Bruins owner Jeremey Jacobs: article

[Wetcoaster]

I have never seen it written anywhere that the NHL revenue disclosure rules were going to be any different than the other leagues. Where did you find this?

Because the NHL has been consistent for decades on this. If they are going to change then say it. Until then there is no offer. In these areas the devil is in the details as we discovered in the last abortive meeting between the NHL and NHLPA.

Here is an explanation as posted by “Outsider†at the Cancuks.com Message Boards. I was given his permission to quote it verbatim.

Say I want you to enter into a "partnership" with me. We discuss it over lunch.

I'm offering you 54% of my total "revenues". That sounds alright with you. You wonder what my actual "revenues" are, and are assured, by me, that the numbers will be provided once I've got your signature on a Legally Binding Contract. Hell....You can even choose any accounting firm/auditing team you wish to go over my numbers so that you're sure everything is fair and square. But in order for you to GET the "numbers", you've got to sign on the dotted line.

So you sign......

And I immediately take the inkpen from my breast pocket, grab a cocktail napkin from the table, and start jotting down numbers.

When I'm finished, I pass the napkin across the table to you, and tell you to go ahead and take it to the accounting firm/auditing team of your choice, have them to check the figures, and let you know what YOUR cut, at 54%, will be.

All is JUST as I said it would be.

I've given you my numbers. It doesn't matter that the numbers I've given you were not exactly what you'd thought they would be, not quite an "in depth look" as to what my "revenues" REALLY are, just the numbers I've CHOSEN to give you. The numbers will stand, however, under the Terms and Conditions of the Contract, as the "real" numbers, as it was never clarified, BEFORE YOU SIGNED THE CONTRACT, just exactly WHAT numbers you would be getting.

Now.....

Take that napkin to your accountant/auditor and have him calculate out your "percentage".

Because 54% of what is written on that cocktail napkin is PRECISELY what you will get.

And not a penny more.

When I see the NHL actually commit to this full disclosure and to deviate from decades of denying access then there is something to consider. Until then it is just more PR spin from Bettman.

All the NHL has to say is that we will give the NHLPA and/or its designated agent full and unfettered access for the purposes of review and audit to all the NHL team books and those of any and all of the teams' related corporate entities including inter alia all financial statements and reports as well as any supporting or ancilliary documents, contracts, information and agreements deemed relevant by the NHLPA for this purpose subject to the usual non-disclosure agreements. That is what the other sports have done. Not difficult - but the NHL has yet to make that offer.

You have my permission to forward the offer as written to Bettman so he can make the offer to the NHLPA. He will not do so since the NHL owners are adamantly opposed to such disclosure.

 

[Jarqui]

Here is an explanation as posted by “Outsider” at the Cancuks.com Message Boards. I was given his permission to quote it verbatim.

Say I want you to enter into a "partnership" with me. We discuss it over lunch.

I'm offering you 54% of my total "revenues". That sounds alright with you. You wonder what my actual "revenues" are, and are assured, by me, that the numbers will be provided once I've got your signature on a Legally Binding Contract. Hell....You can even choose any accounting firm/auditing team you wish to go over my numbers so that you're sure everything is fair and square. But in order for you to GET the "numbers", you've got to sign on the dotted line.

So you sign......

And I immediately take the inkpen from my breast pocket, grab a cocktail napkin from the table, and start jotting down numbers.

When I'm finished, I pass the napkin across the table to you, and tell you to go ahead and take it to the accounting firm/auditing team of your choice, have them to check the figures, and let you know what YOUR cut, at 54%, will be.

All is JUST as I said it would be.

I've given you my numbers. It doesn't matter that the numbers I've given you were not exactly what you'd thought they would be, not quite an "in depth look" as to what my "revenues" REALLY are, just the numbers I've CHOSEN to give you. The numbers will stand, however, under the Terms and Conditions of the Contract, as the "real" numbers, as it was never clarified, BEFORE YOU SIGNED THE CONTRACT, just exactly WHAT numbers you would be getting.

Now.....

Take that napkin to your accountant/auditor and have him calculate out your "percentage".

Because 54% of what is written on that cocktail napkin is PRECISELY what you will get.

And not a penny more.

What a hunk of nonsense. Maybe in the business little leagues but not on a transaction with a scale we're talking about with the NHL. There are some people who may be that stupid. Bettman and Goodenow aren't. However and nearly always, for sizable business involving reliance on accounting records, the typical process is rather dramtically different.

When one company wants to buy another company, a letter of intent is supplied after a review of the selling company's sales literature which includes financial statements/information outlining the company's fiscal health. Due diligence follows including the auditing of the accounting records. If the financial information provided by the selling company is found to be materially different in the auditing of their books during due diligence, the deal is off. End of story. There are a lot of M&A lawyers and accountants billing their brains out doing this work daily. Further, these deals are often stuctured with holdbacks for a significant period of time in the event that something should "turn up" after due diligence.

That is a lot closer to the real and "normal" corporate world we're talking about than the silly example provided above from the Canucks board. In an entry to partnership, you structure it in a similar fashion with a difference being the selling party remains within the business.

 

[Wetcoaster]

What a hunk of nonsense. Maybe in the business little leagues but not on a transaction with a scale we're talking about with the NHL. There are some people who may be that stupid. Bettman and Goodenow aren't. However and nearly always, for sizable business involving reliance on accounting records, the typical process is rather dramtically different.

When one company wants to buy another company, a letter of intent is supplied after a review of the selling company's sales literature which includes financial statements/information outlining the company's fiscal health. Due diligence follows including the auditing of the accounting records. If the financial information provided by the selling company is found to be materially different in the auditing of their books during due diligence, the deal is off. End of story. There are a lot of M&A lawyers and accountants billing their brains out doing this work daily. Further, these deals are often stuctured with holdbacks for a significant period of time in the event that something should "turn up" after due diligence.

That is a lot closer to the real and "normal" corporate world we're talking about than the silly example provided above from the Canucks board. In an entry to partnership, you structure it in a similar fashion with a difference being the selling party remains within the business.

I never said Goodenow or Bettman were stupid - there are a number of fans however who get taken in by the NHL PR.

The NHL has NEVER offered full dislosure of the tam books and those of the related corporate entites. They have refused to do this for decades and it has not changed.

 

[SuperUnknown]

What a hunk of nonsense. Maybe in the business little leagues but not on this scale of transaction. There are some people who may be that stupid. Bettman and Goodenow aren't. However and nearly always, for business involving reliance on accounting records, the typical process is rather dramtically different.

When one company wants to buy another company, a letter of intent is supplied after a review of the selling company's sales literature which includes financial statements/information outlining the company's fiscal health. Due diligence follows including the auditing of the accounting records. If the financial information provided by the selling company is found to be materially different in the auditing of their books due due diligence, the deal is off. End of story. There are a lot of M&A lawyers and accountants billing their brains out doing this work daily. Further, these deals are often stuctured with holdbacks for a significant period of time in the event that something should "turn up" after due diligence.

That is a lot closer to the real and "normal" corporate world we're talking about than the silly example provided above from the Canucks board. In an entry to partnership, you structure it in a similar fashion with a difference being the selling party remains within the business.

Why try to make sense anyway? It's not like the "pro-rhetoric" people will listen anyway.

A business is comprised of fixed costs + variable costs. The higher the revenues, the lower the % of revenues going to fixed costs, and the more can be attributed to the players. As to players % of revenues, we already have two benchmarks: NBA and NFL. NBA revenues are at 58% of revenues and NFL at 63%. Makes sense considering NFL revenues are higher (and fixed costs lower in actual %). Hockey is a bit lower than NBA, so it seems 55% would be a proper revenue. However, why be rational and go with what's reasonable in the industry?

As well, if the deal is made on the premise of the NHL's losing $225M, then the contract in not valid if the numbers are reveled to be off (but the PA would have to prove this in court though, and the court would not necessarily deem all the revenues they account for to go to the NHL).

Lastly, well the CBA doesn't have to be that long. If the PA don't trust the numbers, agree on a shortened CBA of 3 years. If you do this at the start of this year, during that 3 years you lose less potential earnings than what the players have lost so far during this lockout. Then in 3 years, with all the figures in hand, the PA can negociate whatever they feel they should get based on revenues. Or in the event that the numbers were right, well then they would just be happy not losing out on $1.2B!

Anyway this ends now, I'm 100% sure that the players will look back in 5 years and think that it was a mistake not to get a better deal earlier. It's too bad and I already feel for the players.

 

[Jarqui]

Because the NHL has been consistent for decades on this. If they are going to change then say it. Until then there is no offer. In these areas the devil is in the details as we discovered in the last abortive meeting between the NHL and NHLPA.
...

When I see the NHL actually commit to this full disclosure and to deviate from decades of denying access then there is something to consider. Until then it is just more PR spin from Bettman.

All the NHL has to say is that we will give the NHLPA and/or its designated agent full and unfettered access for the purposes of review and audit to all the NHL team books and those of any and all of the teams' related corporate entities including inter alia all financial statements and reports as well as any supporting or ancilliary documents, contracts, information and agreements deemed relevant by the NHLPA for this purpose subject to the usual non-disclosure agreements. That is what the other sports have done. Not difficult - but the NHL has yet to make that offer.

You have my permission to forward the offer as written to Bettman so he can make the offer to the NHLPA. He will not do so since the NHL owners are adamantly opposed to such disclosure.

From Bettman's February 2nd, 2005 proposal :

Joint Audit Controls

Each year's accounting would be performed by an independent accounting firm jointly selected by the league and the NHLPA. Teams would be fined $2 million and the loss of a 1st round draft pick for the failing to disclose required financial information. A team that fails to disclose required financial information a second time would be fined $5 million and three first round draft picks.

I think this covers the spirit of it going forward though I'm sure there would need to be details added to the legal language within the CBA itself.

As for what happened in the past, the NHLPA has had their chance and there is no time to do so now. The two sides are left with around a $130 million piece of the pie to fight over that has cost each individual player around $1.55 mil in salary (well over a billion dollars) so far.

 

[Jarqui]

I never said Goodenow or Bettman were stupid - there are a number of fans however who get taken in by the NHL PR.

The NHL has NEVER offered full dislosure of the tam books and those of the related corporate entites. They have refused to do this for decades and it has not changed.

As I haven't seen any quote or link to contradict his quote in his report as requested, Levitt effectively attested that the NHL (Bettman) offered it to him.

And Goodenow attested that he was able to conduct a "thorough" reivew with the information provided to him. That word "thorough", coming from the head of the NHLPA under these circumstances is pretty darn significant. It doesn't connote any desire to return to those teams to look some more due to a lacking of information. Goodenow saw what he needed to see of the financial records of those teams to arrive at his conclusions.

 

[mooseOAK*]

Because the NHL has been consistent for decades on this. If they are going to change then say it.

So you are asssuming then. So then, why state that the NHL is going to do things differently for the other leagues as a fact?

All the NHL has to say is that we will give the NHLPA and/or its designated agent full and unfettered access for the purposes of review and audit to all the NHL team books and those of any and all of the teams' related corporate entities including inter alia all financial statements and reports as well as any supporting or ancilliary documents, contracts, information and agreements deemed relevant by the NHLPA for this purpose subject to the usual non-disclosure agreements. That is what the other sports have done. Not difficult - but the NHL has yet to make that offer.

You have my permission to forward the offer as written to Bettman so he can make the offer to the NHLPA. He will not do so since the NHL owners are adamantly opposed to such disclosure.

We have seen teams invite the NHLPA to go over their books, haven't we?

Anyway, since the NHLPA has not agreed to any linkage, that is that doesn't work in their favour, they first have to and then the details need to be worked out. So keep on creating scenarios in fantasyland of what the owners will and will not do and let the NHLPA worry about revenue reporting when they agree to total linkage.

 

[Wetcoaster]

So you are asssuming then. So then, why state that the NHL is going to do things differently for the other leagues as a fact?

We have seen teams invite the NHLPA to go over their books, haven't we?

Anyway, since the NHLPA has not agreed to any linkage, that is that doesn't work in their favour, they first have to and then the details need to be worked out. So keep on creating scenarios in fantasyland of what the owners will and will not do and let the NHLPA worry about revenue reporting when they agree to total linkage.

What have they been invited to go over?

Thus far it is the URO's. Not the team books and those of the related corporate entities.

I am assuming nothing. The NHL has NEVER offered full disclosure.

 

[mooseOAK*]

What have they been invited to go over?

Thus far it is the URO's. Not the team books and those of the related corporate entities.

I am assuming nothing. The NHL has NEVER offered full disclosure.

And the NHLPA has never pushed for it. Because they know what the situation is, and it isn't good for the owners.

 

[Wetcoaster]

And the NHLPA has never pushed for it. Because they know what the situation is, and it isn't good for the owners.

Yes they have.

Do you not recall Daly's outburst just rpior to the lockout when he said he was frustrated by the NHLPA continually asking for the same financial information of the teams they had sought for the past five years?

 

[mooseOAK*]

Yes they have.

Do you not recall Daly's outburst just rpior to the lockout when he said he was frustrated by the NHLPA continually asking for the same financial information of the teams they had sought for the past five years?

Which means what? That they wouldn't give it to the players or that the NHL gave them the numbers and the NHLPA had them every year but never did anything with them?

If this was such a big deal to the NHLPA they would be making more noise about it than you, if that were possible.

 

[Wetcoaster]

Which means what? That they wouldn't give it to the players or that the NHL gave them the numbers and the NHLPA had them every year but never did anything with them?

If this was such a big deal to the NHLPA they would be making more noise about it than you, if that were possible.

In case you have failed to notice the NHLPA tends not to negotiate and spin PR through the media to the extent that the NHL does. That does not mean they have not requested the financial information on a continual basis as Daly's outburst indicates.

The players get the URO's and that is all except for the four team review in 1999 and 2000 where they received some additonal information to compare to the URO's. The information did not match.

The numbers are meaningless with the ability to verify.

 

[dakota]

do you know what exactly was $52 million in undeclared hockey revenues? parking? was it one team not declaring money or all of them? what was the breakdown of each team?

Wetcoaster... do you know what this 52 million in undeclared hockey revenue was? Has this ever been commented on... or was it just a number the PA has stated they found? Just curious as this could be important information... if one team did most of the undeclared hockey revenue it does not mean all teams stated this... also what is the NHLPA definition of hockey revenue based on their 52 million dollar figure?

 

[SENSible1*]

Wetcoaster... do you know what this 52 million in undeclared hockey revenue was? Has this ever been commented on... or was it just a number the PA has stated they found? Just curious as this could be important information... if one team did most of the undeclared hockey revenue it does not mean all teams stated this... also what is the NHLPA definition of hockey revenue based on their 52 million dollar figure?

The key point.

The NHLPA's definition of "hockey revenue" is completely bogus.

There was no "money hidden", simply a more realistic definition applied by the NHL.

 

[dakota]

The key point.

The NHLPA's definition of "hockey revenue" is completely bogus.

There was no "money hidden", simply a more realistic definition applied by the NHL.

I would not know to call it "bogus" as I dont know what their definition of it is? Does anyone know? It seems to me they must have something of a definition to accuse the NHL and those 4 teams of hiding 52 million in hockey related revenue... if so is this public? Even if they did I still would like to see them look at all 30 teams instead of just 4...

 

[Morbo]

The key point.

The NHLPA's definition of "hockey revenue" is completely bogus.

There was no "money hidden", simply a more realistic definition applied by the NHL.

Why is the owner's definition automatically more realistic?

 

[SENSible1*]

Why is the owner's definition automatically more realistic?

It is based on the same definition used by the NBA and NBAPA.

 

[syc]

Why doesnt the PA take Melnyk up on his offer? He said he would open the books for both the Senators and the Corel Centre...

also Bettman has stated repeatedly that the PA has been offered the books by their teams but they refuse to look at them... I believe they themselves only looked at 4 teams ... its hard to base your whole strategy on 4 teams when there are 30 teams... ill bet they looked at Toronto, Philadelphia, Detroit and Colorado... which 4 teams did the NHLPA look at does anyone know?

why wont they look at all 30 teams?

LMFAO; yeah because the senators are the poster boy for a well run sports franchise.
:lol

 

[Wetcoaster]

Wetcoaster... do you know what this 52 million in undeclared hockey revenue was? Has this ever been commented on... or was it just a number the PA has stated they found? Just curious as this could be important information... if one team did most of the undeclared hockey revenue it does not mean all teams stated this... also what is the NHLPA definition of hockey revenue based on their 52 million dollar figure?

The NHLPA was under a non-disclosure agreement so they could not get into anything other than a global figure under threat of severe financial penalties.

As Goodenow and Saskin have said about the four team review:

We were given access to the UROs (Unified Report of Operations ) for 30 clubs, but were only able to conduct a thorough review of four NHL clubs. On those four clubs alone we found just over $52 million in hockey related revenues and benefits not reported in the League's voluntary and unaudited URO process - Goodenow

"We went and requested further information that spoke to a lot of the related entities and disclosed a lot of revenue sources that clearly were not being counted in the URO process," NHLPA senior director Ted Saskin told The Sporting News. "Just on those four teams alone, we saw a swing of $52 million toward profitability. That's only on four out of 30 teams.

The NHLPA has pointed out the problems with the URO's which that review was designed to test - it failed.

The Flyers have confirmed this problem, albeit inadvertently. After the Levitt Report came out, Philadelphia Flyers chairman Ed Snider revealed his team was one of the 19 NHL teams the report said lost money in 2002-03. Team president Ron Ryan said the Flyers weren't among the teams whose bottom line was colored in red ink. It depends what you look at. Under the URO's as used by Levitt they are lsoing money but under their own internal financial reports they are making money.

"Where it becomes confusing," Ryan told the Philadelphia Inquirer, "is that it sounds like there are two sets of books. The difference is that the report we make to the league, as directed by the players' association, is different from our own internal audited statement, which we view as the more accurate statement. So we were talking about two different reports."

BTW President Ron Ryan has not been heard from publicly since that little faux pas.

Ted Saskin was asked if the NHLPA accepted the accuracy of the league's URO reporting system:

"Absolutely not. The financial reporting you get from the National Hockey League is only as good as the information they get from each team in what is an unaudited and voluntary submission. And the old adage 'Garbage in, garbage out' is unfortunately an apt description of the current system they have in place. We have numerous examples of teams simply putting down 'zero' for luxury suites, concessions and other items. You can't take that kind of reporting seriously."

 

[Wetcoaster]

It is based on the same definition used by the NBA and NBAPA.

Which was negotiated formula to fit the NBA after the NBAPA had been given full disclosure and access to the NBA team books and those of the related corporate entities - the NHL refuses to do this. The NHLPA studied them for almost three years so they were in a position to negotiate from an informed perspective.

The NFL has a negotiated formaula as well and it is quite different from the NBA.

"In the NBA they have a contrived formula for revenue, and that's a negotiated agreement between the players and owners in that sport," Saskin told the USA Today, "and we don't consider to be the appropriate measure at all."

"We have consistently stated that one critical issue of disagreement between the NHLPA and the League on finances is how to define the complete business of owning an NHL franchise, and how to address the significant inconsistencies contained in the NHL's voluntary and unaudited URO reporting process," said Goodenow. "At the outset it is clear the Levitt report, commissioned by the League, is fundamentally flawed when the author "elects" to define hockey revenues on the same basis as used in the NBA and NFL for defining revenues in their salary cap systems.

The NFL and NBA reached their formulae for revenue by first completely opening the books and then negotiating the definitions. The NHL wants to impose its own definition without disclosure and without negotiation.

The issue is not whether or not the NHLPA gets to do an audit - the real issue is exactly what do they get to audit - the URO's do not do it for the NHLPA and that is all that is on the table thus far.

 

[StanTheMan]

Ted Saskin was asked if the NHLPA accepted the accuracy of the league's URO reporting system:

Quote:
"Absolutely not. The financial reporting you get from the National Hockey League is only as good as the information they get from each team in what is an unaudited and voluntary submission. And the old adage 'Garbage in, garbage out' is unfortunately an apt description of the current system they have in place. We have numerous examples of teams simply putting down 'zero' for luxury suites, concessions and other items. You can't take that kind of reporting seriously."


my question here is that if the pa only took a look at the books for four teams, how could saskin say "we have numerous examples..."? does he consider 4 enough to qualify for using the term 'numerous'? just asking.

 

[wazee]

Which was negotiated formula to fit the NBA after the NBAPA had been given full disclosure and access to the NBA team books and those of the related corporate entities - the NHL refuses to do this. The NHLPA studied them for almost three years so they were in a position to negotiate from an informed perspective.

The NFL has a negotiated formaula as well and it is quite different from the NBA.

The NFL and NBA reached their formulae for revenue by first completely opening the books and then negotiating the definitions. The NHL wants to impose its own definition without disclosure and without negotiation.

The issue is not whether or not the NHLPA gets to do an audit - the real issue is exactly what do they get to audit - the URO's do not do it for the NHLPA and that is all that is on the table thus far.

"We have consistently stated that one critical issue of disagreement between the NHLPA and the League on finances is how to define the complete business of owning an NHL franchise, and how to address the significant inconsistencies contained in the NHL's voluntary and unaudited URO reporting process," said Goodenow. "At the outset it is clear the Levitt report, commissioned by the League, is fundamentally flawed when the author "elects" to define hockey revenues on the same basis as used in the NBA and NFL for defining revenues in their salary cap systems.

If Goodenow does not like the NFL or the NBA definitions of revenue, maybe he would like to tell us what his definition is. He does not need access to a club's books to make that definition.

 

[dakota]

The NHLPA was under a non-disclosure agreement so they could not get into anything other than a global figure under threat of severe financial penalties.

As Goodenow and Saskin have said about the four team review:


The NHLPA has pointed out the problems with the URO's which that review was designed to test - it failed.

The Flyers have confirmed this problem, albeit inadvertently. After the Levitt Report came out, Philadelphia Flyers chairman Ed Snider revealed his team was one of the 19 NHL teams the report said lost money in 2002-03. Team president Ron Ryan said the Flyers weren't among the teams whose bottom line was colored in red ink. It depends what you look at. Under the URO's as used by Levitt they are lsoing money but under their own internal financial reports they are making money.


BTW President Ron Ryan has not been heard from publicly since that little faux pas.

Ted Saskin was asked if the NHLPA accepted the accuracy of the league's URO reporting system:

thanks you for the insight... it still doesnt answer what I really want to know which is what is the NHLPA's definition of hockey related revenue? Have they ever stated this?

I am sure this would not be part of a non-disclosure agreement... if the fan for the LA Kings can talk after signing a non-disclosure, I am sure the PA can at least talk a little bit without getting too detailed... could they not just tell us what they think hockey related revenue is without breaking a non-disclousure agreement? In essence this is their own opinion anyway, and it should be able to brought public.. you would think this would be in their best interest to do so as well if it is a fair definition.

 

[Wetcoaster]

thanks you for the insight... it still doesnt answer what I really want to know which is what is the NHLPA's definition of hockey related revenue? Have they ever stated this?

I am sure this would not be part of a non-disclosure agreement... if the fan for the LA Kings can talk after signing a non-disclosure, I am sure the PA can at least talk a little bit without getting too detailed... could they not just tell us what they think hockey related revenue is without breaking a non-disclousure agreement? In essence this is their own opinion anyway, and it should be able to brought public.. you would think this would be in their best interest to do so as well if it is a fair definition.

it will be a negotiated defintion. the HLPA has laid out some things that think should be part of the defrintion but until they get disclsoure and access it is an unfinished work.

Of course the fan talked - he supported the owners.

As I understand the non-disclosure agreements signed by the NHLPA they are very onerous so unless you want to risk a severe financial penalty you must be circumspect. Usually one of the clauses in such agreements is that you cannot discuss the actual terms of the agreement itself.

 

[Wetcoaster]

If Goodenow does not like the NFL or the NBA definitions of revenue, maybe he would like to tell us what his definition is. He does not need access to a club's books to make that definition.

Yes the NHLPA does because it is a negotiated definition. You need to see how revenues are treated and distributed by individual teams, then you go from there.