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 Post subject: Did we screw the pooch here this is giving me a headache
PostPosted: Thu Aug 23, 2007 3:51 pm 
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Michael Vick's December 2004 contract extension included $37 million in bonuses. Although the money was characterized as a signing bonus, a league source has explained to us that it wasn't. At least not completely.

The signing bonus was only $7.5 million. The remaining $29.5 million was paid out as two roster bonuses.

But the Falcons had the right to convert the roster bonuses to guaranteed amounts, making them the equivalent of signing bonuses for the purposes of proration under the salary cap.

The problem, however, is that the payments were not initially characterized as signing bonuses, and therefore might not be treated as such in a forfeiture effort.

The Ashley Lelie case resulted in a finding that option bonuses are not subject to repayment. Some believe that the next step in the overall NFL labor relations process in this regard is a finding, if/when the issue is presented in a grievance, that roster bonuses are also untouchable, even if the team has the right to treat the payment as a signing bonus in order to manage cap costs.

Think of it this way. Roster bonuses are paid out in a given year, and are charged under the cap only for the year in which they are paid. After the year ends, a default is irrelevant because the money has been paid, and earned.

Why, you might ask, didn't the Falcons just give Vick a $37 million signing bonus? The problem is that such a payment would have required 1/6th of the amount to have been counted against the 2004 salary cap. Since the Falcons likely didn't have more than $6 million left in 2004 cap space at that time, it wasn't a realistic option. By paying only $7.5 million as a signing bonus, the Falcons were required to carry only $1.25 million in 2004.

So the Falcons deferred $22.5 million of the money into a roster bonus due in March 2005, and $7.5 million to a roster bonus due in March 2006. The conversion of the roster bonus to a guaranteed payment was a no-brainer, since there was no way that the Falcons were going to show under the salary cap an extra $22.5 million in 2005 or an extra $7.5 million in 2006 when the money could be spread out over time.

The only alternative would have been to use two option bonuses, and the fact that the roster bonuses that became guaranteed payments operate no differently, as a practical matter, than option bonuses could influence the outcome. The device the Falcons used is no different than an option bonus. Thus, if an option bonus can't be recovered, roster bonuses converted to guaranteed payments are protected, too.

If the converted roster bonuses don't count, Vick likely owes the Falcons only (only?) $3.75 million, which is the remainder of the proration on his original signing bonus. The bonus forfeiture formula that the Falcons were using in 2004 could push that number higher, since it attempts to spread the bonus money beyond the six seasons of cap proration. But if it's determined that the 2006 CBA retroactively restricts forfeitures to the amount of the signing bonus that has yet to be allocated as wages under the salary cap, the amount owed will be $3.75 million.

The other potential twist here is that the Falcons might have to keep Vick on the team (via a reserve/suspended and/or a reserve/in-the-hoosegow list) for the next three seasons (or maybe longer) in order to get the full amount of whatever they are owed. Owner Arthur Blank might be more interested in simply getting Vick's name off of the books than Blank is in chasing money that might not ever be collected anyway.

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PostPosted: Thu Aug 23, 2007 4:50 pm 
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That is exactly what i have been saying all along.


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