)
The beginning of Jack Nicklaus’ relationship with Howard Milstein
Nicklaus’ business relationship with Milstein began in 2005 after Nicklaus stopped competing.
He hired a group of consultants to evaluate his burgeoning design business, which he has been involved with since the mid-1960s, when he advised Pete Dye on a course outside Columbus, Ohio, that would eventually be named golf Club.
Consultants evaluated the design, trademark and endorsement business, and the final valuation was approximately $296 million.
“I want my family to retain control of these businesses during my lifetime and beyond, so I have decided to monetize half of the value of these businesses as part of estate planning to benefit my children and their families,” Nick Rouse said in his affidavit.
By hiring consultants to help sell a minority stake in his company (49%), Nicklaus hopes to find a partner to help the company move beyond where Nicklaus is at.
Emigrant Bank, an entity owned and controlled by Howard Milstein, is one of the potential potential customers.
Nicklaus worked closely with his attorney, Jim Schnell, to broker a potential deal between Nicklaus and what would become known as Nicklaus & Co. LLC.
The new company would essentially take over all of Nicklaus’ stadium design, branding and endorsement business, plus some smaller companies, and bundle them up for sale to the new company, of which Nicklaus would own 51 through his immigrant bank. % of the shares, Milstein will own 49%.
Nicklaus will get $145 million in cash for what he calls estate planning purposes and a 51 percent stake in the new company.
Emigrant Bank will provide the company with a loan of $145 million at 8.5 percent interest, with the option to convert the loan into a 49 percent stake in the company.
“My understanding of future cash flow is that the first $12.325 million of the company’s annual net income will go to Emigrant Bank to pay interest, while GBI [Golden Bear International] As long as the loan does not default, he is entitled to the next $12.835 million in net income,” Nicklaus said, explaining his understanding of the terms of the deal. “I also learned that if the company does not have enough net income to pay Emigrant all interest due at any time, the company will issue PIK [payment in kind] 8.5% interest rate on the outstanding amount of the note. I obviously don’t understand or foresee what that will lead to over time. “
PIK is part of the math of higher finance, not for the faint of heart, but something within Milstein’s purview as a Harvard Law graduate, successful financier and owner of Emigrant Bank.
After an initial payment of $145 million to Nicklaus in 2007, he received no additional profit sharing from 2007 to 2012.
In 2013, Nicklaus received $1,414,500 and will receive additional cash payments totaling $21,167,600 from 2013 to 22.
Nicklaus also received a salary beginning in 2007 and in each subsequent year, including 22, totaling $8,932,700 during his time with the Nicklaus Companies.
From 2007-22, Milstein and Emigrant Bank will receive payments of $73,622,300.
Shortly after the 2007 deal was signed and the money moved, the economy entered what would eventually be called the Great Recession.
The deal would never go the way Milstein or Nicklaus foresaw, with the Nicklaus company continuing to lose money financially, which would require additional financing and ultimately control of the company from Nicklaus to Milstein.
“By 2011, the GBI and NFD [a membership reciprocal network of Nicklaus-designed golf courses] “There’s no real equity in the company because the Class A units are swamped so much,” Nicklaus said in his affidavit. “Howard took advantage of the company’s dire financial situation to gain a majority on the board, which allowed him to control the the company’s board of directors and operations.”
With a year remaining on the original employment agreement Nicklaus signed in 2007, Nicklaus intends to terminate his employment and let his five-year non-compete clause expire due to the company’s ill fortune so he can work on the Left the company 17 years ago.
“Howard then asked me not to terminate my job, but to give him the opportunity to turn the company around after the recession,” Nicklaus said. “I felt it was the right thing to do, so I agreed to the so-called ’employment, governance and control agreement’.”
The agreement changes Nicklaus’ compensation, tying it to the revenue the company receives from design and marketing projects.
The new agreement also grants governance and control of Emigrant Bank’s management board and sees Milstein as co-chairman of the board.
It also gives Milstein control over all major decisions.
“Once Howard took permanent control of the company, he acted as if he owned me,” Nicklaus said in his affidavit. “He tried to control every aspect of my life, from what I did, who I talked to, where I went, like I was his property. I was always trying to show respect, but it wasn’t respected. I’ve also worked really hard to keep the relationship going, but it’s becoming more and more obvious that I’ve been sided with someone who doesn’t respect me.”
Nicklaus attempted to acquire Emigrant Bank but was rejected by Milstein in 2017, and Nicklaus terminated his employment on June 1, 2017.
“I’ve had enough,” Nicklaus said. “I have enjoyed a successful career in both professional golf and golf course design and have earned the respect of many people around the world. I have turned my sporting success into a commercial success and I then allowed Howard to invest in that business And ruined it. I didn’t want to be controlled by Howard anymore. So, I decided it was time to wrap up my time with the company and start my five years of service before I could redesign golf courses and endorsement products myself.”
After letting the company know of his intention to terminate his employment, Milstein tried to change Nicklaus’ mind on two separate occasions, but neither of the proposed agreements worked for Nicklaus, who eventually terminated his employment as scheduled.
For five years, from 2017 to 22, Nicklaus performed services for Nicklaus Corporation and was paid for his efforts.
All the while, Nicklaus believed a five-year non-compete would get him back to a design job at a new company.
Nicklaus said he and Milstein would often discuss possible arrangements that would have Nicklaus back in action, but nothing worked.
Meanwhile, Nicklaus was frustrated with the situation. The straw that broke the camel’s back came.
From 1989-97, Scott Tolley covered Nicklaus for the Palm Beach Post.
In August 1997, Nicklaus said he hired Tolley as his director of communications and eventually promoted him to senior vice president of communications and business development.
In May 2018, Tolley will leave the Nicklaus Company and deal exclusively with Nicklaus until February 22, when Tolley leaves the Nicklaus job.
“The straw that broke the camel’s back came earlier this year when Howard set his sights on Scott Tory, an employee and friend of mine who has assisted me in business and philanthropic endeavors for decades,” Nicklaus said. “Howard’s announcement that the company will sue Scott in Florida for assignments on my behalf is in essence an attempt to indirectly limit my rights. His request that Scott disown me is an attack on me and a further step into my life control.”
On May 3, 2022, in a letter to Milstein, Nicklaus resigned from all board offices and directorships and notified him that a motion for arbitration had been filed on his and Tory’s behalf.
Oddly enough, the company still asked Nicklaus if he would work on the existing project, and he agreed, while, according to him, the company drew up a lawsuit against him.
Once the lawsuit was filed and a statement was made about Nicklaus’ discussions with the new Saudi Golf Federation, Nicklaus was still working on existing projects, but not through the company.
“I told the company that I would still be willing to work on the existing project under two conditions,” Nicklaus said. “It had to be without prejudice to either party’s legal standing, and I had to work directly for the client at no additional cost to the client. I told the company that I no longer wanted to work for the company because of what the company had done, but I Willing to provide services directly to customers to help the company fulfill its previous commitments at no additional cost to customers.”
The company turned down Nicklaus’s offer.
Nicklaus has investigated the design and the possibility of endorsement, but is on hold until the legal issues are resolved.
“Howard asserts that I cannot use my own name, image or likeness in any future business ventures in which I am involved,” Nicklaus said. “I don’t see how that could be true, but I haven’t made any decisions about branding at this point.”
At 83, Nicklaus’ illustrious career is coming to an end, and he hopes to extend it a little longer.
“I went from being the boss of the company to being a disrespected employee. I made a deal that I thought would allow me to retain control of the business I built, but it didn’t,” Nicklaus concluded his affidavit Said. “However, Howard also made a deal, but that didn’t include ownership for the rest of my life.”