Sinclair Responds To $1.5B Fraud Claim Amid DSG Turmoil

Sinclair Inc.’s full response to Diamond Sports Group’s recent $1.5 billion fraud claim hasn’t been made public — but Sinclair believes it shouldn’t have to help fund its own subsidiary’s legal claim against it. 

In a new filing in a U.S. bankruptcy court in Texas, Sinclair said DSG has run up a tab of nearly $147 million in unpaid management services, while also paying Sinclair for other services at below-contracted rates. As a result, Sinclair has asked the court to compel DSG to either pay that bill or reject the companies’ management services contract entirely.

“Sinclair is being forced to shoulder the burden and expense of the [management services] at a significant discount, while effectively subsidizing Diamond’s litigation against Sinclair attacking those very same services,” Sinclair said in its filing. 

The management services have covered affiliate sales and marketing initiatives that promote DSG to distributors, as well as internal functions such as legal and business affairs, payroll, finance, accounting, and insurance.

The situation further highlights the mounting legal, financial, and operational pressures facing the bankrupt parent of Bally Sports. Already, DSG has been granted judicial mediators to help deal with various demands from creditors, leagues, teams, and distributors, while also facing critical decisions about which of its 27 total NBA and NHL team rights it will keep. 

Amid that pressure, Sinclair opines that DSG will not emerge from bankruptcy.

“Based on Diamond’s own statements, emergence — let alone filing of a [reorganization] plan — is nowhere in sight,” Sinclair said.