Reviewing the Miami Heat’s Forgone First Round Draft Picks

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The Heat have traded away multiple first round draft picks in the sign-and-trade transactions that enabled them to acquire LeBron James and Chris Bosh. The years in which those picks will be conveyed are rather straightforward in practical terms. However, literally speaking, there are various rules and protections in place that make it impossible to determine with certainty.

The trading of N.B.A. draft picks is restricted by a series of intricate rules that have been put in place in order to protect teams that are trading away the picks from themselves. History suggests that teams need these protections so as not to unwittingly destroy their own franchises.

No one N.B.A. personality is more historically-renown and nationally infamous for his incompetency than Ted Stepien, former owner and de fact general manager of the Cleveland Cavaliers. In 1980, Stepien parlayed his minority stake in the Cavs into full control of the franchise. After purchasing the club, Stepien thought he could quickly assemble a competitive team, but he proved to be a horrendous judge of basketball talent. He spent ludicrously lavish sums of money on marginal players and made a series of controversial and, to outsiders, ludicrously one-sided player trades.

His first big move happened two months before his purchase of the team went through: He flipped backup guard Butch Lee and a 1982 first-round pick to the Los Angeles Lakers in exchange for backup forward Don Ford and a 1980 first-round pick (needless to say, not a great pick considering the Lakers were competing for titles). Two years later, Los Angeles picked future Hall-of-Famer James Worthy first overall with Cleveland’s pick. 

It got worse from there. Rival teams were all trying to step in and get theirs too.

Later in 1980, Stepien sent another four unprotected first-round picks to the Dallas Mavericks from 1983 to 1986 in three separate trades for four players ranging from borderline starter to unequivocal backup, planting the seeds for a title contender in Dallas in the process. Those picks eventually became Derek Harper (1983, 11th overall), Sam Perkins (1984, 4th overall), Detlef Schrempf (1985, 8th overall), and Roy Tarpley (1986, 7th overall).

The vultures were constantly circling, eager to see what they could extract from Stepien.

In a series of trades with the Pistons in 1982, Detroit extracted eventual four-time All-Star Bill Laimbeer and later a 1986 second round pick which would ultimately become Dennis Rodman.

That’s when the N.B.A. made history three different times.

First, to discourage such carnivorous thinking, then N.B.A. Commissioner Larry O’Brien stepped in and barred Stepien from making any further trades unless they were approved by the league.

Second, when Stepien sold off the team in 1983, just three years after he had purchased it, the N.B.A. granted the new owners four compensatory first round picks from 1983 to 1986 to help in the team’s recovery.

Third, the N.B.A. enacted a new rule prohibiting teams from trading away all of its future first round draft picks in consecutive years, which naturally ended up being called the “Ted Stepien Rule.” The rule is only forward-looking; it doesn’t concern itself with draft picks that have since passed. It also concerns itself only with all picks a team has in its possession in consecutive years; if a team has acquired a pick in trade for any given year, thus producing two such picks, it can freely trade one as well as its pick in the following season as long as it retains the other.

Beyond the restrictions of trading away first round draft picks in consecutive seasons, by virtue of a rule added in 2000, teams are also prevented from trading away picks (first and second rounders) more than seven years into the future, which has come to be known as the “Seven Year Rule.” This helps to prevent a team from mortgaging its distant future for the benefit of the present.

Teams can also place “protections” on the picks they trade away. It is common to “protect” picks depending on their position in the draft (for example, “we keep it if it ends up in the lottery, otherwise you get it”). This helps to avoid situations where future underperformance by teams can make certain picks they have traded away much more valuable than originally intended.

It is common for teams to trade away draft picks with protections to ensure that the pick is conveyed in first year in which the conditions are met. It is also common for the protections to relax over several years. This is done, in part, because picks with protections can have uncertainties as to which future season they will be conveyed, which can complicate matters as teams attempt to operate within the confines of the Stepien and Seven Year rules.

The Heat, to start the summer, had eight first round draft picks over the next seven years – including a 2011 first round pick acquired from the Toronto Raptors in Shawn Marion-Jermaine O’Neal swap on February 13, 2009, which was lottery-protected through 2014, and completely unprotected in 2015 if not previously conveyed.

Of the eight, the Heat traded away four – two to the Raptors for Bosh, and two to the Cavaliers for James.

To the Raptors, the Heat returned the previously-acquired 2011 Toronto pick, thus leaving the Heat with all seven of its own first round picks over the next seven years (one per season). They also traded their own 2011 first round pick in the deal, which is lottery-protected. If the pick is not conveyed in 2011 (i.e., if the Heat don’t make the playoffs next season), the Heat’s draft pick obligation will be extinguished; instead, the Heat will be required to convey $3 million in cash. The two surrendered 2011 first round draft picks satisfied the obligations of the Bosh trade in full.

The Cavaliers were more demanding.

Having traded away both of its first round draft picks in 2011, the Heat were prohibited (in accordance with the Ted Stepien Rule) from trading away their 2012 first round pick. The Heat will thus, by rule, have a selection in the 2012 N.B.A. Draft. The Cavs did negotiate the right to swap the Heat’s pick with that of their own, in the event the Heat were to receive the higher pick. But for that to happen, the Cavs would need to end up with the better overall team record in 2011-12, which isn’t happening. Thus, the swap right is virtually meaningless.

The Cavs will also receive the Heat’s first round pick in 2013. But the Heat did demand some protections to ensure it won’t be more valuable than is currently projected. The pick will be Top-10 protected in 2013 and 2014. If not conveyed by 2014, it will become completely unprotected in 2015. However, with the Heat almost certain to be a playoff team in the 2012-13 season, the pick will, in turn, almost certainly be conveyed in 2013.

The Heat will, by rule, then retain its first round pick in the year after the pick is conveyed to the Cavs. It will almost certainly be a 2014 first round pick, but can’t be any later than 2016 under any circumstances.

The Cavs will also receive a second first round pick from the Heat. It will be conveyed exactly two years after the first one is conveyed. It is impossible to say definitively when that will be, because it is impossible to say definitively when the first one will be conveyed. But, by rule, it can’t be any sooner than 2015 nor any later than 2017. In practical reality, it will be a 2015 first round pick. But it too has protections to ensure it won’t be more valuable than is currently projected. It will be Top-10 protected in 2015 and 2016, and fully unprotected in 2017 if not already conveyed.

Thus, assuming the Heat makes the playoffs in 2011-12, 2012-13 and 2014-15, the swap right will expire worthless, the Heat’s 2013 pick will be conveyed, and the Heat’s 2015 pick will be conveyed. With the contracts of Wade, James and Bosh each extending through the 2015-16, all seem exceedingly likely at this point. However, each player does have an opt-out provision in his contract after both the 2013-14 and 2014-15 seasons, which could put the final pick conveyance at risk. There is a possibility, however remote, that some or all of the Big Three all choose to leave, leaving the Heat as a rebuilding franchise facing the prospect of having dealt away a fully unprotected first round draft pick in 2017 (which remains part of the reason why the sign-and-trade transactions with the Raptors and Cavaliers could certainly be questioned).

The Heat now faces major and complicated restrictions in trading away any of the four future first round picks over the next seven years they still do have. Here is a review of the earliest future first round picks that can be traded (as you read this, bear in that draft picks can be traded up to seven years into the future, and that teams cannot trade away future first round picks in consecutive years):

  • From now until after 2012 draft: The earliest, and only, first round pick the Heat can trade is their 2017 pick, and they can only trade it on condition that they will have already satisfied the last of their pick obligations to the Cavs by 2015. In other words, no trade partner could ever be assured that they’d actually get the pick the Heat would be trading.
  • From after the 2012 draft to before the 2015 draft: The earliest first round pick the Heat can trade is their 2017 pick, and they can only trade it on condition that they will have already satisfied the last of their pick obligations to the Cavs by 2015. The earliest first round pick the Heat will be eligible to trade without any conditions will be their 2019 pick.
  • From after the 2015 draft onward: The earliest first round pick the Heat can will depend upon whether the Heat has already satisfied the last of their pick obligations to the Cavs by 2015.
    • If so, they can finally start trading all of their future first round picks, from 2016 onward, without any conditions.
    • If not, they can only trade future first round picks on condition that they are conveyed at least two years after the Heat’s final pick obligation to the Cavs is satisfied.  Since the final pick obligation to the Cavs will be satisfied by no later than the 2017 draft, all trades involving first round picks in 2019 and beyond can be traded without any conditions. Once the Cavs (or any team to which they trade the pick) have already made their selection with the Heat’s final pick obligation, the Heat will then be eligible to immediately start trading all of their future first round draft picks without any conditions.

The restrictions are long and confusing but, to simplify, they mean that, for the next two years, the Heat will not be able to trade away a first round pick until at least the year 2017 and, even then, they won’t be able to provide any assurances it will actually be conveyed.

Think about that for a second. Think about all the times you’ve identified a player you’d like to acquire in trade. Think about all the times you’ve imagined a scenario where the Heat would simply toss back a first round draft pick as compensation for that player. For the next two years, you can’t under any circumstances(4) create a hypothetical scenario involving the trade of a Heat first round draft pick that provides assurances to your trade partner that it would ever actually receive the pick.

Even if we assume it would be conveyed: How far out is 2017? It is one year after the contracts of James, Wade and Bosh expire. Do you really want to start trading first round picks in drafts that take place after the Big Three era is already over? Do you really want to start mortgaging the team’s future by trading picks that far out?

Of course, none of us can know which players might be available in trade in the years to come. But that’s not the point. The point is that we know that trade scenarios will emerge. We know that the Heat will need draft picks to facilitate those trades. And Riley is leaving the team without any.

So, forget about being able to offer a first round pick in trade at any point during the Big Three era.

Actually, forget about being able to complete any trades of any kind during the Big Three era. With the way the roster has been constructed, it is difficult to see how the Heat will have any player assets of any kind beyond the James, Wade, Bosh, Miller and Haslem, none of whom would realistically ever be traded.

Imagine how frustrating it is going to be, year after year, to contemplate potential trade scenarios that the Heat will not have the assets upon which to execute.

And so, if for some reason this team does not work out, if there are not rings for everybody in the years to come, if champagne isn’t constantly falling from the heavens, it’s worth noting that Riley and crew had countless options in constructing his roster.

Notes:

1. The Cavs, in addition to the two first round picks and the swap right in 2012, also acquired second round picks in 2011 and 2012 from the Heat in the James trade

2. The Heat also acquired two second round picks in its trade of Michael Beasley to the Timberwolves on July 12, 2010 – Minnesota’s unprotected picks in 2011 and 2014.

3. For a detailed review of the Heat’s draft pick flow (and remaining picks) for the next seven years, see the Future Picks tab.

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