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brett's avatar

There are significant California tax benefits to the deferred money, as since it is 10 years later, assuming he moves out of California, he won't have to pay state taxes on it. Otherwise I think your analysis is spot on

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Andrew's avatar

And the fact that Ohtani’s contract was never really meant for $700 mil. Because the contract was so deferred means that the Dodgers only have to put something like $45 mil in an escrow two years after he earns the AAV amount so they really aren’t paying him $70mil/year, it’s just a more eye popping number than a 10 year $450 mil contract but really it’s discounted to $45 mil/year. This doesn’t make him financially irresponsible like Nate suggests because he can earn the bulk of his contract in a lower taxed state but in the future.

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Ed Y.'s avatar

I don’t think it’s Ohtani because I don’t want it to be true.

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Caleb's avatar

Did an MLB write this.

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Ed Y.'s avatar

Nope, just a fan with multiple Ohtani bobbleheads and rookie cards. :(

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Luis Venitucci's avatar

You are already more honest than Manfred!

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Mike Scanlon's avatar

I think the guy needs to be nicknamed "Shoeless Sho" Ohtani.

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Fraser Buchanan's avatar

"Shoeless Shotani" has one hell of a ring to it.

Hell, even if it turns out he gets completely cleared of any wrong-doing I might start calling him that.

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Mike Scanlon's avatar

I agree; "Shoeless Shotani" is superior over "Shoeless Sho Ohtani"!

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Jonathan Cabot's avatar

This post was more interesting before I learned that a bookmaker does not make books

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sean o's avatar

the note about ohtani's deferred money being irresponsible is silly. he wouldn't have been choosing between $70M today and $70M a decade from now; he had a choice between $70M a decade from now and the present value of that money. (that the dodgers can field a better team during his contract is also worth something to ohtani.) the point is that the expected value of an index fund or whatever other discount rate you'd want to apply to the ten-year deferral is baked into the $70M figure. the blog doesn't depend on this claim, but IMO it signals that you aren't self-editing (or being edited) critically enough.

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Josh's avatar

The difference between the present value of the money now and the deferred comp was calculated using a safe rate of return. Something in the 4.x% range that long term US debt is currently paying. When Nate references an index fund, he's implicitly thinking of the fact that the long term returns on the US stock market far exceed 4.x% nominal. The deferred strategy is less risk and less expected reward in the long run.

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sean o's avatar

the luxury tax calculation used a 5% discount rate based on rules established in the CBA. there is no chance that ohtani's advisors, who have a fiduciary duty to maximize his earnings, just used that number off the rack instead of a more realistic, index-y rate of return.

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John P's avatar

I think you’re overstating it a little bit, $700MM wasn’t way more than what he was gonna get without deferring

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Tom Krish's avatar

Also, Ohtani is TREMENDOUSLY private. Which is his right of course. But we can't act like we know the guy, for better or worse. We assume he's not gambling in large part because he's so talented and pleasant and joyful on the field.

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ScandyAndy's avatar

I mean, I guess they are all plausible, but if I had to handicap them, I'd say it's probably 40-50-10 in terms of plausibility. They don't seem equally plausible.

My reason for skepticism on the last one is that it just seems incredibly unlikely that this guy would want to take the fall for him for what's looking like at least a few years in prison. He's got a wife and young kid. I know there's the potential for a lot of money, but if it really was the case, that story is going to get blown up and you aren't going to get that money or it's going to be so convoluted that it's never going to be worth it.

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Buck McDonald's avatar

Nobody is giving a very well paid interpreter a $4.5m line of credit. There is a reason the sport books make money.

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TH's avatar

Why not? The money was paid back

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Terry's avatar

We need the details of the wires, frequency, etc. It is not credible that this was done in one wire or even over a short period of time. No bookie is granting a limit over 10x the customer’s annual salary until there is significant customer payment history. Bookies aren’t giving multimillion $ freerolls to bettors. This story isn’t being told truthfully.

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TH's avatar

lol your theory is that no bookie would give a customer a credit limit 10x their salary despite the fact that nobody is disputing that the bookie was paid back? How does that make any sense? Seems like the bookie made a good gamble.

This is like someone buying a Bugatti for $5 million and selling it for $7 million and then you coming in after the fact and saying nobody would buy a Bugatti for $5 million because it would be impossible to sell for a profit.

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Terry's avatar

First, you clearly know nothing about how bookies operate. They don’t give massive bet limits until the bettor shows a history of paying. Otherwise, the bettor would just be able to take free shots at the bookies’ money. And what is this nonsense about the money being “repaid”? The 4.5 million is not a loan. It’s the amount the bettor lost. If a bettor can lose that much, he could also win that much, which the bookie isn’t going to allow until he is comfortable with a customer’s integrity and ability to pay if he loses

You start with “lol” and then you talk out of your ass. Get some knowledge of the subject before mouthing off. It works much bette that way.

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ScandyAndy's avatar

It's way too early to tell if he really got 4.5 million worth of credit. That could have been 4.5 million over time, not extended as credit at once. If he's skimming off money over months, the bookie is getting paid regularly.

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Terry's avatar

How much does he have to owe the bookie without paying before he gets cut off? $1 million? Bookies don’t let you keep firing away when you can’t pay because anybody can get lucky and go on a hot streak, and then the bookie owes the guy who was broke. $4.5 million is an absurd figure, and this story doesn’t pass the smell test.

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Rachel's avatar

Thanks Nate. Your column reflects my questions and thoughts. What I appreciate about this piece is your lack of advocacy. You provide information and extrapolate to potential different meanings. I am willing to pay for data, expertise, and analysis. If I have access to data, expertise and analysis, if it’s a topic I care about, I can formulate an opinion. Thank you for respecting me enough to not tell me what is truth or what I must believe or think.

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Ivan Fyodorovich's avatar

"But I have to tell you: the very wealthy people I know are all over the place in terms of their financial hygiene, from having a high level of fastidiousness to being downright sloppy or unconcerned."

I would imagine that rich people who made their money in business or investing would be on the more fastidious end, because the same skills that make you good at running a business would make you careful with your own money. Athletes (and heirs) make money for reasons having nothing to do with their own financial acumen and it would not surprise me if many are toward the sloppy end.

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Clay's avatar

Very good point. It's unfortunate, but I think this is exactly why we hear so many stories of broke athletes 5 years after they left their respective league.

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JP's avatar

A lot of tech wealth is in no way indicative of financial fastidiousness. The VC business model encourages risk and probably has more in common with gambling than with the traditional business skills of trying to balance the books and turn a profit.

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Ross Barkan's avatar

Good points here made on several fronts. In my own piece, I underrated the idea of banks having fewer compliance policies for wealthy individuals and Ohtani turning over his finances to his interpreter. I'm glad, too, you took on the media angle and didn't underrate the possibility of Ohtani gambling himself. Sports journalism has a worse "access" problem than political journalism. In politics, of course, reporters try to protect sources and trade access for softer coverage. But the problem strikes me as much worse in sports because athletes aren't on the taxpayer dole and don't have nearly the same obligation to interact with journalists at all.

I don't think it's an exaggeration to say Ohtani is the *least known* superstar in modern times. It's not a cultural thing - we knew a fair amount about Ichiro and Matsui, two very colorful and quirky big leaguers who interacted with media quite a bit. Baseball reporters don't want to anger their sources in MLB by going too hard on Ohtani and they are also deeply reverent of him because, as MLB's golden goose, he's also their own. Their jobs, in some form, depend on Ohtani's great success and baseball's wealth/relevance. (Not true when covering politics.) You made the point well: we know nothing about Ohtani! He might be a degenerate gambler. He might not be. He is extremely talented, extremely competitive, and extremely rich. That's all we can go on right now.

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Alex's avatar

The leaner bank control was because they were subpoenaed by the FBI in a 5 year RICO case. When the money stops the investigation stops. They kept the channels open.

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Ed Y.'s avatar

Am I the only one who sees a level of hypocrisy in sport leagues encouraging betting and partnering with betting companies, but drawing the line at illegal bookies? Yes bookies are against the law but we all know of people who used them. And it’s because for some unfathomable reason California doesn’t permit online sports betting. If bets weren’t placed on baseball games, then I don’t see what the hysteria is. However if the opposite is true then yes, this is the biggest scandal of our generation.

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David Nieporent's avatar

There is a major difference between betting companies and bookies. Caesar's Palace, or FanDuel, won't 'ask' you to throw a game for them if you owe them money.

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Terry's avatar

You’re not going to owe them money. They aren’t credit operations. And whatever was going on with Ohtani interpreter/Ohtani isn’t going to happen with a state licensed book.

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Terry's avatar

California had two sports betting issues on the ballot last time. Both were defeated by the citizens. (The tribal casinos were fighting for monopoly, others wanted a piece of the pie. Both ran ads against the other and they both lost).

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Matt C's avatar

Interesting, well done post. Of course it seems #2 is most likely, as they went out and said it originally, but the Occam argument for #3 is respectable.

My random reaction to all of this - not so much moralizing about gambling, per se - but how ridiculous is it that pro athletes can bet on other pro sports, when they often have unique, close ties to other pro athletes, which gives a built-in unfair advantage (as the line by the great columnist goes “Everything is insider trading.”)

This points to the absurdity of pro sports being heavily, heavily “invested” in gambling and pretending they can keep a lid on it from getting in the way of the integrity of their sports, at least in perception.

As a fan, I have not concluded that various games are fixed or skullduggery is present, but I am dumbfounded by the greed/desire for success (pick your euphemistic level) of sports leagues just jumping on board with gambling with such extreme prejudice.

Maybe the integrity of pro sports is not immediately at risk, but it doesn’t seem like this dynamic will end well.

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Chris Rider's avatar

In regards to how it's being reported. There was zero mention of Michigan actively cheating during the season during the national championship game. Jim Harbaugh becomes an NFL coach with no mention of his cheating during his college tenure.

The sports networks are not interested in stories that make viewers question the authenticity of the sport.

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Jeff Barlow's avatar

Nate- why do other wise legit gamblers use illegal bookies, when they could use legal ones?

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Cus Tomail's avatar

They don’t want tax forms, they want to bet large, they can bet on credit, legal is limited to the state you’re currently in. Many reasons.

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Terry's avatar

Many reasons, including taxes, betting limits, have to be physically located within the state to bet in that state, and you have to post up cash, but local bookies extend credit.

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gary's avatar

How about taxes and credit?

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Richie's avatar

Because there aren't legal ones in California?

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None of the Above's avatar

How much of a constraint does that put on legal gamblers in California? Can they still do it online/with an app, just with some company not in California? Or do they have to leave California to be allowed to place the bet?

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Richie's avatar

You need to leave the state to bet. I believe you can (illegally) use a VPN to log into an online casino, but I've never personally tried.

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Cus Tomail's avatar

Have to be in a state where it has been legalized

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JohnMcG's avatar

This is how I thought a gambling scandal would happen -- someone in an athlete's (or coach's or offical's) circle got in debt with a gambler, and the athlete got ensared.

Now, in Ohtnani's case, because he is financially solvent, the consequence is that he wired some money to a sportsbook.

But imagine if it was an athlete whose finances weren't quite so secure (and we know that lots of athletes are not in as good financial shape as one might expect for someone making their salaries). Or a first-year umpire. Then this is a huge door to them being pressured to shave points or fix games.

That's why I was unmoved by the Voulgaris take (which I also heard from Bill Simmons this morning) that it's unlikely a bookie would extend Mizuhara that much credit. *Of course*, if someone is that much in an elite athlete's circle, the debt would be paid one way or another, particularly for an illegal bookmaker.

Maybe legalization mitigates this, as big sports book businesses probably won't take positions on outcomes, and wouldn't risk being involved in a scandal.

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John P's avatar

I think it's weird to assume he's good for millions of dollars just cuz he's close friends with an athlete. Not sure that's how people view any relationship outside of marriage.

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Terry's avatar

He didn’t wire money to a US licensed sportsbook in CA because there aren’t any. You can’t bet in other states from outside that state. This story is not going away.

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JohnMcG's avatar

The story went away

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Clay's avatar

Enjoyed the conversation and the layout of how all three scenarios are very plausible.

The only discussion that i think is missing that's VERY important concerning Ohtani (regardless of which scenario is true) is whether or not he might have committed wire fraud.

From what I've gathered, even if his wire was to payoff a friend's debt, because it was made to an illegal sports book, it could be a felony crime made by Ohtani. My running theory is that's why his attorneys were so quick to heel turn on their statements and claim the wires were made without his authorization.

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