UPDATE: NHL investigating Hossa, Pronger contracts

I hate it, it lessens the sport.

I tend to separate the two. During the season I could care less about the business side, but it keeps me interested during the offseason.

RobbyJ wrote:I tend to separate the two. During the season I could care less about the business side, but it keeps me interested during the offseason.

Me too.

I insist on trying to know as much as possible about the business and CBA stuff, especially during the off-season, because otherwise conversations on these kinds of sites often become worse than useless. You can't develop much of by way of useful conversation if it's not down with a eye towards understanding all the specific conditions under which the team operates. Trade proposal scenarios concocted without an eye to cap implications infuriate me in particular. They're worse than useless: they ask the team, and posters, to consider what is literally impossible.

I just start arguements when things get old.

Neely4Life wrote:I just start arguements when things get old.

I just check stop reading posters' comments the moment the unmanageable trade proposal scenarios start flying. Complete waste of time. It's why I can't read the comments section over at HB very much any more, or even the comments section at places like Senschirp.

There are just so many frustrated posters claiming they don't understand why BM doesn't get player X, Y, or Z -- when it's clear that that frustration originally stems from a complete ignorance of the financial repercussions or even impossibility, for the Sens and the other team(s), of their proposed moves.

People could save themselves a lot of pain in the form of unrealistic expectations and non-moves from their favourite team if they just made an effort to under the very basic terms in which that team has to operate.

RobbyJ wrote:What I mean is that to close the loophole, they could say for any player that retires after 35 the cap hit remains and is lowered to account for the unpaid portion of the contact. for example:

Player signs contract for 10 years at age 30.
Contract calls for
Year 1 - 8M
Year 2 - 8M
Year 3 - 8M
Year 4 - 8M
Year 5 - 4M
Year 6 - 4M
Year 7 - 4M
Year 8 - 2M
Year 9 - 1M
Year 10 - 1M

Cap hit of 4.8M for each year.

Player retires after year 7 leaving 4M on the table. The team has already taken 33.6M cap hit over 7 years. 48M-4M = 44M.
Cap hit for remaining 3 years would be 10.4M divided by 3 years giving them a cap hit of just under 3.5M.

In your example, the flaw comes when a players contract is structured with an unbalanced deal (front and back loaded). For example:

15 year deal, totalling $120M (cap hit $8M per season), paid as 12M for first 5 seasons, then 10,8,6,3,2,1,1,1,4,8,12.
Player retires after year 12, thus earned $96/120M, and burned off 12y of $8M/yr cap.
By your calculations, there is no cap space to be left to "penalize" the team, as the numbers work exactly.

I'd argue that the best way to do things is to base the cap space on actual salary - if you pay a player $10M per season, then you won't have room to pay anyone else. If you pay even amounts per year, then for longer contracts, you get a "discount" early on but pay more for a "lesser" player later in the contract.

Acrobat wrote:

RobbyJ wrote:What I mean is that to close the loophole, they could say for any player that retires after 35 the cap hit remains and is lowered to account for the unpaid portion of the contact. for example:

Player signs contract for 10 years at age 30.
Contract calls for
Year 1 - 8M
Year 2 - 8M
Year 3 - 8M
Year 4 - 8M
Year 5 - 4M
Year 6 - 4M
Year 7 - 4M
Year 8 - 2M
Year 9 - 1M
Year 10 - 1M

Cap hit of 4.8M for each year.

Player retires after year 7 leaving 4M on the table. The team has already taken 33.6M cap hit over 7 years. 48M-4M = 44M.
Cap hit for remaining 3 years would be 10.4M divided by 3 years giving them a cap hit of just under 3.5M.

In your example, the flaw comes when a players contract is structured with an unbalanced deal (front and back loaded). For example:

15 year deal, totalling $120M (cap hit $8M per season), paid as 12M for first 5 seasons, then 10,8,6,3,2,1,1,1,4,8,12.
Player retires after year 12, thus earned $96/120M, and burned off 12y of $8M/yr cap.
By your calculations, there is no cap space to be left to "penalize" the team, as the numbers work exactly.

I'd argue that the best way to do things is to base the cap space on actual salary - if you pay a player $10M per season, then you won't have room to pay anyone else. If you pay even amounts per year, then for longer contracts, you get a "discount" early on but pay more for a "lesser" player later in the contract.

I can't see a player walking away from that money, but in your scenario the team would recieve an 8M cap cushion for 3 years.

Since this story first emerged, both the NHLPA and a number of hockey writers have reacted strongly to the NHL's purported 'investigation'. Greg 'Puck Daddy' Wyshynski gives us a recap of who's said what.

He also suggests that this action by the NHL sets up a major fight with the Players' Association as discussion of a new Collective Bargaining Agreement draws closer.

Worth pointing out IMHO is the mention by Wyshynski that NHL player salaries are being docked 25% this coming season for the 'escrow fund' that apparently helps support the owners.

Read on for more...

WHERE THE NHL IS RIGHT AND WRONG IN BATTLING LONG TERM CONTRACTS
Greg Wyshynski, PuckDaddy/Yahoo Sports, August 4, 2009

When news broke last week that the NHL was investigating the validity of the long-term contracts signed by Marian Hossa of the Chicago Blackhawks and Chris Pronger of the Philadelphia Flyers, we asked a fundamental question: Why were the contracts approved by the League in the first place?

Ask a simple question, get whatever the heck NHL VP Bill Daly was trying to tell the Chicago Sun-Times recently:

Asked by the Sun-Times about the league's approval of the contract, Daly said it "was approved because there was no basis to reject it on the face of the contract. ... The decision to investigate was made simultaneously with the registration of the contract (and I so informed Dale Tallon personally), so it is not an after-the-fact decision."

So the NHL basically told the Blackhawks, "Look, we think this unusual (Daly's word) contract is structured in a way that might circumvent that salary cap and violate the terms of the Collecting Bargaining Agreement, and we're going to hire an outside firm to investigate it. That said ... here's a giant green stamp that says 'approved,' so please hold your press conference and order some extra balloons for the Fan Fest ..."

Daly and the League can try to save face by claiming that the investigation began "simultaneously with the registration of the contract," but it actually makes this CSI: Bettman nonsense appear even more like a toothless scare tactic aimed to prevent similar deals in the future.

Otherwise, the notion that a professional contract can be approved by a professional league while, at the same time, triggering an investigation about the legality of said contract is a mindboggling contradiction.

But the NHL isn't really all that concerned with invalidating these contracts -- it's sending a message. As a few prominent hockey writers have pointed out, the battle over the loophole is going to be a bloody one.

NHLPA chief Paul Kelly addressed the investigation with Craig Custance of The Sporting News:

NHLPA executive director Paul Kelly said the players' association is not participating in the investigations and sees the Pronger and Hossa investigations as a scare tactic by the NHL to prevent similar, long-term contracts by other teams.
If the league is looking to prevent more of these deals, they'll be in for a fight."This is an obvious effort by the League to attempt to chill the market for long-term contracts," Kelly wrote in an e-mail to SportingNews.com. "Deals with structures such as Hossa and Pronger are perfectly proper and permissible. The NHLPA will take whatever steps are necessary to insure that players continue to have unfettered ability to negotiate contracts that are compliant with existing CBA rules."

Translation: There's a loophole, and the players and their teams are exploiting it until it's closed. Which is how Tim Sassone of the Daily Herald defended the Hossa contract:

This is a whole lot of nothing. So what if these players retire before their contracts run out? If this is a loophole in the collective bargaining agreement, maybe the Hawks just are smarter than everyone else.

Tim Panaccio of Comcast Sportsnet Philadelphia believes there's nothing to the investigation of the Pronger deal, either:

the inference from the league's point of view is that Pronger would have retired by then, having earned most of his money up front. Still, the Flyers are liable for the $5 million cap hit because Pronger wasn't 35 when his contract went into effect.
So why is the NHL questioning the Pronger deal? On the surface, it would appear as though the NHL will have a tough time arguing that the Flyers tried to circumvent the CBA, since they've already admitted they can't void a cap hit in any remaining years in the deal if Pronger decided to retire early.

What this all comes back to is the looming fight between the players and the NHL, as Al Cimaglia of ESPN Chicago believes the long-term contracts tie in with Gary Bettman's pleas for parity:

Both the Hossa signing and the Pronger contract extension could turn out to be poor business decisions. But trying to limit those types of signings will not help the NHL's weakest franchises flourish. The NHL apparently wants to stop the most profitable teams from loading up on high-priced players, at least under the current CBA. Bettman's focus should be on growing the revenue-sharing pool and finding more financially stable ownership.

More than anything else, the NHL may be trying to duplicate other major sports without the necessary revenue sharing to assist the franchises in financial need.

Larry Brooks of the New York Post examines what the NHL might ask for in the next CBA to close the loophole:

If the NHL doesn't like it, the league has the next round of collective bargaining to try to do something about it, which, of course, Gary Bettman and the Board will most certainly do. Not only will the owners come with a term limit expected to be six years, but the league can propose instituting a retroactive limit on contracts, say, negating every existing deal after eight years, just the way every existing contract's value was discounted by 24 percent last time around.
Interestingly, while dramatically front-loaded contracts benefit the individual players signing them, they are detrimental to the Players' Association as a whole because they enlarge total actual payroll, chew up the players' collective percentage of the gross, and thus increase escrow withholdings, which probably will begin at 25 percent this coming season.

Brooks's last point is a good one, although immaterial when it comes to the CBA: The players and agents signing those long-term deals are going to push harder than those on lower rungs on the power ladder to make this fight part of the NHLPA platform for the next negotiation.

But Brooks's earlier speculation about term limits is, perhaps, where the real fight will take place. What's interesting is that while most owners are against the frontloaded, Hossa-esque contracts that lessen the cap hit, there is potentially much less opposition for long-term deals in general.

For example, someone like Ted Leonsis might argue against the Flyers signing Pronger to that end-with-a-whimper deal; but why would the Capitals protest the sort of long-term contract that's going to keep their marquee player in D.C. until 2021?

They drafted him, they built their franchise around him ... who the hell is the NHL to tell them that they shouldn't be allowed to sign him for more than six years at a time? It may be the nation's capital, but not everyone needs a mandated term limit.

Even if you think the NHL is right in going after these "retirement" loopholes, the elimination of "lifetime" deals that don't seek to monkey with the salary cap isn't good for the League.

RobbyJ wrote:
I can't see a player walking away from that money, but in your scenario the team would recieve an 8M cap cushion for 3 years.

Your post count is 666! Post something else, quick!

No news on this front...

Josh Mora, who covers the Blackhawks for Comcast Sports Network Chicago (and does the TV broadcasts for them), is one of the more well informed hockey media types on the situation there. He offers his view...this courtesy of CSN and The Fourth Period.

Punishing the Blackhawks doesn't make sense
Josh Mora, CSN Chicago/TheFourthPeriod.com, August 8, 2009

[CHICAGO, IL] -- The Blackhawks are finding out that at the top of the mountain debris blows in from all directions.

The latest flotsam hitting them in the face is an NHL investigation into the legality of the contract of newly signed Marian Hossa. NHL Vice-President Bill Daly told me last Friday that the League is investigating Hossa's contract to make sure it is in compliance with the Collective Bargaining Agreement. If the League were to find the Blackhawks guilty, and penalize the Blackhawks to the fullest possible extent, the Hawks could lose $5 million, and have to forfeit draft picks.

Around North America, NHL writers and bloggers are piling on and snickering at the Blackhawks, saying this latest disturbance is another example of the front office being the gang that can't shoot straight.

But it isn't so. The Blackhawks are not the bad guys here. At worst, all they did was take advantage of a loophole that other teams have already gone through.

The first item in question is why the League is looking at this particular contract in the first place.

Daly initially told the Ottawa Sun that the League wants to examine whether the Hawks tried to circumvent the salary cap. Daly notes that the contract decreases dramatically in value in the final 4 years of the deal, which lowers the cap hit significantly. They want to know if the Hawks and Hossa talked about Hossa retiring before the end of the contract.

The problem with the League's stance on this is two-fold.

First, past contracts structured in this fashion have been allowed without penalty. For example, Detroit's Johan Franzen and Henrik Zetterberg are at the beginning of multi-year contracts that decrease in salary over the final years. Chris Pronger signed a similar contract this off-season with Philadelphia as well. So there is precedent that the League allows these kinds of contracts.

Second, they approved the contract when the Blackhawks and Hossa struck the deal a month ago.

Daly tells TFP, "The League's approval of the contract doesn't speak to the potential circumvention issue at all."

Still, had the League disapproved the contract initially, the Hawks could have had the option of going in a different direction in free agency. The approval gave the Hawks tacit understanding that they were in the clear.

The second item in question is that Daly told the Sun that the League is concerned about the contract because, "It's the first long-term contract that takes a player out past the age of 40."

The problem here is that while 40 is a nice round number, it's also entirely arbitrary.

The league had several players over 40 years old last year -- most notably Chris Chelios, at age 47. Suddenly 40 is too old to play hockey? Let's also point out that Pronger's contract takes him into his 40's. As does the 4-year deal ex-Blackhawk Nikolai Khabibulin signed in Edmonton. Yet the league is not investigating Khabibulin's contract.

For their part, the Blackhawks are fighting back.

In a statement sent to TFP, the Hawks "vehemently dispute any implication that the Team has in any way violated the Collective Bargaining Agreement, or had any intention whatsoever to circumvent the salary cap. Hossa's contract is a legitimate contract that was approved by the NHL."

And you can imagine that as such, the Players Association would back the Blackhawks. The PA won't look kindly on a punishment handed out to a team for a contract, after that contract was approved and registered by the league. The PA could argue that such a punishment, perhaps designed to freeze future long-term cap-friendly deals, would also be a violation of the CBA, and a way for the teams/owners to circumvent the cap from the other side.

But of course not everyone agrees with the Blackhawks and the PA.

One League executive told the Sun, "The NHL is looking to put a damper on these 10-plus-year contracts with throwaway years tacked on at the end," a league executive said last night. "They are building a strong case against Chicago to make an example of them. This issue won’t just go away. Lots of other GMs are supporting the league here."

And you can imagine why other GM's are supporting the League. With their free agency additions on top of last season's successes, the Hawks are as talented as any team in hockey. You can understand why teams, especially those in the West, would attempt to find any way possible to knock them off their perch. And you can understand why smaller-market teams might be against them, if they can't afford to dole out the total dollars involved in contracts like these.

But you can't make an example out of one team, when other teams following the same procedures have been allowed to make similar deals.

Are these multi-year, salary-reduced contracts good for the League? That's a debate for the owners and players to settle in the next CBA. But if a loophole exists in the current CBA, the way to make it right isn't to punish the Blackhawks. The way to make it right is to change the rule.