Did the LA Clippers Take a Page from the Mob?

deep run in the finals or wins a championship. So the league set the rules, and increasingly in the NBA, these rules are getting pretty strict and the idea of circumventing the rules is taken very seriously. Several weeks ago, the journalist Pablo Tory journalists kind of people might call

him a talking head, but he did. He also has a show where he does at times very serious journalism, discover that this fraudulent carbon credit company, allegedly fraudulent carbon credit company called Aspiration, which had been a sponsor for the Clippers.

him like planting trees or something. He did not do any of that. Right. There's also been disclosures by other news outlets that Kawhi Lenary received twenty million dollars in equity in Aspiration, which is now worth precisely zero, to be fair, but a total package of like forty eight

million dollars in cash inequity. And it also turns out that Seve Balmer, the owner of the Clippers, made a fifty million dollar investment in Aspiration, or the official sponsor of the Clippers, right, So that set of circumstances alone is pretty suspicious. Pablo Torri also had an anonymized source, somebody he went through the kind of vocal processing that

gave him like a very millennial vocal fry. Right, say that this company's going bankrupt, right, and they actually hire legitimately famous people, and the famous people getting paid way too much to actually do something for the company. Robert Downey Junior was one, for example, gravelly voiced adr Kawhi was getting paid seven million dollars to totally ghosts this company. Right, And when people ask why is this bankrupt company paying

this guy who has done nothing good offer us? Nobody even knows he's in a relationship with US seven million dollars a year, people would say things like it's CAPSIR convention loll in text messages. Right. So yeah, the theory.

The theory is that Seve Balmer, I'll be vaguer. The claim is that the Clippers found a way through this company aspiration that their owner is also an equity investor in to pay Kawhi Leonner a bunch of extra money so he'd sign in LA with the Clippers and not the Lakers, or not stayed in Toronto or back to San Antonio or the Houston Rockets or whatever else. And if you're into NBA gossip, Maria, this story at what's normally a slow time for the league has been has been.

The hot dish? Is that a real thing? I don't use. Hot dish is like a Minnesota thing. And I think it's a real term. I think I picked that up. The hot dish.

getting kicked back, getting money around. And when I was reading this, I was like, wait, they're taking they're taking a page out of the mob playbook to try to circumvent caps and get money to the right person in a kind of kickbacky way without actually having a paper trail all aught. This time they did have a paper trail, but that's the first thing I thought about. I was like, wow,

this is like a very mobby type of thing. And then it also reminded me, do you remember back this summer or maybe even earlier, and we mentioned it, I think briefly on the show there was a probe in Las Vegas, which you know, when you think mom and no show jobs, Vegas, Vegas is certainly a top of mind as well when the Aces were getting one hundred thousand dollars sponsorships from the Las Vegas Convention and Visitors Authority. I think we talked about that right to try to

get around those salary caps. So it seems like this is a tactic that's been gaining steam, and so to me, it's just very interesting if we talk about it from kind of a risky business game theory angle, is this the natural devolution of evolution, devolution of salary caps and of trying to curve some sort of behavior where people end up going around it, right and trying to figure out, well, I still really want this player, or I really want this person to come, you know, to the Clippers. I

really want this person on the Aces. Whatever it is, So let's figure out how we make it happen and try not to run a foul of the letter of the law while just totally disregarding the spirit of the law.

that I've seen offered. Well, let me take that back slightly, right, you know, there's not really a rational reason for the value produced to aspiration to pay Kawi million twenty eight million dollars or four years and twenty million dollars in equity to do nothing. Right. I'm sure he's a smart guy. I don't think he was like providing good advice to the board or anything either. And if he was on the board, you know, not a very successful venture by

by Kawhi right now, that however, goes to an arbitrator. Right, so the league is going to have its findings. They hired some three or four name white Shoe law firm. They will come back with a report, not anytime soon, by the way, probably in six months, if not longer. And then it goes to arbitration.

one punishment. So Joe Smith was a Minnesota Timberwolves player back in the day that the team had a sweetheart deal with to say, hey, look, we can only afford to give you this much now, but we'll take care of you on the back end. Right, And this somehow came out I think in like where there was vankrupcy

proceedings or so like. By the way, a lot of the stuff that comes out it comes out because so many fucks up in there's discovery and a lot of things were like you get in legal trouble all of sudden, the things said no one ever believed me be public become public. But the Timberwolves were fined five draft picks, people were suspended, ownership were suspended for like a year. Right. The Clippers barely even have five draft picks. But if I were them, I would fucking trade my draft picks

before I still could you want to take my draft picks? Sorry, we don't have them anymore. We traded them for player talent.

at least pretend. I think even on the Sopranos, the No show guys sometimes came to work to just wave and say, hey, yes here I am just to make big a show of it, and here we had none of that. Right. I think rules exist for a reason and people should face the consequences if they if they

try to do something underhanded. What do we think is the probability of the Clippers actually getting fined in a significant way, in a way that's not a risk slap, but something that is actually deter deter's future behavior like this on the part of the Clippers and other teams.

doesn't know about it. You know, he was known, his representation was known to be asking around for all types of things that are against the league charter, that are way outside the lines, right, so you know they have

been investigated for that before, you know. I think the true chance that, like you know, the other explanations would be like maybe somehow that if you give money to Kawhi that's kind of just transferred to somebody else, then you get money on your balance sheet, and having money in your balance sheet makes a financial statement look better

if you're getting other investors. Right, So, ironically, because this company was allegedly so shady, I just want to use allegedly because they're so sketchy, we're drawing to a gut shot. I think right now, will the NBA want to pursue a death penalty five draft pick type of situation? Right? Like that's kind of more of a political question, you know. I think the league constitution gives the commissioner, Adam Silver, in a relation a fair amount of wiggle broom.

the league could do. Adam Silver could say, uh, we have found that we believe that, you know, salary cap tri convention was committed, and now we're going to go to arbitration for a bruling.

want us to last another two years. Right, So we think we could get three draft picks and avoiding Kawhai's contract and suspending Steve Balmer for a year, but instead sorry, Steve, six month suspension, two draft picks, maybe one of which you can get back for good behavior, the largest fines because you'll pay the money. That's good for both of us, because you don't care about the money, and the other

owners we pacified. Right, Like if I to if I to guess right, I'd say that like twenty per chance slap on the wrists forty percent chance, plea bargain forty percent chance that the league wants to come down pretty hard and it goes to arbitration conditional on that eighty

percent chance the arbitrators agree. So the odds of like the nuclear option happening, I think are lower than the odds of something happening, which in turn now lower than something actually happened having happened, because like you know, if it's borderline, then I think you're get to slap on the risk territory.

and that happens both with rewards and with punishments. And so the three scenarios that you've laid out spell out very different kind of futures that the league might might see and might be signaling that they want to see. Right, Because if you get like a slap on the wrist, they're saying, we don't actually care that much about this kind of stuff. Keep on doing it.

It's just fucking it's guaranteed. That's how an equilibrium works in an efficient market in the NBA is a regional approximation of an efficient market run by players that are very smart and agents that are very smart, and owners that will talk about their intelligence in the moment, but certainly owners who are very, very competitive and accomplished and have the financial means of social connections to accomplish what

they want the large majority of the time. And I think Adam Silver is smart enough to know that, right. I mean, like the other defense I've heard prominently by by Mark Cuban, former Dallas Mavericks owner, another smart, accomplished guy, has been a big defender of Balmer. His defense is Steve Balmer couldn't do something this stupid, to which I say, have you ever fucking met a billionaire before? Like the billionaire I haven't met Elon Musk, right, who was until

recently advising the President of the United States. And I think I have a high opinion about some aspects of Elon Musk, but like, but you know, I also have the opinion that Elon Musk would be one example of how billionaires can can believe in wrong and things and be sloppy and be very arrogant, and like I think arguably also like you know, maybe it's like rational for him to say, Okay, we didn't expect this company to be fraudulent and to have all this discovery that uncover

these under the table relationships, and Okay, we know what's the worst case. You're not going to take away the team. They're not gonna take away the team. So maybe you have a twenty percent chance of discovery times a fifty percent chance conditionally that you get punished for it, right, so like a ten percent chance you get suspended for

a year. And yeah, there's some draft picks. The Clippers are pretty fucked anyway, right, you know, when you don't have many of good draft picks, removing the remaining few, I mean, he can just sell them and go buy a soccer team or WNBA team or whatever else. Right, So it might be quite rational even given the possibility, but not the certainty of this harsh punishment. I mean, isn't all the literature that like, it's the certainty of punishment,

not the severity that actually deters crime. Maybe it's yeah, maybe it's actually wrong.

didn't realize that that wasn't part of the calculus. We thought the company was more legit, which which is quite amusing, Right when you're doing something wrong and it turns out that you get punished because the entity that you're partnering with did something even more wrong.

How pissed would he be then, right, you know, I mean that would create a real deterrent.

in an email. You do this in a phone call, or better than a phone call, you do it in a meeting over coffee at some lemonade at the country club, and you have the conversations there, and then you hire like a middle man who might have a slightly more fingerprints on it, right, or you're kind of informed, you know, you tell somebody, hey, do you haven't you don't know anybody who could maybe help Kawhi get some sponsorships, right, maybe a little step further and say, you know what,

anything within you know, within the higher end of market value, you know what I mean, Like if you instructed somebody to do that, they would kind of get the right impression. If you're a billionaire caterer, I imagine you're quite good like taking the implicit instructions from your billionaire So is not to create legal liability for them?

et cetera. But I think that billionaires forget that and do get sloppy because they think they can afford to be And so you do need to have punishments that are larger, kind of a magnitude larger, in order to deter that kind of behavior. And it's very interesting to me to see, yeah, to see this playing out in a realm that I know very little about, and it turns out that it has all these parallels with realms I know a lot about, because billionaire behavior turns out

to be pretty similar. Across the board. We're thinking, you going to get away with shit and skirt the rules, and you know what, usually you can. So on that note, Nate, do you want to take a break and talk about whether New York needs more of them? Do we need

more millionaires? Do we need more billionaires? In the state. So, Nate, there has been a report that recently came out by the Citizens' Budget Commission that argues that New York needs more millionaires because it's been adding millionaires at a lower rate than that of other larger states. And what that means is that the state is not getting as much

in tax revenue. So there's this, you know, theoretical unrealized potential revenue that it could be getting if millionaires were coming to New York at comparable rates to other states, and instead it is not. And we see increases in Florida, we see increases in Texas. We even are seeing increases in California, which has someone say, even more punitive kind of tax rules than New York does. But for some reason, you know, they're adding millionaires at a much faster rate

than New York is. So in between twenty ten and twenty twenty two, the New York millionaire population has almost doubled, but in the other states it's more than tripled. And so the argument of this report is that, you know, we should have more rich people so that they can pay more taxes. Of all, Nate, you know, this is obviously where we've talked about Mom, Donnie affordability. You know, we're getting to elections. It's interesting timing for the report to come out.

I mean it's possible. And by the way, you know, even as if you're not on the other side, So if you're on the wrong side of Laffer curve, then you actually make less money by tax people more because people less and or relocate. You know, even if you're not in in the upper part of the Laffer curve right then or at the peak, then you do still encounter diminishing returns. You can imagine like a parabola. Right.

I think New York City still offers a pretty unique I mean, I'll be frank, like, I choose to live here and pay I pay a lot of taxes, and I also have a home in Westchester County where I pay a lot of taxes. Right, because, like, I really like New York and there's not any particularly close second. Maybe if maybe if Iroba be like Las Vegas better, it's been half the year out there with you or something.

But like, I think progressives need to understand that, like you do encounter diminishing returns when you just tax rich people more and more. They can decide to work less. They can decide to especially with Trump having good at the irs, right, they can decide to legally hide income

were illegally high income. Right, they can decide to move and like when you start to have you know, if they feel as though that they're not getting their money's worth, if they feel like the quality of New York City is declining, right, Like I don't know, Like, you know, if we had the crime problems in New York City that they have in some other cities, then I'm not super sensitive to crime, but then I might leave right then, you know, if if if they hadn't really built sure

La Guardia Airport, if the subway weren't I think still one of the best transportation systems in the world, if we didn't have so many you know, beautiful we.

think it'd be great at New York hadbar billionaires. My guess is that the current tax co is probably something close to two optimal for the overall welfare of the city. If you tried to increase it more, I could see I could see them being problems. I mean, I think, you know, I have friends who are who are wealthy.

I should say, you know, I'm pretty wealthy myself relative to a lot of people, and some of them I think seem irrationally concerned about Zarron because like tax policy in New York is art addictated by New York State anyway, and there are lots of political and practical constraints and other things like it's not I'll put it like this, it's even as a free market guy and a guy who pays a lot of taxes in New York, maybe a member of the class, even this is not the

most sympathetic cause I don't think.

As you say, a lot of the migration, because this is something that you just asked about, Nate, like, well, you know where are they going? That a lot of the families that are leaving are actually not millionaires. They're kind of the middle at least for New York middle class families. For other parts of the country, they would be considered I think upper middle class that make two hundred three hundred thousand, those are actually that's the demographic

that's leaving the fastest, that's the biggest outflow. A lot of millionaires are not that sun sort of to like a marginal few percent tax, right if they're living where they want to live, because they want to live where they want to live, right, Like, that's part of the point of having of being a millionaire, that you want to live in a place where.

kind of irreplaceable. I think, you know, in fact, I think kind of, yeah, California is struggling more in some ways. I think you hear that San Francisco is like rebounding a little bit, but like you know, since COVID, I haven't heard nearly as much La West Coast jealousy from from New Yorkers. Right, I'd like to see more more housing at all levels of the ecosystem. Right, I'd like to see more of that.

experience for everyone in the city. And that the millionaires are not going anywhere, at least for now, I mean that we're not. We're not at that point.

And likewise, if you have a vicious circle where there's lux tax revenue coming in, so things I like about New York, the parks and the overly expensive but now quite nice airports, and the slightly dirty but very efficient subway and everything else, right, if those things deteriorated, then you know, that can create a vicious cycle. And we have seen the city into.

like that, right, even New York. New York has recovered, but there have been some pretty nasty points in New York City's history. But yeah, with that said, I think you and I are on the same page that we don't think that the millionaire port is the number one problem facing New York City right now, and so yeah, we appreciate that this report is coming out, but billionaires, there are lots of millionaire related problems, and I don't

think this is one of them. On that note, Nate, I'm going to enjoy the fact that I'm in New York right now and go enjoy this fantastic city. Let us know what you think of the show. Reach out to us at Risky Business at pushkin dot FM. Risky Business is hosted by me Maria Kanakova.