NCAA Lawyers Up

Spending on outside lawyers jumped by $18 million in two years amid lawsuits.

July 16, 2019
 
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AUSTIN, Tex. -- The National Collegiate Athletic Association is paying more than twice as much in outside legal fees as it did four years ago in order to fight a slew of lawsuits, according to figures shared by its chief financial officer Monday during an appearance at the National Association of College and University Business Officers annual meeting.

High-profile concussion and antitrust lawsuits have forced the NCAA to hire high-powered lawyers at a time when it is also spending millions of dollars to try to shore up the college basketball ecosystem in the wake of a damaging recruiting scandal. Those expenses put financial pressure on the athletic association at a time when it is also facing uncertainty and risk from major changes to the landscape such as a 2018 court case giving states the ability to legalize sports gambling.

The NCAA is spending about $54 million in third-party legal fees for its fiscal year ending in August 2019, said Kathleen T. McNeely, NCAA senior vice president of administration and CFO. That's up from $46 million the previous year and $36 million in 2017. For the year ending in August 2015, the NCAA spent $25 million, its federal tax filing for the year shows.

“One of our biggest challenges financially -- and by we I mean the NCAA -- I'd say for the last five years has been the growth in our third-party legal fees,” McNeely said. “Our third-party legal fees are escalating to the point where it is affecting our ability to provide additional resources for our schools.”

Despite increasing sharply, outside legal fees are still only a small slice of the money passing through the NCAA's hands. The association reports more than $1 billion in annual revenue, and a 2019 revenue distribution plan called for it to pay about $590 million to individual institutions and conferences at the Division I level alone.

But NCAA leaders worry about continued antitrust suits or other lawsuits that ultimately seek to make sure college athletes are paid for their efforts. The NCAA and its member institutions have in recent years increased what can be offered to athletes in terms of food, stipends and scholarships, but the association still opposes institutions paying athletes.

“We really can't lose these suits,” McNeely said. “This is fundamentally what college sports are about. And so that means we're hiring really good attorneys with national reputations and who have argued in front of the Supreme Court so that we can win.”

All of the lawsuits have had indirect effects as well. General liability insurance premiums have been rising, as have premiums for directors, McNeely said. Some conferences have been informed that general liability claims cannot include head injuries going forward.

Business officers and other leaders at colleges and universities need to think about the financial implications and trickle-down effects those developments may have on their individual institutions, McNeely said.

“They're not just suing us now,” she said. “They're suing your conferences, and in some situations they're suing your schools.”

As different states legalize sports betting in the wake of a landmark 2018 Supreme Court decision overturning a federal ban outside Nevada, the NCAA put together both an internal working group and an ad hoc member committee to look at related issues and new steps. Sports wagering will affect athletes, their coaches and officials, according to McNeely.

The NCAA will develop educational materials for athletes, coaches and administrators. It is exploring changes to how it performs background checks for referees and game officials. It has hired a Minneapolis-based company to look for signs of game fixing.

All three divisions will be monitored. A total of 12,500 events were monitored under a pilot program last year.

Work that the NCAA does on wagering means institutions and conferences don't have to pick up expenses themselves, McNeely said.

Meanwhile, a working group has been studying issues related to athletes being compensated for the use of their names, images and likenesses. Lawmakers in at least two states, California and North Carolina, have introduced bills pressuring the NCAA to allow athletes to profit from use of their images.

“It is really about their ability to sponsor something,” McNeely said of the bills' potential impact on athletes. “Membership has not been accepting or wanting to change this.”

The resistance is rooted in worries about recruiting, she added. Recruiting could become unfair if wealthy and well-connected institutions are able to entice athletes to enroll by offering sponsorship opportunities.

Of course, critics can contend that powerhouse institutions already have the ability to dangle future sponsorship opportunities, athletic connections or business ties in order to tilt the recruiting playing field. And the blurry lines between booster and university, between company and athletic department, make a coherent argument difficult.

“This is not paying the student athlete,” McNeely told university business officers in attendance Monday. “You wouldn't be paying them. We wouldn't be paying them, which is really why this is one of the ones that's hard for us to argue. Although I will say it's difficult if you understand the way recruiting works.”

On the topic of the recent high-profile college basketball recruiting scandal, the NCAA is implementing recommendations from a commission chaired by Condoleezza Rice, the former U.S. secretary of state and Stanford University provost. It will cost about $15 million annually, McNeely said.

She also touted work the NCAA has done to address athlete health, concussion safety and transparency about health risks athletes take.

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