Archives For ESPN

It wasn’t too long ago that I blogged about the purported end of the Demarcus Cousins saga.  For TOTM readers that want to catch up to speed, here is how things stood about a month ago:

For those who haven’t, Cousins is a blue chip high school basketball recruit who has been bargaining hard with the University of Alabama-Birmingham (UAB) over signing his National Letter of Intent — the letter that commits a player to attend the university and imposes the penalty of giving up a full year of eligibility if the student-athlete transfers. Cousins wants to commit to UAB to play for former Indiana University coach Mike Davis but wanted to seek contractual insurance for the possibility that after signing the letter of intent and making specific investments to UAB, Davis might leave the program. Cousins alleged that Davis promised that UAB would release Cousins without penalty if Davis was no longer his coach.

When we last left Cousins, he was holding out, talking to other programs, and attempting to bargain for this term in his National Letter of Intent.  He’s now signed with Memphis.

Back then, I noted that I thought it was odd that UAB could not find a way to include the contractual provision in Cousins’ NLI and wondered whether other athletes were successful in doing so.  It turns out recent developments give answer to that question, and also involve Cousins.

As the college basketball world now knows, former Memphis coach John Calipari (who successfully got the verbal commitment from Cousins) has accepted the head coaching position at the University of Kentucky.

With Calipari accepting the Memphis job, the question now turns to whether his excellent recruiting class will stay at Memphis.  But what about the NLI provisions that commit a player to attend or take the one year penalty for transferring?  Apparently, Cousins only committed to Memphis verbally and so is free to transfer.  ESPN reports that Cousins may stay at Memphis but that Calipari is likely to have a wonderful shot at him heading to Kentucky.

But here is the interesting new fact (at least to me and as it has been reported on ESPN): Another blue chip recruit that had signed an NLI with Memphis, Xavier Henry, but ESPN reporters continue to reference his NLI including a provision that allows him release without penalty in the case of Coach Calipari leaving.  My immediate reaction is that the fact that the competitive process for top recruits allows those players to extract these sorts of commitments from programs like Memphis convinces me that the problem at UAB must be related to a dispute between their coach (Mike Davis) and the UAB administration.  Of course the coach wants the provision.  But perhaps administrations at mid-majors want to increase the cost of early departures by prohibiting coaches from leaving and keeping recruits at the new school whereas this is less of a problem at major programs that have other substitute methods of keeping their coaches on staff for long periods of time.  For example, this list of terms reported to be included in Calipari’s Kentucky deal are too good not to post:

  • The $31.65 million deal making John Calipari the highest-paid coach in college basketball is packed with perks beyond his annual salary, including membership to the country club of his choice, two cars and incentives for reaching the NCAA Sweet Sixteen and Final Four and winning a national title.
  • The Wildcats paid Memphis $200,000 as part of Calipari’s buyout of his Tigers’ contract, which had paid him $2.35 million per year.
  • Including $3 million in retention bonuses he’ll get for staying with Kentucky through March 31, 2016, Calipari is in line to receive an average of $4 million a year over the eight years.
  • Two “late model, quality automobiles,” plus mileage.
  • Membership in a country club of his choice, including monthly dues and initiation fees.
  • 20 prime “lower-level” season tickets to UK home games.
  • Eight tickets for each UK home football game.
  • Hundreds of thousands of dollars in incentives for reaching certain milestones, such as a 75 percent graduation rate or better ($50,000), winning the Southeastern Conference ($50,000), winning the SEC tournament ($50,000), making the NCAA tournament round of 16 ($100,000), making the Final Four ($175,000), or winning the national title ($375,000).
  • The right to income from conducting basketball camps using UK facilities.
  • Should the university fire Calipari without cause, he would still receive $3 million for each year left on the contract, double the annual buyout former Kentucky coach Billy Gillispie says he is entitled to under his memorandum of understanding.

Last month I highlighted the story of DeMarcus Cousins, a blue chip high school basketball recruit who was playing a game of chicken with the University of Alabama-Birmingham (UAB) over signing his National Letter of Intent — the letter that commits a player to attend the university and imposes the penalty of giving up a full year of eligibility if the student-athlete transfers.  Cousins claims that he stayed near home and UAB to play for former Indiana University coach Mike Davis who had allegedly represented to Cousins that UAB would release Cousins without penalty if Davis was no longer his coach.  Cousins has been holding out to try to bargain for this term in his NLI.  Nothing new there — though if anybody has information on the follow-up story there I’d love to hear it.

I came across this story at ESPN on the release of Miami University QB Robert Marve which includes the following detail:

The release comes with conditions that don’t sit well with Marve. He can’t play for teams in the Atlantic Coast Conference, the Southeastern Conference or the state of Florida. It’s not unusual for programs to place restrictions on the deal when a marquee player transfers.

If this sort of ex-post imposition of non-compete conditions on player releases is standard fare, which the article suggests that it is, Cousins’ strategy seems even more reasonable to protect against this sort of hold up with contractual protections ex ante.

UPDATE:  Apparently, the University of Miami has relaxed its restrictions on Marve’s release.  Originally, Miami was prohibiting Marve from transferring to any school in the ACC, SEC and the state of Florida.  Now, Marve is only restricted from attending three schools that the University of Miami believes Marve contacted prior to receiving his release: the University of Florida, Tennessee, and and Louisiana State University.

Here’s another reason—as if you needed it—as to why getting a reasonable bailout of the mortgage-backed securities market through Congress was so difficult. Below I reproduce an analysis from Gregg Easterbrook of the Brookings Institute:

Supposing we assume the bailout is required, here is what bothers me about the plan so far: Taxpayers don’t get stock, what they get is warrants that can be exchanged for stock, and nonvoting stock to boot….  Even if the warrants are called [sic, Easterbrook means exercised], taxpayers get no voting positions…. A week ago, Warren Buffett rescued Goldman Sachs by injecting $5 billion in capital. Did Buffett bargain for warrants that can be exchanged at an unknown later date for nonvoting shares? No: He is not a fool. Buffett gave Goldman Sachs $5 billion in return for senior preferred stock, the kind that votes and also is more valuable than ordinary shares…. The United States Congress and the White House should use the public’s $700 billion to buy … senior preferred shares. Why are Congress and George W. Bush not simply following the road map laid out on this problem by the smartest investor of our era?

The problem is that this is factually mistaken from beginning to end. Easterbrook says that Buffett did not get warrants, but in fact he did—indeed, warrants to purchase $5 billion of common stock with a strike price of $115 per share and a five year term. Easterbrook says that the preferred shares Buffett received are “the kind that votes,” but they’re not. Like the six classes of preferred stock Goldman already has outstanding, Buffett’s shares do not vote in the election of directors. Like virtually all preferred shares, they have very limited voting rights that do not allow the holder any ability to control the affairs of the company. This is all set out in the press release Goldman Sachs issued to announce the transaction and in Item 303 of the Interim Report on Form 8-K it subsequently filed with the Securities and Exchange Commission.

More generally, it’s apparent from his blog that Easterbrook simply doesn’t understand what preferred stock is and how it relates to common stock. As most readers of this blog know, preferred stock is “preferred” not because it’s “more valuable than ordinary shares” but because it ranks ahead of common shares in order of payment. That makes it less risky than common shares but not generally more valuable than common stick. Indeed, since return is proportionate to risk, preferred shares generally have a lower expected return than common shares, and since control follows risk, preferred shares generally have less voting rights than common shares. The preferred shares Buffett purchased from Goldman are thus perfectly typical in these respects.

My point here is not that Easterbrook doesn’t understand what he’s talking about (though he clearly doesn’t). My point is that an intelligent person in the opinion-making class trying his honest best to inform the American public about the merits of the bailout can utterly fail to understand the issues at stake. That’s not because people like Easterbrook are fools (they certainly are not) but because the matters are so complex and technical that even informed, intelligent non-specialists can get them very badly wrong.

This is a genuine challenge for democracy. In The Federalist No. 10, Madison argued that representational republicanism is superior to direct democracy because it can “refine and enlarge the public views by passing them through the medium of a chosen body of citizens, whose wisdom may best discern the true interest of their country and whose patriotism and love of justice will be least likely to sacrifice it to temporary or partial considerations.” In other words, democratically elected representatives are on the whole likely to make better decisions than the people themselves, in part because they are better informed than the average voter. History has by and large proved Madison correct in this. Part of the problem in passing the bailout program last week, however, was that our elected representatives were dealing with issues that were often too complex and difficult even for intelligent, informed people who were trying hard to understand them. I do not for a moment suggest that anyone else should get to decide such matters except the elected representatives of the people, but I think we should realize that the world has become so complex that issues like this may begin to appear with increasing frequency.

Its a few weeks old now, but apparently a couple of former employees were able to bilk online rivals of a lot of money at Ultimate Bet.  How?

Certain players gained an unfair advantage through their ability to see their opponents’ hole cards. In a game of incomplete information, the ability to see an opponent’s hole cards is the ultimate weapon. While the total amount of money unfairly won by the perpetrators has not been reported, it is believed to have reached seven figures.

Heh.  Yes, I’d say seeing the opponents hole cards is an “unfair advantage.”  What I really want to know is how long these guys were able to pull this off, and how they got caught?  See also Steve Levitt on a similar scandal (and resolution) at another online site.

Why Wasn't Belichick Suspended?

Josh Wright —  14 September 2007

An assistant coach takes a substance banned by the NFL to treat diabetes. He is fined one third of his salary and suspended for 5 games. An NFL head coach violates an NFL rule concerning videotaping the opposition during a game from the sideline for fear that such conduct might impact the outcome of the game (though it did not in the case at issue so far as we know). Coach Belichick’s punishment: $500,000 and no suspension. The Patriots’ organization was also fined an additional $250,000 and a few draft picks (a first round or both a second and third round draft pick depending on whether the Patriots make the playoffs). What gives with not suspending Coach Belichick?

Don’t get me wrong, $500,000 is nothing to laugh at (Belichick’s annual salary is reported to be somewhere in the neighborhood of $3 million). It’s a real fine and real punishment for some very troublesome conduct. But in light of the NFL’s harsh punishment of the Dallas Cowboys’ quarterbacks coach Wade Wilson, I’m not sure that failing to suspend Belichick is really defensible if one cares about consistency. There has been lots of very interesting discussion(see, e.g. Adler, McCann, Rapp, and Yen) about the appropriateness of the fine. ESPN’s John Clayton argues that it was too light without a suspension. Others have argued that it was appropriate because of the pre-season warnings NFL Commissioner Roger Goodell gave about precisely this sort of sideline videotaping. Some have expressed that the lack of suspension was appropriate because Belicheck’s absence would have an impact on the outcomes of games.

Presumably, the reason Wilson was fined so harshly was because of the potential of distributing the banned substance to players and the league’s desire to send a strong message about such substances because they can give an unfair competitive advantage (see Wilson’s take on the suspension in this story from ESPN’s Ed Werder). Wilson apparently was able to convince the league that he was indeed using the banned substance for himself and not to distribute to players or else he would have been banned for life. So one cannot distinguish the two on the grounds that Wilson’s conduct actually had an impact on competition. The defense that Belichick’s suspension would have an impact on the field does not seem sufficient to justify the decision either. The notion that suspensions impact on the field performance shouldn’t shock anybody. That is what suspensions are designed to do. Besides, Commissioner Goodell acknowledges that he believes the loss of draft picks will have a more serious impact on the field than suspending the Coach. So far, I can’t think of a persuasive reason why it makes sense for Wilson to face a serious suspension and a serious fine (actually larger as a fraction of his salary) while Belichick only faces the fine.

The most obvious answer lies in the loss of draft picks. In fact, Goodell relies on the severity of the draft pick punishment to justify the decision not to suspend the Coach:

I specifically considered whether to impose a suspension on Coach Belichick. I have determined not to do so, largely because I believe that the discipline I am imposing of a maximum fine and forfeiture of a first-round draft choice, or multiple draft choices, is in fact more significant and long-lasting, and therefore more effective, than a suspension.

This may be true. It may hurt the Patriots more to lose the draft picks than to lose Belichick for a couple of games — but this is debatable. But this answer still does not square the personal punishments of Wilson and Belichick. Belichick, after all, admits that the decision to continue to videotape was his decision based on his incorrect interpretation of the NFL constitution and bylaws.

By the way, I’m hoping Belichick spells out what it was about the following rule that made videotaping on the sideline acceptable: “No video recording devices of any kind are permitted to be in use in the coaches’ booth, on the field, or in the locker room during the game.”

Stay Classy San Diego

Josh Wright —  10 December 2006

My prediction that the Chargers would win it all last month is not looking so bad after the clinic the Bolts put on the Broncos yesterday to clinch the division. Of course, the big news in the game is that Ladainian Tomlinson broke the all-time single season TD record. For those who didn’t see the game, there was something that LT did that caught my eye right after he scored his record-breaking TD.  Immediately, LT motioned to his entire offensive line (and the rest of his teammates) to join him in the celebration, which they did, hoisting him up in the air in jubilation.  Whatever one thinks about the modern day NFL where players can devote significant time to dreaming up post-TD celebrations but can’t stay awake in team meetings or throw teammates under the bus in the media, for my dime nothing beats LT’s traditional celebration of giving the ball to the official without fanfare (a la Barry Sanders), high-fiving a few teammates, going back to the sideline, and acting like he’s been there before. In any event, most of the highlight shows are not likely to show LT’s team-based celebration of this honor, but his post-game comments capture exactly why Tomlinson may be the best the NFL has to offer in more ways than one:

“Once I got over the pylon, my initial thought process was to bring every guy on the offensive unit over to share that moment. When we’re old and can’t play this game anymore, them are the moments we are going to remember, that we’ll be able to tell our kids, tell our grandchildren. We can talk about something special that we did. We made history today. There’s no better feeling than to share it with the group of guys that’s in that locker room.”

Refreshing.

Friday Blog Reading

Josh Wright —  1 December 2006

Tyler picks the San Antonio Spurs to win the NBA title this year. No time like the present to get on the record with a few of my own.

1. NFL: Bears v. Chargers in the Superbowl. I’m going to go out on a limb (and against Tradesports) and pick San Diego over the Colts in the AFC … and to win the whole thing.

2. NBA: The Spurs look good in the West. I’m going to predict a Spurs v. Heat final and stick with my pick from a year ago: Heat in 6. Given Wade’s performance in the playoffs last year, I refuse to pick against him in a playoff series until they lose one again. My own version of the Jordan (Ok, Jordan-like) rules.

3. NCAA Basketball: Ok, its November … but Joe Lunardi has already got his picks up at ESPN, and I’m going to GMU’s home opener against Wichita State Saturday, so it is officially basketball season. There is good news and bad news for me in Lunardi’s picks. He’s got UCLA as a one seed, but also has Hofstra avenging its exclusion from the Tourney in GMU’s favor and taking the only spot from the CAA. Nonetheless, I’m sticking with the Patriots making a return trip to the dance (sorry Matt!), but I’m going to pick a relatively conservative Final Four: UNC, UCLA, Florida and Pittsburgh. The winner? UNC … but I’ll be sitting in the UCLA section. Go Bruins.

Miami Heat in 7

Josh Wright —  6 June 2006

That’s my prediction for the NBA Finals. The betting markets and Vegas have Dallas favored, as do most pundits. The series has a ton of interesting matchups. A classic battle of styles: the Mav’s speed against Miami’s inside out attack. Why pick the Heat? In a game of two very contrasting styles, I refuse to gamble pick against the best player on the floor. Hint: its this guy.

Weekend Reading List

Josh Wright —  3 June 2006

Grading has been keeping me pretty busy the last several weeks, and I haven’t done as much reading or writing as I would have liked recently. I finally finished my grading today, and so can turn my attention to the monstrous stack of papers that have caught my eye over the past month or so. Here’s what is on the top of the list:

Six Flags’ preliminary proxy statement filed with the SEC earlier this week reveals that its board has agreed to reimburse Red Zone LLC, the entity controlled by Washington Redskins owner Daniel Snyder, for expenses incurred in its successful consent solicitation last fall. Red Zone launched the solicitation to address Six Flags’ continued poor performance and was able to oust three of Six Flags’ seven directors (including its CEO and CFO) and replace them with Snyder, Mark Shapiro (former Executive Vice President, Programming and Production of ESPN) and Dwight Schar (Chairman of NVR, Inc., the nation’s 6th largest homebuilder). Snyder has since been appointed chairman and Shapiro CEO. Six Flags’ stock is up over 80% since Red Zone launched the solicitation.

The proxy indicates that Red Zone incurred $11.6 million in expenses related to the solicitation. The biggest single expense was “a signing bonus of $5 million to compensate Mr. Shapiro for leaving his promising career at ESPN at a time when the success of Red Zone’s consent solicitation was uncertain.â€? Other expenses included $813,000 in legal fees; $2.4 million in investment banking fees; $972,000 in travel expenses (including airfare, lodging, meals) incurred to meet with stockholders during the solicitation period, $36,000 for the cost of preparing, printing and mailing proxy materials and subsequent communications to stockholders; and $580,935 in fees and expenses for professional proxy solicitors. Red Zone asked to be reimbursed for $11.4 million of these expenses, and the company has agreed to reimburse $10.4 million, subject to stockholder ratification. For more details, see pp. 31 & 32 of the preliminary proxy linked above. Six Flags spent $9.4 million on legal, investment banking, public relations and other fees in its failed effort to thwart Red Zone’s solicitation.

This battle would make an interesting case study. Proxy fights are extremely rare, especially outside of an acquisition context. In most situations, a disgruntled stockholder will simply opt for the “Wall Street Rule� (sell out) instead of fighting. This is because an insurgent will have to bear the multi-million dollar expense of the fight with the knowledge that the spoils of victory will be shared with all other stockholders. While a company is free to reimburse reasonable costs incurred by the insurgent in the battle (as Six Flags has decided to do), it is highly unlikely a company will choose to reimburse a losing insurgent. And the chances of victory are less than 50% in light of rational shareholder apathy and other impediments. For some reason, none of this discouraged Snyder.

It has been a fine month for George Mason University. The Final Four appearance has attracted a good deal of media attention and general buzz. This week, I received a record number of phone calls from friends about Mason (“No, I dont have any extra Final Four tickets.”). As great as this news is for the university community as a whole, GMU Law had an eventful March in its own right. For what it is worth, we moved up a few (4) spots in the US News Rankings to 37 (Brian Leiter thinks we are still underrated). But I want to write about what I found to be a very interesting series of events following reports that a GMU Law faculty member would be nominated to the Federal Circuit Court of Appeals.

A week ago, the San Francisco Daily Journal reported that my friend, colleague, and prolific patent scholar Kimberly Moore would receive the nomination to the Federal Circuit Court of Appeals. The headline of the article, available here (HT: How Appealing), “Judge Whyte Passed Over for Circuit,” did not convey much enthusiasm for Moore’s rumored nomination (the article does contain favorable reactions from IP scholar Mark Lemley and practitioner James Pooley). The WSJ Law Blog also picked up the DJ story, which was essentially that while “Moore seems well-credentialed,” “the news comes as a disappointment to intellectual property lawyers.”

The blogosphere reaction to the initially lukewarm reports has been enthusiastic, approving, and very interesting to watch. Since the initial rumor broke, here is a survey of reactions from law bloggers:

Christine Hurt, of The Glom:

I only met Prof. Moore for the first time this Fall, so I’m glad I’ll be able to say “I knew her when.” Lattman, who does not seem to have had the pleasure, seems conservative in extolling her virtues, so we will do so here at the Glom. Congratulations on your well-deserved nomination!

Dennis Crouch, of Patently-O:

I commented yesterday to a reporter my belief that Professor Moore is an obvious choice and would make an excellent judge.

Crouch also notes that John Duffy, whose name had also been mentioned for the Federal Circuit position described Moore as “outstanding nominee,â€? who “has spent a large portion of her career carefully studying the judicial process of patent litigation, and she has become a leading authority in the field. She would bring extraordinary knowledge and insight to the bench. Her nomination would, I think, command broad support from the academy and the practicing bar.â€? I do not know where the Duffy comment appears.

Finally, Mike Madison of Madisonian.net notes in response to the Law Blog story:

It doesn’t report that a lot of IP faculty are (or should be) pleased. Nothing against Judge Whyte, who is an experienced federal and state court judge. But Professor Moore is an especially accomplished, thoughtful, and constructive critic of the patent system. Congrats!

Perhaps this is another example of what Larry Ribstein has described as the “decentralized knowledge” function of blogging, where specialized expert knowledge can quickly be disseminated to the public at low cost in order to fill gaps in the information disseminated by mainstream media sources?

I might as well finish off with a Final Four note. As expected, the MSM’s reaction to Mason’s other big news has also been lukewarm. I have only been able to find one expert predicting a Mason victory over Florida in tomorrow night’s action (though I am sure there are others): Andy Glockner, an editor for ESPN.com, is picking the Patriots over the Gators. I wonder what Billy Packer thinks? Of course, Vegas has also spoken, and Florida is favored by 6 at the moment. Lucky for these Patriots, the “W’s” only get handed out after the game is played.