Emergency Pod: Breaking Down the Clippers' Punishment!

The Zach Lowe Show

Zach Lowe is joined by Kirk Goldsberry and Michael McCann to dissect the NBA's unprecedented punishment of the Los Angeles Clippers following a

Key takeaways

• The NBA's punishment is the most severe in league history, marking a significant shift in enforcement against cap circumvention.
• Steve Ballmer's one-year suspension from all league activities signals a hardline stance by Commissioner Adam Silver.

Main topics

• NBA cap circumvention scandal
• Clippers' punishment details

Notable quotes

"This is pretty close to a death knell for a decade, a half decade. We don't even know."

Conclusion

The Clippers' future is severely compromised by the NBA's historic penalties, with long-term rebuilding

Transcript preview

Speaker 1 (0:00) you Speaker 1 (0:06) on a Wednesday night edition of the Zach Lowe Show. The Wachtell, Lipton, Rosen, and Katz report is out. And boy, is it damning, at least in the NBA's view and frankly in mine and some other people's upon reading it. But the bottom line is this. The NBA has thrown the book at the Clippers. Five first round picks gone. $30 million fine. Steve Ballmer. Microsoft's Steve Ballmer. Suspended from all league activities for a year. Speaker 1 (0:36) Multiple Clippers executives, including Lawrence Frank, the president of basketball operations, suspended for prolonged periods of time without pay. There's all sorts of stuff to get in on in terms of what the report found, why the findings merited such a gigantic punishment, really a death knell for the Clippers for the foreseeable future. We've got Michael McCann, a legal expert, and Kurt Goldberry of The Ringer, of course, to talk about Pablo Torre being right all along. Speaker 1 (1:03) to how the penalty superseded everything that we expected or anticipated it could be and why and what's in that report. All things Clippers, Raptors, Kawhi's going there. Apparently we talk about that. Just the moment that has been in the making for a year is here. And then after that, we talk about baseball. Sean Fennessey and I are talking about the Mets as we wind down a depressing season with Pete Alonso coming back to Citi Field in a couple weeks. That'll be fun. So that's all coming up. Speaker 1 (1:31) on the Zach Lowe Show. Welcome to an emergency edition of the Zach Lowe Show. The verdict is in. The NBA has thrown the hammer down at the Los Angeles Clippers in the Kawhi Leonard cap circumvention scandal broken by Pablo Torre almost a year ago. The penalties are the biggest in the history of the NBA and among the biggest in the history of sports. To help us sort out the whole thing, including the 36-page report summarizing Speaker 1 (2:08) Wachtell, Lipton, Rosen, and Katz's extensive investigation. I read it, highlighted the whole thing. We have Kurt Goldsberry, our guy from The Ringer. How are you doing, buddy? I'm doing well. Great to see you again, Zach Lowe. We have a legal scholar. He writes for Sportico. He teaches at the University of New Hampshire, among other places. Michael McCann, sports law expert. How are you doing? I'm doing great, Zach. Thanks for having me on. So I'm going to go through a couple of quick headlines. You guys. Chip in whenever you want. I think by the time people listen to this, they will know the extent of the penalties. But just in case, the Clippers, having been found guilty by the NBA of cap circumvention, have been stripped of five first round picks, one in each of the drafts from 2029 to 2033. They have been fined $30 million. Steve Ballmer. Speaker 1 (3:05) Their owner has been suspended from all league activities for one year. Gillian Zucker, their president of business operations, suspended without pay one year. Lawrence Frank, president of basketball operations, suspended without pay six months. They're going to be monitored more extensively. Kawhi Leonard is required to pay a fine of $700,000. And Dennis Robinson, his uncle, is banned from conducting business in the NBA. Five first-round picks. So headline number one is the Clippers are somewhere beyond fucked. I mean, this is like as harsh of a penalty as you could have imagined, as they could have imagined. And they have released two separate statements today indicating that they are going to fight this somehow, saying that the NBA changed its tune late in the game, saying that really all they are guilty of is introducing. Speaker 1 (4:00) sponsors to Kawhi Leonard and that they were under the impression that that was fine. And even more sort of dire from the NBA's perspective, a little statement within a statement saying, if you spend $50 million investigating every team in the league, I bet you find similar things. We'll see, because I think the report is much more damning than that. But let's, so headline number one is, for an organization that has struggled for relevancy basically its entire existence. Speaker 1 (4:28) This is pretty close to a death knell for a decade, a half decade. We don't even know. They're already rebuilding. The Kawhi Leonard trade will presumably go through now. So they'll have Brandon Ingram and Grady Dick and picks from the Raptors and the Raptors get loaded up with Kawhi. I think they're going to be really good. But I mean, as recently as yesterday, a front office executive from another team, not the Clippers, not the Denver Nuggets who are about to come up. Speaker 1 (4:55) So, hey, the Clippers are kind of quietly positioned in themselves in case Jokic actually wants to leave Denver with lots of cap space and L.A. and all that. Forget that. This team is dead, dead. No, no. The superstars ain't going here when they're out five first round picks and they can't put together real trades and all that. And obviously, Kirk, you and I have been talking about this this summer of 2019 for eight years now. It was a. Speaker 1 (5:23) a failure of some magnitude once the era kind of petered out with playoff losses and Paul George leaving and Oklahoma City winning a championship with Shea Gildress Alexander. And despite the fact that the Clippers made the only conference finals in the history of their franchise, not nothing, it now goes down the signing of Kawhi Leonard and the double sort of blow of the Paul George trade as one of the greatest catastrophic failures in the history of sports. Speaker 1 (5:50) I mean, what an opening. I think I speak for Michael when I applaud you on the opening. But yeah, my first headline, I have five takeaways from this thing. My first thing is what you laid out. This is all about the Clippers and the biggest punishment ever levied on an NBA team from the league office in the 80 year history of the league in terms of team building. Just a massive day in NBA history from that perspective. And it also brings us to the Adam Silver point of it all where. Speaker 1 (6:19) Look, I was pretty cynical all summer long, as were many people I talked to. Oh, Adam's not going to do something that severe to Steve Ballmer. No way. Well, throw that out the window. I was shocked when the thing came in because I had sort of prepared Zach Lowe for a much more minor punishment on the team building side here. I did not expect five freaking first round picks to be stripped away. So all that smoke going back to August 17th. on the ESPN article where a place that you and I worked for a long time together, they had an article August 17th. Hey, they haven't found anything. There's not going to be much here. Well, how is that age, Zach Lowe? Not great. And to your point, Speaker 1 (7:03) If there were ever going to be a deterrent to the other 29 teams, then not only do you not do the stuff that's outlined in this report that we're going to get to, you better have your situation so buttoned up that we can't even find like a dereliction of duty, an NCAA style lack of institutional control, because we are going to come down hard when we find anything. Before I go on to my other takeaways, Michael McCann, I want to enlist you for this. Speaker 1 (7:29) The Clippers have said they are going to fight in any way possible against this decision to reverse it, to get picks back, whatever it is. You do have been writing about the NBA constitution, what it allows, what teams sign on to when they sign into the NBA, how the commissioner's word is kind of binding down at the footnote of the NBA's press releases that the players union has also signed off on this because they are Kawhi Leonard's advocate. And they basically accepted that punishment and moved on. What can the Clippers. Speaker 1 (7:58) actually do? Can they sue the NBA? What are their actual remedies here? Yeah, so the Players Association piece, it's going to get overlooked, and I'm glad you mentioned it, Zach. That's huge, because it is saying the other member of this collective bargaining agreement is okay with this, that they're not contesting it. And there's no question that although a $700,000 fine is obviously a lot of money, Kawhi Leonard comes out of this not looking nearly as bad as everyone else on the Clippers because he's not suspended. His contract isn't voided. He's going to go on and play for the Raptors. He had to issue a press release where he basically blamed others. But I think he's not a winner, but he's clearly not the loser that the Clippers are in this situation. In terms of the Clippers' ability to contest this, good luck because this is a... Speaker 1 (8:52) private association. Fundamentally, sports leagues, pro sports leagues are like country clubs. They administer their own rules. They're given deference by courts. And also, by virtue of buying a franchise, owners relinquish, contractually relinquish certain rights in terms of the ability to sue. So they can issue statements saying this was unfair, this was procedurally invalid, this will lead to negative ramifications. But actually, this is the big problem. Speaker 1 (9:21) getting a forum, getting a court to actually hear any of this. And I think that's going to be the hard part for the Clippers, that they can challenge it internally to the NBA. They can say it's not valid. And maybe at some point the NBA could reconsider. The NBA, with the Timberwolves, as you recall, they docked them five first-round picks, but it ended up being three. So there was some reduction, mitigation, if you will, that occurred there. Maybe we see something like that with the Clippers. I don't know. Speaker 1 (9:49) But going to the legal system, unfortunately for the Clippers, is going to be extremely difficult to do because they are in a club. At the end of the day, this is really just a club. And as long as clubs administer rules not in an arbitrary or capricious way, courts usually don't touch them. I'm glad you brought up Kawhi's statement. I'm going to read part of it now. Integrity and respect for the game are fundamental to who I am. Speaker 1 (10:14) I accept full responsibility for lapses in judgment by people within my inner circle and regret the distraction the situation has caused the fans and my family. Blah, blah, blah, blah. I entered into my contract with the Clippers as well as the agreements in question in good faith, fully committed to fulfilling my obligations and with no knowledge of any intent on anyone's part to circumvent the salary cap. You know, I find some of that at the very least a little bit hard to believe. Speaker 1 (10:47) Presumably, I understand extremely wealthy people have people managing their money and aren't monitoring their bank accounts like I'm monitoring my bank account. But there's a lot of money flowing in and out of Kawhi's account. At some point, you figure, how did this get here? What am I supposed to do for this? And it is a little bit of your responsibility, or as a human, to know what your representatives are doing, to some degree, at least. So yes, he's getting off without a real punishment at all. The union surely fought for that. I don't think he comes off looking particularly good. I think he comes off looking pretty bad, but be that as it may. Headline number two from this is I was dead wrong like you, Kirk, about what I thought was going to happen here. I predicted when this first broke and kind of mostly kind of stuck with it. Speaker 1 (11:33) that it would be a slap on the wrist, that they wouldn't find a quote-unquote smoking gun. I remember, I think with you, Michael, a year ago, I talked about maybe a few second-round picks and a fine or one first-round pick and a fine. Obviously, I was dead wrong. And Pablo Torre is the big winner here. His reporting was assiduous and thorough all along. And none of it was refuted by anybody at this point at all in even a minute detail. But I do think... Speaker 1 (12:01) One of the reasons why the slap on the wrist prediction and the one first round pick or multiple seconds or whatever was wrong is there was all the talk about the smoking gun and there wouldn't be a smoking gun. There wouldn't be a paper trail. And that's why it would all just be circumstantial evidence. We poured over the three of us, the clause in the CBA about circumstantial evidence and what that could, what that could allow the league on its own to do. Circumstantial evidence is not even mentioned in this 36 page report that we all read today because they didn't need it. If there's not a technical smoking gun in here, I don't really know what qualifies as smoking gun. There is. Speaker 1 (12:36) So much damning direct evidence that they didn't need any circumstantial evidence. And this is what I want to go to you, Michael. You're the legal professor. You know, there's there's interviews, there's emails, there's texts. This is something of a magnitude. And there's stuff that predates the aspiration scandal, which is is the entry point for Pablo's podcast and all of this. This, I don't know if there's, there seems to be a lot of smoking guns or things similar to a smoking gun. Like there's stuff in here that if the recounting of the interviews and the conversations is correct and accurate, that is just damning. I mean, I don't know of any way around it, but maybe I'm being overdramatic. You tell me. No, you're not being overly dramatic because I've seen reports like this, and this is maybe the most damning report I've seen in pro sports of a team. Particularly, as you said, Speaker 1 (13:33) Zach, in terms of direct evidence. Again, this is represented as whether it all would prove true in court. We don't know, but we're going by what we're reading. I would also say that you mentioned you and Kirk thought it would be a modest penalty. I was there with you. And also ESPN was there with you based on that article we read last month. It certainly, I mean, clearly the leaks in that story were not from the NBA based on what we just read today in this report. Speaker 1 (14:00) So it wasn't as if the world was expecting five first round picks. I think the NBA community, the sports law community, if I may speak for it, nobody was expecting this. So this was stunning. And that report, it's by Wachtell, which is a top law firm that's going to get its ducks in order before it releases the report. Why did it take so long? Because they made sure there's a report like this. It's really hard to refute. Now, maybe. Maybe some of the things in that aren't true. We don't have access to that information, but this was an extremely damning report. Obviously, the Clippers say it's untrue and they're going to argue that. I don't know if there's a forum for them to argue that other than the public forum. But this was a pretty, I don't want to say impressive, but it's impressive in the sense that it was so comprehensive. Speaker 1 (14:54) Let's just dive into it then, because when we talk about stronger evidence than we were previously aware of, I think people who aren't going to sit down and read it should know a little bit about what's in there. So even before Aspiration, the trees, all of that in 2021. The Clippers, Kawhi signs endorsement deals with three different companies, Daktronics, which Pablo has talked about, Boingo, the wireless company we all sign on to at airports, and an insurance company called Lockdown, not the Lockdown Podcast Network, just Lockdown that I had never heard of before. This is in June 2020. And one of the common themes, and Gillian Zucker is the sort of headliner here in terms of the frontline person who's committing. Speaker 1 (15:41) the against the NBA rules conduct. We'll talk later about what Ballmer knew, what he didn't know, what the report actually says directly about Steve Ballmer, who suspended a year. But one of the commonalities with these three companies and with Aspiration is Gillian Zucker writes emails introducing Dennis Robertson and or some Kawhi representative to representatives of those companies who are interested perhaps in paying Kawhi for some sponsorship deal. And in all the emails, she words the emails as if all of those companies have previously asked her, hey, we would love to get in touch with Kawhi Leonard. Can you do that? And the league, the investigators find no evidence of any prior contact to that nature of those companies reaching out saying we'd love to partner with Kawhi. In other words, the league has concluded that Gillian Zucker was retroactively writing these emails after. Speaker 1 (16:37) introductions had already been made often by the Clippers to make it look as if she were simply responding to those inquiries that had already come in from those companies. And the NBA says or the investigation by Wachtell says no documentary evidence supports those statements. They can't find any prior contact. And in fact, in fact, what they find in a lot of cases is that. the Clippers have already kind of started the ball rolling. But that's step one. Like the absence of those proactive emails is like a big feather in the investigation here. I was just going to add, like, when the report starts to really get going, Zach, there's this also, we have to go back to March and April of 2020. And I thought the Wachtell report did an incredible job of contextualizing. Speaker 1 (17:26) Three or four of these deals unfolding at a time where America is in crisis. Nobody's doing any business. And the report cites that three of these deals that the Clippers had sort of set up for Kawhi happened in the heart of the pandemic. They go so far as to say nobody's doing any other endorsements in pro sports at that time. There's no... The deals moved very quickly, unusually so, and there was no expectation of any return of work in any of the paperwork they found. So I think that was another part of that saga, Zach, that I just thought was really interesting that they had pinpointed this in 2020 and much of Pablo's stuff was later than that. Well, let me just be even simpler. What's outlined here is basically a quid pro quo. These companies pay Kawhi Leonard. Speaker 1 (18:19) for an endorsement deal for which he does nothing. And none of them have any real history of having celebrity endorsers of any kind or athletes. And in return, right as those deals are signed, the Clippers pay these three companies consulting fees, fees for consulting. In a couple of cases, they get the entire consulting fee upfront in multiple payments of $10 million each, according to the report, despite the fact that these companies have no... Speaker 1 (18:48) no history in the consulting business, that the services contemplated by the consulting agreements are not worth what the Clippers were paying for them. And one person from one of these companies says, at some point, here it is, a credible witness with direct knowledge told investigators that the consulting agreement one company signed with the Clippers was in fact a ruse designed and intended to be a vehicle for the team to provide the company with funds to be paid to Mr. Leonard. In other words, just a simple sort of exchange. You endorse Kawhi Leonard, we do some business with you. And the most glaring example is Daktronics, which is the scoreboard thing. Speaker 1 (19:26) And I don't want to get too far into the nitty gritty, but Daktronics was bidding for work on the Inuit Dome scoreboard, right, Michael and Kirk? And the Clippers said, hey, you know what would be great is we think you're good. We'd like to hire you. And I'm going to read from the report. The team wanted to agree on a spend back arrangement whereby Daktronics would provide business back to the Clippers. Ms. Zucker suggested to a Daktronics senior executive that this spend back. Speaker 1 (19:55) could be accomplished through an endorsement agreement between Daktronics and Leonard. Daktronics believe that failing to enter into a commercial relationship with Leonard could jeopardize its ability to win the bid for the Inuit Dome. So they do, in fact, strike an endorsement deal with Leonard. And here's the damning part. In May 2020, in a call with a senior executive of Daktronics, a senior Clippers executive specified The precise financial terms that the Clippers expected Daktronics to provide to Mr. Leonard in the endorsement agreement. $3 million per year for two years. And then a little bit later in February 2021, the Clippers executive told Daktronics that because the team had decided to increase the amount it would spend on the scoreboard, Daktronics should correspondingly increase the amount of money it would pay to Mr. Leonard. That's just... Speaker 1 (20:50) In fancy terms, right, Michael, that's like quid pro quo is what's being alleged there, right? Yeah, and I think the key part here is that the Clippers do not appear to have had a rebuttal to this. I mean, if I'm the Clippers, I'm going to argue this is not unusual. Other teams arrange or play a facilitating role in star players getting endorsement deals with sponsorships. It's not as if Leonard is the only player. Speaker 1 (21:18) to have an endorsement deal with the team sponsor. It happens in soccer. It happens in Major League Baseball. So the opportunity, I think, was there for the Clippers to say, okay, what you're saying sounds suspicious, but in fact, this is how business is conducted. And from what we read in that report, it doesn't seem like the Clippers provided that, or at least it's not, from what I can tell, stated in the report. That would be really contextual evidence that this is not unusual, that this is standard practice. Speaker 1 (21:47) And we don't see that. We actually see it said that this is highly suspicious, highly unusual, atypical. Other NBA teams don't do this. And I think that's hard for the Clippers. Well, that's their statement, right? Is that like, we're just simply introducing Kawhi Leonard to sponsors and helping facilitate. Everybody does that. All 30 teams do that. The NBA knows that. They even name check Rick Buchanan, the NBA's general counsel, saying Rick Buchanan knows this. But the report. Speaker 1 (22:13) When you have an executive telling Daktronics that because, hey, we're spending more on the scoreboard, you've got to spend more on Kawhi, that's well beyond the conduct outline there is well beyond introduction and facilitation. And there doesn't appear to be another example. I think that's the most damning thing for the Clippers is that they can't say, oh, yeah, the Celtics do that. The Rockets do that. If they had that, that would be very powerful evidence. And it doesn't appear based on what we know they do. Speaker 1 (22:42) Kirk, you wanted to say something? I just want to add, like, don't forget, like, if a lot of us who would work with Kawhi in Toronto or San Antonio had to pick which NBA player might get caught up in something like this at the end of last decade, a lot of us would have picked Kawhi Leonard because of Uncle Dennis. You know, coming out of the Toronto free agency period, there was a lot of smoke, reported and otherwise, about what Uncle Dennis was asking for from Toronto. Speaker 1 (23:09) There was reports that he was asking for