team maloof with stern

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.

Watch Brad Stevens remain completely stoic after Avery Bradley’s game-winning 3 (video)

Leave a comment

Avery Bradley hit a perfectly dramatic shot Friday – a 3-pointer down two with time expiring against the conference’s best team.

When it fell, the Celtics justifiably went wild.

Well, not all the Celtics:

Tweet of the Day: Stephen Curry and crying Jordan

Curry super Bowl
Leave a comment

Stephen Curry is a Carolina guy and a huge Panthers fan — he’s been that way since childhood, this was not a bandwagon jump.

Before the Super Bowl Sunday, he got to pound the drum for the Panthers (who also gave him a locker for the day).

We all know how the game went, it wasn’t a good day for Panthers’ fans. Curry handled it beautifully in this tweet.

Five Takeaways From NBA Sunday: Stephen Curry, Kevin Durant at Super Bowl

020716-NBA-Stephen-Curry-PI.vadapt.980.high.66
Getty Images
Leave a comment

Sunday was all about Coldplay… was there something else going on? If you didn’t watch Sunday’s NBA games because you were prepping for a Super Bowl only someone who bet the under could love, here is what you missed from around the NBA Sunday. Which includes some Super Bowl talk.

1) Stephen Curry pounding a drum was not enough for the Panthers. Curry is a Carolina guy — he did not just jump on the Cam Newton/Panthers bandwagon, he’s been a fan for a long time. The Panthers rewarded him on Sunday with a locker and jersey.

They also let him pound the drum for the team pregame. Turns out, that was not enough (apparently Curry cannot secure a win without some help from Draymond Green). But he handled it beautifully on Twitter after the game.

2) Kevin Durant joined the media for a day to be a photographer at the Super Bowl. Kevin Durant’s relationship with the media has been about as smooth as a Kardashian marriage, but since he was in the Bay Area this weekend to take on the Warriors (another Golden State win), he decided to join the media for a day and be a photographer for the Players Tribune. You know, the website that will break Durant’s plans this summer. Follow this link and you can see his account and his photos.

Associated Press
Associated Press

Now, on to actual basketball….

3) Nikola Vucevic saves Magic with fade-away game winner. Orlando looked to be in control of their game with the Hawks, up 11 entering the fourth quarter and leading by eight with 3:30 left in the game — then Atlanta went on an 8-0 run. A Kent Bazemore three with :48 left tied the game at 94-94 (Bazemore finished with 23 points on the day).

But as he had done earlier in the year, Vucevic hit a game-winning fade away (this time over some good defense from Al Horford), and Orlando got the victory.

4) Chris Paul starts slow, finishes fast and Clippers pick up a road win in Miami. Chris Paul and the entire Clippers team started this game out looking like they had the South Beach Flu (after a night on the town). CP3 opened the game 0-of-9. But Paul was 6-of-10 in the second half, and when his shots fell it opened up the roll for a couple of huge DeAndre Jordan alley-oops.

The Clippers got 22 from CP3, another 20 from Jamal Crawford off the bench, and the Clippers kept right on winning with a 100-93 victory against Miami. If you want to nit-pick this team and how the teams above them in the West might attack flaws in the playoffs, go right ahead, but you’ll be missing a fantastic show in the meantime. The Clippers are playing well on the offensive end and just keep winning without Griffin in the lineup.

5) Brad Stevens gets the most out of the talent he has in Boston, George Karl does not in Sacramento. So that matchup went as you would expect. Brad Stevens has proven to be one of GM Danny Ainge’s best moves — and Ainge assembled a title team. He has a team of nice role players as the third seed in the East, with a fantastic defense and enough offense from Isaiah Thomas to get the job done. On the other side, George Karl’s job is in jeopardy in part because he can’t get buy-in from a team with some good talent (except for Rajon Rondo, who likes Karl because Karl has given him carte blanche in the offense). This game was just a contrast of organizations, and as you would expect the Celtics won handily 128-119.

Also, know that Thomas can play a little defense — he blocked a DeMarcus Cousins‘ shot.

Paul shakes off awful start, leads Clippers past Heat 100-93

Los Angeles Clippers guard Chris Paul (3) drives to the basket past Miami Heat guard Goran Dragic (7) and forward Amare Stoudemire, right, during the first half of an NBA basketball game, Sunday, Feb. 7, 2016, in Miami. (AP Photo/Lynne Sladky)
Associated Press
Leave a comment

MIAMI (AP) — Chris Paul had the worst possible start to his shooting day.

His finish, however, was perfect.

Paul’s consecutive 3-pointers in the final minutes were daggers to a Miami comeback, and his game-high 22 points helped the Los Angeles Clippers hang on to beat the Heat 100-93 on Sunday.

“I kept shooting it,” Paul said, “because sooner or later it had to go in.”

J.J. Redick scored 14 points, Wesley Johnson had 10 and DeAndre Jordan and Cole Aldrich grabbed 11 rebounds each for the Clippers, who won despite a 1-for-15 start from the field and swept the two-game season series with Miami.

“That was a team win because nobody really had it going,” Clippers coach Doc Rivers said. “But our defense really had it going all game.”

Chris Bosh, Dwyane Wade and Goran Dragic all scored 17 points for Miami. Luol Deng added 15 points for the Heat, and Hassan Whiteside finished with 10 points and 10 rebounds off the bench.

“They did to us what we’ve been doing the last few games, just grinding an opponent,” Heat coach Erik Spoelstra said. “That’s what they did to us, then made the bigger plays down the stretch.”

Paul was 0 for 7 in the opening period, the worst one-quarter shooting performance of his NBA career, and was 0 for 9 before he finally got a shot to fall. But his 3-pointers in the fourth snuffed out a Miami rally, and his lob that set up Jordan for a dunk was the clincher for the Clippers – who, after that horrid start, shot 55 percent the rest of the way.

Redick made a layup on the game’s first possession and the Clippers proceeded to misfire on their next 14 shots, but recovered to win for the 11th time in their last 13 road games, most of that with Blake Griffin sidelined by injuries.

“We’re just trying to hold it down until our big fella comes back,” Paul said.

Miami went to the oft-used strategy of intentionally fouling Jordan in the third quarter to slow the Clippers’ offense. And while it worked to a point – Jordan went 3 for 10 from the free throw line in the quarter – Miami couldn’t score. The Heat were 4 for 20 in the third, got down by as many as 11 and never led again.

“They made big plays down the stretch,” Wade said. “That’s the way we’ve been winning of late, so we can’t be mad at that. We got a little taste of our own medicine.”

TIP-INS

Clippers: G Austin Rivers will miss four to six weeks with a broken left hand. For now, the Clippers aren’t planning on making any roster changes to add depth. “We may have to make a decision but we’re just going to try to ride it out,” Doc Rivers said. … Paul has faced the Heat 19 times, and his teams are 13-6 in those games.

Heat: Whiteside took his first charge of the season. … Wade’s first point of the day gave him outright possession of 41st place on the NBA’s all-time scoring list. He came into the game tied with John Stockton at 19,711 points. … Deng has scored at least 15 points in five of his last six games.

 

SUPER SATELLITE

The Clippers were using a different plane than usual for their postgame flight from Miami to Philadelphia, for Super Bowl 50 reasons. They changed planes in order to have satellite television access so they wouldn’t miss any of the Carolina-Denver game.

“It’s really nice of the NBA to have us play today and then travel during the Super Bowl,” Doc Rivers said. “Just really a great move. But at least we get to watch it.”