Donald Sterling's Billions Are Built On Exploitation

 @ericbrownzzz
on April 28 2014 7:49 PM
sterling
Los Angeles Clippers owner Donald Sterling, center, his now-estranged wife Rochelle and actor George Segal attend a Clippers game at the Staples Center in Los Angeles in December 2008. Reuters

It was the racist rant heard around the world, but the man who (allegedly) made it has a long and -- until now -- relatively quiet history of racial discrimination. In fact, Los Angeles Clippers owner Donald Sterling owes a good chunk of his 1.9 billion fortune to ripping off minority tenants living in the approximately 5,000 L.A.-area housing units owned by his holding company, Sterling Family Trust.

The man known to the world as Donald Sterling was born Donald Tokowitz in 1936 to a working-class family of Jewish immigrants in Chicago. When Sterling was 2 years old, his family moved to the rough Los Angeles neighborhood of Boyle Heights, where Sterling, whose father was a produce salesman, hustled at local grocery stores to earn extra money. Friends from that period of his life say that even as a child, he was obsessed with earning a buck wherever possible.  

“As a kid, Donald never had enough of anything,” a longtime friend of Sterling told Dave Zirin, author of “Bad Sports: How Owners Are Ruining the Games We Love.” “With him, acquiring great wealth is a crusade. He’s psychologically predisposed to hoarding.”

In 1960, Sterling graduated from Southwestern School of Law in Los Angeles and spent years working divorce and personal injury cases. It was at this time that he changed his name from Tokowitz to Sterling, reportedly in the hopes that the name would convey excellence. A former co-worker told Los Angeles magazine that Sterling thought it was essential to name himself “after something that’s really good, that people have confidence in. People want to know that you’re the best.”

With earnings from his success as an ambulance-chasing attorney, Sterling quickly made his move into the Los Angeles real estate market, purchasing multi-unit apartment complexes in Beverly Hills and the surrounding Los Angeles communities -- primarily Koreatown -- at bargain-basement prices. As their value rose throughout the 1970s, Sterling stopped practicing law and devoted himself to managing his growing list of properties. Although Sterling, as NPR notes, was at one time the largest landowner in Beverly Hills, he maintained a relatively low profile.

That changed after Sterling purchased the struggling San Diego Clippers in 1981 for $12.5 million. It would prove to be one of his best investments, as Forbes now values the team at $575 million. While the deal was a winner for Sterling, the Clippers have had consistently losing seasons and the team’s value is relatively low compared to superstar clubs like the Los Angeles Lakers, which is worth $1.35 billion.

Three years after purchasing the Clippers, Sterling moved the team north to his hometown of Los Angeles. Because the NBA did not approve the move beforehand, the league fined Sterling $25 million. Sterling countersued for $100 million and eventually convinced the NBA to let him pay only $6 million of his fine out of future expansion fees with the franchise.

In the first 11 years of Sterling’s ownership, the Clippers never made it to the playoffs, but Sterling still managed to turn a profit by keeping the overhead low. When Sterling moved the Clippers to L.A., he settled the team in the outdated Los Angeles Sports Arena, later cutting costs even further by choosing to share the Staples Center with the Lakers in 1999.

According to ESPN, the Clippers’ lease for the Staples Center is only $1.4 million per year, and the Staples Center can make more money with five concerts than an entire year of Clippers games. During the 1998 NBA owners’ lockout, Sterling refused to hire a coach for six months of the season. His notorious penny-pinching allowed the losing team to turn a profit of $140 million between 1999 and 2008.

But penny-pinching doesn’t begin to describe his approach to property management. Dubbed “slumlord billionaire” by the Nation, Sterling has faced multiple lawsuits and currently holds the record for the largest housing discrimination settlement in the United States.

In 2006, Sterling was sued by the U.S. Department of Justice on charges that he would not rent to non-Koreans in L.A.’s Koreatown or to African Americans at his Beverly Hills apartments. Sterling ultimately paid a fine of $2.73 million, a housing discrimination settlement that's still the largest on record in the U.S.

Sumner Davenport, one of Sterling’s property managers, filed a discrimination suit in 2003 on behalf of 19 tenants. According to Davenport’s testimony, Sterling claimed he preferred renting to Korean tenants because, “I don't have to spend any more money on them, they will take whatever conditions I give them and still pay the rent … so I'm going to keep buying in Koreatown."

When Sterling acquired the Hollywood Ardmore apartment building, Davenport recounts, flooding from construction damaged the apartment of resident Kandynce Jones, who was legally blind and partially paralyzed. When Jones asked Sterling to pay for repairs on her apartment, he refused and reportedly replied “Just evict the bitch.” Jones died in 2003 soon after being evicted. The lawsuit was settled out of court in 2005. Davenport later sued Sterling for sexual harassment, but lost the case.

Despite (or perhaps because of) a demonstrated history of racial discrimination and exploitation, Sterling has devoted time and money to promote himself as a supporter of diversity. Sterling contributed money to the NAACP for approximately 15 years, L.A. branch president Leon Jenkins announced on Monday, and that relationship led to a lifetime achievement award for Sterling in 2009. He was primed to accept a second lifetime achievement award in May until news of his recent comments broke. In response, Jenkins announced that the NAACP would return his “insignificant” donation, but would not ask Sterling to return the 2009 award.

In 2006, Sterling bought a plot of land near Skid Row in downtown Los Angeles for $8.4 million and announced that he would spend $50 million to build a homeless shelter there. Years later, however, the Sterling Homeless Center still hasn’t materialized and Sterling is sitting on increasingly expensive land in Los Angeles’ ever-gentrifying urban core. Given his history of turning low-priced California land into big money, it’s possible that the homeless center may never surface after all.

Though this is far from the first time Sterling has made incendiary comments, the consequences are already promising to hit him where it hurts. Former partners like CarMax and State Farm have taken notice and withdrawn sponsorships of the Clippers, while commentators have called for Sterling’s ousting.

Still, as IBTimes pointed out in an earlier story, the NBA is limited in its ability to penalize Sterling. Even if he is forced or pressured to sell the Clippers, odds are the sale will amount for significantly less than Forbes’ $575 million valuation, which means he could sue the NBA for damages. But getting him out of the NBA for good is worth its weight in sterling.

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