Financial Irregularities: NFL Revenue Misclassification and Withholding
In a detailed investigation into alleged financial misconduct involving the NFL’s Washington Commanders, a report by Debevoise & Plimpton LLP reveals troubling findings. The investigation, triggered by serious allegations of inappropriate behavior and revenue shielding, sheds light on the club’s potential violations of NFL rules and its failure to cooperate fully during the inquiry.
Allegations of Inappropriate Behavior
Tiffani Johnston, a former cheerleader and marketing employee for the Commanders, accused owner Daniel Snyder of making unwanted physical advances during a work-related dinner. Furthermore, it was alleged that a senior executive acting on Snyder’s directive obtained an unedited photo of Johnston, exposing her personal areas. The report substantiated these inappropriate advances by Mr. Snyder towards Ms. Johnston, creating a distressing work environment.
Allegations of Financial Impropriety
Former Commanders’ employee Jason Friedman claimed that the club intentionally omitted NFL ticket sales revenue from reports sent to the League, thereby withholding revenue that should have been shared with other teams. The report found evidence supporting these allegations, indicating that the club misclassified revenues and improperly transferred funds between accounts, potentially amounting to millions of dollars. This revenue-shielding strategy ceased after the 2015 season.
The investigation faced challenges due to the club’s lack of cooperation. Mr. Snyder and the Commanders failed to provide necessary documents promptly and refused interviews, complicating efforts to determine the extent of Mr. Snyder’s involvement in the revenue-shielding practices.
The report revealed that the Commanders admitted to under-reporting $1.09 million in revenue from the 2013-2015 seasons. However, internal emails and financial documents suggested that the actual amount shielded could be much higher – potentially several tens of millions of dollars – from 2009-2015. Misclassification practices included attributing NFL revenue to non-shareable special events and improper revenue transfers between accounts.
Notably, the investigation could not determine the exact extent of legitimate non-shareable revenues due to inconsistencies and a lack of supporting documentation. Nevertheless, multiple witnesses confirmed the club’s intentional under-reporting of revenue and violations of the NFL’s revenue sharing rules.
The investigation also highlighted Mr. Snyder’s involvement in mishandling security deposits, as the club failed to timely return security deposits owed to ticket holders or remit unclaimed deposits to the states under state escheatment laws. As of July 17, 2023, the club held $1.9 million in security deposits related to inactive accounts.
Despite corroborating some of the allegations, the report couldn’t fully establish the extent of Mr. Snyder’s knowledge and participation in the improper revenue shielding practices. While Mr. Snyder denied any involvement in financial improprieties, the report suggests that he played a role in the club’s revenue-shielding strategies.
The investigation’s findings raise concerns over the club’s compliance with NFL regulations and its financial transparency. If the allegations are proven, there could be severe consequences for the Commanders, including financial penalties and damage to their reputation.
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NFL. “Report of Findings of the Investigation Regarding Daniel Snyder and the Washington Commanders.” July 20, 2023.
