Not surprisingly, out-of-state attorneys at big-time law firms DLA Piper and White & Case worked on the largest deal in NBA franchise history, Houston billionaire Tilman Fertitta’s agreed-to purchase of the Houston Rockets from Les Alexander for $2.2 billion.
But it was two Texas lawyers — Steven Scheinthal and Rafael Stone — who were the real legal minds behind the deal.
Scheinthal is the general counsel for Fertitta’s restaurant, entertainment and hotel company Landry’s. Stone is the longtime general counsel for the Rockets and its home court, the Toyota Center. Together, they negotiated the deal while the New York firms handled the documentation at their direction, Scheinthal said in an email to Texas Lawbook.
“That is how we kept it quiet and it was done fast,” he said.
Baker Botts partner Mike Goldberg in Houston is thought to have advised Alexander on the sale, having worked with him on his purchase of the team back in 1993 and serving for a time as general counsel. Goldberg didn’t respond to a request for confirmation and a spokeswoman for the law firm said the firm cannot comment on Goldberg’s association with the deal.
Scheinthal confirmed that there were challenges getting the deal done given Hurricane Harvey, which flooded thousands of homes in the Houston area, but he wouldn’t elaborate.
“I do not wish to provide any further details or comments,” he said. “We are just the lawyers and not the principals. They deserve their due, not us.”
Fertitta was rumored to be bidding on the team shortly after the 73-year-old Alexander announced he was selling it in July to focus on his philanthropic efforts. It makes sense: Fertitta offered to buy the team in 1993 for $81 million but was outbid by Alexander, who offered $85 million. He has been a limited partner and served as an advisory director in the mid-1990s.
“I am truly honored to have been chosen as the next owner of the Houston Rockets. This is a life-long dream come true,” the Galveston native said in a statement. “I am overwhelmed with emotion to have this opportunity in my beloved city of Houston.”
The billionaire restauranteur paid a high price for his new prize. In February, Forbes valued the team at $1.65 billion, so Fertitta paid about a 33 percent premium.
Others who expressed interest in buying the team included Houston Toyota dealership owner Dan Friedkin and ex-Rockets center Dikembe Mutombo. Even Beyoncé was mentioned as being interested in buying a piece of her hometown basketball team (her husband Jay-Z at one time owned part of the Brooklyn Nets).
The team at DLA Piper advising Fertitta was led by Richard Rubano and Peter White, both in New York.
The lead attorneys at White & Case handling the sale for Alexander couldn’t be ascertained at press time. But the firm represented the Rockets as co-proponents of the confirmed restructuring plan in the 2014 bankruptcy of Houston Regional Sports Network, which carried its games (Los Angeles partner Roberto Kampfner was part of that team).
Fertitta’s purchase of the Rockets still needs to clear the NBA’s board of governors.
Scheinthal began doing work for Fertitta while practicing at Stumpf & Falgout, the law firm of Fertitta’s cousin, Tilman “Skip” Falgout. The task for the “deceptively soft-faced” young attorney, according to a 1997 story in Texas Monthly: To fend off a group of 22 creditors who had filed suit against him.
“Scheinthal delayed, then denied, then delayed some more before at last negotiating settlements that amounted to a fraction of the original debts,” author Robert Draper wrote. “Between the collapse of the Texas banking industry and the heroics of his attorney … Fertitta had bought time, and at a discount.”
Scheinthal has handled plenty of other challenges for Fertitta since he went in-house in 1992 and became general counsel and a director of the company the following year, including well-publicized fights with stockholders, bondholders, employees, customers and even animal rights activists (over the white tigers Fertitta has caged at his Aquarium entertainment complex in downtown Houston).
Among the situations Scheinthal’s had to deal with: When Fertitta reversed course and decided not to sell his then-troubled company to Dallas-based Consolidated Restaurants in 1999.
“He called me and said, ‘You have 30 minutes to get dressed and get your ass into the office,’” Scheinthal recalled to Houston Chronicle reporter Greg Hassell in 2001. “He said, ‘I’m not selling this company. This is who I am and what I do. I am not selling this company.’”
Fertitta took Landry’s private in 2010 in a deal worth $1.4 billion.
Rafael Stone, meanwhile, has been general counsel for the Rockets and the Toyota Center for more than 10 years. The Seattle native played basketball for Williams College and graduated from Stanford Law School in 1997. He previously practiced in the mergers and acquisitions and capital markets group at the now-defunct Dewey Ballantine.
Landry’s owns 500 high-end and casual dining establishments around the world as well as the Golden Nugget Hotel and Casino in Las Vegas and Laughlin, Nev., Atlantic City, N.J., Biloxi, Miss., and Lake Charles, La.
Some have questioned whether Fertitta can own a sports team given his casino interests (the NFL forced him to sell his stake in the Houston Texans in 2008), but other casino owners have held stakes in NBA teams, including Cleveland Cavaliers owner Dan Gilbert, setting a precedent.