Kovalchuk contract latest example of CBA loophole; Averages $583,000 last 6 years
- Blog Post by: Michael Russo
- July 20, 2010 - 9:11 PM
Tuesday night REJECTION: The NHL has rejected the Kovalchuk contract for salary-cap circumvention. The Devils have declined comment, but now this gets interesting. As I outlined below Monday, the intent of this contract was clear, but it seemed to me to be legal under the laws of the CBA. There is a provision in the CBA, however, that prohibits teams from circumventing the intent of the rules.
Where does this go from here? Humorously, the league waited to make its decision well after the theater of the news conference earlier today.
The problem that I see is the league allowed numerous other contracts that were similar in intent, from Chris Pronger to Roberto Luongo. The league has warned teams that if they continued to construct contracts like this, there would be consequences. This is a clear message by the NHL, but I see a little duel on the horizon.
The New Jersey Devils are the latest team to capitalize on a loophole negotiated into the current collective bargaining agreement five years ago, you know, the one where the league's owners locked the players -- and the fans -- out.
To circumvent the salary cap, teams are able to drastically reduce the salaries late in contracts to lower the cap figure dramatically. The loophole? If the player happens to retire, he doesn't get his money AND the team isn't penalized, so the assumption is players are taking significant pay decreases during years they have no intention of playing anyway to help their team get a cap-friendly figure.
In other words, bogus contracts.
Take Ilya Kovalchuk's contract: He signed a deal today with New Jersey for $102 million over 17 years for an annual cap hit of $6 million. He's allegedly going to play until he's 44, averaging $583,000 a year the final SIX years of his contract.
Here's the breakdown, according to Star Tribune sources:
2010-2011: $6 million
2011-2012: $6 million
2012-2013: $11.5 million
2013-2014: $11.5 million
2014-2015: $11.5 million
2015-2016: $11.5 million
2016-2017: $11.5 million
2017-2018: $10.5 million
2018-2019: $8.5 million
2019-2020: $6.5 million
2020-2021: $3.5 million
The NHL is allegedly "investigating" drastically-frontloaded contracts like Chris Pronger's, Roberto Luongo's, Marian Hossa's, Johan Franzen's and Henrik Zetterberg to see if there is any evidence of talk of retirement.
Even writing that sentence, I literally laughed out loud.
NHL Commissioner Gary Bettman has warned teams to stop constructing these type of contracts, yet Devils GM Lou Lamoriello, who sat in the room next to Bettman and helped draft this current CBA five years ago, took this loophole to another level. At least the other contracts are masked a tiny bit.
Do you really think Kovalchuk's playing in his 40's for $550K?
The reality is teams and players aren't doing anything wrong here. This is on the league. The CBA provides the rules, and teams and agents are playing by the rules drafted by presumably educated, intelligent people. They just somehow missed an extraordinary loophole that's turned the salary cap into a joke.
Remember, it's the teams taking advantage of a loophole to get around a salary cap that they fought for, that they locked the players and fans out to get.
I can't wait to see what loopholes they leave in the next CBA. Here's a piece of advice: The cap hit in the next CBA is the annual salary, not average over course of contract.
The biggest shame is the Wild didn't do the same thing with Mikko Koivu's contract. Koivu's got a $6.75 million cap hit for seven years. Kovalchuk has a $6 million cap hit for 17.
But the Wild listened to Bettman's warnings, plus they wanted to make sure the contract was insured (can't be over seven years).
But sometimes playing by the rules isn't the best way to get ahead in the National Hockey League.
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