Congress seeks bowls truth
A congressman said he plans to investigate testimony from Alamo Bowl executive director Derrick Fox at this month’s Bowl Championship Series subcommittee hearing after learning that Fox might have exaggerated by millions of dollars the amount bowl games donate to local charities.
Fox, while representing all 34 bowl games during his appearance on Capitol Hill on May 1, claimed in his argument against a playoff that “almost all the postseason bowl games are put on by charitable groups” and “local charities receive tens of millions of dollars every year.”
In fact, 10 bowl games are privately owned and one is run by a branch of a local government. The remaining 23 games enjoy tax-exempt status from the Internal Revenue Service, but combined to give just $3.2 million to local charities on $186.3 million in revenue according to their most recent federal tax records and interviews with individual bowl executives.
“That doesn’t seem like something that’s really geared toward giving to charity, does it?” said Rep. Joe Barton (R-Texas) after being presented with Yahoo! Sports’ findings.
“It’s perjury if it’s knowingly said,” Barton said of the sworn testimony, which he called “misleading.” “It’s also contempt of Congress. You’ve got to give [him] some sort of due process, but ultimately the remedy is to hold [him] in contempt of Congress on the House floor or send it to the Justice Department for criminal prosecution of perjury under oath.”
Barton, the ranking Republican on the subcommittee and a playoff proponent, did caution that in today’s political climate there is no certainty that charges of perjury or contempt would be filed even if the investigation found wrongdoing.
Fox said in a written statement the “tens of millions of dollars” testimony was “a good faith estimate based on information initially supplied by the FBA [Football Bowl Association].”
Yet Bruce Binkowski of the FBA said the organization doesn’t compile such figures and in literature doesn’t assign a dollar amount to the bowls’ charitable donations because “we just don’t know.”
In a phone interview last week, Fox said he needed a day to come up with the figures to prove he was accurate. But he failed to turn over any more information to Yahoo! Sports and then did not return phone messages. Fox, who was paid $438,045 in total compensation in 2007, also said he wasn’t trying to be deceptive by describing private businesses as “charitable groups” but believed that any entity that does any charity counts.
When asked if he thought a multinational corporation such as ESPN, which owns six bowl games, qualifies as a “charitable group,” Fox said, “Well, they’re certainly involved in charitable activities.”
Barton dismissed that suggestion. He said the overall picture that was painted by Fox and ACC commissioner and BCS coordinator John Swofford, who also argued against a playoff by propping up the value of bowl games, required further review. He vowed to get honest answers and pursue the charge with a bipartisan investigation from the House Subcommittee on Commerce, Trade and Consumer Protection, which held the hearing.
Barton said he’ll try to get the powerful House Committee on Energy and Commerce involved. That committee is chaired by Rep. Henry Waxman (D-Calif.), who ran the 2008 Roger Clemens hearings that resulted in a federal perjury investigation on the former baseball player.
Barton said he also was concerned by testimony from Fox and Swofford regarding the economic impact of having out-of-town fans spend multiple nights in a bowl community as a reason to avoid change.
Individual bowl operators acknowledge the trend with small and midsized bowl games is to invite local schools, whose nearby fans ensure ticket sales but spend far less on hotels and restaurants. Spending by local fans also was dismissed as “displaced” within a metro region, according to an economic study Fox cited at the hearing.
Paul Hoolahan, the CEO of the Sugar Bowl and the chairman of the FBA, said that Fox’s charitable financial claim was high.
“If Derrick made that comment, that kind of invites, ‘OK, let’s go see how many tens of millions were involved here,’ ” Hoolahan said. “That sounds a little hyperbolic in the heat of battle here.”
Fox’s comments were made in a prepared statement, not a fast-moving question-and-answer session. He also used many of the same figures during a 2005 congressional hearing.
Barton said the hearing was called to push for a playoff in major college football and to attempt to shed light on the confusing business of postseason college football.
Mountain West Conference commissioner Craig Thompson and Boise State athletic director Gene Bleymaier, who both advocated for a playoff in front of the subcommittee, are not under investigation, Barton said. Neither is Swofford, whose claims were in line with Fox’s, but matched up with official figures.
Together, Fox and Swofford repeatedly cited two main reasons bowl games must be saved at all costs.
1. Donations to local charities.
2. Economic impact on host cities.
By implementing a playoff system, they argued, some small bowl games might go out of business.
“None of us in college football are anxious to jeopardize … the many … charitable endeavors undertaken by all of the bowl games,” Swofford testified.
Barton said the issue isn’t that there should be a proper amount or even percentage of assets bowl games donate to charity. He said it’s that Fox, under oath, testified of generous donations that don’t appear to stand up.
Bowl games actually received more in direct government spending (almost $5.5 million) than what they gave directly to charity, according to the tax records.
Swofford repeatedly cited the generosity of bowl games in his testimony and claimed bowl games gave “millions.” ACC spokesperson Amy Yakola said Swofford got his numbers from attorneys who represent the BCS.
Yahoo! Sports analyzed each of the bowl games’ most recent federal tax filings and found $2.6 million was donated to local charities. The number jumps to $3.2 million by allowing bowl games to claim donations that were not documented in tax records.
Financial information wasn’t available for the 10 privately held games. But because they are minor bowls that produce relatively low income, any undisclosed donations would not significantly alter the findings, according to an accountant hired by Yahoo! Sports to review the records.
The 23 tax-exempt, not-for-profit games, including all major games and the five BCS bowls, combined to produce $186.3 million in total revenue, according to records. They ended the year with a combined $140.9 million in net assets, including $80.6 million in the bank.
Concerns that charities would suffer if a playoff was created is questionable since most charitable giving comes from major games. The Orange Bowl and Chick-fil-A Bowl alone combined to give $1.6 million, more than half of the total.
Individual bowl operators defended the lack of charitable donations on a number of levels, most frequently saying that despite Swofford’s and Fox’s characterizations, the games aren’t designed to fill the coffers of local organizations. These are not-for-profit businesses, not charitable groups.
“You’ve got to remember, when you’re looking at non-profit [bowl games] there really is a difference [from] a United Way,” Jim McVay, CEO of the Outback Bowl, said. “There’s a difference in economics. We are forced to comply with the market demands.”
Since they aren’t required by the IRS to give to local charities, whatever is donated is considered a benefit.
Fox, in a written response to a question, said “in kind” donations, mostly giving unused game tickets to groups, should be considered even if it doesn’t match with his testimony of “dollars” given.
Also, bowl games do not list giveaway tickets or many other “in kind” donations on tax forms because they are considered lost revenue, according to Bruce Bernstien, an accountant for the Cotton Bowl.
Ticket donations can also lead to fuzzy math.
The Motor City Bowl, for instance, lists a team payout of $750,000. However, for its 2008 game, Florida Atlantic agreed to accept 16,666 game tickets in lieu of money. When it returned approximately $600,000 worth of the tickets, Motor City Bowl owner Ken Hoffman said he turned them over to local organizations, although he couldn’t say whether they were used. He said he did not claim it on his taxes. According to media reports, 65,000-seat Ford Field in Detroit was at slightly more than half of capacity for the game.
By Fox’s bowl calculations, the tickets, even unused, would count twice, as both a “team payout” and a “charitable contribution.”
A few bowls count payouts to participating schools as charity. Fox acknowledged those contributions are different than direct donations to local charities and shouldn’t be counted. Barton also dismissed counting payouts to teams as donations because Fox cited “local charities” in his testimony.
“To use the words ‘local charities,’ that’s a mistake,” Barton said. “I assume it goes to the Boys and Girls Club, the YMCA. Bowl games give very little of their revenue to those charities.”
In addition to investigating Fox’s testimony, Barton said he’s considering whether the IRS could question the validity of bowl games’ tax-exempt status as well as requiring bowl games to provide a portion of revenue to charity through pending legislation.
“We would definitely want to show that they’re not literally telling the truth and the average person understands these bowl games do not give millions of dollars to local charities, they never have and they never intended to,” Barton said.
In further touting the benefits of the current system, Swofford noted bowl games “aim to generate economic benefits for their host regions by attracting visitors who will come and stay several days.”
Fox went on to cite to the subcommittee the “2007 Valero Alamo Bowl Economic & Fiscal Impact Analysis,” which detailed spending by out-of-town fans at hotels and restaurants.
Yahoo! Sports reviewed the Alamo Bowl study, which stated that local fans are far less valuable because they would’ve spent their entertainment dollar elsewhere in the city or region – at a restaurant across town before a movie rather than one near the stadium before the game, for example.
– Paul Hoolahan, Sugar Bowl CEO
“… [M]ost spending by local residents is considered to be displaced spending and is not counted as part of economic impact,” the Alamo Bowl study states. “[The local fan] is … providing zero economic impact.”
Yet it is local fans that bowl games are increasingly turning to in order to anchor ticket sales and stabilize bowl revenue, even at the expense of tourism dollars.
More than a third of last season’s bowl games (12 of 34) featured a local school – eight were from the host city or a short drive from it and four others came from within a two-hour drive.
“I think bowls’ business models have changed,” said Gary Stokan, president of Atlanta’s Chick-fil-A Bowl, which last year included hometown Georgia Tech. “When we all originally started, bowls were created to really develop economic impact. That’s still our goal. But with the contracted payouts you have now, you’ve got to weigh that, balance the economic-impact figure with attendance.”
This might be smart business for the bowls and a positive to cash-strapped fans who want to see their favorite team play, Barton said. It just doesn’t jibe with what Fox and Swofford testified.
“It calls into question their interest in helping the local economy, which is what they claimed,” Barton said.
“Well, that’s his opinion,” Fox said. “He has an opinion. And it’s fine to have an opinion. I think it’s a matter [of looking] at the overall industry we’re in.”
Why the propping up of bowl games in the resistance to a playoff?
For the BCS executives, bowls serve as a useful defense against government reform and the overtaking of football’s postseason system by the NCAA’s central office.
The NCAA has no role in the BCS and does not recognize a champion in football’s top division, the only collegiate sport without a playoff. By bolstering the value of bowls through charitable giving and local economic impact, a playoff that potentially forces the closing of a few minor bowls seems like a potential negative.
Troy Mathieu, who served as executive director of the Sugar Bowl from 1993 to1996, said it largely comes down to money.
“A part of the motivation in keeping the system is there’s truly no revenue sharing with conferences across the country,” Mathieu said. “I don’t think there was anybody that ever debated that a playoff … was more valuable in terms of the dollars that the network would be willing to pay. It was how would the revenue be distributed and divided.”
Thompson, the Mountain West commissioner, testified that the six major conferences (ACC, Big East, Big Ten, Big 12, Pac-10 and SEC) received 87.4 percent of BCS revenue. In contrast, the same six conferences took home just 61 percent of the NCAA Division I men’s basketball tournament revenue.
A playoff might bring football’s revenue sharing more in line with basketball.
Some playoffs plans, including one produced by the NCAA, concluded they could produce so much revenue that even a lesser percentage share would result in more actual dollars for the six major conferences. However, it likely would require ceding power to the NCAA’s central office, which presumably would run a playoff.
Seeking answers to these questions was the purpose of the initial hearing, Barton said. Now he has new questions about whether inaccurate information was used by Fox to paint an anti-playoff picture.
“This is political dynamite,” Barton said. “Never underestimate the power of entrenched interests to fight back in an unfair way.”