Donald Sterling Expected To Sue NBA

Report: Clippers’ Donald Sterling to sue NBA to block forced sale of team
Kurt Helin May 2, 2014, 3:12 PM EDT



Everyone around the NBA expects this day is coming.

Donald Sterling is a litigious man and one who does not give up his holdings easily. When NBA Commissioner Adam Silver walked to the podium and brought the hammer down on Sterling for his racist comments — a lifetime ban, a $2.5 million fine and efforts to force a sale of the team — he knew he needed solid legal ground because Sterling would sue to block it.

And Sterling will, a source told the New York Daily News.

Donald Sterling won’t go down without a fight, according to an NBA executive who is close to the disgraced owner of the Clippers, and will sue the league if the other 29 owners vote to force him to sell….

“He is not going to sell the team,” the executive said….

As the Daily News reported Wednesday, if Sterling sues, he would likely base his case on language in the NBA constitution that deals with conduct that constitutes “willful acts,” a term that can be difficult to interpret and enforce. Generally those acts include criminal behavior, financial instability or gambling or fixing games.

Sterling is reportedly battling cancer, but don’t think that will cause him to change his outlook and decide to just walk away. That’s not who he is. Plus, his identity is wrapped up in owning the Clippers — he loves basking in the glow of celebrity, of people kissing up to him.

One other factor in here — money. Specifically taxes, and the future of the franchise in his family. Sterling bought the Clippers in 1981 for $12.5 million, if he sells the team now for whatever price, he has to pay a roughly 33 percent state and national capital gains tax. A lot of people think the sale price for the Clippers will approach $1 billion, to use that number Sterling would have to pay capital gains tax on $987.5 million, or roughly $329 million in taxes.

However, if one of his family members inherits the team, then he or she sells the team, they are only responsible for the capital gains tax on how much the franchise value increased on their watch. Which is to say, if the franchise is valued at $800 and his wife/son-in-law gets the team and sells it for $1 billion, they only pay the tax on $200 million, or a relatively reasonable $66 million?

The league has already started the process to expel Sterling. Expect his response to come soon.



bob
MY NOTE: There's a difference between celebrity and notoriety. I don't see many people kissing up to him anymore. A report came out last night that Sterling had told dujour.com that he "wishes that he had just paid her (V. Stiviano) off". Hardly setting himself up in a sympathetic light with that one. I cannot wait, absolutely cannot wait, to see what his season ticket sales numbers are like next season.


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No surprise. It's what he does.

If Donald Sterling dies, and it is reported that he has been battling prostate cancer for a long time, then his heirs get to sell the franchise with a cost basis of the then-current value of the franchise at time of death.

So, if Sterling sells it while he's alive, he pays capital gains taxes on the difference between the sales price, let's just say it's $700M, and the $12.5M he paid for it.  That's $687.5M of profit, @ 20% cap gains tax rate = $137.5M in taxes.  If the franchise is worth $700M when he dies and the heirs sell it for $700M, there are no taxes.

That's pretty good incentive for Sterling to drag this out as much as possible, literally, until death do he part.


Potential buyers of the Clippers being mentioned include:

Magic Johnson and his investment group that bought the Dodgers;
Oprah Winfrey;
and Larry Ellison of Oracle.

Ellison is worth $40B.  He tried to buy the GSW but got outfoxed (which doesn't happen often, that's why he's worth $40B).

This is an excerpt from a Wall Street Journal article:

Mr. Ellison, who routinely ditched schoolwork for basketball practice during his high-school years in Chicago, has yet to break into a major American sport.

His top sporting accomplishment has come in the America’s Cup, the world’s most famous yachting competition. He owns Oracle Team USA, the racing squad that lost the contest in 2003 and 2007 before winning in 2010 and 2013. Mr. Ellison, with an estimated wealth of more than $40 billion, lavished his own money on those campaigns; the head of Oracle Team USA estimated last year that the sailing squad’s budget for the 2013 America’s Cup was at least $115 million, though part of that came from corporate sponsors.

The Oracle chief has had basketball courts on at least two of his yachts, said Tom Ehman, who handles America’s Cup matters for Mr. Ellison. He said Mr. Ellison liked to relax by shooting hoops on these courts, and has had someone in a powerboat following the yacht to retrieve balls that go overboard.


Here's one of his yachts, The Rising Sun (Ellison is a BIG fan of the samurai and is reported to have some very, very old (museum quality) samurai armor in his house in Hillsborough, CA.  I know someone who did some of the electrical work on his house when it was being built).

Laker fans' worst nightmare would be if Larry Ellison ended up with the Clippers.  They'd be in for a multi-decade dogfight against one of the most competitive people ever.





bob


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Could he sell the franchise for a buck fifty to a new owners group made up of his family?

That would seem to take care of the whole mess pretty easily...

Matty wrote: Could he sell the franchise for a buck fifty to a new owners group made up of his family?

That would seem to take care of the whole mess pretty easily...

Matty,

I don't think it would, for a couple of reasons.

1. I don't think the league wants the Sterling family involved in any way, shape or form and they get to approve all new franchisees.
2. If he sells the franchise for a buck fifty to his family, then their cost basis is a buck fifty and if they ever decide to sell they will get hit even worse by taxes than he would if he sold when alive.

The idea is to RAISE your cost basis, not lower it. That reduces profit at sale and reduces taxes.

Could he sell the franchise to his family for, say, $350M, which is half price but raises the cost basis? That doesn't really help the situation much, since he's still paying a lot in taxes and still leaves them with a ton of taxes if/when they sell, but it also puts the league in the position of refusing the sale. They'd have a legit argument since, by selling it for half-price, he's watering down the value of all franchises and they have a legit stake in NOT having that happen.

His best case scenario, by far, is to hang on to the Clippers for dear life until he is dead and then his kids get the best of every world.

Unless, of course, Congress brings back the estate tax in which case he'd have to re-think.

Nothing like a healthy meal of capital gains talk to start the weekend, huh?


bob


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