Bypassing the salary cap through hidden accounts

Question

I have a general salary cap question. This can be for any league with a cap, but let's use the NFL.

Is there anything preventing an owner from paying a player with a hidden account or something? For example, if a player on the open market can make $10 million and the owner says to the player, "Take $5 million as your official salary and I will give you $5 million in an offshore bank account." This saves the player money in taxes and in agent fees and it helps the team to be more competitive because it has more cap room than they normally would.

Is there anything preventing this from happening? Obviously you'd want to limit it to a few star players so word doesn't really get around and you wouldn't want the official salary to be super low or it could be suspicious.

I was just thinking about this because it seems like teams will do anything to get an advantage. We've seen with Spygate and Bountygate... this seems like an obvious one.

Answer 1

I can't speak specifically for the NFL, but this does actually happen regularly in a lot of leagues. Since the 2000s, Carlton and Adelaide in the AFL, as well as Melbourne Storm in the NRL, have both been punished for salary cap cheating in this form. The main thing stopping it is the punishment (Melbourne Storm were retroactively stripped of all of their premierships in that period and fined millions of dollars), which often far outweighs any advantages. For instance, Carlton were fined nearly a million dollars and stripped of all of their draft picks for two years, and then proceeded to be the worst team in the competition for most of that decade. The Adelaide Crows were fined nearly half a million dollars, were also stripped of two years of draft picks, lost arguably their best player in a trade to another team without receiving the compensation they otherwise would have, and had a number of players leave in quick succession, possibly due to the scandal. They went from being one of the best teams in the competition in 2012 to being a laughing stock.

Melbourne Storm, in the most infamous salary cap breach in Australian sporting history, had paid roughly $1,000,000 a year to their players outside of the cap, with "off the books" things like payments into offshore accounts, $20,000 gift cards, and boats. They were fined millions, had two of their premierships (and three minor premierships) removed, and were also stripped of their World Club Challenge champions title.

In short, yes, rorting the salary cap is very easy, and many people and many teams have done it. The thing stopping it from become extraordinarily common is that a sports club has so much scrutiny under it, and so many people who need to be kept quiet, and in the end, the punishment if you get caught means that it just isn't worth it.

Answer 2

While this is pretty hard to do, there has been speculation of this occurring recently with the signing last summer of Andre Kirilenko to the Brooklyn Nets. For those who are not aware of the story this speculation started when Kirilenko elected to opt-out of the last year of his contract ($10MM) with the Minnesota Timber-Wolves to take a much smaller salary (~$2MM range) with the Russian Billionaire (Mikhail Prokhorov) owned Nets.

Many felt that because Kirilinko and Prokhorov are from the same country, and because Kirilinko willingly walked away from $7M+ this year, there must have been an under-the table deal in which Prokhorov paid him some other way. However, no one to date has been able to prove that anything of the kind actually occured. Rather, what is probably more likely that Kirilieko either A. over-valued his worth on the free market or at this stage of his carrier and was forced to take a cut after making a mistake in opting out of his contract to test the market, or B. (my personal opinion) that he had made plenty of money with his carrier thus far and that at this stage he was willing to take a pay cut to be on a team that had a chance of winning an NBA Championship.

Still food for thought.