Here's why Donald Sterling gave control of the Clippers sale over to his wife, says lawyer Mitchell Epner.
Facing a June 3 hearing to terminate the Sterling family ownership of the Clippers, Donald Sterling has transferred his ownership to his wife, Shelly Sterling, who reportedly will seek to control the sale of the team to a third party.
Under the NBA Constitution, this transfer can only take effect with the approval of the NBA. The NBA will only approve the transfer if it has a binding commitment from Shelly Sterling to immediately sell the team. Reportedly, Shelly Sterling has backed down from her earlier vow to fight to keep control of the team and will bind herself to immediately sell.
Why the sudden change of heart?
If the NBA had terminated the Sterlings ownership of the Clippers, the NBA would have controlled the sale process. Although the Sterlings would have been entitled to the net proceeds of the sale, they would not have had any ability to shape the transaction in order to lessen its tax consequences. The Sterlings might be required to pay hundreds of millions of dollars in federal and state capital gains tax on the sale of the team.
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By taking control of the transaction, the Sterlings, their lawyers and accountants can structure the transaction in a manner designed to mitigate the taxes they will have to pay.
Beyond the financial consequences, the Sterling family also will have control over the ultimate purchaser of the team. Anthony Resser, a billionaire friend of Sterling, reportedly is preparing to bid for the team. To the extent that Sterling might not want the ultimate indignity of having Magic Johnson and Guggenheim Partners buy the team (Remember, that's how it started: Sterling's girlfriend posted a photo of her with Magic Johnson on Instagram, prompting Sterling to tell her that she shouldn't be seen in public with black people), he could avoid that outcome.
Sterling might also seek a "non-disparagement" clause in any agreement with the new owners, in an attempt to avoid additional damage to his already- tarnished reputation.
Commentary by Mitchell Epner, an attorney specializing in white-collar crime, sports and entertainment law and intellectual property. He's also a former Assistant United States Attorney in the District of New Jersey. Follow him on Twitter @mitchellepner.