Environment and Sports Business

George's role as team owner draws criticism: Some say purchase is conflict of interest

February 21, 2005

Nine years of hunting for sponsors, recruiting and trying to retain drivers, and managing costs that had nearly doubled in recent years had taken its toll. The founder of locally based Kelley Racing shuttered his Indy Racing League team at the close of last season.

And with the close of Kelley Racing, a new era for the Indy Racing League opened. Founded in 1996 as an alternative to CART, the open-wheel racing series stepped into what IRL founder Tony George years ago called one of CART's pitfalls.

George bought Kelley's assets, marking the first involvement of IRL management or ownership in team ownership. And with the purchase, industry observers said, George bought himself a host of conflict-of-interest issues.

In 1996, George derided CART for being controlled by car owners. The apparent aboutface, George said, is all about keeping Kelley's substantial assets intact. He named his 23-year-old stepson, Ed Carpenter, his driver.

George said he talked to several IRL team owners before deciding to buy Kelley's assets. But a conspicuous number of team owners and executives were either unavailable or unwilling to talk with IBJ about George's joining their ranks.

"I don't understand how he does this," said Dennis McAlpine, a motorsports analyst based in Scarsdale, N.Y. "He's opened up a closet full of all sorts of serious issues."

Among those issues is how any success George's new Vision Racing team achieves will be viewed by fans, series' corporate partners and other team owners.

"I think there will be some people with a close eye on things," said Ron Hemelgarn, an IRL team owner since the series' early days. "I don't see a problem as long as there's no favoritism. I suppose there could be an issue with an appearance of favoritism."

Robin Miller, a motorsports columnist and longtime Tony George critic, was less charitable in his assessment.

"Tony has said everything has to be above board," Miller said. "You mean like the 2002 Indianapolis 500 when Paul Tracy won and [George] gave it to Penske?"

In 2002's Indianapolis 500, Tracy-an ardent CART supporter-passed Team Penske's Helio Castroneves with less than two laps to go. But upon review, IRL officials said Tracy passed Castroneves under the yellow, and declared Castroneves the winner. George made the final decision.

There's also the issue of George's choosing engine and chassis manufacturers and other suppliers for his team. Currently, George will continue Kelley's program of using Toyota engines and Dallara chassis.

But industry observers question if George will wrap future negotiations with engine, chassis and other parts makers for the series into decisions for his team.

"Wouldn't it appear to be something of a league endorsement if Tony George is choosing a certain supplier?" McAlpine said. "This isn't just any team owner here. You would have to wonder what weighed on those decisions."

Then there's the matter of George's chasing sponsors, while his league and other teams are hurting for cash and sponsors.

"Tony George has put himself in direct competition with the teams that supported his series," Miller said. "He's now competing with the little guys he's supposed to be supporting. These were the exact people he was supposed to be giving opportunities when he founded this series."

Terms of the buyout were not disclosed, but estimates place George's cost at $5 million to $7 million annually to finance the team. He's made a three-year commitment. If he decides to invest substantially more, that would mean another deep-pocketed owner for smaller teams to battle, tipping the level playing field George said he sought to create when he formed the league, Miller said.

IRL spokesman Fred Nation said there's always tension between the league and teams going after a limited number of sponsors. But Nation doesn't think George's becoming a team owner will exacerbate the situation.

As for George's choice of suppliers, Nation said those decisions will be made separate from league matters.

"[Tony] is like any other team owner," Nation said. "He will make decisions based on what he feels is the best deal for his team. I wouldn't think anyone would view what Tony George chooses as any more important than Roger Penske or Eddie Cheever or any other team owner."

"He controls the entire league and everything about it," McAlpine said. "Of course his operations and decisions will be viewed differently, if not internally, then certainly by those outside IRL's inner circle."

While league administrators and presidents are usually kept out of team ownership in North America's most popular stick-and-ball sports, there is some history of such arrangements in motorsports.

Formula One czar Bernie Ecclestone formerly had a piece of team ownership, and the France family, which runs NASCAR and the Grand Am series, has been involved in Grand Am teams. CART is perhaps the best example. During the 1990s, car owners composed the majority of CART's board of directors. Today, CART-now called Champ Car-is dominated by teams owned by the series' principals.

"It's not that uncommon in today's environment in motorsports," George said during a press conference to announce the formation of his team. "Any instance you can think of, there's someone who has a leadership role or an ownership role in a series who helps support it, even to the extent of fielding a team, or driving."

George, who formed the IRL to give American drivers a better shot at openwheel racing, has taken another step toward re-creating the CART series he criticized, McAlpine said.

"You begin to wonder if he wouldn't have been better off forming a team in the first place and giving American drivers an opportunity under the CART umbrella," McAlpine said. "You could certainly argue the sport would have been better off that way."

Dennis Reinbold, owner of Dreyer & Reinbold Racing, one of the IRL's success stories, said he is optimistic about Vision Racing's inclusion in the series this year.

One thing most owners agree on is the league can't let another team fold, and George's buying out Kelley adds another car-maybe two-to the grid. There are 22 cars set to start the series opener March 6 at Homestead, Fla., which is roughly the number of full-time cars the IRL had last season.

"I would be very concerned if I didn't have the confidence Tony has the ability to separate his duties to run the series and the duties to run his team," Reinbold said. "It's good to have another strong, fulltime team in the series, and I'm happy to see Ed Carpenter get a full-time ride."

Carpenter drove last year for Eddie Cheever, but fared poorly during his rookie season, finishing 16th in the series.

The league could get a favorable publicity bounce from George's emergence as a team owner, McAlpine said. But the biggest upside, industry insiders said, is George will get firsthand experience with problems faced by team owners.

"I think Tony will see a different side of racing as a team owner that he's never seen before," said Hemelgarn, whose team won the 2000 IRL championship. "If he can marry the things he knows from operating the league with what he will learn as a team owner, I think that will really open his eyes and be good for all of us in open-wheel racing."
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