Wednesday, June 25, 2008

Disciplining The Owners

The NHL has had problems consistently doling out punishment for players. If a fringe player like Chris Simon stomps on a player's ankle he gets a 30 game suspension. If a star player like Chris Pronger does it he initially goes unpunished, but upon further review receives an eight game suspension that brings him back in time for the playoffs. Now the inconsistent punishment machine has to be applied to the owners.

The first team to receive reprimand is the New York Rangers. They have sued the NHL unsuccessfully over the right to run their own website independent of the NHL. For their troubles, the NHL has threatened to suspend or boot the Madison Square Gardens group from owning an NHL team. The biggest problem with this move is it set the bar too high for any future owners who require discipline.

Henry Samueli, the owner of the Anaheim Ducks has pleaded guilty in a stock options fraud case. He pled guilty to lying to investigators in their investigation of the backdating of stock options at Broadcom, the semiconductor company he co-founded. Although he will avoid jail time, he receives five years probation, must make a $12 million payment to the US Treasury and pay a $250,000 criminal fine. As a result, the NHL has suspended him as an owner. Whether or not this is a punishment with any teeth is still an open question. As a hockey owner, Samueli's job is for the most part to allow the hockey people in charge of his franchise (ie GM Brian Burke) run things while he stays out of their way as they know more about hockey than he ever will. Officially, the Anaheim Duck CEO and associate governor Michael Schulman will run things during Samueli's suspension. Of course Schulman probably already has in mind Samueli's budget and his willingness to enter into longterm contracts with current players, free agents and GM Brian Burke. Basically, I imagine the team will be run for the most part to Samueli's liking with him "on suspension".

Unfortunately for the NHL, this is not the biggest case of impropriety among owners. Former Nashville Predator minority owner William "Boots" Del Biaggio has declared bankruptcy and is under investigation for fraud regarding several of his loans. This leaves the Predators in a bad place and it leaves the NHL in a worse position. It has come out that the money used to buy his interest in the Predators was loaned to him (in part) by Philip Anschutz who owns the Los Angeles Kings and Craig Leipold who owns the Minnesota Wild. The NHL does not allow the same person to own multiple teams because of the potential conflict of interest when those teams compete against one another. Current owners financing the purchase of rival teams cross that line. These loans were made without Bettman's knowledge and approval. Anschutz owns many arenas throughout the world including the Sprint Center in Kansas City (that has long been trying to obtain an NHL tenant in their building). Del Biaggio initially was involved with the Nashville ownership situation to try to move the Predators to Kansas City. When it became clear this was not going to happen now, he publically claimed Del Biaggio was no longer involved the Anschutz group, despite the fact they were secretly loaning him money. It seems clear that his desire was to be in a position of power to help move the Nashville Predators to Kansas City should local ownership fail. Craig Leipold is the former Nashville owner. He sold the Predators to buy into the more financially successful Minnesota Wild. It looks like he was willing to provide (secret) financing in that deal in order to get himself a team with better financial prospects.

Both Philip Anschutz and Craig Leipold should be punished more severely than Henry Samueli or the Madison Square Gardens Group because what they did directly challenges the idea that the NHL is a fair league. They opened things up to potential conflicts of interest between Nashville and Minnesota and Nashville and Los Angeles. They did this with their secret backroom dealings which are illegal in the NHL.

We will see how Gary Bettman responds to Leipold and Anschutz. If he is consistent, their punishments should be significantly larger than the other punishments to NHL owners. The problem is that the NHL cannot afford to suspend owners or force sales of a large number of franchises simultaneously. It will weaken the league and hurt the values of all franchises. I suspect this will force the NHL's hand to make the upcoming punishments smaller than they should be (if they exist at all).

In the American capitalist system, those who get to the top often do it with questionable backroom deals. The NHL is no different from other branches of big business. The problem is the NHL must have many strong franchises to be a strong league (unlike normal capitalist situations where one player can take over a large share of the market). How they react when it becomes clear that the owners are involved in shady dealings will be a major test for the league. If it turns out Gary Bettman was aware of the shady dealings and ignored them until they came to light in the media, his run as NHL commissioner may end in disgrace.

Comments:
My initial emotional reaction is "close 'em down." This is the best excuse for franchise contraction that I've heard yet. Obviously that's not what the NHL is gonna do, but what else is going to act as a deterrent to these sorts of deals?
 
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