In depth: Stern fires shot across the bow at the Maloofs, who continue to threaten the NBA’s billion dollar arena subsidy

15 Comments

A meticulous planner, everything David Stern says is run through a filter of lawyerly instinct and an ever-present awareness of his surroundings.

So when David Aldridge asked him if the NBA would support the Maloofs in their desire to move the Sacramento Kings to Anaheim on Tuesday – don’t think for a second that he hadn’t weighed the legal gravity of the situation or the wishes of his 29 other bosses.

“If there was a vote now, there would be no support for a move,” Stern said.

Stern then went on to poke at the Maloofs for their current plan, which includes staying in the nearly dilapidated Power Balance Pavilion for at least one more season, despite the family threatening to leave town for years because the building is dilapidated.

“That’s their prerogative. As long as it (Power Balance) stands and passes the fire code, I think it’s been a terrific place for the fans of Sacramento,” said Stern in his typical dry wit.

This is the most recent play on the NBA’s relocation chess board, and with the Maloofs overtly implying an antitrust lawsuit against the league for well over a year now, it’s a telling one.

Antitrust suits have been the weapon of choice for owners looking to find greener pastures, and though case law provides limited guidance for courts, it has generally been a favorable area of law for relocation efforts.

On the other side of the coin lies the ‘best interest of the league’ clause found in most sports associations’ bylaws, including the NBA’s. The bylaws allow for the commissioner to take any action they deem necessary to protect the league, and the league’s preferred association status is tied to the commissioner’s ability to show that ‘due process’ has been provided during disputes amongst owners.

The best way to understand this is to know that the courts generally aren’t going to restrain the trade of an NBA owner. They’re also not going to allow an owner unilateral ability to destroy the league that it operates within as a single entity, and the tipping point is somewhere in the middle. The leagues and courts have already found mechanisms (relocation fees) that allow the individual entities impacted by a move to be indemnified to a certain degree.

In the case of the Maloofs’ attempted move to Anaheim, sources with knowledge of the situation have reported that a relocation fee would be upwards of $300 million.

In this case, there are two injured parties in L.A. that would disapprove of the Maloofs’ desire to move into their market, but the more pressing issue for all of the NBA’s owners is what the Maloofs are doing to impact the integrity of the league’s billion dollar arena subsidy.

Since 1990, the NBA and its players have enjoyed a $3 billion public subsidy toward arena costs.

In April, the family backed out of a deal that as anchor tenants required them to pay $73 million toward a $391 million facility – $67 million of which would be provided by the NBA in the form of a loan. George Maloof called it a “good deal,” Gavin Maloof cried tears of joy after the parties emerged from an Orlando hotel room heralding the deal during All Star Weekend, and both Gavin and brother Joe held Sacramento mayor Kevin Johnson’s hands in triumph at the Kings’ next home game.

All of it was a ruse, though. It became clear that the Maloofs had no intention of striking a long-term deal with Sacramento when political crisis consultant Eric Rose was brought on by the family to handle its media strategy, and their antitrust attorneys began sending threat letters to the city that were designed to disrupt its ability to deliver on a tight timeline. Then came the ridiculous requests and demands, and the confidential communications between the family and the NBA eventually were leaked to a Sacramento website that opposed the arena deal.

Eventually, the Maloofs would burn most of their bridges in Sacramento in what Stern would describe later that day as “not the weirdest press conference we’ve ever had.” They hired an economist that twisted enough facts for Stern to say he acted in “ill grace,” and their antitrust attorneys pitched against Sacramento over PowerPoint. With only the Sacramento media allowed in their New York hotel conference room, George Maloof went on a wild tirade that made their economist Chris Thornberg look like a beacon of truth.

The NBA, who was authorized by the Maloofs to represent them in negotiations, thought the deal was fair, but the Maloofs expected to pay nothing and control all of the revenue streams in Sacramento. They expected this because of Anaheim’s long-standing offer to bring the Kings down south. Billionaire Henry Samueli and Anaheim’s city council’s offer to provide cash relief to the family would theoretically allow them to continue operating the team while making big market TV money, with the fallback position of selling the team for more than they could in Sacramento due to the larger market.

But that didn’t account for the minimum $300 relocation fee that the Maloofs or any subsequent owners would have to pay to infringe upon the Lakers and Clippers’ markets, making the deal untenable for the Maloofs if they wanted to keep the team. If their plan was to sell to Samueli or another Anaheim group, the relocation fee would certainly be a big nut for the new owners to take on in addition to the price of the franchise, not to mention a huge deterrent if the new owner senses they’re not wanted by the league.

It has been theorized that this relocation fee was communicated at some point to the Maloofs, who expected to leverage (or take) Anaheim’s offer despite being near the finish line with Sacramento. In that theory, once the Maloofs realized a move to Anaheim was not in the cards they decided to officially muck up a Sacramento deal that reflected their meager contributions, while testing their leverage with antitrust threats.

Regardless of the Maloofs’ intentions, cities that negotiate with the NBA and team owners over arena subsidies will now point to the family’s apparent bad faith dealings. Now, the league will have to explain to its civic partners how and why they should expend political capital and public funds if owners are going to use the scorched earth strategy when they don’t get what they want.

Sacramento spent significant sums of money and staff time in the arena negotiations process during a budgetary crisis only to find they were spinning their wheels – all while offering to pay for 65 percent of the arena’s costs – and the NBA is going to have to wear that issue unless they make it right by keeping a team there under a workable plan.

The timing couldn’t be worse for the league, either, with the Oklahoma City Thunder in the Finals just four years after Stern, former Sonics owner Howard Schultz, and now Thunder owner Clay Bennett stole 41 years of Sonics history from Seattle because the local government wouldn’t pony up. The government there certainly shoulders some of the blame for how that went down, but as the documentary Sonicsgate so handily points out – the principals on the NBA’s side had agendas that aren’t exactly ringing endorsements for the league.

Even if the league somehow makes things right in Sacramento and Seattle, this pulling back of the curtain could shave millions, if not billions of dollars off the NBA’s bottom line if not handled correctly by the owners. Municipalities are going to have a harder time convincing voters to part with tax money as the subsidy shakedown gets exposed, and arena funding campaigns will be forced to seek lower funding amounts as local voters lose their appetite for unsavory business tactics.

Whether it’s in the best interest of the league’s balance sheet, or the best interest of the league’s PR efforts, the Maloofs are killing the association on both fronts.

With Sonicsgate discussion now creeping into the national discourse during the Finals, we saw the first signs on Tuesday that the owners aren’t going to let the Maloofs throw the baby out with the bathwater. By stating publicly that the Maloofs have “no support” for a move to Anaheim, the league has all-but invited the Maloofs to pursue their antitrust suit.

Namely, a decision to not once, but twice inform the family that they cannot move could spawn any number of antitrust damages. If monies or opportunities are lost as the result of the league’s decision to block relocation last year, or if Stern’s public statement this year causes any damages – it adds a yet another critical piece of evidence the family could use when piled on top of the rest of the evidence they’ve been compiling.

This is a decision that does not come lightly, because neither the league nor its owners truly want to face the time and expense of a massive lawsuit like that, nor do they attack their own knowing they will one day be on the other end of the subsidy discussion themselves. At a higher level, the league does not want to see any more case law put onto record that would either weaken its ability to police itself or the various antitrust protections it enjoys. At the top of that list is the ability for the NBA and other sports associations to leverage its limited, monopolistic demand (teams) against cities in the gathering of public subsidy dollars.

Perhaps the league is aware of a solid offer from Seattle billionaire Chris Hansen that nobody out of Sacramento is willing to match, and that is the source of their confidence in saying the Maloofs would have “no support” in moving to Anaheim. Seattle mayor Mike McGinn met with Stern in New York on Monday and Hansen is ready to take on most of the cost of building an NBA-ready arena, assuming of course he can buy a team. That Stern didn’t mention the city in his response to Aldridge is a huge footnote.

Hansen could conceivably justify a higher purchase price than a Sacramento buyer given his land holdings around the proposed Sodo arena site, and the fact Seattle is about 30 percent larger than Sacramento in terms of its TV market. But those advantages are somewhat mitigated by the fact that a Seattle team would have to compete with both the Seahawks and Mariners for local revenues, whereas the Kings are the only show in town in Sacramento.

That said, saying the league decided to open itself up to antitrust exposure because of a bona fide offer it knows about from Seattle assumes a lot – including Seattle’s ability to deliver on an arena while they face local opposition of their own. It’s way more likely that the league has weighed the Maloofs’ ability to impact the league now and into the future, and it has decided that it’s in their best interests to call the family’s bluff.

If the family still cannot afford to spend money on free agents, and they will be losing significant revenue after spending the last few years biting the hands that feed them in Sacramento – Tuesday’s comments suggest the league has determined that the Maloofs cannot afford to play the antitrust card.

As is the case in most legal disputes, the winner isn’t determined by a judge or jury verdict, but which side has the largest stones and deepest pockets. The Maloofs have a large holding in Wells Fargo which many sources say is untouchable, and outside of that they have a fledgling entertainment business and a partnership to sell (OMG!) cell phone cases.

If we’re buying what the NBA sold us last summer, owning a team isn’t a huge money making endeavor. In reality, it’s a complex issue magnified by being in a small market. And unless you have a way to maximize what a basketball franchise can do, there are plenty of ways to make more from the investment it takes to play in the billionaires’ playpen.

To truly justify owning an NBA basketball team, one has to maximize their various holdings through cross promotion, invest in the areas around the arena, and maximize tax breaks before selling at an appreciated gain one day. To do this it takes a minimum level of free agent spending to field a team that will generate revenues to make that work.

The Maloofs don’t have the money to be that type of owner, at least anymore.

The Maloofs once had designs on maximizing the values of their holdings in the Palms and their entertainment empire, but the entertainment empire never panned out and the Palms is no longer theirs. Sacramento gave the family some proximity to help with the promotion of both entities, but now that bridges have been burned there, the only other destination that would supplement what is left of their non-NBA holdings was just rejected during Stern’s press conference.

Elsewhere, Seattle billionaire Chris Hansen isn’t going to build an arena so ‘the boys’ can play around in it, and even if the other cities that have expressed interest in the NBA can offer a sweetheart deal to them, they can’t significantly change the Maloofs’ cash-strapped outlook.

The only plan that makes any financial sense is for them to sell the team to the highest bidder, and with billionaire Robert Pera reportedly paying approximately $350 million for the Grizzlies to keep the team in Memphis and Tom Benson paying $338 million for the Hornets, it’s possible the Maloofs can top the $400 million mark on their way out the door.

Sacramento’s TV market is double the size of both Memphis and New Orleans, and it’s certainly plausible that Pera made an offer to the Maloofs given his Northern California roots. That Pera wasn’t able to buy the team from the Maloofs (or didn’t try) could speak to any number of issues, but finding a price point that would entice the Maloofs to sell is the NBA’s best bet at ridding themselves of their billion dollar subsidy problem.

A $400 million sale would provide $172 million for the Maloofs’ 43 percent stake, and with at least $150 million owed to the city of Sacramento and the NBA, every dollar is going to count if the family is seeking a debt-free break.

By chopping off the Anaheim leg of the Maloofs’ leverage play, the NBA is one Space Needle market away from stealing away all of the family’s leverage in a potential sale. Franchise prices in Vancouver, Columbus, Louisville, or Kansas City aren’t going to top what multiple Sacramento buyers are willing to pay, and with Seattle closing in on a viable offer it will soon be time for those buyers to put their last, best offers in, as well.

Stern loves the Sacramento market, the 20th largest market in the country and one that is devoid of competition from other sports leagues. He goes out of his way to praise the city at every opportunity for the job they did getting an arena deal done. But he’ll have a hard time forcing the Maloofs to take a substantially smaller offer to stay in California’s capitol.

It’s a nasty game of relocation chess right now. Milwaukee is next up on the clock with a year-to-year lease, an aging arena, and an aging owner. The NBA will be right back at it demanding a public subsidy, assuming of course they don’t let the Maloofs cook the goose that lays the billion dollar eggs.

As for the Maloofs, they have yet to respond to Stern’s ‘call,’ and it remains to be seen if they continue their bluff all the way down the river.

Markieff Morris calls Paul Millsap a “crybaby,” Millsap responds “It definitely got personal now”

Getty Images
Leave a comment

The Atlanta Hawks owned the Washington Wizards from the opening tip Saturday, making it a 2-1 series with an easy win.

It’s a series now — and that includes trash talk.

Paul Millsap had 29 points, pulled down 14 boards, got to the line 11 times, and led the Hawks to the win. He got the calls he wanted this game, but Washington’s Markieff Morris was not exactly down with high praise for Millsap.

The key line here: “”He just did more for his team. He’s a crybaby. Get all the calls and you a crybaby.”

Millsap was asked about that comment in his postgame presser — and the best part may be Dennis Schroeder’s reaction.

“It definitely got personal now, yes. I mean, I don’t care. So what? He can take his loss and go back to the hotel and be ready for the next game.”

These two have already had a beef this series.

Game 4 in this series just got a lot more interesting.

Marc Gasol game-winner tops Kawhi Leonard’s brilliance, evens Spurs/Grizzlies series 2-2

Associated Press
Leave a comment

Best. Game. Of. The. Playoffs.

So far at least.

Kawhi Leonard scored 16 consecutive points for the Spurs down the stretch of regulation to force overtime, then in OT hit a corner three with 7.2 seconds left to tie the game at 108-108. Leonard finished the game with a career playoff high of 43 points.

It wasn’t enough. Because in those final seconds Marc Gasol did this.

The 110-108 Memphis win ties the series at 2-2 as it heads back to San Antonio for Game 5. I might not want to sit next to Gregg Popovich on the flight home.

While Gasol hit the big shot, he never gets the chance if Mike Conley isn’t every kind of amazing through the clutch parts of this game. Conley finished with 35 points, and that includes a floater in the lane that forced OT (although Leonard got a pretty good look to end it in regulation and just missed). I’m surprised the Spurs switched on the pseudo pick on this play.

The Spurs struggled to get stops down the stretch, mostly because they had David Lee and Tony Parker both on the floor and Memphis did a good job getting switches onto those defenders. Spurs starting center and best defensive big Dewayne Dedmon missed the game due to an illness, and that ended up mattering.

Hawks take control early, romp past Wizards 116-98

Associated Press
Leave a comment

ATLANTA (AP) — Paul Millsap scored 29 points, Dennis Schroder had 27 and the Atlanta Hawks delivered an early knockout blow against Washington, cruising to a 116-98 victory Saturday that sliced the Wizards’ lead to 2-1 in the opening-round playoff series.

After two tight losses in Washington exposed some bad blood between the teams, Atlanta returned home and built a 25-point lead by late in the first quarter.

The Hawks were never seriously challenged by the Wizards, who were essentially a one-man team. John Wall kept up his dazzling play in the series, scoring 29 points, but the point guard got no help from his teammates.

The other Washington starters combined to score 30 points on 14-of-45 shooting.

Millsap also had 14 rebounds, while rookie Taurean Prince chipped in with 16 points.

Game 4 is Monday night in Atlanta.

The Hawks came out intent on moving the ball, getting open looks and cutting down on the turnovers that plagued them in the first two contests.

Talk about following the game plan.

Atlanta pushed out to a double-digit lead before the game was 3 minutes old and stretched the margin to 38-13 with just under a minute to go in the opening quarter on Schroder’s 3-pointer.

Wall did everything he could to spark the Wizards. He posed along the baseline after a thunderous dunk, which might have had more effect if the Wizards weren’t losing by 23 at the time. He also darted through the lane against a collapsing defense to bank in an improbable shot, drawing gasps from the Atlanta crowd.

Wall made all but one shot and scored 21 points in the first half, but the Wizards trailed 64-46 heading to the locker room. The other four Washington starters had just 18 points.

Beal, in particular, had a miserable night after averaging 26.5 points in the first two games. He was held to 12 points on 6-of-20 shooting, missing all six of his attempts beyond the arc.

TIP INS

Wizards: Wall is averaging 31 points per game in the series. … F Otto Porter Jr. left in the third quarter with a strained neck and didn’t return. … After a video review, Jason Smith was called for a flagrant foul against Millsap late in the third quarter.

Hawks: C Dwight Howard remains a non-factor in Atlanta’s offense. He scored five points and took just four shots, giving him a mere 15 attempts over the first three games. He did have 11 rebounds. … Schroder had some issues at the free-throw line, making only half of his eight attempts. Millsap did, too, going 5 of 9. … Atlanta had a double-digit lead for the final 44:24 of the game. … Prince picked up a technical foul for taunting the Wizards after an alley-oop dunk in the closing minutes. … The Hawks had just 11 turnovers.

 

Portland’s Jusuf Nurkic to play, start vs. Golden State in Game 3

Leave a comment

In 20 games after the Trail Blazers traded for him, Jusuf Nurkic averaged 15.2 points 10.4 rebounds, 3.2 assists, and 2 blocks per game. Portland was 9.7 points per 100 possessions better with him on the court and went 14-6, a surge that helped get them into the playoffs. Then a leg fracture had him sidelined for the end of the season and the start of the playoffs.

Until Saturday.

He will play limited minutes, but the Blazers will take it.

Portland is down 0-2 to the Warriors but are coming home to take on a Golden State team that will be without Kevin Durant again (strained calf) and coach Steve Kerr (illness).

Nurkic gives Portland some hope, he certainly helps their defense. We’ll see if that’s enough.