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.

LaVar Ball rants about female referee after his AAU team forfeits another game

Leave a comment

Remember when LaVar Ball – father of Lakers rookie Lonzo Ball – pulled his AAU team off the court and forfeited a game it was winning?

In a twist nobody could have ever predicted, LaVar apparently relished the attention that garnered and again sparred with referees today at the Adidas Summer Championships.

First, LaVar received a technical foul from a female referee. A lengthy stoppage followed, and LaVar apparently threatened to remove his team from the court. The referee was replaced mid-game, and play resumed.

Then, LaVar received a second technical foul. He apparently refused to leave, so the referees called the game.

Afterward, LaVar addressed the situation. Via ESPN:

LaVar:

She got a vendetta, because she’s a woman who’s trying to act – I get that she’s trying to break into the refereeing thing. But just giving techs and calling fouls, that’s no way to do it. I know what she’s trying to say: “I gave him a tech. I’m strong.” That ain’t got nothing to do with it. Just call the game. If you’re going to be qualified, you better be in shape, and you better know the game. And she’s bad on both of them. She not in shape. She not calling the game right. And she don’t understand. So, now she’s trying to make a name for herself. So, she walking around like, “You know I’m the only woman in here.” Yeah, we get it. I don’t care if you’re a woman or a man or whatever. Just be good at what you do. Don’t try to step in the lane – she need to stay in her lane, because ain’t ready for this. Coach the little kids first and then come up. Because she ain’t did enough. She ain’t got enough on her résumé. I can tell.

I don’t know whether LaVar is sexist, but he keeps coming across as sexist.

This saga puts a dent in Lakers president Magic Johnson’s theory that LaVar is truly focused on training young players and NBA commissioner Adam Silver’s theory that LaVar would settle down once Lonzo got drafted.

Lonzo’s talent demands dealing with LaVar, who wouldn’t be the first parent of an NBA player to be difficult. But it seems LaVar might be a bigger sideshow than the Lakers bargained for. They ought to be wary of that affecting them – if it hasn’t already.

Heat: We didn’t offer Cavaliers trade for Kyrie Irving

Gregory Shamus/Getty Images
2 Comments

The Heat were among the six (or more) teams that have submitted a trade offer to the Cavaliers for Kyrie Irving, according to Adrian Wojnarowski of ESPN.

Fake news, says Miami.

Barry Jackson of the Miami Herald:

Teams rarely go on the record to correct reports like this. Why did Miami do it here? It might have something to do with Pat Riley’s feelings toward LeBron James.

Other incentives are more clear. The Cavs want to showcase interest they’re receiving in Irving. The Heat want to protect their players from handling trade rumors.

Whether the Heat submitted a formal offer barely matters, anyway. They could’ve offered Goran Dragic straight up for Kyrie Irving. Cleveland wouldn’t have accepted that, anyway. Nobody has published specifics of any Irving offers, so it’s unclear any are viable.

Miami is willing to deal Dragic and Justise Winslow for Irving, per the same report from Wojnarowski. Again, whether the Heat offered that pair for Irving or just acknowledged that they would is splitting hairs. That shouldn’t be enough for the Cavs.

Bottom line: The Heat probably won’t trade for Irving. Whether they made an offer, planned to make an offer or just discussed parameters so far is a fight over imaging. It’s nearly irrelevant to whether the teams eventually complete a trade for Irving.

Kyrie Irving could become one of youngest stars ever to change teams

Ronald Martinez/Getty Images
2 Comments

Kyrie Irving knows, as well as anyone, the value of being an All-Star – how the status validates on-court performance, sells shoes and can be flipped for even more exposure. Irving is comfortable in that environment, promoting his brand at four All-Star weekends already and winning All-Star game MVP in 2014 in New Orleans.

He was back in New Orleans for this year’s All-Star game when he was asked to name his all-time All-Star team.

Joe Vardon of Cleveland.com:

As Irving announced his team — he was responding to a question — he said “I’d put MJ at the 1, Kobe at the 2, Ray Allen at the 3, gotta space it out, got to have a spot up 4, so I’m probably going to go with KG, he’s going to rim-run, do the dirty work. I’d put Shaq at the 5.”

What about LeBron?

Irving, via Vardon:

“Yeah, yeah, yeah well, I mean, he (James) understands,” Irving told cleveland.com, as he walked off the podium.

Foreshadowing? Perhaps.

Irving has requested a trade from the Cavaliers, reportedly to escape LeBron’s shadow.

But take a step back from Irving’s answer, and his mere presence in New Orleans for All-Star – again, already – foretold immense demand in the trade market.

Irving is just 25 and a four-time All-Star. Only two players have reached so many All-Star games and changed teams while as young as Irving is now: Shaquille O’Neal and Tracy McGrady.

Here’s every All-Star to switch teams before turning 26 and their age when the transaction occurred, Irving included for reference as if he were dealt today:

Player All-Star berths Year From To Age
Jrue Holiday 1 2013 PHI NOP 23 years, 1 month, 0 days
Terry Dischinger 2 1964 BAL DET 23 years, 6 months, 28 days
Jason Kidd 1 1996 DAL PHO 23 years, 9 months, 3 days
Ray Felix 1 1954 BLB NYK 23 years, 9 months, 7 days
Jamaal Wilkes 1 1977 GSW LAL 24 years, 2 months, 9 days
Shaquille O’Neal 4 1996 ORL LAL 24 years, 4 months, 12 days
Stephon Marbury 1 2001 NJN PHO 24 years, 4 months, 28 days
Don Sunderlage 1 1954 MLH MNL 24 years, 8 months, 29 days
Mel Hutchins 1 1953 MLH FTW 24 years, 9 months, 1 day
Andrew Bynum 1 2012 LAL PHI 24 years, 9 months, 14 days
Tracy McGrady 4 2004 ORL HOU 25 years, 1 month, 5 days
Chris Webber 1 1998 WAS SAC 25 years, 2 months, 13 days
Bob McAdoo 3 1976 BUF NYK 25 years, 2 months, 14 days
Billy Knight 1 1977 IND BUF 25 years, 2 months, 23 days
Len Chappell 1 1966 NYK CHI 25 years, 3 months, 0 days
Len Chappell 1 1966 CHI CIN 25 years, 9 months, 25 days
Kenny Anderson 1 1996 NJN CHA 25 years, 3 months, 10 days
Kenny Anderson 1 1996 CHA POR 25 years, 9 months, 14 days
Butch Beard 1 1972 CLE SEA 25 years, 3 months, 19 days
Frank Selvy 1 1958 STL MNL 25 years, 3 months, 7 days
Kyrie Irving 4 2017 CLE ? 25 years, 4 months, 5 days
Otis Birdsong 3 1981 KCK NJN 25 years, 5 months, 30 days
LeBron James 6 2010 CLE MIA 25 years, 6 months, 10 days
John Johnson 1 1973 CLE POR 25 years, 6 months, 6 days
Frank Selvy 1 1958 MNL STL 25 years, 7 months, 22 days
Sean Elliott 1 1993 SAS DET 25 years, 7 months, 29 days
Dennis Johnson 2 1980 SEA PHO 25 years, 8 months, 17 days
Alonzo Mourning 2 1995 CHA MIA 25 years, 8 months, 26 days
Andrew Bynum 1 2013 PHI CLE 25 years, 8 months, 22 days
Baron Davis 2 2005 NOH GSW 25 years, 10 months, 11 days
Bernard King 1 1982 GSW NYK 25 years, 10 months, 18 days
Vin Baker 3 1997 MIL SEA 25 years, 10 months, 2 days
Kiki VanDeWeghe 2 1984 DEN POR 25 years, 10 months, 6 days
Frank Selvy 1 1958 STL NYK 25 years, 11 months, 13 days
Kevin Love 3 2014 MIN CLE 25 years, 11 months, 16 days
Mike Mitchell 1 1981 CLE SAS 25 years, 11 months, 22 days

Irving didn’t sneak into only one All-Star game like Jrue Holiday and Andrew Bynum. Irving is a near-perennial selection.

And unlike several players on the above list, he’s also doing it in era where there are more NBA teams than All-Star spots. In the 60s, when the league was smaller, NBA teams averaged more than two All-Stars each.

Irving is under contract for two more years before he can opt out, and his salaries – and $18,868,626 and $20,099,189 – became bargains when the new national TV contracts caused the salary cap to skyrocket.

The timing of Irving’s trade request becoming public has certainly contributed to the frenzy, as other NBA storylines have quieted for the summer. LeBron’s enormous profile also draws attention to anything involving him and his team.

But players like Irving – young established stars – rarely become available. No matter when this story leaked or whom Irving was playing with, this is a special opportunity for whichever team acquires him.

Andrew Wiggins says he’s worth ‘nothing less’ than max contract extension

AP Photo/Mark Duncan
4 Comments

I’d hesitate to offer Andrew Wiggins the full max on a contract extension.

He would not.

Ben Golliver of Sports Illustrated:

While Wiggins said that he is taking a “day by day” approach to the contract discussions, he didn’t waver when asked whether he was worthy of a max contract, which could reach $148 million over five years with a starting salary of $25.5 million. “I definitely do,” Wiggins told The Crossover. “Nothing less.”

File this under: What else is he supposed to say? The two big questions:

1. Would Wiggins accept less than the max?

He might feel he’s worth it, but there’s value in security.

The Timberwolves could offer less now, knowing he couldn’t leave in restricted free agency next summer. There’s risk he signs a shorter contract next summer, but there’s also risk in overpaying Wiggins now.

Of course, Wiggins might get offered a max extension, anyway. But if not, he’ll have to decide whether he’d rather guarantee himself life-altering money or roll the dice on even more.

2. Would Wiggins’ extension kick in with Minnesota or Cleveland? Though the Timberwolves are negotiating with him, they could still trade him – even after he signs the extension – to the Cavaliers for Kyrie Irving. Minnesota is a known suitor of the point guard, and Wiggins makes sense in a potential trade.