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has gotten its hands on the books of the New Jersey Nets — from 2003 to 2006, so they are not new — and while they are outdated they also shed some light on how accountants for teams can turn small profits from teams into losses on paper.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

Watch Draymond Green name all 34 players drafted before him in 2012 (VIDEO)

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Is Golden State Warriors star Draymond Green a petty guy? I will leave that for you to decide.

He is certainly determined, a characteristic that has led him and the Warriors to two championships in the last three seasons.

Green was famously a second round pick, drafted No. 35 overall in the 2012 NBA Draft. And according to the video I’m about to show you, Green can recite the name of every single player who was drafted before him in 2012.

No, seriously.

Via twitter:

This might be the best video I’ve ever put on this website.

DeMarcus Cousins has dropped a ton of weight this offseason already (PHOTO)

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New Orleans Pelicans DeMarcus Cousins has been known to carry a bit of weight on his frame. He is currently listed at 6-foot-11 and 270 pounds.

It appears that last bit has significantly changed over the off-season.

Cousins has reportedly dropped quite a bit of weight during his off-season regimen, eating right and even hiring the personal trainer who made Julius Randle look so good in just a short amount of time for the Los Angeles Lakers.

Speaking to WDSU, Pelicans head coach Alvin Gentry Said cousins was primed to take a new role for the pelicans next season, taking on a bit of a ball handler role as a point center. That should be easily done now that cousins has gained a little bit of mobility by shedding some weight.

Via WDSU:

When I saw DeMarcus, his body looked great. He invited us to his house for lunch; he’s eating really healthy — he’s got a chef that he’s hired. I was really, really excited about what he’s taken from the standpoint of trying to get himself ready for the season and obviously he feels like this is a very important season for him.

Looking at Cousins’ Instagram, you can clearly see the results of his eating and training regimen. He looks damn near svelte.

The newly-formed Pelicans had a disappointing end to the season, but with more time together they will certainly be one of the teams to watch in the Western Conference.

Rumor: Cavaliers, Pacers, and Nuggets discussed 3-way deal with Paul George, Kevin Love

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Don’t count the Cleveland Cavaliers out of the Paul George sweepstakes just yet.

According to ESPN’s Marc Stein and Chris Haynes, the Cavaliers are still working on a way to get George with LeBron James and Kyrie Irving in Ohio.

The latest rumor involves a three way deal being discussed between the Cavaliers, Indiana Pacers, and Denver Nuggets. According to Hayes, the deal would send George and Kenenth Faried to Cleveland and Kevin Love to Denver.

Presumably, Indiana would end up with good picks and a few young assets.

Via Twitter:

There is a lot to think about here given the potential for this trade. The first is how the Cavaliers would be able to complete a deal without a general manager in place. Owner Dan Gilbert fired David Griffin just last week. The Cavaliers are still talking to former NBA player Chauncey Billups about a chance to run the front office, but nothing has been decided just yet.

As good as George is, with the way that Kevin Love played in the 2017 NBA playoffs, it’s a wonder that the Cavaliers would want to let him go. The Golden State Warriors ate up Tristan Thompson in several of their Finals games, and Love was often the best player outside of LeBron on the floor for Cleveland.

Rumors also have George as being adamant that he is a one year rental only. His preferred landing place is still Los Angeles with the Lakers.

How a one year rental would work in exchange for one of Cleveland’s best players is sort of confusing. Even if the Cavaliers landed George and Faried, they would need to add yet another piece in order to get over the hump as the Eastern Conference strengthens and as they try to face off against the Warriors yet again.

This NBA off-season has been particularly crazy, and I don’t expected to calm down anytime soon.

Watch Isiah Thomas work out Lakers No. 2 overall pick Lonzo Ball (VIDEO)

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Lonzo Ball Is finally a member of the Los Angeles Lakers. Magic Johnson & Co. took him with the second overall pick in the 2017 NBA Draft on Thursday.

Despite a few issues with his draft workouts with the Lakers, Ball was still the top choice for Los Angeles when they came to select after Markelle Fultz was off the board. The Lakers have already given Ball more control of the team after trading D'Angelo Russell to the Brooklyn Nets last week.

Before the draft, Ball took some time out to work in his back yard and on his home court with NBA legend Isiah Thomas.

Check out the interaction between the two and see where Ball grew up learning to shoot his oddly-formed but highly-accurate jumper.