Commentary

Michael Vick's bankruptcy botheration

He's back in court about his finances. Plus, another group of NFL lockout losers

Originally Published: July 22, 2010
By Lester Munson | ESPN.com

Here's a question: Do you have a "voidable preference"? Just kidding, 'cause it's fun to write those words. "Voidable preference" is one more of those very cool phrases that Courtside Seat gets to kick around every now and then. In this case, Michael Vick gets to kick it around, too. Or, more likely, Vick is going to get kicked around by it. Anyway, read on. Today, we start with …

Bankruptcy blues

His birthday party ended in a shooting. He missed his own celebrity golf tournament because his parole officer would not let him travel. And now Michael Vick is back in court facing charges that he made unauthorized and illegal gifts to friends and family in the months before he declared bankruptcy.

It's uncertain how this new dispute will end. One of Vick's bankruptcy lawyers is already belittling the claim. Attorney Paul Campsen says the legal proceeding filed earlier this month is nothing more than "a garden-variety attempt to collect money."

It is an attempt to collect money, but there's nothing garden-variety about it. In the next few months, Vick will find himself trying to explain what to most people would be an embarrassing series of financial decisions.

Between October 2006 and November 2007, for example, Vick wrote and cashed 67 checks that he made payable to "cash." According to court records, the total cash he collected from his 31 bank accounts during this period was $751,765. That's an average of nearly $54,000 in cash in his pocket each month during the final seven months of his dogfighting operation and the first seven months of investigations and charges that led to his incarceration.

[+] EnlargeMichael Vick
AP Photo/Dave MartinBankruptcy authorites are interested in Michael Vick's apparent generosity.

The 67 checks range from $1,000 (four times) to more than $50,000 (another four). The largest was $87,726.48, and it was cashed on March 28, 2007, on the eve of the first raid on Vick's kennel.

In addition to disclosing Vick's cash habits, the court papers show that Vick paid $150,000 to each of the three lawyers who represented his colleagues in the dogfighting operation.

In hindsight, the payments to these lawyers might not have been a great investment. Almost as soon as the lawyers received the money, they raced with their clients to the federal courthouse, where the three co-conspirators pleaded guilty and added to the mountain of evidence against Vick.

So even as Vick appeared to be paying for some of their legal fees, his dogfighting pals (Tony Taylor, Quanis Phillips and Purnell Peace) turned their backs on him, made their deals with federal prosecutors and prepared to testify against their benefactor. It left Vick with little choice but to give up and plead guilty himself.

Phillips is the person who was shot in the aftermath of Vick's 30th birthday party last month. This time, however, he is acting a bit differently. Phillips has refused to cooperate with investigators. Even though the local police have identified the gunman, they cannot file charges without Phillips' cooperation.

In the new proceeding filed against Vick in Newport News, Va., his bankruptcy trustee asserts that instead of paying what he owed to numerous creditors as he faced the dogfighting charges and likely bankruptcy, Vick made payments to his mother, the mothers of his three children, his sister and his brother. (Yes, that brother, Marcus.)

It is a violation of bankruptcy laws to give away assets to friends and family on the eve of a bankruptcy. The legal term is "voidable preference." If, as the trustee says, Vick gave away funds that could have gone to official creditors, then the trustee can seek to void the payments and recapture the money for the creditors.

It isn't yet clear how many of Vick's gifts the trustee wants to void and recapture, but the court documents indicate they might total more than $1 million. Ross Reeves, the Norfolk attorney who represents the trustee, wants Vick to account for two years of his expenditures, an enormous task.

If Judge Frank Santoro determines that any of Vick's gifts to friends and family are "voidable preferences," the trustee will try to recapture the money.

Only one of Vick's expenditures during this period is absolutely certain to be approved. In July 2007, in the middle of the dogfighting scandal, he gave $317,000 to a congregation known as Psalms Ministry in Newport News to allow it to purchase a church.

The members of the church have nothing to worry about. But Vick and his family will have some explaining to do in the bankruptcy court about the rest of those checks.

Likely lockout losers

The NFL's 32 owners and 1,500 players are locked in a negotiating battle for a new collective bargaining agreement, and their talks, public statements and posturing should be watched with great interest in the coming months. If a new CBA isn't achieved, it's possible, even probable, that the league's management will lock out the players next spring and jeopardize the 2011 season. Both sides no doubt already have economic contingency plans in place for just such a development.

So a nation of football fans should be paying attention.

There are 608 men, though, with a very special interest in what's happening between the owners and the players. They are the league's coaches. What happens to them if they don't have football to coach after this year?

In the case of the 32 head coaches in the league -- Bill Belichick, Sean Payton, Mike Shanahan, Mike Tomlin, Pete Carroll and the rest -- the answer is easy. They'll work and be paid through any lockout.

But the answer isn't quite so simple for the coordinators, position coaches, strength-and-conditioning specialists and other assistants who do much of the heavy lifting for a team through the course of a year. If a lockout begins some time after the expiration of the current union contract in March 2011, or after the college player draft in April, what would be their fates?

Leslie Frazier
Paul Jasienski/Getty ImagesLeslie Frazier, the Vikings' defensive coordinator, might draw only a quarter of his salary if a lockout lasts longer than 90 days.

There would be no minicamps, no training camps, no exhibition games and, in the worst of scenarios, no season. Why would team owners continue to pay these coaches for work they cannot do?

It's an issue the owners have anticipated.

A few teams would keep their coaching staffs working during a lockout. To the owners of those teams, apparently, a lockout offers their coaches a unique opportunity for continued study of defensive and offensive schemes and for detailed evaluations of players and prospective players. When the lockout ends, these coaching staffs would be ready to welcome their players back.

In an excellent article in the recent issue of the Marquette Sports Law Review, St. Louis attorney Robert H. Lattinville (of the firm of Stinson Morrison Hecker LLP) and NYU law professor Robert A. Boland point out that both the Baltimore Ravens and the Cincinnati Bengals have awarded "coach-friendly" contracts to their staffs. Those teams would continue to pay their coaches during a lockout. The New York Giants would pay their coaches in full for the first six months of any work stoppage.

But most teams have insisted on including lockout clauses in the contracts they've given their coaches that will reduce their salaries and, in some cases, dismiss them altogether. Those owners view the lockout as an opportunity to cut their costs. They would use the lockout clauses to save some money.

The cost savings, however, would be surprisingly small.

NFL teams employ an average of 19 coaches, according to Larry Kennan, the executive director of the NFL Coaches Association, a professional association of coordinators and assistants formed to share salary information and increase coaches' leverage. The New Orleans Saints, who won Super Bowl XLI last season, employ a staff of 21, for example; the Indianapolis Colts, the Super Bowl runners-up, have 19 coaches on their staff.

According to contract studies made by Kennan and the NFLCA, the average salary of an assistant coach is $350,000. The average cost of a coaching staff is only $6.7 million, a pittance compared to a player payroll in the range of the 2009 salary cap of $128 million.

Here are some examples of what specific teams would do with their coaches in a lockout:

New York Jets: A 25 percent salary reduction on the day a lockout begins. After 90 days, a further reduction of 50 percent or dismissal from the staff.

Tampa Bay Buccaneers: A 25 percent salary reduction on the day the lockout begins. After 90 days, a further reduction of 50 percent. (There is no dismissal language in the Bucs' contracts.)

Mike Martz
AP Photo/Nam Y. HuhIf Mike Martz were still a head coach, his salary would be protected. But as the Bears' offensive coordinator, his pay can be docked 25 percent as soon as a lockout starts.

Denver Broncos: A 50 percent salary reduction on the day the lockout begins.

Arizona Cardinals: Four weeks of full pay after the lockout begins, followed by a 35 percent salary reduction.

Minnesota Vikings: Ninety days of full pay after a lockout begins, followed by a 75 percent salary reduction for 90 days and then dismissal.

Chicago Bears: A 25 percent salary reduction on the day a lockout begins with a team option to dismiss after a 60-day notice.

In the face of these contractual provisions, should the coaches be thinking about organizing their own union?

Maybe. It's certainly a possibility.

"When the owners took many of our pensions and started inserting lockout clauses in our contracts, we began to look hard at the idea of a union," Kennan, who coached in the NFL for 16 seasons, told ESPN.com. "We are in a process. It is a process of discussion and education and information. We are educating the coaches and providing them with information. We have been doing this for the last two months. We will be doing more and more as coaches return from their vacations and training camps open. We will not take a vote on a union until after this season. We have been taking unofficial votes in our discussion, and we will continue this process."

But although a union would provide an ironclad pension and other fringe benefits for coaches, it would be a difficult undertaking under the laws that govern labor organizations, and it would eliminate significant leverage that the coaches have enjoyed -- at least until the advent of lockout clauses.

Because coaches have some supervisory and managerial authority in the course of their employment, it might not be legally possible for them to form a union. As the Lattinville-Boland article explains, head coaches have the ultimate authority, while the supervision roles of assistant coaches "fall into a gray area."

Although the coaches would suggest that they act for the players and for themselves, it is more likely that courts would consider them as acting in the interest of the owner. If the coaches are working on behalf of the team owner, they cannot form a union.

Even more important to the coaches as they consider their plight is that, with a cap on player salaries, the best way for high-revenue teams such as the Cowboys, Giants and Patriots to use their money to gain an edge is to invest in the people they consider to be the best coaches. Under the current system, there is no salary cap for coaches, and coaches are free agents whenever their contracts (usually two or three years in duration) expire. An owner can pay a coach whatever the owner needs to pay to bring him to the team.

If the coaches were to form a union, they would find themselves facing demands from owners for limits on their free agency, a salary cap and even a salary scale.

In any event, the ongoing discussions about a coaches' union, according to Kennan, have nothing to do with the ongoing negotiations between owners and the players' association.

Absolutely not," Kennan said. "We are looking at a union because the owners changed our pensions without any discussion, and we decided that we must look into our options."

For now, the coaches' principal concern is the looming lockout. A few would continue to be paid handsomely for jobs they love, but most would face serious, possibly career-bending, issues.

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.

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