Marshmallow Empire

The products are mediocre or worse, management is inexperienced, and it comes as no surprise that the balance sheets are a study in red. Hardheaded investors might be expected to take one look at the enterprise and run in the opposite direction. Right? Wrong. The money-losing operation happens to involve big-time sport, and the locale happens to be Cleveland, where an athletic franchise is almost guaranteed to bring out the small boy and large civic booster hidden in many businessmen.

Banker Bruce Fine, Businessman Alva T. Bonda, Lawyer Richard Miller and Mogul Corp. President C. Carlisle Tippit seem to abandon all fiscal caution when it comes to Cleveland's basketball, baseball and hockey clubs. In the past five years each man has invested from $200,000 to $1 million in one or more of the teams. And they are not alone. "Anybody who invests in sports for profit is out of his head," says Bonda. He should know, having once lost $400,000 in a now defunct soccer team. "The only reason to do it," he says, "is for the fun, for the connection with a sport and the people in it. Maybe it's bringing Walter Mitty up close."

"It's the superfan idea," says Fine. "Seats in the press box, chatting with the general manager or the farm-system director." Miller was a college fullback (Notre Dame) until he was sidelined by an injury; his father, Ray T. Miller, was one of the organizers of the Cleveland Browns. "I've always wanted to be an owner like my father," he says. Tippit was a boyhood baseball freak who wanted to keep Cleveland a major-league city. With the authority of a $250,000 in vestment, he helps run the town's base ball team, the Indians.

Borrow and Buy. Such sports-struck businessmen, and other Clevelanders like them, did not get together by accident. They were mobilized by Nick James Mileti, 42, son of Sicilian immigrants, who has traded his attorney's narrow lapels for the velour suits and mink coat of a promoter. He makes a business of turning rich fans -and ordinary folk as well -into investors. Since he made sport a career six years ago, the former suburban prosecutor, Jaycee BOUTELLE president and housing consultant has created an athletic empire worth $40 million.

In the process of taking over three major-league profes sional teams, an arena and a radio station to broadcast games, Nick Mileti has put up only $1.2 million himself, and most of that has been borrowed from banks.

Mileti's use of investor syndicates to buy teams sets him apart from most owners in big-time sport. Even at a time of explosive growth in professional athletics, most front offices have remained a stamping ground for rich in dividuals or families. Mileti is a wheeler-dealer who must borrow before he can buy.

He stumbled on his new career one night in 1967 when he filled the Cleveland Arena for a benefit basketball game between his alma mater Bowling Green and Niagara University. "I figured if I could get 1 1,000 fans one night, night." I Soon could get Mileti 8,000 made every a $1.9 million deal to buy the arena and the minor-league hockey team that played there.

He wasted no time wooing investors. "It's nothing for me to take somebody's money," Mileti says. "They give me money and I do the work." It is not that simple. Mileti has an infectious enthusiasm about his chosen field. "Sport is a common denominator that transcends even broads," he says. "Here we were, the eighth largest market in the country," Mileti recalls. "Yet we didn't have any major-league hockey or basketball, and the Indians were about to leave town." To a potential investor like Bruce Fine, that pitch made sense. "Maybe professional sports will help dispel some of Cleveland's negative image," says Firie. It is not all fun and altruism, of course. These days even losing teams are glamour properties that can usually be resold for a profit. And while franchises are in the red, owners who have other profitable enterprises get convenient tax losses.

Playing on all such attractions, Mileti in 1970 bought an expansion franchise in the National Basketball Association. To finance the $3.7 million cost, he collected hundreds of thousands of dollars from investors like Fine, Bonda and Miller. He raised the rest by going public, selling shares in the basketball club, the Cleveland Cavaliers, at $5 apiece. Ohio residents plunged in by the thousands.

Local Celebrity. Infatuated with his new business-and with his new status as a local celebrity-Mileti bought the debt-ridden Cleveland Indians. The asking price was about $10 million. When Mileti arrived at an American League owners meeting in 1972 with an offer that included only $1 million in cash, he was nearly thrown out. So he rounded up two new investors who kicked in another $1 million apiece and bought the club. Further rapid money raising bought him the World Hockey Association Cleveland Crusaders.

With the Crusaders, Mileti's empire became one of the biggest sport conglomerates in the U.S. Except for the Crusaders, though, who are showing some life this season, none of Mileti's teams have broken even in competition. Without exception, they do miserably at the box office. Last year alone Mileti's franchises lost $3.5 million.

For a while, Mileti tried to run all his shows singlehanded. "This is an empire built on marshmallows," admits Bonda. "Nick doesn't have his feet on the ground. He has diluted himself." At the behest of increasingly nervous stockholders, Bonda took over administration of the Indians last year. At the same time, Mileti was forced to appoint general managers for his other teams.

Whatever the problems he faces, Mileti has no intention of giving up. Indeed, he is pushing ahead with a project that he thinks will save his entire operation: construction of a new $ 18 million coliseum in a cornfield between Cleveland and Akron. It will be home to his hockey and basketball clubs and, he hopes, a regional entertainment complex. Mileti, however, has no assurance that Ohioans will use precious gasoline for a trip to watch mediocre teams or the circus. Nonetheless, he insists that "I don't even consider the possibility that the coliseum won't work."

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