Expanded Edition
Sports, Business
Publisher: GFA Consulting
Using a business mindset, the author lays out a compensation method for fair and manageable to college athletics.
A review of business wrongdoings over a large time spam highlight how far the wrongdoings went and how, when responsible executives were caught, their price in terns of the prison terms and fines were painfully paid.
Organized in two parts, Part A explores the greed of business executives who blatantly break the rules in pursuit of profit and explores the improvements made through regulation and changes to the law.
Part B explains how the greed around college athletics in basketball and football. expand to coaches, the university staffs, staffs at NCAA, practically to every one except the players themselves, who are creators of huge revenues in attendance tickets, TV and radio programing, and sponsoring from sport shoes and apparel manufacturers.
NOTE FROM THE AUTHOR AFTER THE BOOK WAS PUBLISHED:
The NCAA president and Board of Governors appointed a working group to examine issues highlighted in recently proposed federal and state legislation related to student-athlete name, image and likeness, but the group’s work will not result in paying students as employees.
The book author advocates pay-for-play, and recommends a method to calculate compensation for playing time for basketball and football players.
15
ADDENDUM
Developments after this book was published in
April 2019 deserve this Revision, for both its Part I and Part II.
Bernard Ebbers Fraud.
Nearly 30,000 Employees Lost Their Jobs.
In 2002 the WorldCom fraud scandal broke,
resulting in a filing for bankruptcy in which nearly 30,000 employees lost
their jobs. This fraud contributed to the demise of the
public accounting firm Arthur Andersen and Company, which resulted in
additional job losses. WorldCom Chief Executive Bernard Ebbers was tried, found
guilty, and sentenced to 25 years in prison in March 2005.
In December 2019, Judge Valerie Caproni (1)
granted Ebbers’ release at the request of his relatives, citing health reasons.
Ebbers was 78 years old, having served 13 years of his 25-year sentence. Ebbers
died at home less than a year later in 2020.
The fraud cases against WorldCom and Enron are
considered two of the largest examples of accounting fraud in the financial
history of the United States. These cases are narrated in this book.
- Honorable
Valerie E. Caproni, United States District Judge, Southern District of New
York.
Update on the Security and Exchange Commission (SEC) Enforcement
Division
The following are extracted paragraphs from the
SEC website:
“Spotlight on Financial Reporting and Audit
(FRAud) Group:
The SEC Enforcement Division’s Financial
Reporting and Audit (FRAud) Group is strengthening the agency’s efforts to
identify and prosecute securities law violations related to financial reporting
and audit failures.
In addition to identifying securities law
violations in the preparation of financial statements and the disclosure of
financial information to investors, the FRAud Group is identifying and
exploring areas susceptible to fraudulent financial reporting. These efforts
include an ongoing review of financial statement restatements and revisions, an
analysis of performance trends by industry, and the use of technology-based
tools.
Examples of Filed Actions:
The work of the FRAud Group has led to a number
of matters undertaken across the Division, including inquiries, investigations,
and filed enforcement actions… Examples of these matters…
A number of actions related to our ICFR
Initiative against Respondents that failed to maintain internal control over
financial reporting for seven to 12 consecutive annual reporting periods,
or other failures...
Blow the Whistle on Financial Reporting Fraud
The Financial Reporting and Audit Group welcomes
input and information from public stakeholders who are in unique positions to
help curtail financial reporting and accounting fraud, either by reporting such
misconduct directly to the SEC or by sharing valuable research to inform the
FRAud Group’s efforts.
Corporate Insiders.”
The Domino Effect
In
September 2019 California Governor Gavin Newsom approved SB 206, allowing
college students to earn compensation from their participation in college
athletics, this was the beginning of what I consider to be a Domino Effect.
Shortly
thereafter, the New York Senate approved
Senate Bill S6722A regarding similar benefits to student athletes.
Following their lead, some thirty other states
have enacted or are considering similar legislation.
Others have weighed in on the issue as it gains
momentum, including the likes of Senator Mitt Romney.
‘We’re
coming for you. We’re coming to help these young athletes’: Romney warns NCAA
“By BY BRIAN MURPHY.
MCCLATCHY WASHINGTON BUREAU |
OCT 17, 2019.
WASHINGTON Republican Sen. Mitt Romney issued a
stern warning to the NCAA on Wednesday over its treatment of college athletes.
"I know there are people who think we can
hold this off," Romney said. "We're not going to make a change here.
But the reality is Congress is going to act.
"We're coming for you," he said.
"We're coming to help these young athletes in the future, and the athletes
of today, make sure that they don't have to sacrifice their time and sacrifice,
in many cases, their bodies without being fairly compensated."
…
ESPN analyst Jay Bilas, a former Duke basketball
star and longtime proponent of allowing players to make money while in college,
spent the day on Capitol Hill meeting with lawmakers about the issue. He said
he was not advocating for or against any specific piece of legislation.
"Education and money are not mutually
exclusive," Bilas said: He said college athletics are not amateur sports
nor are they minor-league sports, noting television contracts worth billions
and coaching salaries in the millions. "It's major league sports," he
said.
…
Rep. John Yarmuth, a Kentucky Democrat, is a
co-sponsor of Walker's legislation. "The NCAA is not an organization that
is interested in fairness," Yarmuth said. "They are an organization
set up to exploit young men and women for money."”
In response to these concerns, the NCAA has shown some yielding.
The official website reports the following:
“Board of Governors starts process to enhance name, image and
likeness opportunities.
Each NCAA division directed to immediately
consider modernization of bylaws and policies
October 29, 2019.
In
the Association’s continuing efforts to support college athletes, the
NCAA’s top governing board voted unanimously to permit students
participating in athletics the opportunity to benefit from the use of
their name, image and likeness in a manner consistent with the
collegiate model.
The
Board of Governors’ action directs each of
the NCAA’s three divisions to immediately consider
updates to relevant bylaws and policies for the
21st century, said Michael V. Drake, chair of the board and
president of The Ohio State University.
“We
must embrace change to provide the best possible experience for college
athletes,” Drake said. “Additional flexibility in this area can and must
continue to support college sports as a part of higher
education. This modernization for the future is a natural
extension of the numerous steps NCAA members have taken in recent years to
improve support for student-athletes, including full cost of
attendance and guaranteed scholarships.”...
...“As
a national governing body, the NCAA is uniquely positioned to modify its rules
to ensure fairness and a level playing field for student-athletes,” NCAA
President Mark Emmert said. “The board’s action today creates a path
to enhance opportunities for student-athletes while ensuring
they compete against students and not professionals.”
Note
the following remarks: “Make clear that compensation for athletics performance
or participation is impermissible….”
In this book I reviewed this issue and proposed
what I call The Fernandez Method for Pay-for-Play which is detailed at the end
of this chapter.
An Important Domino Piece Drops
(NCAA) Board of Governors moves toward allowing
student-athlete compensation for endorsements and promotions.
The NCAA’s highest governing body has taken
unprecedented steps to allow college athletes to be compensated for their name,
image and likeness.
April 29, 2020
At its meeting this week, the Board of Governors supported rule
changes to allow student-athletes to receive compensation for third-party
endorsements both related to and separate from athletics. It also supports
compensation for other student-athlete opportunities, such as social media,
businesses they have started and personal appearances within the guiding
principles originally outlined
by the board in October.
While student-athletes would be permitted to identify themselves
by sport and school, the use of conference and school logos, trademarks or
other involvement would not be allowed. The board emphasized that at no point
should a university or college pay student-athletes for name, image and
likeness activities.
The board directed all three divisions to consider appropriate
rules changes based on recommendations from its Federal and State Legislation
Working Group.
“Throughout our efforts to enhance support for college athletes,
the NCAA has relied upon considerable feedback from and the engagement of our
members, including numerous student-athletes, from all three divisions,” said
Michael V. Drake, chair of the board and president of Ohio State. “Allowing
promotions and third-party endorsements is uncharted territory.”
The board’s recommendations now will move to the rules-making
structure in each of the NCAA’s three divisions for further consideration. The
divisions are expected to adopt new name, image and likeness rules by January
to take effect at the start of the 2021-22 academic year.
The board is requiring guardrails around any future name, image
and likeness activities. These would include no name, image and likeness
activities that would be considered pay for play; no school or conference
involvement; no use of name, image and likeness for recruiting by schools or
boosters; and the regulation of agents and advisors…
Source: NCAA News website
“Play with the Chain but Don't Touch the Monkey”
NEW YORK — NCAA President Mark Emmert said Wednesday (12/11/19) it
is “highly probable” federal legislation will be passed that sets national
guidelines for how college athletes can be compensated for the use of their
names, images and likenesses.
Emmert, who spoke at a forum sponsored by the
Sports Business Journal, said he is spending most of his time trying to figure
out how the NCAA and its hundreds of member schools will allow college athletes
to get that kind of compensation under the auspices of amateur athletics.
He said he is also spending a lot of time in
Washington, meeting with lawmakers, often with university presidents and other
representatives from individual schools.
Last week, Sen. Chris Murphy and Sen. Mitt
Romney announced the formation of a bipartisan congressional working group that
will examine compensating college athletes.…
The issue gained urgency after California passed
a law in October that will give college athletes the right to make money of
things like endorsement deals and promoting businesses or products on their
social media accounts. That law does not go into effect until 2023.
Since then, more than 20 other states have moved
on similar legislation, with some states saying they would like new laws to be
in place as soon as next year. That would make it almost impossible for the
NCAA to operate with consistent rules for all its members.
A federal law would eliminate that potential
problem, but the NCAA wants a say in what that looks like.
“If you had a completely unfettered sponsorship
model like some state bills are anticipating, the nature of that can slide very
quickly into an employee-employer relationship,” Emmert said.
The NCAA has had a working
group sorting through name, image and likeness compensation since summer. In
November, the Board of Governors voted to allow college athletes to be
compensated for their names, images and likenesses. Now that group is working
on how to change NCAA rules. The board gave its sprawling membership a deadline
to make legislative changes by 2021…
Source: Mark Emmert: ‘Highly probable’ federal legislation needed
for NIL compensation for college athlete. Associated Press, NBC SportsDec 11, 2019,
It
seems that some minor and controlled student athlete compensation will get the
green light. Nothing in terms of paying for playing time.
It
looks like Mr. Emmert is concern in keeping the college basketball and football
riches at a level assuring that his multimillion compensation (a) as well at
the very high earnings of coaches and the related NCAA and college staffs,
remain untouched.
(a) NCAA
president Mark Emmert was credited with nearly $3.9 million in total
compensation during the 2017 calendar year, according to the association’s new
federal tax return. Steve
Berkowitz, USA TODAY, May 24, 2019.
I have been unable to find
Emmert current salary in the NCAA website or in any other internet news. End of
April 2020 news show that Emmert and other NCAA top executive are getting 20%
salary cuts, taking into account the overall reduction of revenues in college
sports due to the pandemic.
The
White House Too
An article written by Denis Dodd on February 3,
2020, under the title “White House weighing whether to get involved in name,
image, and likeness rights for college athletes”. It indicates that Federal
legislation is in the works, but the name, image and likeness issue may go one
step further.
“The source is CBS Sports that sought comment
from the administration after two sources said there had been at least one
meeting between the Trump White House and individuals involved in these
developments
‘The White House wants to make sure NCAA student-athletes
are treated fairly without harming the integrity of college sports,’ said Judd
Deere, White House deputy press secretary, when asked about that meeting…
"
…Deere, who is also special assistant to
the President, said he would not comment further.
"It's very real," said a source
familiar with the situation regarding the interest between the two parties.”
With all the pressing issues regarding the
Pandemic, the White House is probably placing its involvement in the backburner
Paths to the NBA Other Than the NCAA
The NBA G League
The
NBA G League, or simply the G League, is the National Basketball Association's (NBA) official minor league basketball organization. The league was known as the National Basketball
Development League (NBDL) from 2001 to 2005, and the NBA Development League
(NBA D-League) from 2005 until 2017. The league started with eight teams until
NBA commissioner David Stern announced a plan to expand the NBA D-League to fifteen teams and
develop it into a true minor league farm system, with each NBA D-League team affiliated with one or more NBA
teams in March 2005.
At
the conclusion of the 2013–14 NBA season, 33% of NBA players had spent time in the NBA
D-League, up from 23% in 2011. As of the 2019–20 season, the league consists of 28 teams, all of which
are either single-affiliated or owned by an NBA team.
In
the 2017–18 season, Gatorade became the title sponsor of the D-League, and it was renamed the
NBA G League.
Source: WIKEPEIDA
· print
California high school star Jalen Green, the No. 1 prospect in the 2020 ESPN 100, is making the leap to a
reshaped NBA professional pathway program -- a G League initiative that sources
say will pay elite prospects $500,000-plus and provide a one-year development
program outside of the minor league's traditional team structure.
Green -- a potential No. 1 overall pick in the
2021 NBA draft -- announced Thursday that he is bypassing college to become the
professional pathway's first participant, a decision that likely clears the way
for more commitments from elite prospects.
…
Green is expected to be in line
for a seven-figure shoe deal this year, sources said.
·
Source: Top high school player Jalen Green enters NBA/G
League pathway. ESPN, Jonathan
Givony and Adrian Wojnarowski
NBA
G League Website
Prior to the 2018-19 season, the NBA G League announced a Select
Contract as part of a comprehensive professional path that will be available,
beginning with the 2019-20 season, to elite prospects who are eligible to play
in the NBA G League but not yet eligible for the NBA. The contracts, which will
include robust programmatic opportunities for development, are for elite
players who are at least 18 years old and will pay $125,000 for the five-month
season.
…
NBA G League Select Contracts are designed for
year-round professional growth and will include opportunities for basketball
development, life skills mentorship and academic scholarship.
Players will be eligible to sign a Select
Contract if they turn 18 by Sept. 15 prior to the season in which they would
play. While there is no maximum age for a player to be eligible for a Select
Contract, the contracts are not available to players who have gone through an
NBA Draft.
….
When 2018-19 tipped off, an
all-time high 40 percent of players on NBA start-of-season rosters had NBA G
League experience — 198 of the league’s 494 players. That figure has more than
doubled in just the past six seasons.
PCL
A
group of investors have organized a Professional College League that intents to
have basketball teams in several cities with players attending colleges as any
other students, but receiving pay-for-play for participating in a National
Championship.
I
extracted the following from their website:
The First College Basketball League To Enable
Athletes To Directly Benefit From Their Talent, Marketability, and Hard Work By
Offering An Education and Compensation
There is a staggering
injustice in college sports
College basketball players are the heart of the
college game and deserve a fair share of the revenues they generate. Before the
PCL, they were excluded from those financial benefits while everyone around
them received significant compensation.
educatION AND compensatION IS A BETTER
OPPORTUNITY
The PCL aims to change the landscape
of collegiate athletics by disrupting the amateurism model and offering a
legitimately superior alternative. We aim to improve the economic outlook of
our athletes, the majority of whom will likely be minorities and/or come from a
low socioeconomic background.
The Pandemic
has slowdown the activities of this League. There are
not widespread news regarding the status of the League taking into account
current Pandemic situation.
A The Wall Street Journal Article
On
March 12, 2020, the article, written by Laine Higgins, took most of a full page
under the title: “WHEN COLLEGE ATHLETES CASH IN”, and the following
introduction: “Students are closer than ever to being allowed to make money
from their sports, spelling big changes for schools, players and fans”.
The
author had an in-depth review of topics pertaining to National College
Athletics Association’s “amateur” status applicable to student athletes; states
actions on this regards; House of Representative and Senate members
contemplating nation-wide applicable laws, as opposed to piecemeal State laws;
and the plans for establishing a Professional Collegiate League.
All
of these topics are included in my book.
Center
page vertical space highlighted pertinent information in yellow as follows:
“2023
The Year California law allows college athletes to sell the rights to their
name, image and likeness”.
“34
The number of states that have proposed laws similar to California’s”.
353
The number of programs in the NCAA’s Division I”.
8
The number of teams in the independent Professional.
Another Step on the Right
Direction
In Chapter XIII, under the caption A Step in the Right Direction,
there is an account of news reporting a $3 million gift by Mike and Mickie
Krzyzewski to The Emily Krzyzewski Center, which is named after his Mom.
Coach
Roy C. Williams' followers may not know about the many
generous donations he and Wanda Williams have made to scholarship programs
and non-revenue sports over the years.
News in March 2021 reported that North Carolina Chapel Hill head
coach Roy Williams and his wife Wanda Williams have made their largest one-time
gift to the University of North Carolina. $3 million to
support scholarships for athletes, Carolina Covenant Scholars, and Chancellor’s
Science Scholars. The gift includes $1 million to endow a scholarship for men's
basketball.
In
the website Go Heels it is highlighted the following comment:
"The
whole world is in a tough situation right now — financially, health wise, everything
you can think about. And we are in a position to be able to do
something about it. It just seemed like it was the right idea at the right
time," said Coach Williams. "We hope others might be
encouraged to do some things as well".
Coronavirus
The magnitude of the COVID 19 infection has
brought to a halt most of the activities in business, sport, education and any
other has resulted to implement strict confinement of individuals at their
homes in many cases.
Protection of health has been the first priority
for the State and Federal governments.
College basketball and football has resulted in
reduced revenues resulting from less games played, and playing without paying
audiences allowed, although it seems that restricted number of seats permitted
to be filled might be allowed in the future.
Fernandez Method for Pay-for-Play:
It
seems that somehow the improvements requested by players will be adopted, but
nothing in terms of paying for playing time.
This
what was written in Chapter XIV: I think that there should be a basic monthly
allowance for all student athletes involved in the money-making basketball and
football college programs. This monthly allowance should be increased to a
higher level based on the playing time in the 68 finalist teams in basketball (during March
Madness).
Football players should
be similarly rewarded based on time on the field in regular season games,
football bowls, and football playoffs.
I am by education and experience a “numbers
person,” I sincerely feel that this calculation method provides a simple and
feasible implementation. I call this pay for play The Fernandez Method.
Complete fair compensation to college basketball
and football players should include the Fernandez Method of pay for play.
About the Author
After early retirement from ITT in 1983, he worked in management consulting with High Rock Partners Inc, as a partner, until retirement.
Fernandez worked for Procter and Gamble of Cuba for ten years in auditing and other fields.
He earned a bachelor's degree in accounting from Havana University.
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