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Avoid Cap Penalty on Long Term (Back Diving) Contracts

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04-01-2013, 11:45 AM
  #1
Numbers
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Avoid Cap Penalty on Long Term (Back Diving) Contracts

I was thinking today about how Kiprusoff might not report to a team if he is traded and whether the team with his contract would take a cap penalty for that. Since his contract is not a 35+ contract there would be no cap penalty, only the player suspended by the team.

So in the case of players riding those back diving contracts this might be the best way out of them. Luongo, Hossa, Kovalchuk, etc...can effectively say I'm not reporting to my team, but not retiring. This means that the players cap hit is off the books, the players does not need to play those extra years, and there is no cap penalty. In the end there is then no consequence for either party.

Alaxander Radulov is a good example of a suspended players cap hit taken off the books. A team has the right let the years pass or to freeze the contract. Either way cap hit does not appear in any form on teams Cap balance sheet.

CBA Article 50.10(c)
(c) For Players that are suspended, either by a Club or by the League, the
Player Salary and Bonuses that are not paid to such Players shall not count against a
Club's Upper Limit or against the Players' Share for the duration of the suspension, but
the Club must have Payroll Room for such Player's Player Salary and Bonuses in order
for such Player to be able to return to Play for the Club.


Last edited by Numbers: 04-01-2013 at 12:32 PM.
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04-01-2013, 11:51 AM
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When I looked at this thread at a first glance, I thought it said to give a cap penalty for diving teams.

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04-01-2013, 11:56 AM
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Quote:
Originally Posted by Numbers View Post
I was thinking today about how Kiprusoff might not report to a team if he is traded and whether the team with his contract would take a cap penalty for that. Since his contract is not a 35+ contract there would be no cap penalty, only the player suspended by the team.

So in the case of players riding those back diving contracts this might be the best way out of them. Luongo, Hossa, Kovalchuk, etc...can effectively say I'm not reporting to my team, but not retiring. This means that the players cap hit is off the books, the players does not need to play those extra years, and there is no cap penalty. In the end there is then no consequence for either party.
I'm only vaguely aware of it, but isn't there some sort of pension from the NHLPA for retired players? I would imagine that if a player didn't retire, they wouldn't be eligible for it.

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04-01-2013, 11:59 AM
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Even so the pension is really small compared to what they been making. Think about this for a second I think this might be the loop hole everyone has overlooked.

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04-01-2013, 12:05 PM
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Quote:
Originally Posted by Numbers View Post
I was thinking today about how Kiprusoff might not report to a team if he is traded and whether the team with his contract would take a cap penalty for that. Since his contract is not a 35+ contract there would be no cap penalty, only the player suspended by the team.

So in the case of players riding those back diving contracts this might be the best way out of them. Luongo, Hossa, Kovalchuk, etc...can effectively say I'm not reporting to my team, but not retiring. This means that the players cap hit is off the books, the players does not need to play those extra years, and there is no cap penalty. In the end there is then no consequence for either party.
I really doubt that is the case.

There are a couple of mechanisms that work here.

Kiprusoff's contract is not subject to any claw back or cap penalties because it was not 7 years or longer in length.

If any player chooses to not report to their team, this does not remove the cap hit from the team because the player is still on the roster, just simply not with the team. The team can choose to suspend the player, at that point I'm not 100% clear on what happens to the salary or cap hit.

LTIR remains the most likely method of avoiding cap hit penalties on long term contracts.

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04-01-2013, 12:07 PM
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Originally Posted by tempest2i View Post
I really doubt that is the case.

There are a couple of mechanisms that work here.

Kiprusoff's contract is not subject to any claw back or cap penalties because it was not 7 years or longer in length.

If any player chooses to not report to their team, this does not remove the cap hit from the team because the player is still on the roster, just simply not with the team. The team can choose to suspend the player, at that point I'm not 100% clear on what happens to the salary or cap hit.

LTIR remains the most likely method of avoiding cap hit penalties on long term contracts.
But if a player is suspended his not on the books, see Radulov.

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04-01-2013, 12:13 PM
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But if a player is suspended his not on the books, see Radulov.
Radulov was suspended during the playoffs. Radulov is an unsigned RFA at the moment.

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04-01-2013, 12:15 PM
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Even so the pension is really small compared to what they been making. Think about this for a second I think this might be the loop hole everyone has overlooked.
Even if it's small compared to what they used to make, why would a player give that up to benefit a team they're no longer playing for? Out of the goodness of their heart?

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04-01-2013, 12:17 PM
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Radulov was suspended during the playoffs. Radulov is an unsigned RFA at the moment.
No before that. Radulov still had a contract playing in KHL, then returned to Nashville at end of season. For a couple years he was a suspended player with contract, with no cap penalties.

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04-01-2013, 12:21 PM
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Even if it's small compared to what they used to make, why would a player give that up to benefit a team they're no longer playing for? Out of the goodness of their heart?
If its for a couple of years and the pension is $50000 a year, a team can easily offer a job. If you see this as the major holdup, I think you are being short sighted. This could be a way for teams to save millions on their cap.

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04-01-2013, 12:25 PM
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If its for a couple of years and the pension is $50000 a year, a team can easily offer a job. If you see this as the major holdup, I think you are being short sighted. This could be a way for teams to save millions on their cap.
So the team would suspend the player to get his contract off the cap and then offer that player a job? I would imagine that the NHL would see that as a clear cut case of cap circumvention.

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04-01-2013, 12:26 PM
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Quote:
Originally Posted by tempest2i View Post
If any player chooses to not report to their team, this does not remove the cap hit from the team because the player is still on the roster, just simply not with the team. The team can choose to suspend the player, at that point I'm not 100% clear on what happens to the salary or cap hit.
From the old CBA - and there is no indication in the NHL/NHLPA MOU that this has changed:

Quote:
Originally Posted by Old CBA Article 50.10(c)
(c) For Players that are suspended, either by a Club or by the League, the
Player Salary and Bonuses that are not paid to such Players shall not count against a
Club's Upper Limit or against the Players' Share for the duration of the suspension
, but
the Club must have Payroll Room for such Player's Player Salary and Bonuses in order
for such Player to be able to return to Play for the Club.
However, if there is any evidence, even circumstantial, that there was any agreement between the team/player or that the team encouraged the player to refuse to report - then the team and player could be subject to Article 26 investigation and penalties for Circumvention.

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04-01-2013, 12:28 PM
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Originally Posted by illogic View Post
So the team would suspend the player to get his contract off the cap and then offer that player a job? I would imagine that the NHL would see that as a clear cut case of cap circumvention.
Offer a job once contract expires, what can the NHL prove. In the case of Luongo if he is traded and then does not report to different team at end of contract, Canucks could offer him a job and how could NHL link that to either team circumventing the cap.

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04-01-2013, 12:29 PM
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Originally Posted by kdb209 View Post
From the old CBA - and there is no indication in the NHL/NHLPA MOU that this has changed:



However, if there is any evidence, even circumstantial, that there was any agreement between the team/player or that the team encouraged the player to refuse to report - then the team and player could be subject to Article 26 investigation and penalties for Circumvention.
How can you prove it? Team, player, agent won't say anything.

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04-01-2013, 12:33 PM
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Did Keenan already out Kipper's contract as being intentional cap circumvention?

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04-01-2013, 12:37 PM
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Did Keenan already out Kipper's contract as being intentional cap circumvention?
I dunno, but this is a major loop hole that basically nullifies the NHL's attempt to penalize teams.

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04-01-2013, 12:40 PM
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Refusing to report in the final year(s) of a front loaded contract when a player is presumably quite old, has nagging injuries (who doesn't have a lingering/inconvenient ongoing injury after a 15-20 year career playing a contact sport) or simply going on LTIR are both options to rid bad contracts from my perspective and always felt this way. Kipper is a good hypothetical because it seems quite possible he doesn't report next year. Pronger is a good real example of the second scenario.

There is so much fanfare when big contracts get signed or traded but when these contracts start coming off the books due to injuries (and again I think it's understated how really any given player in his early 40's has some lingering injury, especially head injuries that nobody understands anyhow) it will be very quiet and I doubt it gets any real attention.

This is just one of the reasons I've always felt the 'liability' of Luongo's contract is overblown

I could be wrong though, time will tell

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04-01-2013, 03:50 PM
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Sergei Shirokov
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Or you could just buyout these back contracts before the player retires.

Since they back dive the actual financial cost would be less.

Or just trade said player to a cap floor team and let them have the cap penalty on there cap.

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