Going for Gold: Team USA Eyes $100M+ in Legal Fees Since Rio Games
On its federal tax returns, the United States Soccer Federation lists as its organizational mission making soccer “the preeminent sport” in America. Ten pages later is where it reveals that it may have already achieved a far less desirable kind of preeminence: spending money on lawyers.
In its latest Form 990, filed earlier this year, U.S. Soccer reported nearly $19 million on outside legal expenditures between April 1, 2019, and March 31, 2020. That amounted to almost half of what the organization paid in wages and benefits for all its 868 employees over that same period.
Since 2017, U.S. Soccer has been embroiled in an expensive antitrust lawsuit filed by the North American Soccer League, a former Division II league that accused the federation of conspiring with Major League Soccer to create an arbitrary sanctioning process that spares the MLS from fair competition. In 2019, the governing body’s legal bills piled higher after a pay discrimination lawsuit was filed by members of the women’s national team.
Through it all, the sport’s national governing body reported paying $27 million in legal fees over a four-year period.
But U.S. Soccer is hardly alone when it comes to Team USA sports organizations spending Olympian sums on lawyers. Since the last Summer Games were played in Rio de Janeiro, the United States Olympic and Paralympic Committee and 50 affiliated national governing body members (NGBs) are on pace to spend well over $100 million in legal bills by the time the torch is lighted in Tokyo in July, according to a Sportico analysis of the nonprofits’ tax filings. Already, the amount disclosed by those organizations, from their 2016 to 2019 returns, stands at almost $87 million.
In addition to the USOPC—which reported spending $13.6 million on attorneys in 2018—eight NGBs have disclosed at least $1 million on legal fees during this time frame, while four others reported spending at least $500,000. None of the organizations’ 2020 tax returns have been made public; assuming they’ve filed for extensions, their 990s from last tax year aren’t likely to be available until this coming fall. Still, given the extent of several of the organizations’ troubles, the safe bet is on legal bills to continue growing. While the NGBs aren’t required to more specifically disclose what the fees are for, previous public reporting and the immensity of certain line items suggests civil-litigation defense is a major source of the costs.
Reached last week, a USOPC spokesperson declined to comment.
These sums encapsulate only what the entities spent on their own lawyers—not what they have or will have to spend on settlement payments, judgments or statutory penalties. The potential settlements involving USA Gymnastics, which currently faces hundreds of sexual assault lawsuits, most involving convicted former team doctor Larry Nassar, are expected to cost several hundred million dollars.
In late 2018, USA Gymnastics filed for Chapter 11 bankruptcy, which temporarily put a halt to the litigation it faced—but not its attorney’s fees. The following year, the organization reported on its tax returns having spent more than $6.6 million on lawyers, bringing its three-year total by that point to nearly $12.9 million. Earlier this year, USA Gymnastics CEO Li Li Leung said she hoped to still reach settlements with all the sexual assault plaintiffs and emerge from bankruptcy by this summer. USA Gymnastics did not respond to a request for comment.
The IRS requires tax-exempt nonprofits to report on their annual returns the aggregate sum of “any legal fees charged by outside firms and individuals.” But there are various distinctions that organizations make in the reports, which can lower the reported tally. Within this batch of Team USA filings, a number of entities disclosed paying individual law firms amounts in excess of what the organizations reported as their net legal expenses.
For example, USA Volleyball reported no legal fees on its 2017 and 2018 tax returns, while at the same time revealing that it had paid the law firm Bryan Cave Leighton Paisner $233,136 and $315,800, for those respective years. From 2016 to 2017, USA Track & Field claimed $697,428 in total legal expenditures, but it also reported paying $885,850 to the law firm Barnes & Thornburg over that span. Neither USA Volleyball nor USTF responded to emails seeking clarification.
A spokesperson for USA Cycling, which reported zero legal fees on its returns from 2016 to 2019, said its outside accounting firm “does not split out legal fees,” instead including those expenditures as part of its professional fees.
Brian Mittendorf, a professor at Ohio State who specializes in nonprofit tax returns, said that such practices can get into an accounting “gray area,” but aren’t likely to raise the IRS’s antenna.
Discrepancies and data limitations aside, the thus-far reported legal fees still add up to a staggering sum, a financial consequence of litigation that has consumed much of the Team USA organizations, much of which involves claims of athlete mistreatment.
“The Olympic and Paralympic corporation has spotted the enemy, and it is athletes,” said Nancy Hogshead-Makar, a former Olympic gold medalist swimmer-turned-advocate, who currently serves as CEO of Champion Women. “Now, it is spending money hand over fist to avoid paying athletes to remedy the harms they created.”
While some of the Olympic movement’s entanglements are generally well known, others are less so. USA Rugby, for example, reported nearly a million dollars in legal fees from 2018 to 2019, amid a $40 million breach of contract lawsuit from a company claiming that it had conspired to seize a lucrative tournament’s hosting rights. USA Rugby, which settled the suit, exited Delaware Bankruptcy Court last September. The organization did not respond to a request for comment.
US Equestrian reported paying $1.63 million in legal fees from December 2016 to November 2019, during which time it faced mounting allegations of failing to protect young athletes from predator coaches. The organization, which was dealt its latest child sexual abuse lawsuit last week, did not respond to a request for comment.
The US Bowling Congress, which has faced multiple lawsuits from individuals who claimed to have been victimized by their coaches when they were minors, reported paying its outside counsel $1.77 million from 2016 to 2019. In March, the organization agreed to a $750,000 settlement with one plaintiff, who said he was sexually abused by Ty Lee Treddenbarger, a former coach who is currently serving a 25-year prison sentence for the production of child pornography. The USBC received a $1.69 million Paycheck Protection Program loan last April.
Some of the disclosures indicated controversies that may have not yet surfaced publicly. In 2018, USA Shooting reported spending $142,523 dollars in legal fees, a noticeable uptick from the previous years. In an email to Sportico, CEO Matt Suggs said the expenses were incurred as part of investigations into potential code of conduct violations by two of its athletes, who had been temporarily suspended from the Olympic training facilities. Other than saying that the incidents predated his hiring last year, Suggs declined to provide more details, saying that settlement agreements with the athletes prevented him from doing so. Leading up to the 2016 Summer Games, USA Shooting made headlines after it sued some of its athletes who had previously filed grievances with the USOPC.
As is often the case in the field of discord, victory comes to those who work billable hours.
U.S. Soccer’s legal quandaries have mostly redounded to the benefit of mega-firm Latham & Watkins, which received $9 million from the organization in 2019, after pocketing $6 million from 2016 to 2018. In addition to handling the equal pay and NASL litigation, Latham & Watkins also represented U.S. Soccer in an antitrust lawsuit filed against it in September 2019 by international events promoter Relevent. A spokesperson for U.S. Soccer declined to comment about its legal expenses.
Bryan Cave proved to be a go-to shop for a number of NGBs, pulling down six-figure annual hauls from USA Volleyball, USA Basketball, US Equestrian and USA Triathlon since 2016. On its website, the St. Louis-headquartered international law firm touts its “Olympic and National Governing Body Practice,” as part of its sports and entertainment group. Faegre Baker Daniels raked it in from both USA Gymnastics and USA Hockey, and was one of three law firms that collected a seven-figure sum from USAG.
Ropes & Grey, the firm that investigated and produced a 233-page report on Larry Nassar’s abuses, took in $5.2 million in fees from the USOPC in 2018, while Covington & Burling, which a decade earlier served as pro bono counsel to the USOPC’s advisory committee, scored a little over $4 million from the organization in 2019.
Following the Nassar scandal, Congressional legislation entrusted a new nonprofit, the United States Center for SafeSport, to independently investigate all allegations of sexual misconduct made within the USOPC and NGBs. In 2019, SafeSport’s first CEO Shellie Pfohl resigned amid criticism that the center was failing to inspire an atmosphere of greater enforcement. In an interview with USA Today, Pfohl seemed to suggest that SafeSport had been overwhelmed with the volume of complaints.
So far, the linchpin for the four-year-old organization, based in Denver—a 90-minute drive from USOPC’s headquarters in Colorado Springs—is a local attorney named Joe Zonies, whose practice specializes in mass tort litigation against pharmaceutical companies. From 2017 to 2019, SafeSport paid Zonies’ firm $1.6 million, according to the organization’s tax filings.
“The US Center for SafeSport has relied on outside counsel for a variety of reasons since its inception in 2017, from providing guidance on rule-making, to representation in arbitration hearings on sanctions handed down by the Center,” a SafeSport spokesperson said in an emailed statement. “Outside counsel also provides an additional layer of oversight on response and resolution matters while providing the center the kind of flexibility it needs to fulfill its mission to end abuse in sport.”
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