Any rules against team owners also owning sponsor companies?

[fordman84]

Forget the dollars that would be needed and roll with me for a minute...

Are there rules in place to keep an owner, say Cuban, from buying a major company that already has endorsement deals (UnderArmor, Powerade, etc) and using them to circumvent the salary cap? Suppose he calls up Melo, and LeBron and tells em to come to Dallas on cap friendly deals and he would guarantee them 5/$100M endorsement deals (or some number way higher than they could get with another team) that have very little required of them.

Seems that unless someone talks about it, or it is obvious (like Cuban invents a company with zero income but pays a half a billion in endorsements) it could be done. Probably already is, actually.

 

[TheSnowdog]

Interesting question - you know there would be owners up in arms about it - the bozo in Cleveland Gilbert comes to mind

Here is a side bar to the question - what happens if Donald Sterling takes his billions and buys a company that has a major endorsement deal with the NBA in an ironclad contract - what does the NBA and the players do?

 

[fordman84]

Interesting question - you know there would be owners up in arms about it - the bozo in Cleveland Gilbert comes to mind

Here is a side bar to the question - what happens if Donald Sterling takes his billions and buys a company that has a major endorsement deal with the NBA in an ironclad contract - what does the NBA and the players do?

Nice add-on question. Yeah, if he takes his half of the sales money and buys a majority share of a major sponsor. lol

 

[gordontrue]

From cbafaq.com (includes interesting story about when the Wolves tried to compensate Joe Smith under the table)

23. Can a team circumvent the salary cap by paying a player less but arranging for an affiliated company to also pay him, perhaps by way of an endorsement contract?

I suppose it could happen, but the NBA will investigate if it suspects that an outside person or organization is paying a player on behalf or at the request of a team. If they find out that such an event has occurred, they will penalize the team. For the first offense by a team, the fine can be up to $2,500,000, forfeiture of a first round draft pick, and/or voiding the player's contract. The penalties increase for subsequent violations.
Incidentally, players are no longer allowed to become player-coaches. This is because it would be possible to circumvent the cap by signing a player as a player-coach, and paying him less as a player but overpaying him as a coach.

24. Do players and teams ever have under-the-table agreements? What happens when the league finds out about them? Is this what happened with the Timberwolves and Joe Smith?

If a team makes a direct agreement with a player that is not reported to the league, the penalties can be even harsher than those described in question number 23. Such a violation is considered by the league to be among the most serious a team can commit. Again, the league will investigate any allegations of wrongdoing. A violation can result in a fine up to $5,000,000, forfeiture of draft picks, voiding the player's contract(s), and/or the suspension for up to one year of any team personnel who were involved. In addition, the player himself can be fined up to $100,000, and prohibited from ever signing with that team.
This is what happened in 2000 with Joe Smith and the Minnesota Timberwolves. Smith left the Philadelphia 76ers in 1999 (following the lockout) to sign with the Minnesota Timberwolves for their $1.75 million Mid-Level exception. They made an under-the-table agreement that Smith would play under three consecutive one-year contracts at below market value, and the Timberwolves would reward him by using their Bird rights to sign him to a huge contract beginning with the 2001-02 season. Unfortunately, they reduced this agreement to writing, and the written agreement eventually found its way into the league's hands.
It had long been rumored that such under-the-table agreements existed, but this was the first time the league had hard evidence in the form of a signed contract. The league responded by fining the team the maximum (at the time) $3.5 million, taking away their next five draft picks (two were later returned), and voiding Smith's then-current contract. Owner Glen Taylor and GM Kevin McHale also agreed to leaves of absence (in lieu of suspensions, at which time the fifth draft pick was returned). Most interestingly, the league also voided Smith's two previous, already-completed contracts. This essentially stripped the Timberwolves of any Bird rights to Smith, preventing them from re-signing Smith for any salary above the minimum (they had already used their other exceptions). Smith left Minnesota and signed with the Detroit Pistons, but returned to Minnesota in 2001.

 

[SoPortland]

It would be painful for the team if they get caught. The league wants nothing to do with corruption. It already has enough problems surrounding the refs.

 

[badinflu]

Is it really corruption? They could be 2 reasonable business decisions (in the OP scenario)

 

[SoPortland]

Is it really corruption? They could be 2 reasonable business decisions (in the OP scenario)

Any form of paying money outside of the restrictions of the CBA can be seen as corruption.