The Slatest

Russian Plutocrat Set to Make $1.6 Billion in Brooklyn Via Tax Money, Eminent Domain Seizure

Vladimir Putin and Prokhorov in March.

Alexei Nikolsky/AFP/Getty

Mikhail Prokhorov is a Russian man who made a fortune in the nickel business by giving the Russian government a tiny amount of money in return for a hugely valuable company during a period of notoriously brazen corruption. Ha ha, Russia, right? Well, guess what: He’s done it again, this time in our own United States. Prokhorov paid $223 million in 2010 for large shares of the Nets NBA basketball franchise and the Barclays Center arena in Brooklyn. The arena was built with hundreds of millions of dollars of taxpayer money and subsidies, and it was built, in part, on land purchased from private property owners under threat and use of eminent domain seizure—via the government simply asserting its ownership of homes and places of business.* (For good measure, the Barclays corporation, the arena’s sponsor, borrowed $800 billion from the U.S. government during the financial crisis bank bailouts.)

Prokhorov’s stewardship of the team itself has been a failure; the franchise loses money, hasn’t won 50 games in a season (a basic benchmark of a quality performance in the NBA) since he took over, and doesn’t seem likely to get better any time soon because it’s committed to long, expensive contracts with players who are getting worse every year.

So how has that worked out for Prokhorov? According to reports, he’s preparing to sell either some or all of his shares in the Nets and Barclays Center for a huge profit. From NetsDaily:

In the discussions, the team is being valued at $1.7 billion and the arena at $1.1 billion, said both sources.

That’s a profit of about $1.6 billion for Prokhorov in four years. To be fair to the group thinking of buying his shares, the team has become quite popular, and has been the subject of a lot of media attention, since it moved to Brooklyn. There’s clear potential for a big-deal franchise here—if it’s run by someone who knows what he or she is doing. (The same effect was at work in the $2 billion that the Sterling family got for the Clippers, which they mismanaged for years.)

So Prokhorov has made himself another billion-plus dollars by, more or less, getting United States and New York taxpayers to subsidize four years of acting as counterfactual proof that the Nets could be a big deal if they weren’t run poorly. That, as they say, is nice work if you can get it. But if you don’t already have millions of dollars and social relationships with powerful public officials, you can’t get it. 

Correction, Oct. 15, 2014: This post originally misstated that land was acquired for the Barclays Center using only the threat of eminent domain seizure; some area properties were acquired by the state via seizure, a process that is ongoing