A day later, we can only sketch the latest extraordinary situation to whack the Pac-12.
We know two participants in the financial wrongdoing revealed Friday have been terminated: CFO Brent Willman and Pac-12 Networks president Mark Shuken.
We know the nature of their transgression: Failure to take proper corrective action after learning that one of the Pac-12 Networks’ distribution partners was overpaying.
We don’t know which company was involved, but we know which companies were not: Fox and ESPN. They aren’t part of the Pac-12 Networks distribution chain.
That might be the only sliver of good news for the conference in this matter. Two highly-influential media companies that stand to play a critical role in the future of the conference — by potentially partnering with the Pac-12 on a media rights contract — were not impacted by the impropriety of the past.
The conference disclosed a timeline of events on Friday, with the central piece being this sequence:
— “In the spring of 2017, the Pac-12 Networks engaged the industry-leading auditor to conduct an audit of certain distribution partner payments.
— “The audit concluded that one of the Pac-12 distribution partners had overpaid the Pac-12 Networks for the year 2016 by a material amount …
— “In October 2022, the distribution partner who was the subject of the 2017 audit claimed that it had been overpaying the Pac-12 each year since prior to 2016.”
The partner claims the overpayments totaled $50 million, but that is only a claim at this point. The real total could be slightly or significantly different.
Key details are missing, and questions remain, including:
— What prompted the networks to seek the initial audit, by the “industry-leading” firm, in the spring of 2017? Was that simply part of a routine practice? Was there something amiss?
— If the overpayments were only for “each year since prior to 2016,” why did the distributor not step forward until October 2022? (Possible answer: The Pac-12 never came clean to the partner about the overpayments.)
— Did the overpayments continue after 2016, until the partner stepped forward in October 2022?
— We’re also left to wonder why Willman and Shuken didn’t take what the Pac-12 believed would have been appropriate steps once they learned of the situation. Did the overpayments lead to a revenue figure that somehow triggered performance bonuses for executives?
“It doesn’t make any sense,” said a Hotline source familiar with the Pac-12 Networks’ business operation. “Something is definitely missing.”
The other question, of course, is the disclosure piece: Who else knew? Or did Shuken and Willman keep the situation to themselves?
According to the Pac-12, Willman and Shuken failed to share “the ongoing financial risk associated with the apparent overpayment with either the Pac-12 Board of Directors or the Pac-12’s external auditors.”
That statement says nothing about whether they alerted former commissioner Larry Scott.
Is that because they did alert him and Scott failed to act appropriately?
Or because the Pac-12’s public disclosure on Friday was intended to focus only on the executives and process with current relevance?
We know Scott was one of the people interviewed in the investigation conducted by Cooley LLP.
We don’t know what he said.
We don’t know if he knew about the overpayments.
Other than issuing the public statement and timeline, the conference has declined to comment on any aspect of the investigation, including the people interviewed.
Could Scott have been kept in the dark by Willman and Shuken? We might never know.
What’s next for the conference?
The distributor has filed a claim. The Pac-12 has conducted an investigation and fired two executives. Obviously, there is wrongdoing. The next step could be additional audits, a settlement, a lawsuit, or whatever lies behind curtain No. 4.
But the facts at hand strongly suggest the Pac-12 will reimburse the distributor for the total amount of the overpayments. Maybe that’s $50 million. Maybe it’s more, or less.
And ultimately, any reimbursement is cash from the conference that won’t be paid to the schools as part of the annual distributions.
If, for example, $50 million is withheld over the course of the current and upcoming fiscal year, that’s $2.1 million per school per year — a significant amount, but not budget-crushing for the athletic departments. (Yes, USC and UCLA would have money withheld, just like everyone else.)
Also, the discovery of the overpayments could impact the Pac-12 Networks’ revenue for the remainder of the current contract cycle with the distributor, which expires in the summer of 2024.
And, of course, we should expect more information to surface in the coming months as the Pac-12 digs deeper into the mess.
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Soruce : https://www.mercurynews.com/2023/01/21/whats-next-for-the-pac-12-after-revelations-of-financial-impropriety-unanswered-questions-missing-details-and-the-likely-outcome/