On March 10, Senator Charles Schumer ventured to the Downtown
Athletic Club, the once shabby-chic sweat temple for the likes of Robert De
Niro and John F. Kennedy Jr. and longtime home of that symbol of youth and
athletic prowess, the Heisman Trophy. The Senator brought his cheerleader’s
smile and the governmental equivalent of a giant shot of cortisone: He chose
the club as the place to propose a $225 million package for non-profit
organizations hobbled by the events of Sept. 11. He indicated that the club,
which is located on West Street just four blocks from Ground Zero, would likely
receive a nice chunk of that money. “The club is one of the most venerable and
civic-minded institutions in the city,” he said, “and I can’t imagine a
downtown without it.”
For members of the club, it was an encouraging, even poignant,
sight. The D.A.C. has been closed since Sept. 11, and has been in financial straits
for at least three years before that. A particularly dark time came in
December, when the ceremony for the Heisman Trophy, which the club awards every
year to the best college-football player in the country, had to be moved to the
Marriott Marquis Hotel in Times Square because the club’s notoriously shoddy
elevators were condemned by the city.
And though management doesn’t know how much of that $225 million
it will eventually see, it’s clear that without several million dollars in
financial assistance, the Downtown Athletic Club may never open again.
“Chuck Schumer’s the man ,”
said James McNamara, who sat on the club’s 24-member board of governors from
1997 to 1999. “It’s like when [Governor] Hugh Carey saved the Radio City Music
Hall.”
“I really hope we get that money,” said Jim Corcoran, the club’s
president and a 42-year-old senior vice president at Morgan Stanley. “That
would be a great story.”
The real story, though, is how Mr. Schumer ended up fighting for
an institution that might very well have closed even if the terrorist attacks
had never happened. It turns out that despite years of alleged mismanagement
and withered revenues, the Downtown Athletic Club has retained some Tammany
Hall–era influence.
The club’s financial troubles started more than a decade ago, and
club insiders cite several reasons, including the demise of the maritime
industry in lower Manhattan; competition from cheaper, sleeker gyms; the end of
big tax deductions for corporate luncheons; and increasing uneasiness about the
nutritional value of corned-beef hash and martini lunches at the club’s Jack
Mowbray Grill.
“It was a bunch of lawyers
trying to become businessmen-and that don’t work,” said Frances Powers, who was
president of the club from 1995 to 1997, adding, “9/11 had nothing to do with
the failure of the club. The club’s been failing for years.”
The D.A.C. was charging up to $2,300 a year for memberships when
it closed. Joe Farrell, a former secretary and general counsel of the club,
told The Observer that some members
decided the D.A.C.’s mahogany moldings and antique racquetball courts-on which
the likes of disgraced financier Ivan Boesky once played-weren’t worth $1,900
above what a year’s membership at Lucille Roberts would cost.
By September, membership had dropped from a high of 4,000 members
to 700. Robert Kirk, who served as one of the club’s governors from 1997 to
1999, said that many of those remaining members had joined because of bargain
incentives. “Three-fourths of them were paying $1,800 a year,” he said.
For these reasons, Mr. Kirk alleged, “the club decided not to pay
taxes. That really put them into a hole-they just decided not to pay taxes!
They felt they were being financially savvy.” The club’s current president, Mr.
Corcoran, confirmed that the club management did stop paying taxes, but didn’t
elaborate the reasons for doing so.
In 1996, the city placed a number of liens on the club’s West
Street building. Two years later, the club filed for Chapter 11 bankruptcy.
After fending off takeover bids by several developers, the club agreed to sell
its 35-story building to creditors for $16 million. After the club paid off its
debts, it took out an $8 million mortgage on floors 2 through 13 of the
building and continued to operate.
The upper portion of the building, which had been the club’s
hotel, was sold to a group of developers that included Jack Lefkowitz. A source
close to the club said that Mr. Lefkowitz had to stop renovating the hotel
prior to Sept. 11; at the same time, he was facing troubles surrounding his
allegedly shoddy work at the Ice House, a tony building in Tribeca. As things
stand, the upper portion of the club building is an abandoned shell. (Mr.
Lefkowitz declined to comment for this story.)
Meanwhile, club insiders contend that the way the club
reorganized was not particularly savvy. “The hotel was making them money,” Mr. Kirk said.
“They sold off the only asset that was making them money. Can you
believe it?”
What’s worse, Mr. Kirk said, the cash from the sale of the hotel
didn’t even keep the club afloat. “They still have an $8 million balloon
payment due,” he said, “which could be called in at any time. That’s the
balance of the building. For a while, they were just paying off the interest on
the mortgage and none of the principal. They hadn’t paid anything on the mortgage for some time prior to 9/11.”
The club’s president, Mr. Corcoran, strongly disagreed and said,
“All mortgage payments were made up until Sept. 11.”
Mr. Kirk estimated the club’s pre–Sept. 11 debt at more than $13
million. Mr. Corcoran said the debt was “several” million dollars, but didn’t
provide an exact figure. He said the club has been leaking $500,000 a month
since it closed in September. Losing the Heisman ceremony further cost the club
an estimated $2 million in sponsorships.
For that reason, Mr. Kirk said that a government bailout would be
“a waste of money …. How can the government help them when they can’t get their
own financials together?” he asked. “Even [former Dallas Cowboys quarterback]
Roger Staubach, who actually won the
Heisman and who owns a real-estate company-Staubach wouldn’t touch it with a
five-foot pole.”
Mr. Corcoran said that rumors of the club’s demise pre–Sept. 11
were premature. “We’ve had difficulties for some time by not upgrading the
facilities,” he said. But shortly before Sept. 11, he said, the club had hired
Club Corp., which Mr. Corcoran described as “the largest operator of clubs in
the country …. They were going to come in and be the five-star developer. That
changed on the 11th. A lot of things changed.”
But the question remains: Why is Senator Schumer-who never won a
Heisman-getting involved? Mr. Corcoran said he didn’t know. “I don’t know where
it came from,” he said. “I’ll be honest: I had been in touch with FEMA, Empire,
Giuliani, Bloomberg, everybody. I was asking for money. Then this thing with
Schumer happened.”
“Why should they come to the rescue of a private club that was in
deep financial trouble before Sept. 11?” said Mr. Powers, the former club
president. “I know Chuck Schumer pretty well, but when you know the facts, it
doesn’t make any sense.”
Asked about the Senator’s involvement, a spokesman, Bradley Tusk,
said, “We think that it’s important to help New York City’s non-profits rebound
from Sept 11.” Pressed about the club, Mr. Tusk added, “Thinking about the
future of the club, they’ve offered to donate space to other non-profits hurt
by Sept. 11. Chuck thinks that’s important.”
But what actually brought the Senator downtown on March 10 was a
flurry of behind-the-scenes activity by one of the club’s more influential
members, Brian O’Dwyer. Mr. O’Dwyer is a well-connected lawyer downtown, a
20-year supporter of the D.A.C. and an even bigger supporter of the Democratic
Party. He’s contributed close to $30,000 to New York Democratic candidates and
political-action committees since 1990.
More significantly, he is the son of Paul O’Dwyer, a New York
City Democratic agitator who died in 1998, at age 90. The elder O’Dwyer was a
genuine Irish-American hero: an advocate for immigrants, blacks and the working
class with lots of political sway. He lost to Republican Jacob Javits when he
ran as a Democrat for the U.S. Senate in 1968, but was elected City Council
president in 1973. When he died, The New
York Times ran a 2,000-word obituary.
So when Brian O’Dwyer decided the government should bail out the
club, he didn’t have much trouble getting Mr. Schumer’s attention.
“I was very upset about the fact that the club was closed,” said
Mr. O’Dwyer. “It looked like it might not reopen.” He said his friend Mr.
McNamara, one of the former governors of the club, told him the Federal
Emergency Management Agency was “taking the position that they were only going
to help for-profit organizations hurt by Sept. 11, and not non-profit
organizations.”
Indeed, the federal government is planning to spend $2 billion in
aid to downtown for-profit businesses.
“We lost 65 employees!” Mr. O’Dwyer said, referring to the club
employees who had to be let go when the club closed. “All of them were
unionized. These are people who have been long-term employees. You develop a
fondness for them.
“The distinction between for-profit and not-for-profit made no
sense to me,” he continued. So he did what any well-connected Democrat would
do: He called the state’s senior Senator.
“I consider him a friend,” Mr. O’Dwyer said. “I’ve been a supporter for many years; I
supported him when he ran for Senate in 1998. I guess that’s the best way to
put it: I really do know him.”
Mr. O’Dwyer placed a call to Senator Schumer’s office. “They were
terrific,” said Mr. O’Dwyer. “They looked at it and they said, ‘Yeah, we agree
with you.'”
The next thing anyone knew, Chuck Schumer was standing next to
the Heisman and making his announcement.
Mr. Corcoran, who said he was unaware of Mr. O’Dwyer’s shadow
diplomacy, said that if the money comes through, the club will stay in
business.
“It was a tragedy for so many,” Mr. McNamara said of the World
Trade Center attacks. “And it was harmful to the future prospects of the club.
We weren’t out of business yet.”
Not everyone cares whether the club re-opens. At the Heisman
ceremony, several onetime laureates said they were glad the D.A.C. wasn’t
hosting the ceremony anymore. “I like the Downtown Athletic Club, and I
appreciate the things they did, but the Marriott is a better atmosphere,” said
George Rogers, a 1980 Heisman winner, speaking to a reporter from ABC. “You get to go and see everything in town
being here at the Marquis. When you’re downtown at the D.A.C., there’s not many
places you can go.”
