Insiders use the college bowl system to loot American universities
The summer sun glints off the Caribbean as the Majesty of the Seas, a luxurious 12-deck ship with nine bars and a topside pool, docks at a private island called CocoCay in the Bahamas. Guests hug the railings and look out at a paradise stocked with palm trees, tanned masseuses, bars full of rum, and sumptuous white sand beaches.
The deck is crowded with college football bigwigs: Pete Garcia, Florida International University's executive director for sports; Florida State athletic director Randy Spetman; and Kirby Hocutt, then the University of Miami AD. Also present are more than three dozen colleagues from Missouri to Mississippi to Duke, all with spouses in tow.
And this NCAA who's who looks happy not just because of the sun; they're all enjoying this luxury cruise for free.
More accurately, they're taking a vacation on the backs of the students and taxpayers who subsidize an outrageously crooked college football system that culminates in January with the Bowl Championship Series (BCS), including Miami's Orange Bowl on January 4.
The Orange Bowl is a rat's nest of corruption and waste, critics say. Ostensibly a nonprofit, the South Florida organization that runs the game was named last year in a complaint to the IRS for spending $535,000 on gifts, $40,000-plus on golf outings, and more than a million bucks in salary for its top executives, all while giving only a fraction of the cash the festivities earn back to local charities.
"To claim that items like this Caribbean cruise are 'business expenses' for a nonprofit is just a ridiculous abuse of the taxpayers' trust," says Matt Sanderson, an attorney who heads the Playoff PAC, the anti-BCS group in Washington, D.C. that uncovered the questionable expenses.
Bowl execs argue that Sanderson's numbers are inaccurate and that the game brings millions of dollars to South Florida while helping local youth football leagues. "It's really unfair to pull numbers out of a line-item form without context and accuse the Orange Bowl of misspending its funds," says Larry Wahl, the bowl's vice president for communications. "We give much more to the community than shows up in our nonprofit reports."
But spending aside, there's an even larger problem with the Orange Bowl and its ilk such as the Fiesta and Sugar bowls: Thanks to a corrupt system lubricated with tropical cruises and huge bonuses, games bleed struggling public universities by forcing them to buy tens of thousands of tickets at absurd markups — all so a needless middleman can make millions.
This scheme plays out across the nation each year on the ostensibly pristine fields of amateur athletics. Bowl executives grant themselves breathtaking salaries — some more than $600,000 per year. The games, meanwhile, provide coaches, athletic directors, and the suits who nominally supervise them with an unending stream of bonuses.
Everyone else picks up the tab.
There's a reason cities hosting the Super Bowl or rounds of March Madness bid with buffets of giveaways to land the tourist traffic: If you want a taste, you have to pay.
College football is the only sport that gives away its postseason revenues. The business model is akin to Walmart keeping its profits for the first ten months of the year and then letting Target pick up its holiday sales.
This is an especially hazardous form of capitalism for the nation's universities, which have been bloodied by ever-diving state funding combined with double-digit tuition hikes. And contrary to popular belief, their athletic departments just widen the damage.
Depending upon the year, only about 20 of the 120 athletic departments featuring Division 1 football actually pay for themselves. The rest require students and taxpayers to ride to the rescue.
The racket works like this: Through required purchases of anywhere from 10,000 to 17,500 tickets, schools essentially pay for the right to appear in a bowl. The bowls keep the ticket and sponsorship money. Bowl execs also negotiate their own TV contracts.
After taking 50 to 60 percent off the top, the bowls then write checks to the teams' conferences. The conferences, in turn, split that money among their schools. (Profits from the five BCS games are spread to varying degrees among all conferences.)
But only about half of the 35 bowls offer payouts large enough to cover team expenses. So the conferences use money from more lucrative bowl games to cover losses from the barkers.
"You don't lose money going to bowl games, at least not in the Big 10," says Andy Seeley, a spokesman for the University of Minnesota, whose football team won't be headed to a bowl this year after suffering through a 3-9 season.
But that's true only in a technical sense. In one case involving Minnesota — a 2009 trip to Tempe's Insight Bowl — the Big 10 covered the university's million-dollar loss. (The school had to eat $476,000 in useless tickets and then paid $542,000 for airfare and thousands more for food and hotels.)
What insiders don't mention is the humongous pyramid of cash that schools are leaving on the table. "They should go take Economics 101," says Dan Wetzel, a Yahoo! Sports columnist and co-author of Death to the BCS. "Lost profit is lost money to any other business in the world."
And those losses are staggering. Last year, the nation's bowls paid schools roughly $270 million. Just for playing middlemen and providing 70-degree temperatures, bowl execs grabbed a larger cut, north of $300 million.
Even bowl apologists admit that by implementing a playoff system — like every other NCAA sport does — schools could generate three to four times the amount they're bringing home now. That's because TV networks will pay far more for a playoff game than they will for straight-to-DVD thrillers such as the Beef O'Brady's Bowl St. Petersburg.
Under a playoff system, the schools' collective take might even approach $1 billion annually. It's the kind of money that could fill budget gaps in nearly every Division 1 athletic department.
Yet there's one small barrier that stands in the way: A playoff system would ensure that schools, not the insiders who make these decisions, would take home the money.
So college football is left with lopsided accords like Minnesota's. When the Gophers were requiring a Big 10 bailout for those large red numbers in Tempe , Insight CEO John Junker was paying himself nearly $600,000 a year, with perks like country club memberships in states as far away as Oregon and Oklahoma.
Coaches and athletic directors make a similar killing. Three years ago, the University of Florida beat Oklahoma for the national title. The Gators may have generated untold riches, but the school itself managed just a $50,000 profit — enough to pay for a team banquet and perhaps another part-timer for the groundskeeping crew.
Florida's coaches and athletic officials were bound by no similar restraints. They took home $960,000 in bonuses.
That's the beauty of the system: No matter how money is torched, the insiders always get paid.
"The money is not the reason we have the system we have," says Bill Hancock, executive director of the BCS. "It rewards the athletes at the end of the year with a celebration."
It's a common refrain among the sport's elder statesmen, and the gentlemanly Hancock speaks with the earnestness of a true believer. There's little doubt players have earned a respite after the ceaseless beatdown that is a football season. Especially since they receive but a fraction of the towering wealth they generate.
Minnesota's Seeley describes bowls as an educational experience, a chance for young men to spend a week learning about another part of the country.
But considering that schools are giving away more than $300 million a year to bowls, it might be the most expensive week of touring amusement parks and children's hospitals ever conceived. And it presumes the schools couldn't do it better without making someone else rich.
Take Junker, the system's most egregious sponge. He was the CEO of the Insight and Fiesta bowls until he was fired last spring. His games may have technically been charities; he just considered himself the neediest recipient of all.
According to lawyers hired by the bowls' boards to investigate malfeasance, he blew $33,000 on his own birthday party in Pebble Beach. He spent $19,000 on country club memberships in three states. When he wasn't running up $1,200 bills at strip joints, he was bidding $90,000 in a charity auction to play golf with Jack Nicklaus.
It all came from money that could have gone to America's colleges. More alarming, Junker's spree only ended after he was outed by the Arizona Republic for illegally reimbursing employees for donations to his political allies.
Most bowl executives have equally inflated views of their own value. Orange Bowl CEO Eric Poms pays himself $506,000 a year in salary, bonuses, and benefits, and kicks nearly $1 million in salaries to four lesser execs. Outback Bowl President Jim McVay takes in $808,000 annually. The bosses for the Cotton and Alamo bowls make $419,000 each. Just for staging one game a year.
Meanwhile, the nation's colleges put on ten times the number of events back home at just a fraction of the cost.
Bowl executives defend themselves by claiming to run charities. That might be true in terms of their IRS status, but charity implies giving to someone other than yourself. In the world of college bowl games, that hasn't happened for more than 60 years.
Studies show that as far back as 1947, bowls were giving less than 1 percent of their receipts to the needy. Today their benevolence ranges from just 1 to 3 percent.
By comparison, "Most highly efficient charities will spend 75 percent or more," says Megan Davison of CharityWatch, a Chicago group that helps donors find the most effective charities. "A program that spends 60 percent will get a C grade from us."
So what grade does one receive for donating just 3 percent? "We would give them an F grade and call them pathetic and urge the general public not to support them," says Daniel Borochoff, president of CharityWatch.
But while bowls violate every principle of philanthropy, state and city politicians are happy to look away. The games' nonprofit status allows them to skirt taxes, but they deliver built-in tourist traffic.
To ensure no one asks too many questions, the bowls fete these same politicians with receptions, comped tickets, and sideline passes. The Fiesta Bowl even paid for luxury legislator junkets to cities such as Chicago and Boston.
The Orange Bowl tells the IRS it doesn't pay lobbyists to influence Florida politicians, yet its forms show it gave more than $55,000 on several occasions to registered lobbying groups, Sanderson says.
The bowls then do their best to cloak this strange approach to philanthropy. Both the Orange and Sugar bowls claim they do wonders for their cities' charities; for reasons unexplained, they just don't include those donations on their books. Meanwhile, bowls such as the Cotton simply ignored a reporter's requests for comment.
The wiser Hancock downplays the beneficence angle, well aware it's riddled with blather. Instead, he emphasizes the tourism advantages to host cities.
He's right, of course. By forcing schools to write mammoth ticket checks — and contractually coercing teams to stay in the host town longer than they need to — bowls do wonders for warm-weather economies.
"There's no question bowl games benefit charities in their community," Hancock says. "From my perspective, the economic development to the community is significant. It's a blend. I think the people who talk about the bowls as nonprofits exclude the economic development end."
Left unmentioned is why University of Missouri students would have wanted to subsidize Tempe when the Tigers played the Insight last year. Or why Washington state residents would have been thrilled to see their tax money burned in San Diego when the Huskies appeared in the Holiday Bowl. That's the problem with the insiders: The system rewards them so lavishly they simply can't fathom that others might resent paying the freight.
College presidents could easily put a stop to the shell game. If they had the will. Which they don't.
They tend to be a lot like coaches, a job-jumping species forever on the hunt for more prestigious posts. This march to greater altitudes requires staying within the graces of trustees and big donors, who enjoy free bowl vacations as much as everyone else. Besides, many presidents wield less institutional power than their own coaches, as Penn State's pedophilia scandal revealed.
So they behave like congressmen, allowing their schools to be pillaged to preserve their political capital. Better to kick these decisions to athletic directors and conference commissioners.
And that's where the pitfalls begin.
"The bowl directors are a lot smarter than the athletic directors, because anyone who would agree to this deal is getting whomped," says Yahoo! columnist Wetzel.
It's not that ADs are necessarily stupid. Let's just say they're incurious and not especially self-aware.
Most have spent years, if not decades, being chummy with bowl execs. When they're invited to events such as the Fiesta Frolic, a weekend of splendor and golf in Phoenix — price tag: $387,421 — they don't believe their allegiance is being purchased. It's just a swell time among old friends.
The same goes for the Orange Bowl's Summer Splash events, which include that Caribbean cruise on the Majesty of the Seas. Wahl, the Orange Bowl's spokesman, says the cruise was in fact a business trip for the dozens of ADs on board.
"It's really an opportunity for us to bring key stakeholders together, whether conference people or folks from the schools, to come down to South Florida and to get a taste of what we have to offer," he says.
Yet he admits his game has to "vie constantly to maintain the position in the BCS. It comes up for renewal every four years." And there's nothing like a free luxury cruise to butter that renewal.
Wetzel contends that athletic directors simply aren't bright enough to know they've been bought, seeing these freebies from friends as just another part of college football's grand tradition. So they're not inclined to get too inquisitive over contracts. And this allows their so-called friends to utterly rip them off.
The biggest scam is the bulk ticket purchases. Depending upon the bowl, schools are required to buy anywhere from 10,000 to 17,500 up front. So begins the seasonal hemorrhaging.
The deal starts with a presumption of failure. Even powerhouses such as Ohio State rarely sell that many tickets. When the Buckeyes played the Fiesta Bowl in 2009, they failed to sell more than 7,000 seats. Price for this bath: $1 million.
Auburn, last year's national champion, was still stuck with $781,000 in unsold tickets from the title game.
What's worse is that the seats depreciate from the moment of purchase. Though crowds for most games are a smattering of capacity, the schools still pay bloated face-value prices. Their "friends" aren't about to grant them bulk discounts.
So when the colleges can't sell these seats to their fans, the market is flooded with more than 200,000 bowl tickets a year.
Prudent fans of UCLA, for example, know better than to buy hefty-priced seats from the school. After all, a ticket broker will soon be pushing the same seats for dimes on the dollar. Stub Hub once famously sold tickets to the Music City Bowl in Nashville for just 19 cents.
So while Connecticut may have won the Big East championship last year, it still failed to sell 14,729 seats to the Fiesta Bowl. The bowl charged the Huskies prices ranging from $111 to $268 a ticket. Stub Hub, meanwhile, was offering them for 20 bucks.
The ticket scheme alone leaves schools awash in red ink. Virginia Tech lost $400,000 on last year's trip to the Orange Bowl — despite getting $1.2 million from the Atlantic Coast Conference. Though Auburn claimed last season's BCS crown, financial records show it still lost $600,000 — even after a $2.2 million bailout from the Southeastern Conference.
Some bowls have also found a way to scam schools on hotels. Because the bowls usually arrange lodging, athletic directors assume their "friends" are negotiating the best group deals. But that's not always the case.
Under Junker's rule, the Fiesta Bowl required schools to purchase 3,750 room-nights at about $200 a pop. According to the contract, the schools had to pay whether they used them or not.
But what Junker wasn't telling his "friends" was that he had arranged a side deal with the Scottsdale Convention & Visitors Bureau. In exchange for funneling teams to Scottsdale resorts, the city's tourism arm agreed to kick the Fiesta Bowl $8.2 million over the 20-year pact, according to a contract discovered by the Arizona Republic.
The Sugar Bowl — which pays executive director Paul Hoolahan $645,000 — also received "voluntary commissions" from New Orleans hotels. Other bowls have been accused of similar arrangements.
Resplendent in dusty-orange jackets, the Orange Bowl's top brass gathered next to the pool at the Seminole Hard Rock Hotel & Casino last week alongside West Virginia's head coach Dana Holgorsen and Clemson's Dabo Swinney.
In a few weeks, Holgorsen's and Swinney's schools will spend hundreds of thousands of dollars to send athletes, bands, students, and boosters hundreds of miles to play a football game at Sun Life Stadium.
The coaches smiled, the bowl's anthropomorphic fruit mascot Obie danced, and Jeff Roberts — a local vice president of Goldman Sachs and the bowl's chairman — gave the company line.
"We're more than just a football game and a tradition," he said.
But for the first time in decades, that "tradition" is decidedly under attack. Consider Taylor Morgan. He's a board member of Playoff PAC, the same group that reported the Orange Bowl to the IRS. His group also filed federal complaints against the Rose Bowl and the Fiesta Bowl, whose head, Junker, lost his job in part because of their research.
"These bowls receive millions of dollars in federal and state subsidies," Morgan says. "They don't donate money to their communities. They don't do anything of substance in a charitable sense other than line the pockets of their friends and executives."
Add in books such as Wetzel's Death to the BCS, a step-by-step account of this wholesale soaking, and bowl execs were suddenly being publicly strafed for their sins.
The system is also facing attack on the antitrust front. Only the six biggest conferences — plus Notre Dame's athletic director — have voting rights within the BCS. The BCS picks the teams for the top five bowls. These six leagues also receive the largest revenue cuts, leaving the five remaining Division 1 conferences at their mercy.
Sports economist Andrew Zimbalist likens it to Major League Baseball allowing the Yankees, Red Sox, and Phillies to decide who makes the playoffs — and guarantee themselves the biggest paydays. So he and 21 other economists filed a complaint last spring urging the Justice Department to investigate the BCS for antitrust violations.
What's more, despite having access to the nation's best mathematicians, the BCS can't even get its rankings right, many critics argue. Famed sports statistician Bill James has said the rankings are based on "nonsense math." Hal Stern, a professor at the University of California-Irvine, has even called for a BCS boycott in the Journal of Quantitative Analysis.
Then there are the university presidents. Faced with continuous funding cuts, they're bound to go looking for new revenue at some point.
Because college basketball's March Madness generates more than $600 million a year, schools might belatedly realize that a playoff for football, the more popular sport, is sure to bring a torrent of cash.
Hancock seems to know the end is near, though he won't say it outright. The BCS contract expires in 2014, and he acknowledges that dozens of new proposals are floating around college football.
History says the insiders will try to change as little as possible. Every few years since the dawning of the BCS, they've offered minor concessions, just enough to keep attorneys general and nosy congressmen at bay. But the bowls' duplicity is so obvious they can't hold on much longer.
"I want what's best for the students," Hancock says.
If he's being honest with himself, he can't help but push for reform. After all, he has to know that at the bottom of this insiders' pyramid are those who can afford it least — the kids paying tuition.
"What's really egregious," Morgan says, "is they shift that burden to their students."
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