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8 ways to legally circumvent salary cap

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Old
12-27-2011, 12:36 PM
  #26
barneyg
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Originally Posted by squidz View Post
Someone will correct me if I'm wrong, but if Savard retires, the Bruins are cap-hit free. His contract comes off the books as it's not a 35+ contract. The fact that he's on LTIR means he keeps getting paid, and if the contract is insured, Boston isn't the one writing the checks. If he were to move off LTIR and retire, he'd stop receiving a paycheck, so it's not an example of cap circumvention.

Now if Philly were to do the same thing with Pronger, and it were allowed, that would be legal circumvention as he's on a 35+ contract and his retiring would leave Philly with his cap hit.
You're absolutely right, the Savard and Pronger cases are different because of Pronger's 35+ contract. The only thing I'm not sure of is the "Savard will stop receiving a paycheck" part. I don't want to go look that up now, but IIRC there's a CBA article saying that if a player retires following a career-ending injury, he'll keep receiving his paycheck for the remainder of his contract and maybe later (some kind of workers' compensation). However I've read a few times that Savard would be penalized if he retired so maybe workers' comp would be lower, or his earnings wouldn't count toward his pension, or something else.

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12-27-2011, 12:48 PM
  #27
knorthern knight
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However, what's to stop a team from negotiating a contract that includes a "handshake agreement" of an endorsement deal with a corporation that retains no affiliation with the team? That's something I've always wondered.
No, No, No. To quote Elliot Spitzer...
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Never write when you can talk. Never talk when you can nod. And never put anything in an e-mail.
( And don't fool around with prostitutes ). But seriously, do not put anything in writing.

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Old
12-27-2011, 03:57 PM
  #28
thinkwild
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I also fail to see any of those as circumvention except for the obvious illegal one, of say, signing Yashin to a cheap contract but then getting his parents $1mil contracts to sit on the Board of the National Arts Centre.

Teams dont do things that i'd figure because the likelihood they will be caught is high and the penalties are severe.

Two obvious ones i think you missed:
1) Shuffling players back and forth to the minors between games so they only get 1 days pay.
2) Signing players to a hometown discount.

No one thinks that signing a player to a knowing home town discount is a slimey move that obviously circumvents the salary cap?

What if 5 top ufa's one year decided over a summer of jamming and drinking at country and western bars, that they were big Country music fans and so were all willing to sign a one year contract with Nashville together for $1 mil each. Basically guaranteeing them the Cup.

Is that legal? Is there any mechanism to stop it? What if Parise decides to help out a cap strapped Philly team and sign for one year at $500k for them only. Shouldnt there be some mechanism where a majority of GMs could throw a challenge flag say, and ask an arbitrator to nullify that contract on the grounds it is an obvious cap circumvention?

But fans dont often tend to think of those hometown discounts as circumventions for some reason. But managing cap space over several years by front loading a contract is.

There seems a dissonance there i dont quite get how to explain. When fans say circumvention, there's a lot of curious things lumped in there. Circumvention from perfection?

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12-27-2011, 05:08 PM
  #29
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I'm wondering if there are any rules preventing the following:

BUF's Shaone Morrisonn was assigned to the AHL during training camp. He is on a one-way contract with a $2M cap hit. BUF will not call him up this season since he would be exposed to re-entry waivers. That's a legitimate risk for BUF since Morrisonn, who has played well the last two months, could be picked off of waivers, leaving BUF with half his cap hit. BUF can't afford the $1M cap hit to their books since they are so close to the cap ceiling.

Lets say NSH, a middle of the road team, wants Morrisonn for his vet presence. So instead of re-entry waivers, BUF trades him + their 7th rndr for NSH 7th rndr. Beforehand, NSH makes a deal with CBJ (last in NHL standings thus first on waiver priority list) to have CBJ select Morrisonn off of re-entry waivers in exchange for that BUF 7th rndr. Subsequently, NSH then sends a their own 6th rndr to CBJ in a trade for Morrisonn.

NSH total cost: 6th & 7th rndr. NSH also takes the full $2M cap hit on their books since they would retain half of that cap hit when CBJ selects him off of waivers, and then get the other half back when CBJ trades Morrisonn to NSH.

Is that allowed, or is there some rule preventing the original owner of a re-entered player from trading for him within the same season?

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Old
12-27-2011, 11:07 PM
  #30
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Quote:
Originally Posted by thinkwild View Post
1) Shuffling players back and forth to the minors between games so they only get 1 days pay.
2) Signing players to a hometown discount.

No one thinks that signing a player to a knowing home town discount is a slimey move that obviously circumvents the salary cap?

What if 5 top ufa's one year decided over a summer of jamming and drinking at country and western bars, that they were big Country music fans and so were all willing to sign a one year contract with Nashville together for $1 mil each. Basically guaranteeing them the Cup.

Is that legal? Is there any mechanism to stop it? What if Parise decides to help out a cap strapped Philly team and sign for one year at $500k for them only. Shouldnt there be some mechanism where a majority of GMs could throw a challenge flag say, and ask an arbitrator to nullify that contract on the grounds it is an obvious cap circumvention?

But fans dont often tend to think of those hometown discounts as circumventions for some reason. But managing cap space over several years by front loading a contract is.
You and I seem to have different definitions of circumvention. I define circumvention as gaming the system such that the your cap-hit is less than what you're actually paying a player. What is your definition?

Under my definition, paying a player X dollars, but having a cap hit less than X dollars, e.g. front-loaded contracts, is circumvention. It is best solved by getting rid of averaging alltogether. You pay a player X dollars, your cap hit should be X dollars. No way around that. Obviously, paying "under the table" or via a non-arms-length deal would count as circumvention.

I don't have a problem with "hometown discount". You pay a player X dollars, and have a cap hit of X dollars, what's to complain about?

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Old
12-28-2011, 04:12 AM
  #31
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For #8, there's a way I thought of to effectively bank cap space. (Note: I'm not sure if this contract is legal, but this is just an example)

Year 1 - 5: 1 million $ salary
Year 6: 10 million $ salary

Buyout at the end of year 5

Cap hit for year 6: -4.166 mil

If you made it 10 mil for years 6 and 7, the cap hit would be around -3 mil each year.

It's an insane way to generate future cap space, but under the current rules it's ALLOWED.

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12-28-2011, 07:46 AM
  #32
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Quote:
Originally Posted by f2d View Post
For #8, there's a way I thought of to effectively bank cap space. (Note: I'm not sure if this contract is legal, but this is just an example)
1
Year 1 - 5: 1 million $ salary
Year 6: 10 million $ salary

Buyout at the end of year 5

Cap hit for year 6: -4.166 mil

If you made it 10 mil for years 6 and 7, the cap hit would be around -3 mil each year.

It's an insane way to generate future cap space, but under the current rules it's ALLOWED.
It may be legal but there is not one player in the world with any sense that would sign that contract. We could call this the wimpy contract as it is a "I will gladly pay you tuesday for a hamburger today"......

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Old
12-28-2011, 08:20 AM
  #33
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Originally Posted by Tommy Hawk View Post
It may be legal but there is not one player in the world with any sense that would sign that contract. We could call this the wimpy contract as it is a "I will gladly pay you tuesday for a hamburger today"......
If the player is only worth 1-2MM/year, they'd sign it and laugh their way to the bank. With NHL contracts fully guaranteed, they know they're getting paid the full amount. The purpose of that contract is to literally buy cap space. In that scenario, the team pays $10MM for $4.1MM worth of "bonus" cap space. The player is paid extra solely for the purpose of being bought out.

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12-28-2011, 08:44 AM
  #34
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Quote:
Originally Posted by f2d View Post
For #8, there's a way I thought of to effectively bank cap space. (Note: I'm not sure if this contract is legal, but this is just an example)

Year 1 - 5: 1 million $ salary
Year 6: 10 million $ salary

Buyout at the end of year 5

Cap hit for year 6: -4.166 mil

If you made it 10 mil for years 6 and 7, the cap hit would be around -3 mil each year.

It's an insane way to generate future cap space, but under the current rules it's ALLOWED.
Why aren't the Islanders doing this? Sign a guy who deserves $1 mil a year for 3 years, then tack on a few extra years at $10 million. Once the cheap years are up, trade him to Philly or some other team that needs the cap space, let the other team buy him out.

Isles win since they have a cap hit much higher than the actual amount paid for years, then they get something like a draft pick when they trade the guy. Flyers win since they literally buy cap space with a draft pick and a buyout payment.

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Old
12-28-2011, 10:43 AM
  #35
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Quote:
Originally Posted by f2d View Post
For #8, there's a way I thought of to effectively bank cap space. (Note: I'm not sure if this contract is legal, but this is just an example)

Year 1 - 5: 1 million $ salary
Year 6: 10 million $ salary

Buyout at the end of year 5

Cap hit for year 6: -4.166 mil

If you made it 10 mil for years 6 and 7, the cap hit would be around -3 mil each year.

It's an insane way to generate future cap space, but under the current rules it's ALLOWED.
The contract as structured isn't legal, but the concept itself could be pulled off with different numbers.

The risk to the team/player is that the league could reject the contract and/or penalize those involved with negotiating a contract they didn't expect to be fulfilled. A la Kovalchuk.

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Old
12-28-2011, 11:03 PM
  #36
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Originally Posted by knorthern knight View Post
You and I seem to have different definitions of circumvention. I define circumvention as gaming the system such that the your cap-hit is less than what you're actually paying a player. What is your definition?
You call it circumvention, i call it managing your cap space as allowed for and agreed upon in the collectively bargained agreement. An important part of team building these days.

I figured you dont so much circumvent the cap as the CBA. Circumvention I would see as an illegal or fraudulent attempt to get around the letter and spirit of the cba.

Im not sure if offering the parents a well paying job qualifies as circumventing, but i imagine it would be if in return, the player accepted less than perceived market value on the contract.

I thought i heard that flying ufas and their families to your city on the corporate jet to try and convince them to sign in your city though is.

The long tail years on a contract where no one believes the player or team have any intention of living up to it would be circumvention, was sort of ruled such already, and the rules changed to pretty much take that away.

So just signing a player for 5 years at 10, 8, 6, 4, 2 for a cap hit of 6 isnt circumventing the cap in the last 2 years, that would be a ridiculous interpretation to me.

And why would it be so important for anyone to want to alter that potential payout structure into a homogeneous one just to satisfy some curious desire for equivalence where it doesnt matter?

Why is it you used the term "gaming" the system? Are you suggesting that the team is getting some competitive benefit by getting far better value of player than their cap space is being charged for and so the team has a competitive advantage? Well i see a hometown discount the exact same way.

But front loading contracts now that the tail years problem has been addressed isnt circumvention. Putting a player on injury reserve isnt circumvention of anything, it is written right in the cba as part of the agreement.

Sending players to the minors sure makes a mockery of the utopian perfect hard cap many fans thought they won, but it isnt circumventing the cba because it is agreed upon in it. And are you sure you want to eliminate this? It's always fun when some other team suffers.

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Old
12-28-2011, 11:15 PM
  #37
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What happens long-term though?

Does anyone really think that Marc Savard is not effectively retired? By having him stay on LTIR for the rest of his contract, the Bruins don't get the cap hit. But they are a rich team so they can afford to keep paying him and use the cap space to pay other player(s).

Seems to me the same thing will happen with Pronger. We don't know yet of course, but I don't expect him to ever announce that he is retired. Announcing already that he is out for the rest of the year, including the playoffs which could end 6 months from now, appears to me as doctor(s) advising him never to play again. He simply won't come back to play; he'll stay on LTIR for all those years left on his contract, and the Flyers save the cap space to spend on somebody else.

Poorer teams presumably would not be able to afford swallowing such huge long-term contracts and adding other big contracts, but rich teams can.
the savard situation does infact hurt the bruins. it would seem he is effectively retired and if he did officially retire his cap would come off the books (he doesnt have a 35+ contract like pronger) as it stands now the bruins are paying his salary (hes not on ltir right now) when the bruins decide to add players at the deadline they will likely move him to ltir inorder to exceed the cap by his cap hit amount. but during the offseason the bruins must become cap compliant with savards contract counting. (so the bruins are effectively at a 4 mil disadvantage when building there team in the offseason. he can only go on ltir after the start of the season and the bruins meet the cap requirements counting him.

so unless savard retires the bruins will always have 4 mil of space at the start of each season. unless there is some way around this that im not aware of.

this is actually one thing i think the league should change. if a guy is ltir for multiple years his cap hit should not effect the teams offseason. it should be understood that he is out and the team in question shouldn't pay cap wise for a career ending injury

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12-29-2011, 12:25 AM
  #38
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this is actually one thing i think the league should change. if a guy is ltir for multiple years his cap hit should not effect the teams offseason. it should be understood that he is out and the team in question shouldn't pay cap wise for a career ending injury
Savard's contract remains one of the most blatant deals intended to circumvent the salary cap by artificially lowering his cap hit with phantom years tacked on the end. 90% of the seven year contract is paid out in the first four seasons, essentially turning what should have been a $6.4m cap hit into a $4.0m one.

Why should the Bruins should be let off the hook when their attempt to game the salary cap went wrong?

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12-29-2011, 01:00 AM
  #39
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Originally Posted by thinkwild View Post
Im not sure if offering the parents a well paying job qualifies as circumventing, but i imagine it would be if in return, the player accepted less than perceived market value on the contract.
I view that as a non-arms-length transaction, or under-the-table payment. Definitely circumvention.

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Originally Posted by thinkwild View Post
So just signing a player for 5 years at 10, 8, 6, 4, 2 for a cap hit of 6 isnt circumventing the cap in the last 2 years, that would be a ridiculous interpretation to me.
Player retires after 3 years. Team pays $24 million, but is charged only $18 million. That smells like circumvention, even if it is allowed.

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And why would it be so important for anyone to want to alter that potential payout structure into a homogeneous one just to satisfy some curious desire for equivalence where it doesnt matter?
I'm not talking about altering allowed contracts. If a team wants to pay $10 million in year 1, and $1 million for the next 4 years, so be it... AS LONG AS THEIR CAP GETS HIT $10 million in year 1, and $1 million for the next 4 years. Do whatever contract you want, AS LONG AS IT'S REFLECTED IN THE CAP HIT.

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Originally Posted by thinkwild View Post
Why is it you used the term "gaming" the system? Are you suggesting that the team is getting some competitive benefit by getting far better value of player than their cap space is being charged for and so the team has a competitive advantage? Well i see a hometown discount the exact same way.
Like I said, your definition differs from mine.
Your definition... compare cap hit to subjective "worth"
My definition... compare cap hit to objective amount of money paid out

Quote:
Originally Posted by thinkwild View Post
But front loading contracts now that the tail years problem has been addressed isnt circumvention.
If the player in your mythical 10+8+6+4+2 contract retires after the 3rd year, does the team have to top off their cap hit, and throw in an extra $6 million?

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Originally Posted by thinkwild View Post
Putting a player on injury reserve isnt circumvention of anything, it is written right in the cba as part of the agreement.
That is a valid exception. The player is not playing.

Quote:
Originally Posted by thinkwild View Post
Sending players to the minors sure makes a mockery of the utopian perfect hard cap many fans thought they won, but it isnt circumventing the cba because it is agreed upon in it. And are you sure you want to eliminate this? It's always fun when some other team suffers.
Similar to injured reserve. He's not playing in the NHL, so the team isn't getting any production from him.

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12-29-2011, 08:36 AM
  #40
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Originally Posted by FallsForItEveryYear View Post
the savard situation does infact hurt the bruins. it would seem he is effectively retired and if he did officially retire his cap would come off the books (he doesnt have a 35+ contract like pronger) as it stands now the bruins are paying his salary (hes not on ltir right now) when the bruins decide to add players at the deadline they will likely move him to ltir inorder to exceed the cap by his cap hit amount. but during the offseason the bruins must become cap compliant with savards contract counting. (so the bruins are effectively at a 4 mil disadvantage when building there team in the offseason. he can only go on ltir after the start of the season and the bruins meet the cap requirements counting him.

so unless savard retires the bruins will always have 4 mil of space at the start of each season. unless there is some way around this that im not aware of.

this is actually one thing i think the league should change. if a guy is ltir for multiple years his cap hit should not effect the teams offseason. it should be understood that he is out and the team in question shouldn't pay cap wise for a career ending injury
Teams are allowed to exceed the salary cap in the offseason by 10%. While Savard's contract reduces the flexibility the Bruins may have in the offseason, they can still enter the season using 100% of their cap space because his contract is less than 10% of the salary cap (or is it 10% of the midpoint...I don't recall).

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