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The 30-Year Legal Battle Between the Owner of the Washington Nationals and His Estranged Brother

Washington knows them as the close-knit real-estate family that built landmarks like Tysons Corner Center, donated millions to area nonprofits, and turned the Nationals into playoff material. Less well known is that for the last 30 years the Lerner dynasty was mired in an epic legal battle with one estranged member. Decades of court filings feature clashes over everything from control of a family company to a disputed $429 payment. Luke Mullins digs through the paper trail to chronicle the saga.
The 30-Year Legal Battle Between the Owner of the Washington Nationals and His Estranged Brother
Illustration by Alex Fine.

In the spring of 2006, Major League Baseball commissioner Bud Selig faced one of the thorniest decisions of his career: whom to put in charge of Washington’s new baseball team.

The league had purchased the floundering Montreal Expos, relocated the franchise to DC, and slapped a $450-million price tag on it. Now it was up to Selig to select an owner.

Washington hadn’t had a team since 1971, and there was no shortage of qualified candidates vying to revive the legacy. Billionaire investor Ron Burkle joined with Jesse Jackson’s son Yusef to make a play for the franchise. Former Seattle Mariners owner Jeffrey Smulyan lobbied local politicians to support his bid. And an investor group led by GOP powerbroker Fred Malek and entrepreneur Jeffrey Zients landed the endorsement of DC’s then mayor, Anthony Williams.

For 17 months, Selig agonized. Finally, on May 3, 2006, he picked Ted Lerner, the local billionaire real-estate developer, who had bid along with his son and two sons-in-law. The Lerners might have lacked some of the star power and political support of their competitors, but they had one thing the others didn’t.

“The family model meant a lot to me,” Selig told reporters. “There’s continuity. There’s stability. If you look back in our history, the family model works well.”

By then, the Lerners had already established themselves as one of the most powerful dynasties in Washington. Ted had amassed his fortune building shopping malls and offices—landmarks such as Tysons Corner Center and the Washington Square building at Farragut North. His son, Mark, and his daughters’ husbands, Edward Cohen and Robert Tanenbaum, are all principals at Lerner Enterprises. Ted told Washingtonian in 2007 that when the four men visited Milwaukee to discuss the Nationals deal with Selig, they chartered two planes so that the heads of the Lerner empire wouldn’t be wiped out if, God forbid, one jet went down.

There’s continuity. There’s stability. If you look back in our history, the family model works well.

Bud Selig

The Lerners have applied this same family-first approach to their stewardship of the Nationals. Ted, his wife, and their children and spouses are the team’s primary owners, and daughter Marla Tanenbaum chairs the ball club’s foundation. Over the past ten years, as they’ve turned the Nationals into a perennial playoff contender, the Lerners have projected themselves as a tight-knit, nothing-to-see-here family unit—above the internal power struggles that befall other wealthy bloodlines and stoke tabloid gossip.

“It’s not a facade,” Mark Lerner once told Washingtonian. “We love one another.”

With one possible exception.

Like many triumphal dynasties, the House of Lerner has an alienated outlier. Throughout the last three decades, the family was at war with the 90-year-old patriarch’s only brother, Larry. Estranged from Ted since at least 1983, Larry has alleged that he’s been cut out of the profits from real-estate deals. He has sued Ted or his affiliated companies at least 16 times, alleging breach of contract, breach of fiduciary duty, unjust enrichment, civil conspiracy, and fraud. He also accused one of the firms of operating under a “veil of secrecy.”

Some disputes Larry won; others he lost. Along the way, the fight split the family tree, threatened to destroy the Lerners’ real-estate business, and ensnared some of the most notable properties in greater Washington. And, in keeping with the family’s reputation for intense privacy, it has played out almost entirely out of public view. While neither Larry nor Ted would talk to Washingtonian , there’s a mountain of legal documents chronicling the blood feud.

• • •

The first Lerner in Washington, Mayer, arrived from Palestine in 1920.

He married a Lithuanian immigrant, Ethel, and they settled into a rowhouse in a mostly Jewish neighborhood along Georgia Avenue, Northwest. Mayer initially worked for a clothing company, but as Ted once told Forbes, Mayer soon went into real estate: buying, remodeling, and reselling buildings. Ted, Larry, and the couple’s youngest child, Esther, had a modest upbringing. As a boy, Ted sold magazines door to door so he could afford 25-cent bleacher seats at Washington Senators games.

After being stationed at Fort Hood in Waco, Texas, during World War II, Ted enrolled at George Washington University’s law school. When his father died of cancer in 1946, Ted worked to support his mother and siblings. He studied during the week and sold houses on the weekends. Soon, his passion for real estate eclipsed his interest in law.

By that time, the federal government’s expansion had fundamentally reshaped Washington. New federal jobs had brought more workers to the region, and thanks to the advent of the automobile and newly constructed highways, many wanted to live in the quiet neighborhoods outside the city. Ted cashed in by selling suburban homes and developing shopping malls. He cut the ribbon on Wheaton Plaza in 1960 and Tysons in 1968. Along the way, he became known as one of Washington’s toughest dealmakers.

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“If he didn’t get his way, he was a terror,” H. Max Ammerman, a former business partner, told the Washington Post in 1988. “Meetings would end up in verbal fights.”

Larry began his career working for a drug company, but by the mid-1960s he and his big brother were working side by side. Larry sold subdivision houses for Ted’s company, and Ted gave him an ownership interest in Lerner Corporation, according to Ted’s pleadings. Ted also made Larry a minority partner in several development projects.

For years, the arrangement thrived and the men’s families grew close. In 1976, according to the Post, Ted and Larry made a $10-million cash offer for the San Francisco Giants. Had it panned out, bringing baseball back to Washington together could have been a lasting legacy for the Lerner brothers.

• • •

It was right around this time that Lerner Corp. brought on the next generation, beginning with Ted’s son, Mark, newly graduated from GW.

And soon, tension developed. Larry had previously enjoyed a warm relationship with his nephew, but according to court documents filed by Ted’s lawyers, Larry turned cold toward Mark. Ted’s lawyers claimed that Larry stopped speaking to his nephew entirely and all but stopped speaking to his brother; he also sent “mean-spirited letters” to Mark and Ted.

If he didn’t get his way, he was a terror.

H. Max Ammerman

According to Ted’s pleadings, Larry harbored a hatred for his older brother that “flared up” in 1977, the year their mother died. Over the next several years, the bitterness intensified. By 1983, the relationship finally cracked. Ted, as majority stockholder, removed Larry from Lerner Corp.’s board of directors and in his place elected a new board consisting of his wife, Annette, and Mark.

Larry, for his part, alleged he’d been excluded from the upside of deals he’d helped assemble. He claimed he’d only been thrown off the board once he brought these concerns to Ted, according to an opinion written by a Maryland judge. Larry also accused Ted of taking $289,157 from his bank account. (Repeated requests for comment sent to Ted through one of his daughters, the Nationals, and lawyers who recently represented him went unanswered. Larry’s lawyer, Jeremy W. Schulman, declined to comment for this story.)

In April 1985, Larry filed a $56-million lawsuit against Ted, Annette, and Lerner Corp.’s CFO. The complaint—which made its way into the Post but has since been sealed—alleged that Ted had developed projects using resources from Lerner Corp., which Larry partly owned, but diverted the proceeds to entities from which Ted alone would benefit.

Ted’s lawyer denied the allegations to the Post. “My brother joined a company which I started,” Ted told the newspaper, “and he now finds himself a very fortunate person in terms of material wealth.”

After Larry filed his suit, Ted fired him. But Larry’s 26-percent stake in Lerner Corp. meant that cutting all ties with him was going to be tricky. A few weeks later, Ted attempted a forced buyout of his brother’s stock. A judge, however, blocked the move.

The brothers ultimately called a truce: Larry and Ted would drop their lawsuits, and Lerner Corp. would pay Larry 26 percent of the company’s management-related net income each year. Larry would also remain a shareholder. “It was thought,” Ted’s lawyer later wrote, “that the settlement would bring to a close years of strained relations and business disputes.”

• • •

The deal didn’t resolve much.

Between 1987 and 1999, Larry sued Ted or firms he was a part of at least eight times. During those same years, according to Ted’s filings, Larry received more than $30 million in distributions from development projects that Ted cut him in on. The litigation cost the family business more than $2 million.

Larry has argued that Ted tried to eliminate his ownership interests because of Ted’s “personal dislike” for him. He said that Lerner Corp. didn’t fork over the payments agreed to in their settlement, and after he filed a lawsuit seeking the cash, the court awarded him nearly $1 million. A year later, Larry sued to prevent a real-estate partnership in which he and Ted were investors from diluting his stake. Once again, the courts sided with Larry.

Larry wasn’t always the one doing the suing. Companies with which Ted was affiliated have filed complaints against Larry on at least four occasions.

Washington Nationals Lerner
Illustration by Alex Fine.

Ted’s lawyers have dismissed Larry’s legal arguments as “often petty and frivolous.” According to a chronicle of the years-long battle prepared by a lawyer for Ted, Larry once filed a motion claiming that a $112,475 payment to him should actually have been $429 higher. In another case, a Montgomery County judge described Larry’s actions as intended “to push the buttons of the defendant.”

Larry’s behavior was “akin to a power struggle between a parent and a child,” the judge said, “or a contest as to who gets the last word.”

Ted’s lawyers argued that Larry’s “crusade” against his brother began to convince lenders that Lerner Corp. was a “risky investment.” The company found it tougher to raise capital. “If Lawrence is permitted to continue holding stock in the corporation for even a short while longer,” Ted’s lawyers claimed, “he may succeed in destroying Lerner Corporation.”

Ted’s side said they were out of options—their best hope was to oust Larry for good. On August 11, 1998, in a special meeting of the board, Ted huddled with Annette, Mark, and one of his sons-in-law to consider engineering a second forced-buyout attempt, according to minutes from the meeting. The family agreed to schedule a vote in two weeks and notified Larry of their plans. He immediately filed for an injunction to block the maneuver.

This time, a judge allowed the buyout to proceed. After years of wrangling, Ted had finally severed all of Larry’s ties to Lerner Corp.

• • •

Not much is known about Larry Lerner.

Around the time that his relationship with Ted fell apart, he began spending six months of the year in Florida. Today he and his wife, Iris, live in Boca Raton. His son, Richard, was at one time CEO of Annapolis Bancorp, which Larry helped start after Ted fired Larry from Lerner Corp.

Larry was the bank’s largest shareholder but said little at board meetings. “He was very close to the vest and not someone that you really could get close to,” says C. Terry Adkins, the bank’s first president.

Those who squared off against Larry in court found him more assertive. Former Lerner Corp. CFO Thomas Bowersox describes Larry as a “very intelligent, angry person.”

Despite his ouster from Lerner Corp., as of 1999 Larry remained a partner in roughly 17 real-estate development projects, some of which Ted also had a stake in. It wasn’t long before the brothers began to clash over these ventures.

In January 2007, Larry unleashed his most explosive allegations to date, accusing Ted of orchestrating a 20-year conspiracy to cover up a pattern of “systemic fraud” and “sweetheart self-dealing” that diverted millions of dollars in profits from a jointly owned venture to benefit Ted and a firm he controlled.

The dispute involved Lerner Development Company, a partnership involving Ted, Larry, and Larry’s wife that held ownership stakes in seven apartment complexes in Maryland and Virginia. Larry’s lawyers claimed that Ted provided Larry with “false and misleading” financial records, directed their joint venture to pay inflated management fees to a company Ted controlled, and used joint-venture funds to cover legal and accounting expenses incurred by Ted and one of his firms.

Larry’s behavior was “akin to a power struggle between a parent and a child,” the judge said, “or a contest as to who gets the last word.”

Lawyers for Ted’s side denied the claims. In earlier filings in the same case, they accused Larry of “a pattern of harassing conduct toward” his brother and noted that Larry was now on his fifth set of attorneys. The men went after each other in court for another three years, then resolved the matter in a confidential settlement.

As that fight dragged on, Larry disrupted Ted’s plans for the area surrounding Nationals Park. Many years earlier, the brothers and their wives had become part of a joint venture that bought a plot of vacant land on South Capitol Street in Southeast DC. After the city agreed in 2004 to bankroll a new stadium a few blocks away, Lerner Corp. issued a “cash call” requiring the partners to finance the construction of a parking lot on the land. Larry’s and his wife’s share was nearly $167,000. They filed for a temporary restraining order to block the development. Larry’s lawyers argued that the deal was “clearly designed” to benefit Ted’s companies’ interests “in the Washington Nationals baseball team at the expense of the Joint Venture.”

In response, lawyers for Ted’s side accused Larry of “acting out of ill will and spite” and alleged that he was “motivated by a desire to harm the [team].”

Eventually, the two sides reached yet another agreement: Construction on the parking lot could proceed, but Larry wouldn’t have to chip in for expenses—and he’d be entitled to a share of future profits.

Five years later, Larry caused a fresh round of headaches for his brother by suing to halt the sweeping redevelopment of White Flint Mall in North Bethesda. Although it was for many years a Montgomery County landmark, White Flint—in which Ted and Larry both had stakes—had emptied out, and the partnership that owned the mall invested more than $13 million to transform it into an open-air, mixed-use residential development.

But according to Larry, there was a serious problem with the plans: No one had bothered to tell him about them.

When he found out, Larry’s lawyers asked a judge to stop the redevelopment, arguing that the new White Flint would violate the terms of the original partnership agreement, which his attorneys said specifically authorized the partners to operate a regional shopping center—not a mixed-use development.

Washington Nationals Lerner
In one lawsuit, Larry Lerner (far left) accused his brother Ted (second from right) of engineering a 20-year conspiracy to cover up “sweetheart self-dealing” that diverted millions from a joint venture involving Ted, Larry, and Larry’s wife, Iris (second from left) to benefit a firm Ted controlled. Photo of Larry and Iris courtesy of Janis Bucher/Gulfstream Media Group. Photo of Ted by Rich Pilling/MLB/Getty Images.

Once again, a family lawsuit dumped sand in the gears of a business opportunity. And once again, it took a lot of lawyers a lot of time to make it go away. After 14 months of litigation, the dispute was settled in a confidential agreement in January 2015.

• • •

As the Lerners prepare for their tenth full season as owners of the Nats, they have all sorts of questions to ponder.

Can the team bounce back from a disappointing 2015? Will Ryan Zimmerman and Jayson Werth be sidelined by injuries again? How will new manager Dusty Baker handle the bullpen?

One thing they won’t have to worry about: Uncle Larry. For the first time in many years, the family isn’t tangled up in litigation.

Not that the armistice couldn’t collapse. Unlike ballplayers, estranged brothers never get too old to swing the bat.

 

Senior writer Luke Mullins (@lmullinsdc on Twitter) can be reached at lmullins@washingtonian.com.

This article appears in the April 2016 issue of Washingtonian.


Senior Writer

Luke Mullins is a senior writer at Washingtonian magazine focusing on the people and institutions that control the city’s levers of power. He has written about the Koch Brothers’ attempt to take over The Cato Institute, David Gregory’s ouster as moderator of NBC’s Meet the Press, the collapse of Washington’s Metro system, and the conflict that split apart the founders of Politico.