To match Interview NBA/STERN

Report: How NBA owners turn profits into paper losses

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UPDATE July 2, 11:10 am: We need to make you aware of some flaws in the accounting used by Deadspin (and repeated here) in their original post that was the basis of this one. However, I don not believe it changes the overall theme that completely legal and widely accepted general accounting principles allow an NBA team to inflate losses or even hide small profits, with the losses all being paper.

To the corrections. First, the loss on player contracts cited in this article of $25.1 million almost certainly was a buyout of Dikembe Mutombo. A legitimate loss to write off. That said, the RDA that allows owners to write off players depreciation is in place, legally allowed and used.

Also, the NBA does not include the amortization of losses on buildings in its figures. Finally, it should be noted the Nets owners at the time were forced to take out loans that year to cover the losses.

The examples used here turned out not to be ideal ones. But as anyone who has dealt with accounting like this before will tell you, there is a lot of way to move money around on paper — the Nets claimed losses of more than $100 million over a couple years, ESPN’s accountants looked at it and found closer to $24 million in actual losses. Still, those are actual losses, you understand the owners concerns about the financial system the game has been using. The point that one should be cautious with the claims of ownership about the size of the losses they incur remains valid, however. But we strive here to be accurate.

June 30, 2:36 pm: It simpler to explain cold fusion than to explain the finances of an NBA team.

But Deadspin has gotten its hands on the books of the New Jersey Nets — from 2003 to 2006, so they are not new — and while they are outdated they also shed some light on how accountants for teams can turn small profits from teams into losses on paper.

Which would allow someone like David Stern to talk with a straight face about how 22 of the 30 teams are losing money, when in fact what you and I would consider the real numbers tell a different story in a number of those cases.

Deadspin’s Tommy Crags explains how the Nets lost $27.6 million in 2004:

That’s not a real loss. That’s house money. The Nets didn’t have to write any checks for $25 million. What that $25 million represents is the amount by which Nets owners reduced their tax obligation under something called a roster depreciation allowance, or RDA.

Bear with me now. The RDA dates back to 1959, and was maybe Bill Veeck’s biggest hustle in a long lifetime of hustles. Veeck argued to the IRS that professional athletes, once they’ve been paid for, “waste away” like livestock. Therefore a sports team’s roster, like a farmer’s cattle or an office copy machine or a new Volvo, is a depreciable asset….

If we’re trying to arrive at some idea of how much money the Nets really made in 2004, we’ll need to do a little crude math. Knock out the $25.1 million RDA — a paper loss, remember — and add the $9.1 million in tax savings. Suddenly, that $27.6 million loss becomes a $6.6 million profit.

It gets more complex when teams are sold, as the Nets were, because the new owners get to write off part of the purchase price. Larry Coon does a good job explaining this over at ESPN. And then there are the other businesses tied to this an NBA team owner may also own — if he owns the building you can charge rent or not, do all sorts of things to move the money around on paper. There are countless other examples.

Nobody — not even the players — are arguing that some markets are not hurting and that the system does not need adjustments. It does. More than the players want to admit. Owners in the NBA should have a fair opportunity to turn a profit — but if you put a bad product out on the floor and do a poor job marketing, you should not be guaranteed a profit. Like any business, you should need to earn it.

What we’re saying here is don’t take the owners word on what they are losing as fact. It’s very complex and there are plenty of ways to hide profits on paper — all legally, under generally accepted accounting principles — and make things look worse than they are.

Kyrie Irving, LeBron James lead Cavaliers past Knicks, 119-104

OAKLAND, CA - JANUARY 16:  LeBron James #23 of the Cleveland Cavaliers stands on the court during their game against the Golden State Warriors at ORACLE Arena on January 16, 2017 in Oakland, California. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this photograph, User is consenting to the terms and conditions of the Getty Images License Agreement.  (Photo by Ezra Shaw/Getty Images)
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CLEVELAND (AP) LeBron James recorded his 48th career triple-double and Kyrie Irving scored 23 points, leading the Cleveland Cavaliers to a 119-104 victory over the New York Knicks, who hung on to superstar Carmelo Anthony and Derrick Rose at Thursday’s trade deadline.

James scored 18 points and had 13 rebounds with 15 assists for his sixth triple-double of the season.

Anthony, the subject of trade rumors because of a strained relationship with Knicks President of Basketball Operations Phil Jackson, scored 20 points, going 9 of 25 from the field.

Kyle Korver scored 20 points for Cleveland, which is 8-1 in February and has beaten New York 10 straight times.

Courtney Lee had 25 points for New York, which has lost six of seven and is 12th in the Eastern Conference playoff race.

Knicks forward Kristaps Porzingis, the team’s second-leading scorer, left the game with a sprained right ankle in the second quarter and didn’t return.

New York took an early lead in the first game since the All-Star break for both teams, but the Cavaliers closed the first half on a 25-8 run. Cleveland built the lead to 72-51, but Anthony scored eight points in the third quarter and kept New York in the game.

The Knicks trailed 87-79 entering the fourth, but the Cavaliers quickly regained control. James scored on two layups while Korver and Channing Frye each hit two 3-pointers, pushing the lead to 110-91.

James, who had eight assists in the fourth, also turned in two outstanding defensive plays. He swatted Rose’s layup attempt into the courtside seats in the second quarter and pinned Lee’s breakaway drive against the backboard in the fourth.

Rose, another subject of trade rumors as the deadline approached, scored 13 points.

TIP-INS

Knicks: C Joakim Noah (sore left hamstring) traveled with the team to Cleveland, but coach Jeff Hornacek said no timetable has been set for his return to action. . Lee has been battling an illness, but has stayed in the lineup despite not being fully healthy.

Cavaliers: James’ missed layup earlier in the quarter fooled the arena PA announcer, who began calling the four-time MVP’s name as the ball spun out. …. Irving missed a free throw in the second quarter, snapping a streak of 29 made foul shots in a row.

OAKLEY RETURNS

Former Knicks forward Charles Oakley watched his former team in his hometown. Oakley sat next to Cavaliers owner Dan Gilbert in a front row seat adjacent to Cleveland’s bench.

Oakley attended his first Knicks game since being arrested after getting into an altercation with security guards at Madison Square Garden earlier this month.

UP NEXT

Knicks: Host Philadelphia on Saturday night.

Cavaliers: Host Chicago on Saturday night.

Rockets rout Pelicans, 129-99, in DeMarcus Cousins’ New Orleans debut

Houston Rockets guard James Harden watches his 3-point shot during the second half of the team's NBA basketball game against the Milwaukee Bucks, Wednesday, Jan. 18, 2017, in Houston. Houston won 111-92. (AP Photo/Eric Christian Smith)
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NEW ORLEANS (AP) The Boogie-and-Brow era in New Orleans is off to a highly inauspicious start.

The Pelicans’ tandem of newly acquired All-Star DeMarcus Cousins and All-Star Game MVP Anthony Davis was no match for the surging Houston Rockets on Thursday night.

Reserve Lou Williams hit seven 3-pointers and scored 27 points in his Rockets debut after a trade from the Lakers, and Houston crushed New Orleans, 129-99.

Davis had 29 points, and Cousins finished with 27 points and 14 rebounds after he was acquired from Sacramento during the break. But New Orleans turned the ball over 20 times couldn’t keep pace with the firepower of the Rockets, who hit 20 3-pointers.

Eric Gordon scored 19 points and Ryan Anderson added 17 in both players’ first game in New Orleans since leaving the Pelicans. James Harden had 13 points and 14 assists.

Houston led by as many as 35 points when Gordon’s free throws made it 100-65 late in the third quarter.

Patrick Beverley had 12 rebounds for Houston. Montrezl Harrell added 10 points for the Rockets, who shot 49.5 percent (45 of 91).

After New Orleans acquired Cousins, nicknamed “Boogie,” in a deal involving five players and two draft choices, Pelicans general manager Dell Demps hoped Cousins and Davis would thrive playing off one another while point guard Jrue Holiday initiated offensive sets. But Holiday had arguably his worst game this season, turning the ball over seven times and finishing with only six points and four assists.

The crowd was charged up for both Cousins’ debut and Davis’ resumption of a sensational season following his record 52-point performance on Sunday.

Both players received rousing receptions during introductions and the crowd roared when Cousins hit a jumper for games’ first points.

Cousins and Davis each scored eight in the first quarter, but it was also apparent that the integration of new personnel had New Orleans a bit out of sync. The Pelicans turned the ball over 12 times in the first half, leading to 17 Rockets points.

The Rockets also hit nine 3s in the opening half, including three each by Gordon and Williams, and led 66-50 at halftime.

By the end of the third quarter, the crowd that had been so rowdy at tip-off was starting to file out with their team down 100-67.

TIP-INS

Rockets: Houston has won seven of the past eight meetings. … The Rockets hit at least 10 3s in a game for the 55th time in 59 games this season. … The Rockets, now 41-18, have matched their win total for all of last season.

Pelicans: Before the game, New Orleans waived F Terrence Jones and signed G/F Hollis Thompson to a 10-day contract. Pelicans coach Alvin Gentry said Jones, who joined New Orleans on a one-year contract this season, was released to help him find a team where he could play more. Thompson played a little more than four minutes and scored three points. … The Pelicans are now 14-16 at home.

UP NEXT

Rockets: Host Minnesota on Saturday night.

Pelicans: Visit Dallas on Saturday night.

Damian Lillard rallies Trail Blazers to 112-103 win over Orlando

Portland Trail Blazers' C.J. McCollum (3) and Damian Lillard (0) celebrate a basket by McCollum against the Dallas Mavericks during the second half of an NBA basketball game in Dallas, Tuesday, Feb. 7, 2017. McCollum had 32 points and Lillard had 29 in the team's 114-113 win. (AP Photo/Tony Gutierrez)
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ORLANDO, Fla. (AP) Damian Lillard scored 33 points, C.J. McCollum added 22 and the Portland Trail Blazers beat the Orlando Magic 112-103 on Thursday night to snap a three-game losing streak.

After trailing for much of the game, the Trail Blazers rallied in the fourth quarter behind Lillard’s 17 points. Recently acquired center Jusuf Nurkic also had 12 points and 12 rebounds during the much-needed win for the Portland.

The Trail Blazers spoiled Terrence Ross‘ debut with the Magic after being traded last week for Serge Ibaka. Ross, who is supposed to added athleticism and a scoring punch, managed just 13 points on 4-of-17 shooting with his new team.

Nikola Vucevic scored 25 points and Evan Fournier added 20 as the Magic lost for the sixth time in seven games.

Portland trailed by 11 points early in the fourth but then outscored the Magic 16-4 during a stretch that ended with the Blazers taking a 96-95 lead on a 3-point shot in the corner by Lillard with 5:20 left.

After trailing by as many as 14 points in the third, the Trail Blazers used an 11-0 run to pull within three late in the period with Lillard and McCollum doing most of the damage. But that was as close as the Blazers could come as the Magic pulled back out front with Vucevic hitting some big shots and then D.J. Augustin burying a 3-pointer just before the buzzer to give the Orlando an 85-77 lead going into the fourth quarter.

The new-look Magic were inconsistent in the first half with a permanent small lineup and the addition of Ross. But they played well enough to take a 55-46 lead into halftime.

Ross missed his first four field goal attempts before knocking down a 3-pointer that gave the Magic their biggest lead of the half at 37-26 lead with 8:22 remaining in the second quarter. Otherwise Ross struggled from the field, going 1 for 7 for the half.

TIP-INS

Trail Blazers: Forward Al-Farouq Aminu did not play Thursday because of continued problems with his left knee. Aminu missed the Blazers’ last game before the All-Star break against Utah on Feb. 15 because of a left knee sprain. … Nurkic was inserted into the starting lineup. … With his 3-pointer early in the third quarter, Lillard has now made at least one 3-pointer in a career-high 37 consecutive games dating back to Nov. 22. It’s the second-longest streak in franchise history.

Magic: Point guard C.J. Watson, who was recently inserted into the starting lineup, is listed as day-to-day with a sore right Achilles tendon. Watson said he expects to miss about a week to allow the injury to heal. … With Watson out, Frank Vogel went with a starting lineup of Elfrid Payton, Evan Fournier, Aaron Gordon, Ross and Vucevic.

UP NEXT

Trail Blazers: Portland continues its four-game road swing with a stop at Toronto on Sunday.

Magic: Orlando will host Dwight Howard and the Atlanta Hawks on Saturday night.

Report: Newly-acquired Pelicans F Omri Casspi breaks thumb, out 4-6 weeks

ATLANTA, GA - NOVEMBER 18:  Omri Casspi #18of the Sacramento Kings against the Atlanta Hawks at Philips Arena on November 18, 2015 in Atlanta, Georgia.  NOTE TO USER User expressly acknowledges and agrees that, by downloading and or using this photograph, user is consenting to the terms and conditions of the Getty Images License Agreement.  (Photo by Kevin C. Cox/Getty Images)
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This has got to put a damper on the whole DeMarcus Cousins trade thing for New Orleans Pelicans fans. According to multiple reports, Omri Casspi — who was part of the trade that sent Cousins to Louisiana — has broken his thumb. The sharp-shooting forward will be out 4-6 weeks.

It’s disappointing news for the Pelicans, who could certainly use Casspi’s 3-point shooting ability. Casspi is shooting 38 percent from deep this season, and while the Pelicans make enough threes per-game they are near the bottom-third in percentage.

Casspi would have been a real help for Alvin Gentry’s offense, but for now it appears they’ll have to make do without him. Casspi should continue to occupy a roster spot for New Orleans, given his expiring contract and the fact that even if the Pelicans make a run for the playoffs they won’t be in a situation to add to their lineup since they won’t expect to get very far.

The good news out of New Orleans on Thursday night? Despite a loss to the Houston Rockets, Cousins nearly dropped a 5 x 5.

The race for the No. 8 seed is on.