No end to NHL ownership scandals

Story Highlights

Ducks, Senators and Predators latest in long line of shady ownership behavior
NHL's efforts to prevent another John Spano fraud case appear to have failed
Recent Predators sale a morass of fraud allegations and questionable loans

Under clouds: Henry Samueli (top); William Del Biaggio III of the Predators (middle, right, with his father), and the Senators' Eugene Melnyk (bottom, left, with Jim Balsillie, who was thwarted in bids to buy the Preds and Penguins.)

Getty Images/Reuters/AP

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"Trouble is a funny thing."
-- NHL Commissioner Gary Bettman in a television interview on the CBC regarding allegations of financial misdeeds by team owners that came to light during the 2008 Stanley Cup Final.

Trouble can be a funny thing, but in the National Hockey League these days, no one is laughing.

A "new breed" owner, Henry Samueli of the Anaheim Ducks, has signed off on a plea deal that will see him get five years probation and $12.2 million in fines and penalties for lying to federal investigators who were looking into a scheme that tied him to an options backdating scandal in his company, Broadband. In the plea deal, Samueli will avoid jail time, but may still face other charges in state court.

There's a similar case being built by the U.S. Securities and Exchange Commission and its counterpart in Canada against Ottawa Senators owner Eugene Melnyk. It charges that he and others who ran the pharmaceutical company Biovail, which Melnyk founded, improperly pumped up earnings, overstated revenues, minimized liabilities in contravention of accounting rules, failed to correct entries related to foreign exchange losses and, not least, misled securities investigators.

Melnyk recently stepped down as Chairman and CEO of Biovail and has vowed to fight the charges and clear his name. If he fails, he too might join Samueli on the league's suspension list.

Also in June: William "Boots" Del Biaggio, once a rising star in the investment world, who recently provided cash to help secure the sale of the Predators to a local group intent on keeping the financially troubled franchise in Nashville, was discovered to be under federal investigation for a slew of financial fraud allegations. Del Biaggio recently filed for bankruptcy protection and is being sued by a variety of banks, one of which his father co-founded.

If you toss in another serious scandal that popped up earlier in Bettman's tenure as NHL boss -- the 1997 purchase of the New York Islanders by John Spano, who was shortly thereafter found to be a fraud who almost totally misrepresented his wealth, and was eventually sent to prison -- you have to wonder exactly what's been going on in NHL financial circles.

The Spano case was thought to be a turning point in the NHL -- an embarrassment in which the league fell flat on its face regarding its "due diligence" process. After that debacle, the NHL announced a series of stringent conditions for passing economic muster into its ownership ranks. New processes were put into place and there was much talk about the character of individual partners undergoing intense scrutiny as well. A major investigative firm was hired and all relevant safeguards were said to be in place.

It was under those standards that another pair of would-be NHL owners, the father and son team of John and Tim Rigas of Adelphia Communications, were vetted. Not long after they were approved, the two were convicted of fraud in federal court regarding billions in off-the-books loans, a ruling that plunged both Adelphia and the Buffalo Sabres into bankruptcy, and put both Rigas in jail.

In the Samueli case and, perhaps Melnyk's as well, one could argue that these things happen in the world of big business and high finance. The NHL has a long list of owners and even a former commissioner who have done jail time for business-related activities after they purchased or obtained their franchises. Among them are the Rigas, former New Jersey Devils minority owner Dennis Kozlowski, former San Jose Sharks owner Greg Reyes, former New York Islanders co-owner Sanjay Kumar and former Los Angeles Kings owner Bruce McNall.

Those are only the ones who had problems under Bettman's watch. The overall historical list is considerably longer. Still, there was never supposed to be another Spano.

There are a variety of opinions why these things keep happening to the NHL, seemingly more so than any of the other major sports league. The best explanation may reside in economics. If you're looking to buy into the NFL, you can figure on spending near (and in some markets more than) a billion dollars for a franchise. Major League baseball teams have gone for considerably less, but it wouldn't cause anyone to blink if the Chicago Cubs sell for somewhere between $600 million-$800 million. The NBA, a league more in line with the NHL in terms of winter sports, indoor play and the like, can command near $500 million for a team like the Los Angeles Lakers, according to a recent Forbes Magazine report.

Contrast that with the NHL. A few years before the lockout, a franchise could be had for somewhere around $80 million. Although they increased in value after the 2004-05 lockout, established franchises have struggled to hit the $200 million mark. Many are considered worth a great deal less.

In truth, the NHL is viewed as an entry-level league for people with some cash to spend. Unfortunately, that can attract folks who may not have the wherewithal to make a purchase, but try with what may fairly be termed "creative accounting" to get their cheaply shod foot in the door.

To drive franchise values higher, the NHL seems more intent on getting the money rather than scrutinizing where it's coming from. Couple that with what appears to be a far too cozy "old boys" club regarding the way the NHL tends to steer business among favored partners -- and sometimes even against long-time partners who stand up to its rulings (see the court battle between the NHL and New York Rangers owner James Dolan as Exhibit A) -- and, well, the league's somewhat nefarious history speaks for itself.

So how does the NHL now explain Boots Del Biaggio?