Covington & Burling, Proskauer Rose, and Skadden, Arps, Slate, Meagher & Flom have formed something of a triumvirate when it comes to representing major professional sports leagues, including the National Football League, whose nonprofit status was recently criticized by U.S. Senator Tom Coburn as part of his crusade against federal government waste.
Coburn’s Waste Book 2012 states that taxpayers are losing out on at least $91 million in revenue from tax loopholes that allow pro sports leagues such as the NFL, National Hockey League, National Lacrosse League, and The Professional Golfers’ Association of America to classify themselves as nonprofit organizations.
Coburn’s criticism prompted The Am Law Daily to review the Form 990s filed with the Internal Revenue Service by the NFL and NHL. The forms, which are required of all nonprofits and must list the five highest-compensated independent contractors to which they have paid more than $100,000 in any given fiscal year, offer detailed breakdowns of how much the two leagues have paid Covington, Proskauer, and Skadden in recent years.
The NHL, which announced Wednesday that its New York Islanders franchise would move to Brooklyn, disclosed in its latest Form 990 covering the period between July 1, 2010, and June 30, 2011, that it paid a combined total of more than $8.8 million to the three firms. Skadden received nearly $6.1 million for its services, while Proskauer received more than $1.7 million, and Covington collected $979,589.
Skadden and Proskauer, both of which are longtime outside counsel to the NHL, helped the league temporarily scuttle a contract signed in August 2010 by New Jersey Devils winger Ilya Kovalchuk, one of several Russian players threatening to stay overseas if an ongoing labor lockout remains unresolved.
Proskauer is representing the NHL in collective bargaining negotiations with players it locked out last month, and the firm also advised the NFL on its own recent lockout of referees, as reported by The Am Law Daily. The NFL eventually reached a new labor deal with those referees in late September, but the NHL’s talks with its players hit a snag last week, with the two sides unable to even agree on where to meet at this point, according to media reports.
Earlier tax filings show that Skadden received nearly $9 million from the NHL for the one-year period ending June 30, 2010. Proskauer was paid nearly $1.3 million that year and Covington received $746,095. (The payments do not include fees for work done on behalf of individual teams or organizations affiliated with the league like NHL Enterprises and the NHL Network that are not tax-exempt.)
The NHL’s Form 990 for 2009 does not list expenditures above $100,000 to any outside firms. But the league’s tax filings over the past three years do list individual compensation for several former Am Law 100 lawyers.
NHL commissioner Gary Bettman and league general counsel David Zimmerman, both of whom once worked at Proskauer, saw their total compensation rise in 2011. Bettman’s pay package increased to nearly $8 million from the roughly $7.5 million figure he received in 2010, while Zimmerman saw his compensation increase from $666,520 to $975,037 last year. Deputy commissioner William Daly, a Skadden alum, received nearly $2.9 million in 2011, a significant increase over the roughly $2 million he was paid in 2010.
The NFL has also richly awarded its own executives and outside lawyers over the past three years. (Alas, the NFL’s most recent Form 990 covers the period between April 1, 2010, and March 31, 2011, just before the league’s own collective bargaining battle with players reached its peak. After several months of antitrust litigation, both NFL owners and players reached a labor accord in July 2011.)
Covington has long served as primary outside counsel to the NFL, a relationship highlighted in the IRS filings, which show that the firm has received about $16.3 million from the league over the past three years. Covington was paid a little more than $3.8 million for the period ending March 31, 2011, another $5.4 million in 2010, and nearly $7.1 million in 2009.
Also well compensated are former Covington lawyers that have gone on to work for the NFL. Tax records show that Paul Tagliabue, who spent 20 years at Covington before being named league commissioner in 1989, received nearly $8.6 million from the NFL in 2011, following disbursements of $12.5 million in 2010 and almost $14.2 million in 2009.
After leaving Covington, Tagliabue spent the next 17 years adding four more teams to the NFL and negotiating lucrative television contracts that helped grow the league’s annual revenues from $900 million to $6.5 billion by the time he retired on September 1, 2006. He has also periodically been brought in as an adviser to the league, such as during an ownership dispute involving the Pittsburgh Steelers back in 2008, according to our previous reports.
Tagliabue, who made headlines this week over his appointment as an arbitrator in a bounty scandal involving several current and former New Orleans Saints players, rejoined Covington as senior of counsel in late 2007 and as noted above continues to receive millions in deferred compensation and retirement benefits from the league.
While at Covington, Tagliabue worked closely on NFL-related matters with Jeffrey Pash, who now serves as the league’s general counsel. Form 990 filings by the league show that Pash was paid nearly $6.8 million in 2011, $5.5 million in 2010, and $5.8 million in 2009.
The NFL’s current commissioner, Roger Goodell, was one of five finalists to replace Tagliabue in 2006. He beat out lawyers contending for the role such as longtime league outside counsel and Covington litigation partner Gregg Levy and Frederick Nance, head of the sports and entertainment group at Squire Sanders.
Goodell, while not a lawyer, is the brother of Timothy Goodell, a former cochair of the global M&A practice at White & Case who now serves as general counsel for the Hess Corporation, a New York–based oil and gas company whose namesake, the late Leon Hess, once owned the NFL’s New York Jets. The NFL’s compensation package for Goodell totaled nearly $11.6 million in 2011, a raise over the roughly $9.8 million he received from the league in 2010 and 2009. Goodell’s salary is expected to approach $20 million a year by the end of the decade, according to news reports.
The NFL’s nonprofit status stems from lobbying efforts by former commissioner Pete Rozelle during the 1960s. (Click here for a law review article cited by Coburn written by Vermont lawyer Andrew Delaney, which takes a closer look at the league’s tax status.) Major League Baseball gave up its nonprofit status in 2007, while the National Basketball Association is not a tax-exempt organization.