Shoe Deal Is No Shoo-In -- State Scrutinizes James' Nike Contract
The state attorney general's office has told the University of Washington that parts of a proposed contract between football coach Don James and Nike likely violate state laws.
James orally agreed to a four-year contract Feb. 1 in which he would receive $35,000 a year and other financial benefits for using his position to promote Nike's products and outfit the players in its shoes.
Nike agreed to pay James an additional $1,000 if the Huskies win the Pac-10 Conference and $5,000 if the team finishes first in the USA Today / CNN coaches' poll, or $4,000 for second, $3,000 for third, $2,000 for fourth, and $1,000 for fifth.
James agreed to accept 325 pairs of football shoes for his team, encourage his players to use them and other Nike products, and discourage the players from taping over the Nike logo on shoes.
Officials at the University of Washington refused to release the memorandum from the attorney general's office that questioned the legality of such an arrangement. However, a copy of the memo was seen by The Seattle Times.
The state is believed to be among the first in the country to question a coach on the legality of a shoe deal.
"There's never been any memorable instance where a contract between a coach and Nike was challenged on the basis of state law," said Lindsay Stewart, Nike vice president and general counsel. "And we have a lot of coaches in a lot of states."
Barbara Hedges, athletic director, said the school is scrutinizing all Husky coaches to determine if their outside compensation is within NCAA rules and state laws.
The review was prompted by recent NCAA legislation requiring coaches to submit their contracts to the school president for prior written approval, said Jim Collier, vice president for university relations. He said James' deal with Nike was the only contract that led to written advice from the attorney general's office.
The issue should be resolved sometime in May, Collier said.
James said his attorney was trying to make the Nike contract fit with state law. "It's not really a negotiation," James said. "It's something that they're just trying to work out."
The review is not part of the joint Pac-10 and university investigation into the football program.
In the memo to Hedges, Mark S. Green, assistant attorney general who reviewed terms of the proposed contract between James and Nike, gave advice on the legality of several elements:
-- Performance bonuses are probably not permitted under state law because state employees, such as James, are not allowed to receive outside compensation for official duties, Green advised.
James' duties as a state employee are coaching and operating the UW football program, for which he is paid $161,004. He made another $309,000 in outside income last year, including $25,000 from a Converse endorsement contract that ends in June.
-- An arrangement whereby James could order the purchase of Nike shoes on a 2-for-1 basis for the school probably would violate a law stating no employee can have an economic interest in such a purchase.
-- By using players to promote products, the proposed deal may violate a law preventing state employees from using people they supervise for their own financial gain.
As part of the contract, James receives the players' shoes plus an additional 100 pairs for bowl games. Nike also provides 288 wristbands, 216 pairs of game socks and 24 sideline T-shirts, as well as 400 T-shirts and 15 coaches' shirts for clinics and camps.
Coaches and staff also receive merchandise: $500 worth for each of 12 assistants, $1,000 worth each for the trainer and equipment manager, and $2,000 worth for James.
-- If James provides Nike executives with the option to buy tickets to Husky games, as the contract specifies, he could be in violation of laws that prohibit him from using state property for personal gain.
James agreed in the contract to give Nike the chance to buy two season tickets and six bowl-game tickets.
H. Bink Smith, division manager for Nike, said his company wants to sign James because of his success as a coach and the program's rising visibility.
"It would be great to have his presence on the West Coast, although I was in New York recently and people were talking about the Huskies there, too," Smith said. "They've made a name for themselves nationally."
Nike supplies about 60 college-football teams with shoes and apparel, and about 25 of those coaches receive some form of compensation, Smith said. Among them is Washington State Coach Mike Price. His deal, however, is much smaller than that of James, who said he was offered contracts by five shoe companies.
Price agreed Feb. 1 to a one-year deal that gives him $750 in free merchandise but nothing in outright income, according to the contract, which was released by the school. Price must encourage his players to wear Nikes but the school gets free shoes only for a bowl game; otherwise, it buys them on a 2-for-1 basis.
Price expressed surprise that Nike plans to pay James $140,000 over the next four years to promote the same shoes. "I can't get anybody to shine mine," he said.
But Price, who makes $90,000 a year in salary and $60,000 in outside income, does not begrudge James the Nike windfall. "More power to him," he said. "We earn our money."
The Nike money would actually represent a small portion of James' overall income and makes for a modest sum compared with contracts given some basketball coaches. Nike recently agreed to pay Mike Krzyzewski of Duke $1 million plus a salary of $375,000 over each of next 15 years (by contrast, Washington State's Kelvin Sampson gets $5,000 per year).
James' Nike contract comes at a time when college presidents have shown concern about the growing influence of shoe companies on NCAA sports.
The NCAA began last year to require that coaches gain prior written approval from their presidents for outside income was recommended by the Knight Commission, a panel of educators, businessmen and politicians which in 1991 outlined a plan to reform college sports.
The Knight Commission called for schools, not coaches, to negotiate the shoe deals, to avoid conflict-of-interest problems. Like most schools, Washington has continued to allow its coaches to make their own deals, although Collier said that could change.
"It's like a professor getting compensation from a certain textbook company and requiring the students to use that textbook," said Kit Morris, staff director of the Knight Commission. "It doesn't happen. But if it did, it would raise certain ethical questions."
Questions of equity have also been raised - such as, should coaches get to keep all the shoe money? Many coaches contend that schools should be happy with the free equipment and the reduced pressure to pay them higher salaries. Morris argues that schools deserve a cut of the funds because their name figures so prominently in the value of the contract, a proposal supported by Richard Dunn, UW faculty athletic representative.
"We get cuts on patents (developed at UW), so why not?" Dunn said.
The biggest losers are those most often wearing the shoes, WSU's Price said. College athletes, unlike their professional peers, are restricted by NCAA "amateurism" rules from receiving any compensation for promoting a product.
"The players are kind of getting screwed on the deal," Price said. "As is, the kids barely have enough money to live."
James said he was willing to structure the contract within state laws, but defended his proposed Nike contract.
"It's not a bad deal for the university," he said. "You get a lot of free shoes."