Feb. 14 (Bloomberg) -- The $22,000 Patek Philippe timepiece showed Jerome Williams that something was wrong in the National Basketball Association players union.
It was a 2010 gift to Derek Fisher in his first year as union president, paid for with organization funds by Billy Hunter, executive director since 1996. Hunter helped negotiate collective bargaining agreements that pushed the average NBA salary past $5 million, the highest in U.S. team sports, in a league with $5 billion in annual revenue.
By April 2012, Fisher was expressing concerns about union practices, leading to an investigation that concluded Hunter placed himself above the association with actions and spending that were ill-advised though not illegal. Still the subject of a probe by the Manhattan U.S. attorney’s office, Hunter was suspended with pay on Feb. 1, and this weekend the 30 team representatives in the National Basketball Players Association will decide during the All-Star break in Houston whether to fire him from the $3 million-a-year job.
“When you’re in this type of position these things can’t be done,” said Williams, a former New York Knicks forward and union executive committee member from 1999 to 2004, adding the most valuable item he received from Hunter was a leather jacket worth $200. “We’re not talking about the local Big Daddy’s pizza shop. This is the NBA players. This is billions of dollars on the line.”
It hasn’t been determined whether the union’s five-member acting executive committee will permit the 70-year-old former federal prosecutor to address the players before their vote.
Deciding whether to fire Hunter was among the recommendations from a nine-month investigation by the New York law firm Paul Weiss Rifkind Wharton & Garrison LLP, which was retained by a special committee of players formed to examine union practices. The 229-page review criticized Hunter, saying he failed to manage conflicts of interest, including the hiring of family members; didn’t disclose that his contract wasn’t properly ratified; and made questionable choices on billing for personal travel and vacation time.
Hunter, who while playing football at Syracuse University helped to organize a boycott of Southern schools with segregated stadiums, brought that same assertive personality to the union’s top job.
“Billy, in my experience, was a very strong advocate for the players,” said former NBA Deputy Commissioner Russ Granik, who twice served as management’s lead negotiator in contract talks. “The deals that were reached were in both cases appropriate deals under the current economic circumstances.”
While Hunter’s fighting instinct served the players well during collective bargaining talks with Commissioner David Stern and the owners, he alienated employees and the agents who orchestrated the dismissal of his predecessor, Simon Guordine, according to a half-dozen people who have worked with Hunter and who spoke on the condition of anonymity.
Stern declined to comment on Hunter, the Paul, Weiss report or union matters. Hunter declined an interview request.
NBA players receive about 50 percent of so-called basketball-related income under the current contract, which was reached after a lockout in 2011. That’s about the same percentage as their football and hockey counterparts who recently negotiated agreements after their owners imposed lockouts. Only the National Football League avoided missing games and paychecks.
The Paul, Weiss report said Hunter spent more than $100,000 in union funds over the past 10 years on luxury gifts for members of the executive committee, which sets association policies. They included alligator belts, gold cuff links, Louis Vuitton bags and the watch given to Fisher.
“The facts do show that, at times, Mr. Hunter’s actions were inconsistent with his fiduciary obligations to put the interests of the union above his personal interest,” according to the report.
Keith Murnighan, the Harold J. Hines Jr. Distinguished Professor of Management and Organization at Northwestern University’s Kellogg School of Management, said in a telephone interview that no chief executive would keep his job in the face of such a report.
“The combination is clearly a picture of someone who has lost sight of their basic duties and responsibilities,” Murnighan said on Feb. 11 after reading the Paul, Weiss report. “He clearly was not always putting the union first.”
Hunter has denied wrongdoing, and offered a point-by-point rebuttal of the Paul, Weiss report to the New York Times last week. Hunter said he would fight to keep his job.
“It’s almost like you put enough together, and you throw it up against the wall, hopefully something will stick,” Hunter was quoted as saying in the newspaper. “But when you look at them each individually, we can rebut them.”
The union paid more than $4.8 million to Hunter’s family members and their professional firms since 2001, according to a U.S. Department of Labor filing first reported by Bloomberg News in April. Hunter purged family members from the association after the report was released nine months later.
Agent Arn Tellem, in a letter to clients that include former Most Valuable Player Derrick Rose, accused the executive director of “treachery.” David Falk, who represented Hall of Fame members Michael Jordan and former union president Patrick Ewing, lambasted apathetic players in a Jan. 19 Bloomberg News interview for creating an anything-goes atmosphere at the New York-based association.
“Hunter is betting that the players -- historically passive -- will let him slide,” Tellem said in his Jan. 28 letter. “I hope you don’t. Clearly, Hunter has violated your trust.”
Theo Ratliff, 39, sees it differently. He spent 1998-2012 on the union’s executive committee. Contrary to the Paul, Weiss report’s finding, he said Hunter was always transparent with the association’s officers.
“All he’s ever done is enhance the union and try and have it more forward-thinking. I’ve always had the utmost respect as far as how he’s handled his business,” said Ratliff, who last played for the Los Angeles Lakers. “My biggest problem is you have a guy, Derek Fisher, that’s basically trying to control the union. He’s trying to control the guys by giving them the information he wants to give them. Billy can’t tell his side.”
Like Ratliff, Bob Lanza, the union’s general counsel from 1997 to 2002, said in an interview that Hunter should be granted an audience with the players who’ll decide his fate.
“This is the single most important decision they’re going to make,” Lanza said. “A rush to judgment doesn’t serve the players.”
Etan Thomas, a Tellem client and retired player who was on the union’s executive committee during the most recent labor talks with owners, says he wants to ensure that players are making up their own minds and not taking direction from their agents.
“The only way that can happen is if they hear both sides,” he said, adding that he and Tellem have frequently disagreed about Hunter. “We know what the report says. Now let’s hear from Derek, and let’s hear from Billy. Both of them have earned that respect. After that, whatever the vote is, the other person bows out gracefully.”
Pat Garrity, a former union treasurer who graduated from Duke University’s Fuqua School of Business after his retirement in 2008, unsuccessfully tried four years ago to warn Fisher and other executive committee members about questionable business and hiring practices. Garrity says the late Gary Hall, Hunter’s friend of 30 years and the union’s general counsel, told him he wasn’t an active member and that his input wasn’t welcome.
Players are taking notice of the conclusions made in the Paul, Weiss report, which also said Hunter spent at least $300,000 pursuing speculative business ventures as potential investments for the union, including a mixed-martial-arts fighting league in Japan and a failing bank that had Hunter’s son as a director, according to the report.
Brooklyn Nets teammates Deron Williams and Jerry Stackhouse, and Paul Pierce of the Boston Celtics are among those who have publicly called for a change in leadership. Stackhouse said Fisher should be ousted as president, too.
Fisher, 38, didn’t respond to a request for comment through his publicist, Jamie Wior.
The union, in debt when Hunter took over, has assets listed at $184 million in 2012 filings with the U.S. Labor Department.
The rift between Hunter and Fisher, a 17-year veteran with five championships, began after Foxsports.com reported that Fisher during the lockout usurped the executive director and privately negotiated a 50-50 revenue split agreement with Stern. The commissioner and Fisher denied the report.
Ratliff said Fisher “disappeared” after the labor agreement was reached.
“And then when he shows up he wants to do an internal audit,” Ratliff said.
The Patek Philippe was given to Fisher in June 2010, when he was finishing his first year of a four-year term. Union presidents historically were given a watch at the end of their term. Williams, 39, said he was unaware of luxury gifts to executive committee members until he read the Paul, Weiss report.
Hunter, according to the report, told Fisher that if a lockout occurred he might never get his gift. Fisher was quoted by investigators as saying he didn’t recall any discussion about the timing and that he felt uncomfortable accepting the gift.
“So Billy Hunter, if we give him a benefit-of-the-doubt outlook on it, it’s easy to say to yourself, ‘I’m doing the best things for these guys,”’ said Murnighan, the Northwestern professor. “If you look beyond the surface, it’s very clear that a lot of his actions favored himself at least as much as the union he’s representing.”
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