Q&A: Under-the-table-agreements

The following question to Ira Winderman has piqued some interest from my shockingly tiny reader base:

“In all your posts, you are undermining and flat out discarding one very real possibility for the Heat to round out the roster. That is, for veterans like U.D., J.O. and Q, and even possibly Dorell, to sign a one-year minimum deal and keep their Bird Rights.”

It is easy to understand the connotation behind this question, though it is not explicitly stated. The concept would be for the Heat to sign any or all of the players mentioned to one-season minimum contracts. Doing so would allow the Heat to maximize cap space this summer and, with Bird rights intact, exceed next year’s salary cap to grant them significant raises for their troubles.

While this is quite a creative concept, the premise is inherently flawed.

This approach is illegal. Teams are not permitted to make direct agreements with a player that are not reported to the league. If they do, the penalties can be severe. Such a violation is considered by the league to be among the most serious a team can commit. A violation can result in a fine of up to $5.0 million, forfeiture of draft picks, voiding of the player’s contract, 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.

You might be saying to yourself that the easier solution would be to report the agreement to the league in order to avoid any allegations of wrong-doing. Future contracts, however, are also illegal.

You might also be saying to yourself the league would never find out. This is very risky business – particularly for complementary players – with the penalties being so severe.

In the summer of 1999, the Minnesota Timberwolves tried this approach with Joe Smith. Smith left the Philadelphia 76ers to sign with the Timberwolves. The two sides made an under-the-table agreement that Smith would play under three consecutive one-year contracts at below market value ($1.75 million, $2.1 million and $3.6 million), and the Timberwolves would reward him by using their Bird rights to sign him to a much larger contract beginning with the 2001/02 season (reportedly worth between $40 and $86 million over seven years, dependent on performance clauses).

The league discovered the arrangement the following season, and 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). Most interestingly, the league also voided Smith’s two previous, already-completed contracts. This essentially stripped the Timberwolves of any Bird rights to Smith.

If Riley were to be found in violation, leniency would not be something that would be afforded. Pat has a history of violations of league rules.

In the summer of 1995, Riley and the Heat were found to be in violation of the league’s tampering rules. The organization was said to have negotiated with Riley while he was still head coach of the New York Knicks. The Heat settled, and avoided league-imposed penalties, by compensating the Knicks with $1 million and their first round draft pick in 1996.

The following summer, Riley attempted to sign Juwan Howard to a then record seven-year, $100.8 million contract. The contract was subsequently voided by the league, citing non-compliance with salary cap rules. The verbal backlash from Riley which ensued surely left its mark.

Ignoring the issue of legality, there are also the practical ramifications to consider. The current collective bargaining agreement is set to be terminated following the upcoming season, and negotiations for a new deal are currently underway. It is widely known that the league will attempt to institute gargantuan slashes to new contracts, both in size and term. In its first proposal to the player’s association, the league even spoke of its desire to implement a “hard cap.” A hard cap would eliminate the concept of Bird rights altogether, and any player who signed a one-year deal banking on them for the following season would be left twisting in the wind.

With the possibility of an under-the-table agreement a non-starter, the possibility remains for any of the above names to sign minimum contracts of their own accord, simply for the love of the game, South Florida and teammate Dwyane Wade.

Only days into the July 2005 negotiation period with the Miami Heat, Udonis Haslem agreed to a mid-level five-year, $33 million contract. After completing the negotiations, Jason Levien, Haslem’s agent at the time, estimated that he left around $10 million on the table in order to meet Haslem’s hometown wishes. This was a rare and altruistic act for a player in the me-first world of professional sport.

This time around, however, Haslem expects negotiations to be neither as swift nor as smooth. “I would love to stay in Miami, but the bottom line is there’s a business part of this and sometimes you really can’t let emotions get involved and you’ve got to think about what’s best for you and your family,” he has been quoted as saying. He will not accept a minimum contract.

Jermaine O’Neal will be searching for what will most likely be his final N.B.A. contract. He has spoken of a desire to play for another four to five more seasons. Whether or not a team will give it to him remains to be seen, but he most certainly would not be interested in signing a minimum contract to assist a team he’s been affiliated with for less than two full seasons.

That leaves Quentin Richardson and Dorell Wright. Each player’s love for teammate Dwyane Wade has been well documented. But the N.B.A. is a business, and we’re talking about people’s livelihoods. This might be a case of Heat fans thinking with their hearts, without the benefit of our better judgment.

Let’s take a brief look at how much each would stand to lose. A minimum N.B.A. contract would cost the Heat $854,389 against the salary cap next season. But that does not reflect what either Richardson or Wright would actually earn. The value of a minimum contract to a player depends on his tenure. Having been in the league for 10 and 6 seasons, respectively, Richardson and Wright would command minimum salaries of $1,352,181 and $1,069,509, respectively, from the Heat. The difference would be reimbursed to the Heat by the league. They do this so that teams won’t shy away from signing older veterans simply because they are more expensive when filling out their last few roster spots.

An accurate calculation of forgone funds would depend on what you think each could earn in the open market. In this post, I estimate Wright’s value in the $3.5 million range. This would suggest he’d be leaving at least $2.5 million (don’t forget the propensity for stupidity with so much cap space available around the league) per season on the table. Quentin’s value is a bit more difficult to assess. Either way, with the differences so great and the new, more restrictive collective bargaining agreement about to take hold, neither is likely to make such a large sacrifice.

Pat Riley has some tough decisions to make.

1 Response

  1. TKO says:

    That’s the hard part about building a title contender. Sacrifices need to be made. In this case, the Heat had to let go of valued and loved members such as Wright, Richardson, and Haslem (at least his cap hold) to free up cap space for 3 max free agents. These guys took the money while it was offered to them; I definitely don’t blame them for it; I would’ve taken the best offer also.

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