Legal Issues, Other Risks, Could Spell Trouble for NCAA, Report Says

Sep 8, 2005

By Gabriel J. Hernandez
In countless ways, the NCAA is no different than any of the country’s largest corporations. And like most corporations, it spends a fair amount of time – and money – dealing with legal issues.
If the association is not careful, though, it could find itself working overtime to keep itself out of our nation’s courts.
According to a recent “risk assessment” report solicited by the finance committee within the NCAA’s executive committee, the potential for future litigation involving the athletic institution is greater than ever, and could pose a significant threat to its ability “to govern and regulate intercollegiate athletics.”
Ironically, the report, prepared by the consulting company Deloitte, intersects a recent, rather litigious period for the NCAA.
Just last month, a judge dismissed part of a potentially damaging lawsuit brought about by two former Alabama football coaches who sued the NCAA over its enforcement procedures.
More recently, a trial began involving the National Invitation Tournament, which contends that the NCAA’s financial juggernaut, the NCAA Basketball Tournament, is in violation of federal antitrust laws. The NIT argued that invited schools shouldn’t be forced to play in the NCAA tournament.
Being that the NCAA relies on the basketball tournament for approximately 90 percent of its annual revenue – another area deemed a “risk” in the report – the potential fallout from an unfavorable ruling in this case would have had enormous consequences for the association. Realizing that, the NCAA worked toward a settlement. A goal that was achieved in later August.
Still another legal battle seemingly brewing in the not-so-distant future would be challenges to the NCAA’s recently announced policy involving Indian mascots and their ban at NCAA-sanctioned tournaments.
All taken into consideration, the legal landscape for the NCAA could become somewhat problematic very quickly.
“Unfortunately, we can’t do anything about people bringing litigation against us,” said Bob Williams, managing director of public and media relations for the NCAA. “How much of a threat any of this is, is very hard to quantify. All we can do is make sure our processes are sound so that if litigation does come forward we can do our best to prevail.”
Williams added, “Reality, however, says that any time you enter into litigation, anything can happen.”
The potential for “anything can happen” is exactly what NCAA officials should be worried about, according to Chuck Smrt, president of The Compliance Group, and former director of enforcement at the NCAA.
“The collegiate athletic environment and its processes as a whole are becoming much more litigious,” Smrt said. “There are more institutions and many more individuals and their respective counsel involved in the processes, and as a result there could be many more court decisions in the future.”
The key, Smrt said, will be in how the NCAA administers and follows its own processes and policies.
“Having processes in place and following them usually alleviates, diffuses or eliminates potential litigation,” Smrt said. “Some people will sue you regardless, but it certainly reduces the likelihood of successful litigation if procedures are followed uniformly.”
One of the things that also will help the NCAA is the legal precedents that have already been established as a result of past court cases.
“They’ve had a very good history with precedents,” Smrt said. “Obviously, the more cases that get stacked up against you, the more opportunity there is for loss, and they eventually could lose some precedents along the way. But in the past they have been quite successful as a result of precedents.”
Rulings such as the recent court decision involving former Washington football coach Rick Neuheisel, however, won’t do the NCAA any good. In this case, an apparent oversight about a rule change led to a settlement that cost the NCAA $2.5 million and a truckload of humiliation.
In light of the potential for such dubious situations, the report suggests the outsourcing of attorneys to review enforcement policies and actions, athlete reinstatement, the committee on infractions and the infractions appeals process, in general.
In addition to the legal liabilities, the report, while somewhat general in offering other solutions, also addresses three other specific areas of “vulnerabilities”:
§ Federal or state legislative intervention: namely, the NCAA’s tax-exempt status as a non-profit organization, which came up last year during a Congressional hearing on abuses in recruiting. Some members of Congress suggested taking away the institution’s tax-exempt status if it failed to revamp its recruiting policies. To make matters worse, and in apparent retaliation to the Indian mascot mess, some states – namely Florida – may also begin their own investigations into possible antitrust violations;
§ NCAA’s lack of revenue diversification: as mentioned earlier, the NCAA relies on its basketball tournament for approximately 90 percent of its annual revenue. The report said this makes it “vulnerable to competitive actions (or) adverse events …”. The report suggests the NCAA look into further development of the other “88” championships that it funds, most notably women’s basketball, baseball (College World Series), lacrosse, ice hockey, etc.; and
§ Reputation: the report identified this as the “common theme in all the significant risks identified …” therefore requiring “indisputable positive direction and clear-cut leadership practices that strengthen the NCAA’s brand and its reputation.”
Exactly what direction the NCAA will shift in light of the report’s conclusions, however, is still very much up in the air.
“We really don’t have any specifics just yet,” said Jim Isch, the NCAA’s senior vice president for administration and chief financial officer. “With this report, the plan was identification. We’re now in the process of reviewing it and prioritizing the risks that have been identified. We have to be certain that we are focused on all these areas, and that we’re doing as much as we possibly can to mitigate these risks. I think the big point here is that it’s all about prudent managerial leadership. It’s what any organization should be doing.”
Some even believe the report may have been somewhat overdue.
“The thing that surprised me was that they did (the report),” Smrt said. “I was there for 18 years and I’m not aware of them ever assessing themselves in this manner. In the past they’ve done more strategic planning and forward thinking than anything else. I think (this type of report) makes a lot of sense for them.”


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