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

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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.

Wizards reportedly to finally remove interim tag from GM Tommy Sheppard

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Tommy Sheppard has been doing the work as the Wizards GM since April when Wizards owner Ted Leonsis finally ended Ernie Grunfeld’s run as team GM.

Sheppard was the GM through the draft. Through free agency. All the time with the “interim” tag on his job title. In Las Vegas for Summer League, plenty of other executives wondered why that tag was still on Sheppard’s title.

It’s finally coming off, reports Candace Buckner of the Washington Post.

The Washington Wizards removed the interim tag from Tommy Sheppard’s title Friday, promoting him to be the 12th general manager in franchise history, according to a person with knowledge of the situation…

The promotion of Sheppard, who will be entering his 17th season with the Wizards, mirrors the internal hiring decision Leonsis made with his hockey team. In 2014, Leonsis elevated Brian MacLellan as the Washington Capitals senior vice president and general manager after firing George McPhee. Before the promotion, MacLellan had spent the previous seven years under McPhee as an assistant general manager.

This likely will be made official in the next 48-72 hours.

Part of the delay may have been that a couple of prominent names were linked to the Wizards job at different times. There were reportedly talks with Tim Conley, who built Denver into a real threat, but he decided to stay in the Rockies. There were rumors of Masai Ujiri coming to the District, but he has chosen to stay in Toronto after winning a title.

Making Sheppard the full-time GM provides some stability just as the Wizards reach their most important moment of the summer.

On July 26 the Wizards can offer star two guard Bradley Beal a three-year, $111 million extension. The Wizards have been talking to Beal’s people and the offer will be made.

What Beal decides will decide the Wizards future for years. If Beal doesn’t sign that offer, the Wizards have to look at trading him. If he signs it, they need to build more around him.

Beal has spoken numerous times in the past about wanting to stay with the Wizards. However, there was plenty of informed speculation at Summer League that he is frustrated with the franchise and could choose to not sign it and essentially force his way out.

Either way, Beal’s decision will define the next steps for Sheppard for years.

 

Child tries to call out James Harden for step-back travels, he says it’s no travel

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If you tried this move in a high-school game 10 years ago, you would have been called for traveling.

In today’s NBA, as the rules are interpreted, James Harden‘s step back is not a travel.

At an event on Friday, a young fan tried to call Harden out on the travel and he defended himself. Via Kelly Iko of The Athletic.

Harden’s stepback is not a travel (when he executes it properly). Even if it looks like it is.

Here is the play in question.

The official response — meaning from officials:

I know when you played Junior High basketball in 2002 that was a travel, but the NBA hasn’t called it that way in years.

The NBA rule here (Rule 10, Section XIII) simplified is a “gather and two steps.” Meaning one step while Harden is gathering the ball, plus two more. Nobody pushes the boundary of the gather step like Harden, he has mastered the grey area. But when he executes it properly — and he doesn’t every time — it’s not a travel.

No matter what that young boy’s father tells him.

Justin Holiday reportedly reaches deal with Pacers, will join forces with brother

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The Pacers just added the wing depth and some defense at the position they have been looking for.

It’s through someone they have long had their eye on, Justin Holiday, the six-year NBA veteran who split time last season between Chicago and Memphis. He has reached an agreement to join the Pacers — and his brother, Aaron Holiday — for a season in Indiana. Shams Charania of The Athletic broke the news.

The Pacers have been in touch with Holiday for a while, reports J. Michael of the Indy Star.

Holiday averaged 10.5 points a game last season, shot 34.7 percent from three, and played solid wing defense.

Victor Oladipo is the team’s best wing player, once he returns from injury (the Pacers are hoping around Christmas or a little after). Beyond him there is Jeremy Lamb, C.J. Wilcox, T.J. Warren, Doug McDermott, and Brian Bowen. Holiday can find minutes in that group.

This also sparks the dream of an all T.J./Holiday lineup. The Pacers have two Holidays, Justin and Aaron, as well as three un-related players named T.J. — T.J. McConnell, T.J. Warren, and T.J. Leaf. We need to see those five on the court together next season, if only for a few minutes.

Rumor: Clippers offered Marcus Morris three-years, $41 million at start of free agency

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Marcus Morris thought it was his time. Coming off a 13.9 point, 6.1 rebounds a game season where he shot 37.5 percent from three and was one of only a couple of guys who seemed to bring it nightly in Boston, he thought he was going to get PAID this summer. As in the $20 million a year range.

The market for Morris was not quite that hot, and there is a lot of buzz around the league about how that frustrated him. His agent, Rich Paul, ultimately set up a two-year, $20 million contract with the Spurs, which Morris agreed to then backed out of to take a one-year, $15 million contract with the Knicks. That move pissed off the Spurs and led to Morris changing agents.

Rumor is Morris could have gone to the Clippers for three years at an average of $13.7 million at the beginning of free agency but turned it down, according to Frank Isola of The Athletic.

Morris, however, lost out on a much more lucrative contract with the LA Clippers, who were prepared to pay him $41 million over three seasons. A Clippers source said the three-year deal included a provision for Morris to receive 50 percent of his salary on Oct. 1.

Morris was hoping to earn $40 million over two years but the Clippers couldn’t offer that deal if they wanted to sign Kawhi Leonard to a max contract. Once Morris took that stance, the Clippers moved on and acquired Portland’s Maurice Harkless in a four-team trade that included Jimmy Butler signing with the Miami Heat.

One of the biggest challenges for agents is to get the player to understand market realities. For players, their salary is a measuring stick of their worth (even though we know that is flawed reasoning), kind of a capitalistic “you are what the market says you are” approach. Players have egos and often people around them who continuously pump them up. Players often expect the market to be more robust for them than it will end up being, and the agent has to be the voice of reality.

Morris is a good player, but one caught somewhat by circumstance. The market moved very fast this summer — more than 50 deals reached in the first 12 hours — and players who hesitated got lost. The Lakers and Clippers were hung up holding space open for Leonard. This July saw more “you have an hour to take this offer or we have to move on” conversations than in years past. Morris understandably thought he would get a higher payday, but by the time he pivoted the market got thin.

For the Clippers, everything worked out just fine, thank you very much.

For Morris, what kind of season he has and what kind of market there will be for him next July will be something to watch.