DOJ and Treasury Schooled by College Athletes
Below is a memo I’d love to see, but I’m not going to hold my breath waiting for it to be written by the White House. Since they won’t likely write it, I thought I’d better write it myself . . .
To: Attorney General Eric Holder, Treasury Secretary Jack Lew
CC: United States Attorneys, SEC Chair Mary Jo White
Date: August 8, 2014
We’re going to talk law, but it starts with sports — specifically, college football and men’s basketball.
Like many sports fans, I watched with amusement as Northwestern football players asked the National Labor Relations Board to certify that they were employees of their university, and thus should have the right to form a union. “No way they’ll be able to beat the university and (by extension) the NCAA,” I thought. Like many sports fans, I was shocked when the hearing officer agreed with their argument — until I read his decision.
Brian Phillips at Grantland has a nice, layperson’s summary, in which he wrote:
[NLRB hearing officer Peter Sung] Ohr put aside the accumulated decades of fake idealism and rhetorical obfuscation and laid out the — again — really, really obvious facts: . . .
That is not glee club, friends; that is a job, and if you’re defining it otherwise, you have an agenda. To have the case presented this starkly, and by a federal agency no less, is a powerful thing.
It is indeed. Let me remind you that the Departments of Justice and Treasury are also federal agencies, who often presenting cases in c0urt. But more on that in a bit. Back to sports first.
Yesterday, former UCLA basketball player Ed O’Bannon and a number of his colleagues won their anti-trust case against the NCAA. As ESPN summarized the ruling:
U.S. District Judge Claudia Wilken, in a 99-page decision that followed a contentious three-week trial in June, ruled in favor of former UCLA basketball star Ed O’Bannon and 19 others who sued the NCAA, claiming it violated antitrust laws by conspiring with the schools and conferences to block the athletes from getting a share of the revenues generated from the use of their images in broadcasts and video games.
The ruling by Wilken repeatedly finds that the NCAA and its witnesses misrepresented their own history. She repeatedly finds that the NCAA and its witnesses presented studies and data that, when examined carefully, do not support the arguments put forward by the NCAA. After listening to the litany of horrors put forward by the NCAA about the disastrous consequences a ruling against them would have on college athletics, Wilken laughed. Like that of Ohr in the NLRB case, Wilken’s ruling cut through the obfuscation and pushed aside attempts to mislead. She labeled the NCAA for what it is: a cartel engaged in price-fixing and other practices that constitute an illegal restraint of trade.
Her conclusion is a well-sharpened blade, slipped deftly between the ribs of the NCAA:
College sports generate a tremendous amount of interest, as well as revenue and controversy. Interested parties have strong and conflicting opinions about the best policies to apply in regulating these sports. Before the Court in this case is only whether the NCAA violates antitrust law by agreeing with its member schools to restrain their ability to compensate Division I men’s basketball and FBS football players any more than the current association rules allow. For the reasons set forth above, the Court finds that this restraint does violate antitrust law.
To the extent other criticisms have been leveled against the NCAA and college policies and practices, those are not raised and cannot be remedied based on the antitrust causes of action in this lawsuit. It is likely that the challenged restraints, as well as other perceived inequities in college athletics and higher education generally, could be better addressed as a policy matter by reforms other than those available as a remedy for the antitrust violation found here. Such reforms and remedies could be undertaken by the NCAA, its member schools and conferences, or Congress. Be that as it may, the Court will enter an injunction, in a separate order, to cure the specific violations found in this case.
As I was reading both the NLRB ruling by Ohr and yesterday’s decision by Wilken, I was struck by a sense of deja vu. Where had I heard the arguments of Northwestern and the NCAA before? Then it hit me: they are the same kinds of arguments made by the financial services industry against any kind of oversight or accountability for their actions, especially those that led to and emerged during the Lesser Depression. Outrageous claims were made on the basis of unsupported assertions and dubious data, and the financial industry has managed to escape unscathed.
I know that Matt Taibbi’s name is not exactly beloved at DOJ or Treasury, but when the JPMorgan Chase board rewarded Jamie Dimon with a 2014 compensation package of $20 million (a 74% raise) in gratitude for keeping the legal penalties they paid during 2014 to only $20 billion, Taibbi’s observation here is spot on:
. . . if you punish a firm, and its executives come out of the episode convinced their only problem was an irrational PR issue, your enforcement strategy probably needs tweaking. It doesn’t exactly send much of a message when, mere months after you’ve imposed record enforcement penalties, the CEO of your target company is being led down Wall Street on a donkey, board members showering him with cash.
The last time I checked, DOJ has a whole unit devoted to anti-trust enforcement, and yet it took a gutsy move by a bunch of former college basketball and football players to hold the NCAA accountable.
The last time I checked, Treasury had an army of forensic accountants and lawyers whose job it is to put aside rhetorical obfuscation and monitor compliance with federal law in the banking industry, and yet they can’t manage to follow the bread crumbs laid down for them by the Financial Crisis Inquiry Commission and file a basic criminal case for securities fraud in the residential mortgage-backed securities that were misleadingly packaged and sold in the run-up to the financial crisis. The DOJ received referrals, but all that anyone has heard since is . . . crickets. Foreclosure fraud, robosigning, and lying in regulatory and court filings ran rampant, and yet not one flesh-and-blood banker has been tried and convicted for the actions that led to the crisis or the actions taken during the crisis that made matters worse and took advantage of everyone’s attention being elsewhere.
I know the complaints your two agencies have raised about resources. “Compared with the banks, our lawyers are outnumbered and outspent.” I agree. But that’s beside the point. Do you seriously believe that Kain Coulter and the Northwestern football team had resources equal to Northwestern University? Do you seriously believe that Ed O’Bannon and his 19 co-defendants had a legal budget equal to the National Collegiate Athletics Association? What they had on their side were the facts and the law — and that was enough. Whether on the playing field or in the courtroom, they knew how to take their opponents apart, using their opponents’ own words and documents to make their cases.
I am tired of my administration being schooled by a bunch of football and basketball players, who seem to know more about not being bullied and scared by the legions arrayed against them than all the lawyers at DOJ and Treasury. Don’t agree with that characterization? Then prove me wrong, convict someone, and demonstrate that Too Big To Jail is a myth.
* * *
Yeah, that’s a memo that’ll never get written by the White House.
Photo h/t to Pete Souza, official White House photographer. No, that’s not the president drafting this memo, but a boy can dream . . .
Note well the official White House disclaimer:
This official White House photograph is being made available only for publication by news organizations and/or for personal use printing by the subject(s) of the photograph. The photograph may not be manipulated in any way and may not be used in commercial or political materials, advertisements, emails, products, promotions that in any way suggests approval or endorsement of the President, the First Family, or the White House.
Let me be crystal clear: the above is not an actual memo written by an actual POTUS, and there is very very little that leads me to believe that the president either approves or endorses what appears here. But if he decides he’d like to approve and endorse it by actually sending it to Holder and Lew, I’d be very very happy.