- Lester Munson, Legal Analyst
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The world of crime and punishment, money and sex, indictments and lawsuits, and drugs and celebrity never lets us down. Here's the latest from behind the headlines of sports and the law.
Today, we start with
Con men and capitalists: a teaching moment
It might be a tough decision for the owners of some teams. Do they embarrass themselves by filing a lawsuit and admitting in public that they'd been snookered by a con man for $50,000 in advertising? Or, maybe to protect their billion-dollar business, do they take the loss, try to keep it quiet, and just move on?
It's hard to know how often that second option happens, because we likely never hear about the con that way. But for the Halas-McCaskey family and the Chicago Bears, it was not a tough call.
The Bears, apparently, are not easily embarrassed. (Their first-round draft picks, for example, include Cade McNown, Curtis Enis, Michael Haynes and Stan Thomas.) So when the team's executives realized what David Hernandez had done to them, they did not hesitate. They admitted their blunder and sued him, even though he was in jail and his company was in bankruptcy.
Here's how it happened: The Bears believed Hernandez when he said he would send the money in a day or two to pay for two 30-second commercials for a medical-staffing business and another of his enterprises during an exhibition game, even though Hernandez had never signed the written contract. In the breach-of-contract lawsuit they filed in the Circuit Court of Cook County, the Bears are relying on e-mail exchanges with Hernandez to establish his promise to pay. They served the papers on him at a downtown jail where he's awaiting trial on separate federal mail-fraud charges. The team now can count itself as a Hernandez victim, along with the numerous investors whom he allegedly bilked out of $12 million in the business that was supposed to provide staffing for hospitals.
Some of the investors' money went into Hernandez's next operation. A serious sports buff who hung out at games and banquets throughout Chicago, Hernandez used the money to convince a bevy of Chicago broadcast personalities that they could establish a new form of sports talk. Several quit their jobs to join him in his "webio," a Web-based sports talker that looked promising until it collapsed along with Hernandez's alleged Ponzi scheme.
Although Hernandez fooled a lot of smart and successful people before he was finally caught, he is far from the slickest con man in sports history. That honor goes to the amazing John A. Spano, who makes "Ferris Bueller's Day Off" look like child's play. In 1997 at the age of 33, Spano managed to buy the New York Islanders and operate the team for three months without ever paying a nickel of the $165 million purchase price.
He ran up $220,000 in personal expenses as the team's CEO while assuring three banks, two major law firms, the Pickett family (the Islanders' previous owners) and NHL commissioner Gary Bettman that his checks would soon be in the mail. When one finally arrived in the amount of $1,700 instead of $17 million, Spano explained that his bank had screwed up the decimal point.
Neither Bettman nor the Picketts thought it was funny. When they realized what Spano had done, they went to the FBI, as embarrassing as it was. Spano, who tried to pull off other major cons, too, spent nearly 11 years in federal penitentiaries and finally was released April 3, 2009.
To the Bears -- and certainly to the Islanders and the NHL -- the bottom line apparently was well, the bottom line. It didn't take them long to get over the embarrassment and humiliation, and focus on the money. There's a lesson here somewhere.
A Mike Nifong moment
They've reached a new level of animosity in the Ben Roethlisberger sexual assault litigation in Reno. In a 39-page brief filed Tuesday, Roethlisberger's legal team suggests that the attorney for Andrea McNulty, who accuses Roethlisberger of raping her in his hotel room at a celebrity golf event, "decided to take a course from Mike Nifong," the disgraced and disbarred prosecutor in North Carolina whose prosecution of rape charges against three Duke lacrosse players disintegrated in a serious of legal missteps. The accuser's attorney, Calvin Dunlap, a former district attorney in Reno, has filed "a blatant extortion attempt masquerading as a lawsuit," according to Roethlisberger's lawyers. Instead of checking on his client's story, they say, Dunlap "slapped together" a "tangled web of lies, deceit, and misdirection."
Both Dunlap and Roethlisberger's lead attorney, David Cornwell, declined to comment to ESPN.com.
Roethlisberger's defense against the allegations is based on an enormous trove of e-mails from McNulty's company computer at the Harrah's Tahoe resort-casino. In a series of nearly 3,000 e-mails to someone she thought was a soldier in Iraq, McNulty referred to herself as a "sex addict," described explicit sexual scenarios, and attached a topless photo of herself. It later became apparent that the "soldier" was an unknown person somewhere in Nevada.
In other e-mails to friends and co-workers, she described the quarterback as "effing hot," said that there had been a "sexual encounter" with Roethlisberger that was the "best ever," and maintained that she did not care if it ever happened again "because it was soooo good."
In this corner, the 'Great One'
Wayne Gretzky is one of hockey's all-time greats, of course -- a legend to be treasured by the sport. He was the face of the franchise in Phoenix, and the primary source of any hope that hockey might somehow succeed in the desert. But somehow, the NHL and commissioner Gary Bettman, in their attempt to buy the Coyotes from the current owners in a bankruptcy auction, have put themselves in a position where they are now labeling Gretzky as one of their "opponents." The league's proposal to buy the team was based on an offer of $140 million that would have paid some of the team's debts.
Gretzky's salary as the Coyotes' coach, $8 million per season, was excluded from the list of bills the NHL was willing to pay. In a sworn statement, Bettman said the league's bid to buy the team was "structured to allow payment of all legitimate creditors." Yet neither Gretzky nor his contract was on the list of legitimate creditors.
Although Gretzky voluntarily resigned as the season was about to begin, bankruptcy judge Redfield T. Baum was not happy with what the NHL was doing to the Great One. Judge Baum refused to allow the NHL to buy the team, noting that there has been no determination "that [current owner Jerry] Moyes and Gretzky claims are not 'legitimate creditors.'" Instead of stiffing Gretzky, the judge suggests in a 28-page opinion, the league should consider curing "the defect" in its offer. Gretzky is entitled either to payment with other creditors or a "fair trial" on his claim, Judge Baum concluded.
He told the NHL to reconsider its approach to Gretzky and to "take another shot at the sale."
Returning fire at Cuban
After a surprising triumph over the Securities and Exchange Commission in an insider-trading case, Mark Cuban and his legal team demanded that the SEC pay Cuban's fees. The case against Cuban was so bogus, they asserted, that the SEC must be punished. It was a highly unusual maneuver in the ordinarily polite world of securities litigation, an accusation that the regulators were guilty of conduct so egregious that they had "defiled the very temple of justice."
The SEC and its lawyers were not happy.
They came back firing with an appeal of the judge's ruling for Cuban, and with a 145-page brief that adds significant details to the public evidence against the Mavericks' owner. The brief includes transcripts of e-mails, investigators' interviews, and other documents that bolster the SEC's case, supporting its assertion that Cuban knowingly violated securities laws by selling his stock in Mamma.com to avoid a loss that would have come hours later when the company initiated a new financing.
Although the SEC attorneys refused to comment on their filing, it is clear that the materials will become a centerpiece of their arguments in the U.S. Court of Appeals in New Orleans. Until the SEC filed its additional evidence, the case against Cuban was marked with ambiguities and with equivocal evidence. The new material, which was filed only after Cuban attacked the SEC with his demand for fees, resolves many of the doubts about the case against him. It might have been better for the billionaire to pay his lawyers quietly without poking a needle into the SEC's eye.
And speaking of a Needle
As owners, commissioners, unions, players, coaches, colleges, networks and the entire rest of the world of sports watch closely, the U.S. Supreme Court's consideration of a radical departure in the laws that govern the industry is moving along briskly. The lawyers for the NFL and American Needle Inc. will appear before the high court's nine justices in January, with a decision expected by June 2010. Between now and then, the NFL will file its brief, asserting that it and other sports organizations such as MLB, the NHL, the NBA and the NCAA are exempt from the nation's antitrust laws.
Within 10 days after the NFL's filing, other briefs may be filed by people or organizations that support the NFL's position. They'll try to match up against briefs filed against the NFL by players unions, NFL coaches and a group of 20 nationally recognized sports economists. If the NFL succeeds in convincing at least five of the justices that its "single entity" theory -- in which the league claims it is a single entity competing with other providers of entertainment rather than a group of 32 separate businesses competing with each other -- is correct, it will be the biggest court determination in the history of American sports.
What will the court do? If you line up nine different law professors, they will give you nine different predictions. But whatever the decision is, it will be done before the court's term ends in June.
Lester Munson, a Chicago lawyer and journalist who reports on investigative and legal issues in the sports industry, is a senior writer for ESPN.com.
What would George Halas have done? Probably the same thing his team did when the Bears got conned recently. Ain't the life of sports and the law grand?