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What should sports leagues do when a team owner is indicted?

Daniel Roberts
Senior Writer

Aubrey McClendon, who died in a single-car crash on Wednesday at 56, was the current CEO of American Energy Partners, and the former CEO of Chesapeake Energy (CHK). He was also a co-owner of an NBA team, the Oklahoma City Thunder. On Tuesday, the day before he died, the U.S. Department of Justice announced his indictment on conspiracy charges for rigging bids to buy oil and natural gas land leases.

The details around McClendon’s death, which occurred in Oklahoma City, are still unclear. But the federal charges against him would have created a thorny issue for the Thunder, and the NBA: What to do about a team owner charged with a financial crime?

The Thunder declined to comment on McClendon’s charges when asked on Wednesday, before news broke of his death, and the NBA front office did not respond to a request for comment. Neither the team nor the league issued a statement about the federal charges.

McClendon's current company, American Energy Partners, posted a long statement from McClendon on its web site on Wednesday morning: "The charge that has been filed against me today is wrong and unprecedented. I have been singled out as the only person in the oil and gas industry in over 110 years since the Sherman Act became law to have been accused of this crime in relation to joint bidding on leasehold. Anyone who knows me, my business record and the industry in which I have worked for 35 years, knows that I could not be guilty of violating any antitrust laws. All my life I have worked to create jobs in Oklahoma, grow its economy, and to provide abundant and affordable energy to all Americans. I am proud of my track record in this industry, and I will fight to prove my innocence and to clear my name." McClendon's lawyers, from two different firms, added their own statement that said, in part, "A charge is one thing. Proving the case is another. Starting today, Aubrey gets his day in court where we will show that this prosecutorial overreach was completely unjustified."

It certainly looks bad for a sports team when its owner is charged with a federal crime. But as Warren Zola, a sports law professor at Boston College, points out, “The public response is typically related to the type of crime rather than a blanket level of disgust… White-collar crime, such as the conspiracy charges filed against McClendon, seem to be largely ignored. If it doesn’t impact Kevin Durant or Russell Westbrook suiting up for the Thunder, I’m not sure if the general public really cares.”

The NBA has no clear rule about how to handle or punish a team owner charged with a crime. When L.A. Clippers owner Donald Sterling was recorded making racist remarks about his players two years ago, the public outcry was fevered and the response from commissioner Adam Silver was swift: the NBA banned Sterling for life.

But the NBA’s by-laws regarding ownership focus on removing an owner if they have violated league rules, or have a conflict of interest, or have engaged in illegal gambling. They don’t, as Zola says, “specify any automatic ouster based on an indictment—criminal or civil in nature.”

The situation of an owner being charged with federal crime has some precedence, but mostly in other pro sports leagues.

In the NFL, Cleveland Browns owner Jimmy Haslam has been under fire since 2013, when federal agents raided the headquarters of his truck-stop company, Pilot Flying J. Most recently, eight current and former executives of the company were indicted on charges over rebate fraud. Haslam has not yet been charged, but according to a Cleveland Plain Dealer report, there is still a strong chance he could be. In the same year that Haslam's company first came under investigation, the Wilf family, owners of the Minnesota Vikings, were found guilty of civil fraud, breach of fiduciary duty, and racketeering, and were ordered to pay nearly $85 million to former business partners over a real estate deal decades earlier.

To name an example from the NHL, former Toronto Maple Leafs owner Harold Ballard, who also owned Maple Leaf Gardens, where the team played, was convicted in 1972 on 48 charges of fraud involving the misuse of Gardens money. He was sentenced to nine years in prison but only served one, then was released on parole. He never had to relinquish ownership of the team, and remained majority owner until he died in 1990.

Major League Baseball had its own criminal scandal recently: the St. Louis Cardinals came under federal investigation for allegedly hacking the computer systems of the Houston Astros last year. In the end, just one Cardinals executive was charged, and in January pleaded guilty.

Soccer has had the starkest examples of owners in trouble. FIFA, the global governing body of the sport, has been riddled with a corruption scandal centering on its former president Sepp Blatter and many of his fellow executives. That scandal reached all the way America's pro soccer league, Major League Soccer, where Carolina Railhawks owner Aaron Davidson was charged by the DOJ last year, along with 13 others, for racketeering, money laundering and wire fraud. Davidson was president of Traffic Sports USA, the company that owned the team; in October, the company sold the MLS team to local tech entrepreneur Stephen Malik.

As the furor over Donald Sterling showed, the NBA can oust an owner whenever it pleases, if it gets a three-fourths vote from the other owners. The primary owner of the Thunder is Clayton Bennett, who purchased the team from Starbucks CEO Howard Schultz in 2006, when it was called the Seattle SuperSonics, and moved it to Oklahoma City in 2008. Bennett is also chair of the NBA’s relocation committee.

McClendon was only a part owner; he held a 19% stake in the Thunder. Had he not died, he could have been “pressured to sell his ownership rights,” said Darren Heitner, a sports lawyer in Florida. Because of the tragic events that transpired only one day after the DOJ brought charges, it is a situation the Thunder will not have to deal with after all. But it was one that still may prompt deep thinking for the league about what to do the next time an owner is indicted.


Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology. 

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