Sunday, February 24, 2013

The NCAA and the University of Miami: Through the Smoke

You know the smoke that spews forth when the Canes football players come on to the field? It seems as if the UM has borrowed some of that smoke during football offseason to try to draw attention away from the pesky question of institutional control.

As everyone in the world knows by now, the National Collegiate Athletic Association (“NCAA”) has served a Notice of Allegations on the University of Miami. According to media reports, it charges a lack of institutional control.

The UM has fought back, not by making the Notice of Allegations public and refuting its allegations, point by point. But by releasing a statement in the name of its President, Donna Shalala, attacking the NCAA and crying that the UM has “suffered enough."

Since it came out that several NCAA investigators had disregarded legal advice in conducting the investigation of the UM, the South Florida media have been awash with attacks on the NCAA.  Herald columns have been filled with vitriol, with very little attention, if any, on whether the U of M deserved the charge of lack of institutional control.  

             Greg Cote: “College sports’ governing body should drop its case against UM and instead direct the scrutiny and punishment upon itself”. 

             Dan LeBatard: “The consensus for decades has been that the NCAA is an absurd, unjust artifact that belches out unfairness.” And “So Miami, while fighting punishment, keeps getting punished … while awaiting yet more punishment.” (In fairness, LeBatard also added: Miami is not an innocent here, and the program’s history makes it a bad applicant for martyrdom as Ponzi weasel Nevin Shapiro works from jail to bring it down.”)  

It’s hard to defend or even maintain an open mind about the NCAA. For sheer hypocrisy, it’s hard to beat the NCAA. Take its Constitution, which states that its first two purposes are 

(a) To initiate, stimulate and improve intercollegiate athletics programs for student-athletes and to promote and develop educational leadership, physical fitness, athletics excellence and

(b) To uphold the principle of institutional control of, and responsibility for, all intercollegiate sports in conformity with the constitution and bylaws of this Association.

Then the Constitution states its “basic purpose” is “to maintain intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body and, by so doing, retain a clear line of demarcation between intercollegiate athletics and professional sports.”

Can grown men and women spout such malarkey with a straight face? Big Time College Sports treats “athletics participation as a recreational pursuit” and maintains “a clear line of demarcation between intercollegiate athletics and professional sports”? Maybe they don’t say these things with a straight face. Maybe they’re so inured to the anomalies that when they meet at NCAA conventions they recite these lines with broad smiles on their faces, presumably what some law professor was wearing when, on his he recited, in a monotone, the Internal Revenue Code. I don’t know. I’ve never been to an NCAA convention, and there's no picture on the poor prof's blog.

But put that all aside. The University of Miami is a member of the NCAA Division 1. It is supposed to abide by its rules -- and, as an institution of higher learning, with openness and intellectual honesty.

About that Notice of Allegations. Has anyone outside the U seen it? No. (In fact, I would bet good money that it has not been shown to members of the Board of Trustees outside a very small circle of Trustees who can be trusted not to release it to the press.) Because it is a private institution and thus is not subject to the State’s Sunshine Law, the University has not had to release the Notice. 

But its not releasing the Notice is shameful. But let's be realistic: doing so would interfere with the UM’s apparent desire to win its battle with the NCAA by staging an aggressive public relations campaign against the NCAA. That way, no one can know for sure what the NCAA had to say about lack of “institutional control.”

The NCAA’s Constitution is organized around a series of “Principles for Conduct of Intercollegiate Athletics,” the first of which is “The Principle of Institutional Control and Responsibility,” about which the following is said:

Responsibility for Control. It is the responsibility of each member institution to control its intercollegiate athletics program in compliance with the rules and regulations of the Association. The institution’s president or chancellor is responsible for the administration of all aspects of the athletics program, including approval of the budget and audit of all expenditures.

Scope of Responsibility. The institution’s responsibility for the conduct of its intercollegiate athletics program includes responsibility for the actions of its staff members and for the actions of any other individual or organization engaged in activities promoting the athletics interests of the institution.

Rather than having to confront, publicly, whatever the NCAA alleged was evidence of lack of institutional control, the UM went on the offensive with a bare-knuckle attack on the NCAA by President Shalala. The UM has “suffered enough” at the hands of the NCAA, according to the U’s Chief Cheerleader.  Why? Because the NCAA "violated its own policies and procedures in an attempt to validate the allegations made by a convicted felon,” and because “many of the charges brought forth are based on the word of a man who made a fortune by lying.” 

Who is the unnamed convicted felon? That would be the pint-sized Uber Booster, Nevin Shapiro. The same Nevin Shapiro who, according to numerous reports, during half-time of the football team’s last game at the OB in 2007, confronted UM’s then head of UM in the press box, cursed at him, tried to draw him into a fight, and accused him of causing the UM’s football decline.  The same Nevin Shapiro who, in 2008, was photographed speaking at a basketball fundraiser at a bowling alley while, standing next to him, Donna Shalala had a broad smile on her face while ogling Shapiro’s $50,000 check to the “U,” as Coach Frank Haith and Sebastian the Ibis looked on. The same Nevin Shapiro after whom the UM named its players’ lounge, supposedly in exchange for $150,000. That Nevin Shapiro.

There's more. Dissect the University's attack document and you’ll find a few holes in that green and orange garment.

First, as best can be determined, the NCAA did not “violate its own policies and procedures” when it agreed to pay Nevin Shapiro’s lawyer to ask questions in aid of the NCAA investigation as part of the bankruptcy proceeding for his Ponzi scheme.

What actually occurred, according to the independent counsel hired by the NCAA to investigate the matter, was that the investigator on the case disregarded the advice of the NCAA’s in-house lawyers that the NCAA’s investigators not accept Shapiro’s lawyer’s offer to conduct bankruptcy depositions of persons whom the NCAA itself could not otherwise interview. When the NCAA learned that its investigator had run through this red light and had actually arranged for Shapiro’s lawyer to conduct the depositions and pay her for her time, it made the decision that the evidence derived directly or indirectly from the Perez depositions should not be used in any way against the U of M or any other investigated parties. Nevertheless, according to independent counsel: "The facts do not establish that any NCAA staff member intentionally or unintentionally violated any bylaw, bankruptcy procedure or law in their acceptance or implementation of the Perez proposal. Based on the circumstances as we now know them, it does not appear that any bankruptcy rule or procedure was violated. Nor have we found any NCAA rule or bylaw that specifically prohibits any of the Enforcement Staff’s conduct in this matter."

Second, the UM statement's allegation that the NCAA is basing its allegations on the uncorroborated word of a convicted felon is, at best, naïve. It is common knowledge that prosecutors in criminal cases routinely rely on the testimony of convicted felons to try to get convictions: who else will be around to testify about an accused criminal's conduct? In fact, in federal court at least, the rule is that a criminal conviction can rest on the uncorroborated testimony of a convicted felon. Davis v. United States, 411 F.2d 1126 (5th Cir.1969).

There have been at least two notable exceptions to the blanket of local pro-UM media coverage. One is the Sun Sentinel’s Dave Hyde, a former Herald reporter, who had this to say in a recent column:

Here's a question amid the fans' hosannas for Shalala for the way her statement attacked the NCAA's leadership like a declaration of war:

Where was such strong leadership when it was needed most? Where was it for all those years the school's football coach and compliance officer warned of a rogue booster running through the department? When players were introduced to the slime of Nevin Shapiro?

Here's where: It was naming the players' lounge after him. It was meeting him at a bowling alley to accept a donation. It was listening to the wrong people and ignoring those who could have spared the university this embarrassment.

‘Leadership’ is one of those cliché words in sports. Teams are asked about it. Players are asked to play the part. But when it came for the supposed leaders in the collegiate world to define it, everyone was lacking in this episode. Miami officials. NCAA officials. Everyone.

Shalala played her final, brazen card with this statement. She wants to bring media and public opinion down on the NCAA in a maneuver that will reduce the coming punishment.

The other is the Herald's Linda Robertson, who wrote that Shalala should "reveal the charges against UM. . . . Her school, under her watch, has been accused of 'lack of institutional control,' the Doomsday Switch of NCAA accusations. If that is unfair or unsubstantiated, then show why." She added: "The NCAA has been criticized as the “pot calling the kettle black” by botching its investigation of unethical behavior at UM with unethical behavior by its enforcement staff. UM can and should avoid similar criticism that it is being hypocritical in its reaction." 

Ultimately, it's the Trustees, not the President, who are in charge. The first obligation of a Board member is to become fully informed. If they're truly interested in becoming fully informed, they need go further than the NCAA's ByLaw 22.2, which, since 1994, has stated:

Each member institution, at least once every 10 years, shall complete an institutional self-study, verified and evaluated through external peer review. The self-study shall encompass the following operating principles:  

·      Governance and Commitment to Rules Compliance, including Institutional Control, Presidential Authority and Shared Responsibilities.

·      Academic Integrity [presumably like not whitewashing an All-American wide receiver’s admitted cheating and plagiarizing so that he serves his suspension during summer school]. 

·      Gender, Diversity and Student-Athlete Well-Being.

In the meantime, there's still that secret Notice of Violations. Last week, Leonard Abess, the Chairman of the U of M Board of Trustees, wrote in the Herald that, in reaction to the NCAA investigation, “Our administrators, staff and student-athletes have been forthcoming with information and transparency in their efforts to address any concerns." 

Isn't it time for the Trustees to be "forthcoming with information and transparency" by directing the administration to release the Notice of Allegations?

Friday, February 15, 2013

Should I Go to Marlins Games This Year?

Baseball in Miami is a little personal to me. So let me wander a bit.

Thirty years ago, when my wife and I had been in town for two years, I joined up with Rick Horrow, the wunderkind head of the Miami Sports and Exhibition Authority, and formed South Florida Baseball Committee, Inc., with the aim of attracting interest in Major League Baseball's locating a franchise here. We attracted the biggest names we could think of to the Committee. Jeb Bush. Bob Traurig. Judge John Gale. Hank Goldberg. Ron Fraser.  

People laughed. Baseball in Miami? We pointed to the combined population of the three counties and to the large number of Hispanics here. Crossroads of the Americas. Hip hip hooray. All I wanted was a chance to take my son to baseball games.

We did accomplish something. We put Miami on The List. Fast forward to 1985, when MLB formed a Long Range Planning Committee, which consisted of twelve owners who the smart money said had the Long Range Plan of not expanding. Twelve cities were invited to "present." Joe Robbie and I spoke for "Miami." By then he had broken ground on his stadium in what became Miami Gardens. Contrary to popular belief, it was designed for baseball. Robbie showed me the original plans. An overlay to scale showed there were more seats closer to home plate than my beloved Fenway Park. The only problem: no roof nor even an umbrella. Sound familiar?

Six years later, we were awarded a franchise, but not to Robbie. To the non-baseball-loving, non-Miami-Dade-oriented Wayne Huizenga. After the '98 season, he had had enough, and sold to a commodities trader named John Henry. Henry loved baseball. He came up with a great idea: build a domed stadium on "Bicentential Park," an empty plot of land just north of downtown Miami alongside the most beautiful urban waterway this side of Seattle, Biscayne Bay, and finance it with a $4/passenger tax on cruise passengers. The cruise industry protested and actually threatened to leave Miami. (As if. It reminded me of United Airlines' threat to move their hub out of Denver if the Denver International Airport were built and near-in Stapleton were closed. A bunch of hooey and hot air.) Some Big Wig on the Greater Miami Chamber of Commerce huffed that John Henry was from Palm Beach, as if that were a reason to oppose the plan.  Eventually, my former Committee member Jeb Bush vetoed the bill that would have enabled this plan to eventuate. On April Fool's Day. 

Finally, in 2002 MLB sold the Marlins to Jeffrey Loria, who, unfortunately, loves baseball, has the personal touch of a cold, dead fish, and must have pictures of Bud Selig with one or two of the other owners. With the expert assistance of his creepy and insincere stepson, Loria outwitted the Miami-Dade County Manager and negotiated the most one-sided stadium deal in U.S. history. Largely by threatening to move to San Antonio. (As if. The suckers bought that line! I wish I could get the people who "negotiated" for the County to agree to negotiate on the other side on all settlements I am trying work out for my clients.) Anyway, they built a fantastic stadium. 

My wife and I have been going to 20 Marlins games a year since Year One. All those late-afternoon trips up I-95, when often it was sunny all the way up but dark rain clouds hung over Joe Robbie Stadium. Last year we bought two season tickets and sold off all but 23 of the games. 

We all know what happened. The fans stayed away in record numbers, and Loria, having made huge, back-weighted contracts with Jose Reyes and Mark Buehrle, and being unwilling to wait out contracts with the problematic Josh Johnson and Anibal Sanchez, not to mention the third year of the contract of the putrid John Buck, ordered his "baseball people" to engineer Fire Sale III. The problem with Loria is that he doesn't really have baseball people. He and his smarmy step-son are make-believe baseball people. He has former baseball people without the cojones to tell him to keep his hands off baseball decisions or they'll walk. He's the genius who insisted on signing John Buck to a three-year contract worth $16,000,000. 

John Buck at bat.

People are starving in India, for God's sake. Maybe Buck has pictures of Loria.

This winter I told the Marlins ticket people that I would not sign up for another year of season tickets unless I got to meet with Larry Beinfest, the "President of Baseball Operations," to learn about the actual state of the farm system. The San Francisco Giants have proven that a solid farm system is the key to winning World Series and contending every year. I wanted to know whether the Marlins have the structure in place to build a strong farm system: the scouts and the cross-checkers, etc. The results have not been there: it's been slim pickings since 2002, when they picked a pitcher from Massachusetts who turned to drugs rather than trying to get to the Show in South Florida. Unless you want to count the immortal Taylor Tankersley and Chris Volstad. Needless to say, I never got an answer on my demand to hold out unless I got a meeting with Beinfest. Hell, I would have settled for Mike Hill, the GM. At least he went to Harvard. 

I am sure my wife and I will go to our usual 20 games this year, because we love baseball and, believe it or not, love the Marlins. Not Loria or his step-son. The players, and the pleasure of watching our team's story unfold over a six-month season, and the enjoyment of watching 142 games listening to Tommy and Rich. And listening as little as possible to the worst baseball radio announcers this side of Seattle. I really can't stand Glen Geffner, who talks too fast and swallows whole words.

But one thought haunts me. Maybe the critics were right in 1983. Maybe this isn't a baseball town.

Thursday, February 14, 2013

A New Remedy Against Directors Who Fail to Oversee the Corporation

Everyone agrees that directors play a vital role in monitoring the performance of modern corporations, including the establishment and enforcement of risk-taking standards. But can anyone seriously argue that in the mid-2000s the directors of Lehman Brothers, Bear Stearns, Citigroup, AIG or countless other financial companies maintained an attitude of “constructive skepticism,” as the Business Roundtable prescribes for directors, or adequately “monitor[ed] the management” of risk, which Martin Lipton, perhaps the preeminent corporate lawyer of our times, acknowledges to be one of the principal roles of corporate directors? The oversight failures of boards of directors are a silent monument to ineffective corporate governance, with severe negative effects on shareholders and the society at large.

Other than defeating a director’s bid for reelection in a proxy contest, which is next to impossible, the only legal tool available to shareholders seeking to hold directors personally responsible for their failures has been a suit for damages. Corporate law is a state-by-state issue, and states have made it extraordinarily difficult to hold a director financially responsible. The stated reasons are that directors should not be held responsible for simply errors in judgment and that if directors faced ruinous liability for failures of due care, no one would agree to be a director. 

Thus, for example, under the laws of the State of Delaware, where, because of its management-friendly and director-friendly corporate laws, most major corporations are incorporated, even a director who acts with “reckless indifference” or beyond “the bounds of reason” is free from personal financial liability. It takes “bad faith,” akin to intentional misconduct, to establish personal liability for directors in Delaware -- an extremely rare result, far rarer than incidents of director incompetence. And Delaware is not alone.

It should be obvious that, right or wrong, the current system cannot be counted on to provide a realistic incentive to directors to perform their monitoring functions in accordance with nominal standards.  A far more nuanced approach is necessary. The only arrow in the quiver need not be nuclear-tipped. What is needed is a judicial remedy to remove complacent, uninformed and ineffective directors from corporate boards.

Shareholders who wish to remove directors for inadequate performance should be permitted to sue the company to remove a director who fails in a material respect to perform his or her duties in a minimally acceptable manner. That minimal standard should be ordinary care, which is the standard that is said to govern directors now, rather than bad faith. A prevailing shareholder should be entitled to be paid reasonable attorneys’ fees and costs by the corporation, and fee levels should be set at a high enough level to make it worthwhile for qualified attorneys to take on the risk of losing the lawsuit and receiving only nominal fees. To avoid nuisance suits, the definition of “material” should be stated in terms of enabling major harm to occur because of the director’s actions or omissions.

It would be up to state legislatures to pass a law permitting such actions, but it might be unrealistic to expect any one legislature to do so, for fear that corporations incorporated in that state flee to a state with laxer standard. A possible solution would be for the New York Stock Exchange and the Nasdaq Stock Market to enact listing standards requiring corporations to insert in their by-laws a provision permitting shareholders to file such actions, or requiring corporations to be incorporated in states that permit such actions by law. If enacted by the state, the law could also bar the director from serving as a director of another company incorporated in the state. The federal securities laws already contain a provision permitting the entry of such orders, but this is limited to instances of securities law violations, and only upon the request of the SEC. A state-law based remedy is needed.

Facing the realistic possibility of being removed as a director would be a far more potent incentive to directors to perform their duties effectively than the microscopic possibility that they might be called on to pay damages. This is a realistic remedy that should improve director performance and therefore benefit corporate shareholders and the society alike.

Wednesday, February 13, 2013

John Boehner's facial expressions and body movements

I watched the State of the Union Address last night and two things leaped out from the screen: first, Barack Obama, perhaps for the first time, looked free and happy; second, John Boehner, not for the first time, looked very frustrated. (Biden looked Bidenesque.)

Boehner was far more interesting to watch. Obviously he has been told, or realizes on his own, that he can't sit behind a President of the United States, even Obama, and show scorn or anger. He has to maintain as close to a deadpan expression on his face as humanly possible. But this is a difficult pose for any mortal to maintain for an entire hour, particularly when the guy in front of him is successfully painting him into a corner that he most likely does not want to occupy. It's equivalent to watching a great stand-up comic and trying to suppress even a smile. 

I thought Boehner looked uncomfortable, not just because he is personally "conservative," whatever that means in the context of our pay-to-play Congress, and thus disagrees with a lot of what Obama was proposing, but also because he was watching Obama set him up for two years of fighting within the Republican Caucus. 

Boehner may not be the second coming of Henry Clay or Speaker Joe Cannon. But he is a good enough politician to realize that the action is always in the center and the win goes to who can dominate the center, from either left or right. Hence, his on-again, off-again efforts to reach agreement with Obama back in 2011. He decided then to punt on third down and see what happened in November 2012. Now he has the answer.  He must realize that the tide has turned and that the election results in November pose a major challenge for Establishment (K Street-dominated, golf-and-country-club loving) Republicans like him. (The GOP would have lost the House had the vast majority of the seats not been gerrymandered by Republican-controlled state legislatures.)  He definitely knows that if the people whom he must look to muzzle and ultimately defang the right-wing nuts who dominate the Republican Caucus are pretend-loyalists like Eric Cantor and Paul Ryan, he has good reason to look as if he just swallowed a peeled lemon. 

Jindal's imprecation that the GOP stop being the "stupid party" without actually changing any of its positions is the rhetorical equivalent of Boehner's squirming and twitching. 2 plus 2 is not zero. 2 minus 2 is zero. In other words, if the Republican Party is again going to be able to contest Presidential elections, there must be not just a change of rhetorical tone, including resorting to speaking en espanol, but a change of positions on countless bloody-shirt issues for right-wingers. Or there must be a purge of those right-wingers. Far easier said than done, which is enough to put a serious frown on Boehner's face.

Tuesday, February 12, 2013

Why "The Splendid Spitter"?

Theodore Samuel Williams, the Ted Williams, was my boyhood hero and the best natural hitter ever. Just look at that swing. When he was young he was tall and thin and known as "The Splendid Splinter." He had a lifetime average of .344, hit 521 home runs, had an OBP of .482, walked 2021 times and struck out only 709 times. And he served as an ace Marine aviator for three years in World War II and was called up at age 35 to fly jets for the Marines in Korea for a year and a half.

In 1957, when I was ten, Ted Williams, aged 39, batted .388, hit 38 homers, had a slugging average of .731 and an OBP of .526. And still finished second to Mickey Mantle for AL MVP. I'm still upset about that. I remember reading it in the evening paper and going crazy.

Ted Williams is no longer my hero because, as a grown-up, I have come to realize that boyhood heros usually have feet of clay. So let's just say that Ted Williams remains a strong presence in my life not only because he was The Splendid Splinter but also because he was The Splendid Spitter.

Ted Williams became The Splendid Spitter because Ted Williams, in his quest to be his own man, never could resist telling off someone who had failed to show him what he considered the proper respect. 

August 7, 1956, in the top of the eleventh in a scoreless tie, Williams drops a Mickey Mantle fly ball for a two-base error. The fans boo him mercilessly. Some of the fans along the left field line in Fenway Park used to barrage him with boos, catcalls and bad names. He retires Yogi Berra on a line drive to end the inning. The attacks continue. On the way to the Boston dugout along the first base line, Williams spits - not once, but twice - at the fans. Some say he spat towards the Knights of the Keyboard, as he called the local writers. 

In the bottom of the eleventh, two errors and a walk load the bases. Williams walks in the winning run to end the game. And tosses his bat forty feet in the air. And immediately gets fined $5,000 by the Red Sox. And gets quoted by the United Press as saying "I'm not a bit sorry for what I did. I'd spit again at the same fans who booed me today."

This blog is going to be about baseball, politics and the law. Hopefully, The Splendid Spitter wouldn't spit on it.