SBD/May 8, 2014/Franchises

Clippers Co-Owner Rochelle Sterling Believes She Is Entitled To Maintain Control Of Team

Ownership by any of the Sterlings could mean a continued flight of sponsors
Clippers co-Owner Rochelle Sterling believes that she is "legally entitled to maintain ownership" of the team and will attempt to do so, even as the NBA "pushes to remove her husband from the team he has owned for 33 years," according to a front-page piece by Rainey, Bresnahan & Fenno of the L.A. TIMES. She said that Donald Sterling's sanctions "do not apply to 'me or my family.'" A source said that her position "presents a 'wild card'" for the NBA as it faces its "biggest crisis in memory." Her intention to "hold on to the team is a wrinkle apparently not contemplated by NBA officials" when they moved to strip her estranged husband of ownership. Ownership by any of the Sterlings "could mean a continued flight of sponsors and a potential boycott from players and fans." Clippers broadcaster Ralph Lawler said that Rochelle Sterling's plan to keep the team "was understandable but that others in the organization were ready to move on." Lawler: "In the eyes of the players and the coaching staff and the basketball staff, the page has been turned, and I think it would be difficult to turn it back." The NBA "has sent signals that it is uncomfortable" with Rochelle Sterling's "continued presence in the organization." The league "let her know that it would prefer that she not attend playoff games Friday and Sunday at Staples Center." Analysts said that even if she "is not included in the owners' vote to force a sale ... she might still need the approval of the 29 other owners before she can take over the team." That bid "could become complicated by the fact that she, like her husband, has been accused of racial bias and other misdeeds in lawsuits related to the family's expansive real estate holdings" (L.A. TIMES, 5/8). ESPN L.A.'s Ramona Shelburne noted the situation "could become further complicated" if either Rochelle or Donald Sterling file for divorce (ESPNLA.com, 5/7).

THE NEXT STEP
: In L.A., Mike Bresnahan notes the NBA Advisory & Finance Committee yesterday spoke via conference call and "addressed the process and timing regarding the termination of Donald Sterling's ownership of the Clippers." The committee "planned to meet again next week." The committee also "reviewed the status of the search" for a new Clippers CEO after team President Andy Roeser on Tuesday "took a forced leave of absence" (L.A. TIMES, 5/8).

A TAXING SITUATION: SI.com's Michael McCann wrote there has "been significant debate in recent days about the potential tax consequences" of Donald Sterling selling the Clippers. Sports & Entertainment Group Senior Manager Robert Raiola contended that if Sterling "sells his equity in the Clippers," he would "pay hundreds of millions of dollars in capital gain taxes." Between federal and California tax capital gain rates, Sterling "would pay" approximately 33% on the difference between what he bought the team for and what it is sold it for. The IRS "permits taxpayers to treat gains from 'involuntary conversions' of property as nontaxable income." Any gain resulting from the property's "destruction" can "sidestep taxes, provided the taxpayer reinvests the gain within two years, such as by buying other property or stocks." However, Raiola believes that the IRS "would not treat the loss of an NBA team as an involuntary conversion." Raiola: "The IRS could argue that the sale was pursuant to bylaws and provisions which Sterling agreed to play by, rather rules being forced on Sterling." Raiola also raised a "second reason why Sterling might not benefit from involuntary conversion: IRS rulings and case law indicate that the involuntary conversion must be made at the behest of the government or a government agency." Raiola: "It appears that Sterling's best course of action would be to defer the sale as long as possible to avoid capital gain taxation or until a favorable settlement is reached with the NBA" (SI.com, 5/7). Former Clippers GM Elgin Baylor yesterday appeared on CNN’s “AC360” to discuss Donald Sterling. Baylor, when asked whether Sterling would fight the NBA-imposed penalties, said, “Probably; Donald likes the limelight whether it's good or bad. That's the type of guy he is” (“AC360,” CNN, 5/7).

A FAMILIAR VOICE: Lawler yesterday said that he "would return for at least one more season because he did not want his retirement to be associated with the messy end" of the Sterling era. Lawler: "I positively don't want to get thrown out with the dishwater, so to speak. I want to come back with new ownership, new vision, new hope and be a part of that transition, be a part of the solution, not a part of the problem" (L.A. TIMES, 5/8).
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