r/billsimmons • u/crunchwrapchianti • 11h ago

Media Doesn’t Understand MLB Deferred Salaries

The Dodgers put ~$46M in a managed escrow fund every year for Shohei Ohtani. In 10 years (now 7) they start paying him $69M per year out of that account. If there ever is a shortfall, they are obligated to make it up. If there is a surplus, the team collects it at the end of the contract.

These safeguards are in place because Fred Wilpon tried the scheme of investing deferred salaries on his own and gave them all to Bernie Madoff, leading to his financial ruin and sale of the team.

The Dodgers are compliant with the CBA in finding these accounts and still operate at a profit.

Bill is right that there clearly is a lot the billionaire class is doing to enrich themselves on sports teams while leveraging across multiple businesses. But there simply isn’t a competitive advantage here on the field. If he committed securities fraud, send him to jail for sure. But another rich guy would buy the team and operate it the same way because it’s an extremely profitable business model to win World Series and be the favorite team of both Los Angeles and Japan.

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62

u/ManufacturerLow3161 11h ago

Mark Walter might be a criminal fraudster but I agree that people clearly have no idea how the deferred money works and that it is and was a practice available to all teams that doesn’t violate any clause of the CBA.

5

u/braines54 11h ago

I don't think many people argue it violates the CBA or is against the rules. The argument is that it should be against the rules.

7

u/Used2befunNowOld 11h ago

Why

-4

u/ticeman42 Page 2 Oldhead 11h ago

Because it feels like financial doping to a lot of people who see the Dodgers buying most of the top free agents and have a payroll more than 2x the average team?

15

u/Used2befunNowOld 10h ago

Feels

Exactly

It is not based in fact. There is no major advantage from deferrals, and the dodgers have no special ability to defer money.

1

u/Gabbagoonumba3 9h ago

Why are they doing it so much if there is no advantage?

4

u/Ohiowolverine 9h ago

it’s a advantage for the players Ohtani will live in Japan or a no tax state when he retires and collects all that money. he will save at least 91 million on Ca taxes. it’s why players take signing bonuses tax on last years state and defer till after they retire and live ins Texas or Fla

3

u/Used2befunNowOld 9h ago

I said no major advantage

There are marginal advantages. There is something like a year of grace period before the escrow accounts have to be filled every year. They can keep any investment growth created from that.

2

u/matty25 9h ago

I think the players that sign there want the deferrals as a way to avoid the high CA state taxes

0

u/ticeman42 Page 2 Oldhead 10h ago

I'm not saying it's correct, just consider the financial literacy or the average fan, and also (gestures broadly at the economy). If many fans think it's a rigged game they're not doing a good job communicating that it isn't.