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 Post subject: Falcons asking for $20 million
PostPosted: Wed Aug 29, 2007 6:19 pm 
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Falcons asking for $20 million; experts say it could be only $3.5M

By Len Pasquarelli
ESPN.com
(Archive)

Updated: August 29, 2007, 5:05 PM ET


ATLANTA -- The Atlanta Falcons formally sent a demand letter to Michael Vick on Monday, asking to recover $20 million of the $37 million in total bonuses paid to Vick under terms of the 10-year extension that he signed on Christmas Eve 2004.

The unanswered question: how much of that $20 million will the Falcons actually receive? Most experts agree that the Falcons probably will eventually recoup only a fraction of what they are seeking, perhaps as little as $3.5 million by some estimates. And that amount might not be clear for a long time, given that the matter is almost certain to be resolved by an arbitrator.

New sentencing date?

In a separate matter, sources close to Vick told ESPN.com that his legal team is exploring its options in attempting to have his sentencing by U.S. District Judge Henry E. Hudson moved to an earlier date. Those same sources said the Vick camp has yet to hear directly from NFL commissioner Roger Goodell about a face-to-face meeting with the banished quarterback.

Hudson on Monday set Dec. 10 for sentencing Vick. Federal authorities have recommended that Vick serve a sentence of 12-18 months, ESPN's Kelly Naqi reported. Hudson, however, does not have to accept that recommendation. Chris Mortensen of ESPN reported Monday that Goodell likely will meet with Vick before the Falcons' star begins serving prison time.

NFL Players Association executive director Gene Upshaw, perhaps communicating with Vick's lead counsel, Billy Martin, may play some role in arranging such a meeting.

-- Len Pasquarelli

Falcons president/general manager Rich McKay on Wednesday declined to comment on the team's efforts to recapture bonus money, and referred to comments that he and owner Arthur Blank offered on Monday during a press conference following Vick's plea.

"We have studied [our] options a lot," McKay said at the time.

The attempt by the Falcons to recover a portion of Vick's bonuses was not unexpected. For much of the months-long ordeal, it was speculated that Atlanta would seek to recoup part of the bonus money if Vick defaulted on his contract. Blank and McKay confirmed that in their Monday news conference. Neither Blank nor McKay commented Monday on how much the Falcons might try to recover.

The $20 million amount, generally estimated at $22 million-$29 million in previous media reports, was confirmed for ESPN.com by league sources.

The lone certainty, at least for now, is that the Falcons are not liable for Vick's scheduled $6 million base salary for 2007, as he serves the indefinite suspension that Goodell imposed on him. That $6 million amount will be credited to the Atlanta salary cap for this season.

In terms of recoverable bonus money, though, the matter is anything but simple. And it is certainly complicated by an arbitration ruling last November in a case involving former Denver Broncos wide receiver Ashley Lelie, who, ironically, played for the Falcons in 2006.

In that ruling, an arbitrator stipulated that teams cannot recover option bonuses or prorated shares of option bonuses, and appeared to severely limit the money that teams could recoup if a player defaulted on his contract. Providing even more teeth to the ruling was that the decision by the arbitrator was sealed by U.S. District Judge David Doty, who has jurisdiction over the collective bargaining agreement between the NFL and the NFLPA.

Much of Vick's bonus money, $29.5 million of the $37 million, was characterized as roster bonuses in the December 2004 extension. Some experts who have carefully studied the Lelie ruling generally feel that roster bonuses will be viewed as similar to option bonuses if teams attempt to recover them.

That might mean Atlanta would only be able to pursue a prorated share of the initial $7.5 million singing bonus Vick received in three installments as part of his 10-year extension. For salary cap bookkeeping purposes, that signing bonus was prorated over six years, the 2004 through 2009 seasons. Since Vick fulfilled his contract in three of those six seasons, the Falcons might be entitled to only half of the signing bonus money.

The contract extension called for Vick to receive a roster bonus of $22.5 million in 2005, and a second roster bonus of $7 million in 2006. According to a copy of Vick's contract, the first of those bonuses was paid in three installments: $4.5 million in February 2005, $8 million on Oct. 15 of that year and $10 million on March 16, 2006. The second roster bonus was paid in full on March 15 of this year.

But for salary cap purposes, the Falcons converted about $26 million of the $29.5 million in roster bonuses to signing bonuses, allowing that the money to be prorated.

The Falcons might argue that, since the roster bonuses were converted to signing bonuses, they have the right to seek repayment. Vick would likely counter that it was the prerogative of the Falcons to convert the money into signing bonuses, that they were not bound to do so, and that they are characterized as roster bonuses in the original extension document of 2004.

Falcons officials have spent considerable time consulting with the NFL's Management Council, which is the labor arm of the league, about their rights to recover bonus money. It appears that the amount Atlanta is seeking is generally based on the remaining prorated shares of the three bonuses paid to Vick on the 2004 extension.

There is very precise default language in the contract and it leaves little doubt that Atlanta can seek some sort of recourse. In part, the default language stipulates the Falcons can take action against Vick if he "is suspended for violating any of the NFL's disciplinary policies or programs, including but not limited to the NFL Policy and Program for Substances of Abuse, the NFL Policy and Procedures for Anabolic Steroids and Related Substances, and the NFL Personal Conduct Policy."

Also included is a formula for determining the amount that Vick could be asked to forfeit if he defaulted on the contract. The formula: total bonus money, multiplied by the remaining number of games left on the contract, divided by the total games covered in the contract. By that formula, it would seem Vick could be liable for as much as $28 million-$29 million.

But the ruling in the Lelie case supersedes the forfeiture language in the Vick contract and, again, appears to severely limit the amount the Falcons will eventually recover.

Atlanta will not be liable for any of the base salaries in seasons Vick does not play. The base salaries after this season were to have been $7.5 million (for 2008), $9 million (2009), $10.5 million (2010), $12 million (2011), $12.5 million (2012), and $13.5 million (2013). There was a base salary of $17 million for 2014, but that season was voided once Vick reached predetermined playing time thresholds.

Including the Lelie ruling, the NFLPA has won several key battles in recent years to limit the amount that teams can recover in such default cases, and the players association certainly will take up Vick's cause in any arbitration action.

On Tuesday, union president Troy Vincent dispatched a letter to his constituents in which he reiterated that stance.

Vincent wrote, in part: "As you may have heard, the Atlanta Falcons have sent a demand letter to Michael Vick for repayment of certain bonuses previously (paid) under his NFL Player Contract as a result of his plea to dog-fighting charges in Federal Court in Richmond, and his subsequent suspension by Commissioner Goodell. As we do with all our members, we will represent Mike in any efforts by the Falcons to recoup monies previously paid to him, and we will make sure that his rights under his player contract and the CBA are fully enforced. As a union, our responsibility is to protect our members' rights as it pertains to hours, wages, and working conditions, and this case is no different. We will continue as an organization to protect and serve all of our members."

Len Pasquarelli is a senior writer for ESPN.com. ESPN NFL reporter Chris Mortensen contributed to this story.

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PostPosted: Thu Aug 30, 2007 3:41 am 
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The picture that has been recently painted by ESPN is a grim one in how much money the Falcons will be able to get back.

So the "worst case" scenario seems to be that the Falcons get $3.5 million back to spend on free agents next off-season, but any more money saved will have to come as a result of the team releasing Vick, which most feel won't come until June 2, 2008 at the earliest.

Or perhaps the Falcons will release him earlier, and use the "June rules" in order to reap the same cap space earlier.

Someone remind us again, how much money we save if/when Vick is cut post-June?


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PostPosted: Thu Aug 30, 2007 2:18 pm 
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Isn't his prorated bonus merely split evenly between the current years cap and next years cap? That or it's the current years bonus applies to that years cap and the remainder is applied against the next years cap.

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PostPosted: Thu Aug 30, 2007 3:03 pm 
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If I understand what you're asking/stating, when a player is released after June 1, the remainder of his prorated bonus is split between the next years.

But it's not always split evenly. It is the normal prorated bonus vs. the remainder.

For example, if Ed Zample signed a 5-yr. deal with a $10 million bonus. Clearly, $2 million will be prorated each year. So let's break it down like this:

2006 - $2M
2007 - $2M
2008 - $2M
2009 - $2M
2010 - $2M

If he was cut prior to the '08 season, that would mean he has $6 million remaining in bonus money. If he was cut prior to June 2, then ALL of that money would count against the cap.

If he was cut after June 1, then only the 2008 proration would count against the '08 cap (so in this case $2M), and then in '09, the remaining bonus money ($4M). Most people believe it's split evenly ($3M and $3M) which is not the case.

How much money is saved is determined by his base salary. Regardless of when a player is cut, his base salary is eradicated from the books. So for example, if Ed Zample had a base salary of $1M in '08, then after his June 2 release, his cap hit goes from $3M to $2M, saving the team $1 million. But if his base salary in '09 was $1.5M to start, you're not saving any money that year because instead of the $3.5M cap hit he was scheduled to have, now he's on the books for $4M in dead money.

Ask The Commish.com has a pretty good FAQ that probably does a better job of explaining it.

http://www.askthecommish.com/salarycap/faq.asp

Ask The Commish wrote:
Q: If that is the case, why are so many players cut AFTER June 1?


Answer: After June 1, the team can stretch their salary cap liability over the next 2 seasons. Let's look at our example above, where a player signs a big contract for 4 years, including a $1 million signing bonus.

If the player is cut after the first year of the contract, the remaining $750,000 of the "un-amoratized" signing bonus hits the cap immediately (accelerates). However, if he is cut after June 1, the team can spread that money over Year 2 and 3 of the contract instead of taking the full brunt of the cap hit in Year 2.

Doing this will save $500,000 against the cap hit for Year 2.

Clearly, this practice is a nice way of freeing up cap space in a given year. Note, however, that the money still has to be accounted for against the cap -- and the remaining $500,000 that was never accounted for will hit the cap in Year 3. In essence, many NFL teams have mortgaged their future by overusing this practice, whereby they continue to pay against the cap for players who have not been on the roster for over a year.


Just looking at the numbers Lenny P wrote, it would seem that after this season there will be about $23.5 million remaining bonus money to pay Vick. And the annual proration is about $4.375 million. Which means a post June 1 cut of Vick would mean $4.375 million would be counted against the '08 cap, and $19.125 million against the '09 cap. Considering Vick had roughly a $13.375M cap hit in '09 anyway, it means we will be eating roughly $5.75M more in cap space then.

But of course, these are just rough guess. Cappy I'm sure has more accurate number on this issue, and he's probably posted it somewhere on the site, I just haven't looked hard enough for it.


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PostPosted: Thu Aug 30, 2007 3:23 pm 
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I may be wrong here, but what i have read Vick will not count ANYTHING against the cap in 2008 or 2009.Those "base salaries" will be voided. The pro-rated signing bonuses that the falcons turned into roster bonuses wont be paid either , according to the above article.

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PostPosted: Thu Aug 30, 2007 4:22 pm 
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I did some research, looking at what Lenny P wrote and what Pat Kirwan and others wrote about back in July about the Falcons options. I've been wanting to update Vick's cap page for a long time, since it got all screwed up due to the CBA extension a year ago.

BB, from what I understand the Falcons are still on the hook for all the bonus money they gave to Vick. The only get cap relief this year from his base salary, which is $6 million. The remaining bonus portion of his cap hit (roughly $7.5 million) is still on the books. As will that for 2008 and whenever for how long he stays on the team.

The only way the bonus money will not count against the Falcons cap (as I understand it) is if the Falcons can recoup some of it back. What Lenny P is saying here that we will only get that cap relief if the Falcons are successful in their bid to get $20 million back.

As far as I see, the Falcons are on the hook for roughly $22.3 million as far as the cap is concerned with unamortized bonus money. The Falcons are seeking to recoup $20 million according to Mr. Pasquarelli. If they are successful, then $20 of that remaining $22.3 million will be wiped away from the salary cap whenever that proves successful (we're assuming this will be settled at some point before the end of the '08 season, which means that relief will come against the '08 cap).

So as I see it, based on the new update that will soon be featured on Vick's player page, this is how it looks (these figures are rounded):

2007- $6 million base + $7.6 million in bonuses = $13.6 million cap hit
2008- $7.5 million base + $7.6 million in bonuses = $15.1 million cap hit
2009- $9 million base + $6.4 million in bonuses = $15.4 million cap hit
2010 - $10.5 million base + $700K in bonuses = $11.2 million cap hit

The base salaries are immediately wiped off the books because Vick is suspended indefinitely. Unless Goodell reinstates him before the Falcons release him (extremely doubtful), we won't have to worry about that money anymore.

The issue is just how much of that $22.3 million in bonuses will the team have to pay. Blank and McKay are hoping that it will only be $2.3 million due to $20 million Vick will pay back soon. Others say it will be as little as $3.5 million that the Falcons get back, meaning that Vick will still count roughly $4 million against the '08 cap, whether he's on the team or not.

As I understand it, if we cut him after June 1, 2008, that means that we will have a dead money hit of about $7.1 million (2009 and 2010 bonuses) in 2009.


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PostPosted: Thu Aug 30, 2007 4:34 pm 
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But i thought that Lenny P said Vick was given a 37 million dollar bonus when the contract was extended. And that those dollars were already paid, the last one being paid earlier in the year.Thus Vick having to pay BACK the money he has already received

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PostPosted: Thu Aug 30, 2007 4:54 pm 
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Yes, Vick has pocketed $37 million. That money is or has been in his bank account since March of this year. But there is a difference between what a player actually receives in real paychecks vs. what counts against the cap.

As far as the cap is concerned, $22 million of that $37 million has not been paid. In terms of real life, Vick has been paid that money and thus will owe a portion of it back. And when that portion is repaid back to the franchise, then we will see it reflected on the salary cap.

A good illustration of this difference is that in 2001, Vick received a $3 million signing bonus as part of his first rookie contract. In reality, when Vick signed his name on that dotted line back in May 2001, he got a check for that amount to spend or save however he wanted. But as far as the salary cap was concerned, that money still counted as late as the 2006 season, with 1/6th (or $500K) being counted against our cap that year. When in reality, that money was long since paid to him and probably spent.

I'm sorry if my use of the term "pay" is confusing you. I was using that word as it applied to the salary cap as opposed to reality. In real terms, the Falcons will NEVER have to pay Michael Vick another dime. That is there will never be another check made out to him signed by Arthur Blank. Or at least that is assuming that Vick is not reinstated into the league while still on the Falcons roster (which seems about as likely as me going to the moon).

Instead of saying how much of the remaining $22.3 million in unamortized bonuses the team will "pay" I should have said how much of that will be "counted" against the cap.


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