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Cap Circumventing Contracts

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Old
07-15-2012, 10:01 PM
  #1
bcjonny
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Cap Circumventing Contracts

I understand that these contracts basically ended with the Hossa and Luongo Deals and that New Jersey was penalized very harshly for signing Kovalchuk to one.

I am a bit miffed at how the Brad Richards Contract is able to be acceptable to the NHL.

11-12 12 Million
12-13 12 Million
13-14 9 Million
14-15 8.5 Million
15-16 8.5 Million
16-17 7 Million
17-18 1 Million
18-19 1 Million
19-20 1 Million

Aren't there rules in place that make going from 7 Million to 1 Million in one season against the rules. How come this contract was allowed to stand and why were the Rangers not sanctioned.

How this ties into Trades and Free agents is he signed this contract last year as a free agent.

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07-15-2012, 10:04 PM
  #2
Socratic Method Man
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Quote:
Originally Posted by bcjonny View Post
I understand that these contracts basically ended with the Hossa and Luongo Deals and that New Jersey was penalized very harshly for signing Kovalchuk to one.

I am a bit miffed at how the Brad Richards Contract is able to be acceptable to the NHL.

11-12 12 Million
12-13 12 Million
13-14 9 Million
14-15 8.5 Million
15-16 8.5 Million
16-17 7 Million
17-18 1 Million
18-19 1 Million
19-20 1 Million

Aren't there rules in place that make going from 7 Million to 1 Million in one season against the rules. How come this contract was allowed to stand and why were the Rangers not sanctioned.

How this ties into Trades and Free agents is he signed this contract last year as a free agent.
I think the rule is that the salary cannot drop from one year to the next by more than half of the first [2?] years divided by 4. So basically half of 12 million, which is 6 million, which is how much it dropped.

But yeah, it's blatant cap circumvention.

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07-15-2012, 10:37 PM
  #3
number72
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Richards ends when he is 40.
Prongers end when he is 42.
Hossa end when he is 42.
Kovy's end when he is 42
Kovy's rejected contracted had him retiring at 44.

The problem with the contracts is not the length of the contract nor the front loading.
The league rejected Kovy's because they felt the contract was not entered in good faith because Kovy would not be playing at age 44. Apparantly the league will accept longer contracts for a player up to at least the age of 42.

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07-15-2012, 11:03 PM
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bcjonny
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I think the big difference is the NHL had already accepted the contracts for Luongo, Hossa and Pronger. Along comes Kovy and he pushes the envelope just bit too far for the league not to step in. If I remember correctly the Devils were pre warned about the contract and defiantly went ahead with making him the 100 Million dollar man.

But looking at 3 years of 1 million after making 7 the year before is no less unethical.

The easy solve is to make the salary cap based on total annual dollar hit not average cap hits.

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07-15-2012, 11:08 PM
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Pretty sure Pronger's contract is a 35+ contract so there is no possible circumvention there.

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Old
07-15-2012, 11:09 PM
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Quote:
Originally Posted by bcjonny View Post
I think the big difference is the NHL had already accepted the contracts for Luongo, Hossa and Pronger. Along comes Kovy and he pushes the envelope just bit too far for the league not to step in. If I remember correctly the Devils were pre warned about the contract and defiantly went ahead with making him the 100 Million dollar man.

But looking at 3 years of 1 million after making 7 the year before is no less unethical.

The easy solve is to make the salary cap based on total annual dollar hit not average cap hits.
More to the point before the Kovalchuk rejection there was no defined ceiling limit in place meaning technically a team could have signed a player even longer. The prior contracts were pushing the envelop, but when the Devils signed Kovalchuk to a contract that runs until he's 44 they were forced to step in and set a limit or else the next wiseguy GM would have went even higher.

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07-15-2012, 11:14 PM
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The problem with the Kovalchuk contract wasn't necessarily that it had the throwaway years tacked onto it. The problem was that, with the way it was structured, the Devils had little incentive to keep Kovalchuk around while he was making League minimum at the age of 40+. Kovy was going to have a 7 million dollar cap hit while making League minimum in salary and (most likely) producing at a low level. The Devils had large incentive to buy him out, and Kovalchuk had large incentive to either go to Russia or get another contract.

Signing a contract that is not intended to be fulfilled by either party is a blatant CBA violation.

You can argue that this applies to all contracts with throwaway years, and I would agree with you. But the problem is that the NHL had to convince an unbiased arbitrator that this was the case, and Kovy version 1 was such a leap past the line in the sand that the NHL decided to make it a test case.

I hope that the NHL sits down with the NHLPA and hammers out an agreement to limit throwaway years.

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07-15-2012, 11:28 PM
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The new CBA will hopefully take care of these absurd contracts

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07-15-2012, 11:35 PM
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I just looked at the two latest long term big dollar signings and guess what...

Zach Parise and Ryan Suter both are making 2 Million, 1 Million and 1 Million in the last 3 years of their contracts.

I say again the Salary Cap should be based on actual dollars spent on Salary AND Performance Bonuses AND Signing Bonus in a given year. Its the only fair way.

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07-16-2012, 12:09 AM
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Doubt we'll be seeing these with the new CBA.

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07-16-2012, 12:12 AM
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Quote:
Originally Posted by bcjonny View Post
I just looked at the two latest long term big dollar signings and guess what...

Zach Parise and Ryan Suter both are making 2 Million, 1 Million and 1 Million in the last 3 years of their contracts.

I say again the Salary Cap should be based on actual dollars spent on Salary AND Performance Bonuses AND Signing Bonus in a given year. Its the only fair way.
And the contracts expire when those two players are 40 years so the league can't prove the contract was entered into without good faith. That is, it is reasonable (but realistically unlikely) to assume Parise/Suter play to 40 years.

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07-16-2012, 12:21 AM
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Is using actual $$$ paid to the players in a given year such a stretch...

It would suck for Minnesota though as they would have 44 million committed to 2 players for next season already.

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07-16-2012, 12:26 AM
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Quote:
Originally Posted by Prairie Habs View Post
Pretty sure Pronger's contract is a 35+ contract so there is no possible circumvention there.
It is a 35+ contract.

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07-16-2012, 12:33 AM
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Doubt we'll be seeing these with the new CBA.
I really hope they take care of it. They are horrible.

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07-16-2012, 12:38 AM
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I really hope they take care of it. They are horrible.
Well in the NHL's first proposal, although it was a low ball, they had a 5 year limit on contracts, obviously that won't happen, but its nice to see the NHL acting on this. I think there will be contract limits around 7-8 years, no more 12/13 year deals.

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07-16-2012, 12:38 AM
  #16
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I think the hit should equal that years salary, but I don't think owners or players would go for that. It works to well for both of them right now. I wonder if something where a contract couldn't drop below 50% of the highest year? It does give teams flexibility, but not the stupid 11 million drop in salary over the life of a contract. The contract lengths are getting stupid, but those kind of drops is what really annoys me.

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07-16-2012, 12:45 AM
  #17
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I think they should just make all contracts stay on the books regardless of whether or not the player retires. It'd prevent teams from having a 7 million dollar player who isn't playing

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07-16-2012, 12:47 AM
  #18
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Quote:
Originally Posted by bcjonny View Post
Is using actual $$$ paid to the players in a given year such a stretch...

It would suck for Minnesota though as they would have 44 million committed to 2 players for next season already.
This could lead to other problems though. There would still have to be some restrictions in place (i.e. on how much salaries can fluctuate year to year). Otherwise teams could just heavily front or backload contracts to deal with issues in their financial structure.

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07-16-2012, 12:50 AM
  #19
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Kovalchuk's contract was extreme in so many ways.

First, it took him to age 44, which is 2 years beyond what anyone else's contract runs to.

Secondly, there were 5 years at the end of it that were significantly below the majority of the contract - from age 39 to 44, in his final 5 seasons, he would be paid the current league minimum of $550,000.. and his age 38 season (6th to last) would pay just $750,000. That's less than $3m for 6 years.

Look at the age 38 to 42 portion of some major contracts:

Luongo: $13.71m
Hossa: $8m
Franzen: $5.35m (over 3 years, signed until age 40)
Kovalchuk's denied deal: $2.95m (then another 2 years after, at $0.55m)

If you don't see the difference there, you're not looking hard enough.

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07-16-2012, 01:19 AM
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Quote:
Originally Posted by eklunds source View Post
Kovalchuk's contract was extreme in so many ways.

First, it took him to age 44, which is 2 years beyond what anyone else's contract runs to.

Secondly, there were 5 years at the end of it that were significantly below the majority of the contract - from age 39 to 44, in his final 5 seasons, he would be paid the current league minimum of $550,000.. and his age 38 season (6th to last) would pay just $750,000. That's less than $3m for 6 years.

Look at the age 38 to 42 portion of some major contracts:

Luongo: $13.71m
Hossa: $8m
Franzen: $5.35m (over 3 years, signed until age 40)
Kovalchuk's denied deal: $2.95m (then another 2 years after, at $0.55m)

If you don't see the difference there, you're not looking hard enough.
The excessiveness of Kovalchuk's deal isn't in the PA's best interest either. From your example above that's 6 (or 7) years where Kovalchuk's cap hit is worth roughly $30 million dollars but he would only take home $4 million. As everyone knows the salary cap is determined based on a percent of revenue's which the players get a fixed cut of. These sorts of contracts allow teams to go over the cap in terms of real dollars, which is supposed to be balanced out at the end of the players contract.

But if the player retires early then the $$$ don't balance out and the difference will come out of the players portion of the escrow. With the original deal whenever Kovalchuk decided to retire he'd effectively be taking an extra $20+ million out of the owners pockets for himself and leaving the bill for the rest of the active players to pay it all back.

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07-16-2012, 01:24 AM
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The recent proposal by the NHL claims that they want the longest possible contracts to only be 5 years. I think that's ridiculous. I'd say the longest should be 7-8 years.

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07-16-2012, 01:46 AM
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Quote:
Originally Posted by bcjonny View Post
I understand that these contracts basically ended with the Hossa and Luongo Deals and that New Jersey was penalized very harshly for signing Kovalchuk to one.

I am a bit miffed at how the Brad Richards Contract is able to be acceptable to the NHL.

11-12 12 Million
12-13 12 Million
13-14 9 Million
14-15 8.5 Million
15-16 8.5 Million
16-17 7 Million
17-18 1 Million
18-19 1 Million
19-20 1 Million

Aren't there rules in place that make going from 7 Million to 1 Million in one season against the rules. How come this contract was allowed to stand and why were the Rangers not sanctioned.

How this ties into Trades and Free agents is he signed this contract last year as a free agent.
we all agree that these contracts are done to mess with the intention of the cap... but the owners run the league and the owners are the ones doing this stupidity so they are going to let it pass if it stays within their own set of acceptable push

the kovalchuck deal was done by an outsider and went one step too far... it became the perfect opportunity to be made an example of. sooner or later someone needed to be made an example of cause it was insane how things were going. i would say that new jersey just had the bad luck of not being an inside member of the boys club that runs the nhl and trying to take it to age 44 instead of the 42 that the made members would have agreed to and eventually did agree to

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07-16-2012, 01:57 AM
  #23
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I can understand why the league was upset with the Kovy contract, but it didn't make sense to punish New Jersey. I also am tired of hearing about "cap circumventing contracts" because these are entirely artificial rules that the league made up and the contracts follow those rules. Plugging the Kovy loophole makes sense and a further "fix" for this non-problem like this:
Quote:
Originally Posted by The Nuge View Post
I think they should just make all contracts stay on the books regardless of whether or not the player retires. It'd prevent teams from having a 7 million dollar player who isn't playing
can work, but there will just be another trick or loophole to take this one's place.

Limiting contract length is pointless, because the owners will just wind up overpaying for younger players, whine about it, and then have another labor stoppage. I don't see the problem if both a team and a player want to make that type of commitment.

Everyone assumes that these players will retire before they hit those low salary years, but I don't think that is really the way recent players have retired. Big name players that stayed healthy like Selanne, Lidstrom, Modano, and Whitney played through age 40, and there are other motivations beyond money to stick with hockey. Maybe Parise or Suter don't want to retire because they haven't won a cup or they are chasing some HOF numbers/record. In Brodeur's case, what does he have left to prove? A million dollars will still be a lot of money in the last years of the Richards/Parise/Suter deals and nobody can assume they will surely retire in 2018 or whenever just because their actual salaries will be lower.

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07-16-2012, 04:28 AM
  #24
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Quote:
Originally Posted by bcjonny View Post
I am a bit miffed at how the Brad Richards Contract is able to be acceptable to the NHL.

11-12 12 Million
12-13 12 Million
13-14 9 Million
14-15 8.5 Million
15-16 8.5 Million
16-17 7 Million
17-18 1 Million
18-19 1 Million
19-20 1 Million

Aren't there rules in place that make going from 7 Million to 1 Million in one season against the rules. How come this contract was allowed to stand and why were the Rangers not sanctioned.
http://capgeek.com/players/display.php?id=690

It's the base salaries who only counts and not the signing bonuses so therefor the contract it's legal by the current CBA.

11-12: $2.0m ($10m in signing bonus)
12-13: $4.0m ($8m in signing bonus)
13-14: $7.0m ($2m in signing bonus)
14-15: $6.5m ($2m in signing bonus)
15-16: $6.5m ($2m in signing bonus)
16-17: $3.0m ($4m in signing bonus)
17-18: $1.0m
18-19: $1.0m
19-20: $1.0m

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Old
07-16-2012, 04:53 AM
  #25
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Quote:
Originally Posted by bcjonny View Post
Is using actual $$$ paid to the players in a given year such a stretch...

It would suck for Minnesota though as they would have 44 million committed to 2 players for next season already.
But in these case the new CBA would grandfather them , so they would apply to the old CBA Rules

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