Tuesday, April 17, 2007

One little additional thing on Beilein's Buyout


As we've previously discussed, no one is readily paying over the $2.5 million allegedly owed by Beilein to WVU pursuant to his employment contract. We proffered earlier that Beilein and his team of crack attorneys may be banking on the fact that the buyout clause is potentially unenforceable due to its amount in proportion to his salary and lack of language declaring otherwise.

The guys over at mgoblog raised another possibility - er, a plan B for Beilein. Even if the clause if found enforceable, Beilein should be able to get the amount reduced if he pays it all right now based upon current value accounting. Without getting too technical, CVA is premised upon inflation, i.e. $500k in 2012 is actually worth less than $500k in 2007, so any payment today of a sum guaranteed in the future should be appropriately reduced.

The contract language, "Coach will pay . . . $500,000 per year for the remainder of the Agreement's term" suggests that if this liquidated damage clause is enforceable in its entirety, Beilein would owe the University $500,000 once per year over the next 5 years instead of $2.5 million right now. Using the CPI calculator available from the US Bureau of Labor and Statistics, and assuming a rate of growth over the next 5 years similar to the past 5 years, Beilein's total buyout has a current value of $2.31 million.

Furthermore, cash in hand is always more valuable than cash owed. And let's not forget settlement value. The potential flaws in the liquidated damage clause raises the possibility of expensive litigation and creates the possibility of WVU getting squat, nada, zilch.

Add it all together, and assuming some sort of financial backing permitting Beilein to settle now, I'm predicting a settlement in the $1.7 million dollar range.
*The mgoblog guys also raised some issues about taxes (as did my boss), but I know about as much about taxes as I do about appropriate conduct in public.

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