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Massive Loophole? What's Next?


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Well, I'm gonna keep this simple mainly because I don't know all the ins and outs of it but...


how could the NHL have allowed such a huge loophole to exist in the CBA? Of coarse we are talking about O'Reilly and his 7.5m salary. Now that money in of itself is stupid money for him in the amount and term IMHO but it's far worse than that. It's the structure.


(to be clear, there are 2 issues here: The shear numbers of what these guys got signed to and secondly and more concerning, O'Reilly's contract structure)


87% of O'Reilly's money is in signing bonuses. His actual salary is only 1 million a year which means that only that 1 million is subject to the 14% escrow payment. I can't imagine that's gonna make for a workable situation for the league if more players get deals like this. In addition, it makes him virtually buyout proof since you can only buyout the salary and not the "signing bonus" which accounts for a vast majority of the money. And just for fun, Buffalo is paying him most of the signing bonus money in the first 3 years or so.


So, for instance, when the Flyers sit down with Voracek to talk about his extension where do the Flyers even start now? Many other teams are going to be in the same boat. Here is what I mean: If Sadd and O'Reilly are pulling in 6 mil and 7.5 mil respectively, then we are talking crazy money for a guy who lead the league in scoring for a vast majority of last season. Now, I'm sure the Flyers don't care whether they pay him via actual salary or via signing bonus. The cap hit works the same. The owners still have to write the check for the same amount of money regardless. Where the system breaks is the whole escrow thing. Why wouldn't Voracek demand 80-90% of his money be paid in bonus money and thus avoid the roughly 14% escrow "tax" payment?


Sometimes is the the most small nuance of a deal that can break a system. By itself it looks like a small aberration, even just plain boring. But this particular seed planting could result is a very fast growing, invasive noxious weed that could be difficult to eradicate until the next CBA negotiation. By then, the damage will have been done and the whole escrow system could be in shambles.


Will the league and Bettman challenge and say it violates the intent of the CBA? As far as I can tell no "rules" were broken. 


In the end, O'Reilly is buyout proof, doesn't pay the roughly 14% escrow payments and is immune to how much the league makes or doesn't make. His salary (escrow) refund after all the numbers are crunched is meaningless to him for the most part because his salary was mostly paid in signing bonus's. There will be significantly less money in the escrow pool. It's true he also won't get any back, if there is any to get back, like other players with more traditional contract structures. But in effect, he just avoided a big "tax". 


The ripple effect could be far more reaching than the simple little pebble thrown into the pond. It could be a tidal wave...

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David Clarkson made the same type of contract.  

One of the things that make a buyout interesting with this type of contract is essentially after the contract ends the buyout is really minimal for the next few years.

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