The NBA Went Too Easy on Steve Ballmer and Too Hard on the Clippers

In order to promote competition, the National Basketball Association (NBA) has a salary cap. Its rules (which are adopted as part of collective bargaining between the team owners and the players' union), are very complicated but the key point for purposes of today's discussion is that there are caps on both individual salaries and total team salaries. There are also anti-circumvention rules. As basketball fans undoubtedly know, the Los Angeles Clippers were recently given a very severe penalty for violating those anti-circumvention rules by using third parties to funnel millions of dollars beyond the official salary to their star player Kawhi Leonard.

In saying the penalty is severe, I am not referring to the financial penalty. Leonard was fined $700,000, and Clippers owner Steve Ballmer was fined $30 million. But Leonard's salary for last season was about $50 million, so his fine amounted to less than 1.5% of one year's salary. Ballmer, meanwhile, is a co-founder of Microsoft with a net worth of over $150 billion. To get a sense of what his fine means in percentage terms, that's like a "mere" millionaire having to pay a fine of about $300. He'd rather not pay it, but he's not going to feel it.

Nonetheless, I say the penalty for the Clippers was severe because in addition to the fines (and a one-year suspension for Ballmer), the team had to sacrifice five consecutive first-round draft picks. The Clippers have had some good seasons over the years. They were entertaining and competitive (though they never made it past the second round of the playoffs) during the Lob City era of Chris Paul, Blake Griffin, and DeAndre Jordan. They made it to the Western Conference Finals in 2021 but injuries and other setbacks meant that the Clippers with Leonard and Paul George never fulfilled their full potential. And in between there have been some very bad seasons. Rebuilding without any first-round draft picks will be very difficult. The pain will be felt chiefly by Clippers fans and not at all by Leonard, who has returned to the Toronto Raptors (a team he led to an NBA championship in 2019).

Hovering over all of this is the question why? Why does a man earning $50 million want his team to cheat to pay him even more?

When people ask why billionaires want more money, one answer often floated is that the super-rich treat wealth as a kind of competition independent of any direct utility of the money. Elon Musk feels like he is winning as against Jeff Bezos because Musk has more money than Bezos, even though each of them has way more money than anyone could ever possibly spend.

That explanation has a close analogue in sports. The ability to get a "max contract" in the NBA is vindication that one is a super-elite player, a way of keeping score. But the whole point of under-the-table payments is that they're, well, under the table, and thus not visible for scorekeeping. We still have a puzzle.

The puzzle seems especially acute when one considers that the New York Knicks just won a championship in no small part because their star player, Jalen Brunson, took $113 million less than he could have received so that more money would be available under the salary cap to surround him with other talented players. It worked.

I suppose one might say that Brunson's decision made sense because he was hungry for professional fulfillment, which arrived when he led the Knicks to a championship and was named NBA Finals MVP. Leonard, by contrast, has already been the Finals MVP twice--once with the San Antonio Spurs and once with the Raptors. So maybe he's professionally fulfilled and just wants more money.

But that's hardly a sufficient explanation. LeBron James has won four NBA championships, four Finals MVPs, and four regular season MVPs; he is widely recognized as either the greatest or one of the two greatest NBA players of all time; and yet James recently signed a contract with the Philadelphia Seventy-Sixers for $8 million for the upcoming season, which is an order of magnitude less than what he could have earned; he did so for the same reason Brunson left money on the table--to help his team improve its personnel and thus boost its odds of a championship.

Maybe Leonard is either a much greedier human being than Brunson and James? That's theoretically possible, but Leonard has always come across as soft-spoken and humble--much less flashy in his personal style than many of his peers. The notion that Kawhi Leonard is unusually greedy or unusually uninterested in helping whatever team he is on win is far-fetched.

So perhaps responsibility for the salary cap circumvention does not rest with Leonard. A story last week in The Athletic (behind a paywall) lays the blame for the demand for under-the-table payments to circumvent the salary cap on Leonard's business manager, who also happens to be his uncle, Dennis Robertson. Greed by Robertson is a highly plausible explanation for the scandal. The NBA caps agents' percentage of their clients' salary at 4 percent. But Robertson is not a registered agent and did not act as an agent on Leonard's behalf. Not sharing in Leonard's salary, for him the under-the-table payments were in fact a very big payday.

If a large portion of the anti-circumvention-rules-violating payments went to Robertson, we don't have much of a mystery. And in fact, the NBA found that Robertson acted without Leonard's knowledge. Moreover, when Leonard was shown a preliminary version of the league's findings, he fired his uncle as business manager, which cannot have been easy, given that Robertson was a father figure to Leonard, whose own father was murdered when Leonard was sixteen. The fact that Leonard was not responsible for Robertson's actions explains why Leonard received (for him) a very light penalty. Indeed, one might think that if Leonard really was an innocent bystander in the scheme, then any fine for Leonard was uncalled for.

Was Leonard really unaware? The one observer who seems to know best is Pablo Torre, the investigative journalist who discovered the Clippers' scheme to circumvent the salary cap in the first place. And he thinks the evidence suggests that Leonard very much did know what his uncle was up to. If so, that revives our mystery. 

Maybe Leonard knew what Robertson was up to but didn't object because he wanted his uncle to get a big payday. That's possible, I suppose, but Leonard is sufficiently wealthy that he could have just paid Robertson more as his manager or even as his uncle. We routinely read stories of athletes purchasing homes, cars, and other expensive items for relatives to whom they feel warmth and gratitude. Accordingly, I remain puzzled by Leonard's motivation and will simply leave it there. 

What about the bigger picture? If one believes that Leonard really was innocent in the plot, then his story jibes somewhat with other stories of athletes and others being taken advantage of by people they trust with their finances. Kareem Abdul-Jabbar's manager mismanaged and stole millions from him. Bernie Madoff did the same to his clients. Against that backdrop, Robertson is less of a villain. He cheated the league but not his client/nephew.

But what about Ballmer and the Clippers? Why did they accede to Robertson's demands for deals that circumvented the salary cap? Why didn't someone for the Clippers just say no, we can't do this? That question seems easy enough to answer: Team owners, managers, and players want to win. To do so, they sometimes cheat--whether by using forbidden performance-enhancing drugs, stealing signs, or circumventing the salary cap.

Whatever the explanation for everyone's conduct, the penalties seem mismatched: too harsh on the Clippers and their fans but insufficiently harsh on Balmer, who can be back at games and running the team in just a year and who, as noted above, will not feel any financial pain from the loss of $30 million. (Robertson received a five-year ban, but I doubt he will be able to find other clients even after the ban ends.)

Pete Rose was rightly given a lifetime ban from baseball for gambling on games he managed, even though he only ever bet on his own team. Steve Ballmer deserves the same penalty for trying to circumvent the salary cap, even if he did so only to help his own team. After all, Rose's gambling was not calculated to cheat other teams (which is not in any way to excuse it). Ballmer's circumvention was in fact designed to give the Clippers an unfair advantage in competition for Leonard's services.

-- Michael C. Dorf