Audit Notes: College Sports, NY AG Probing Lehman Execs, Shale Drilling

— Taylor Branch’s cover story in the new Atlantic is a devastating indictment of the NCAA, a must-read for anyone interested in college athletics and the business of sports.

It’s a superb synthesis of the history of the NCAA, the hypocrisy of keeping athletes from getting paid while the commercialization of college sports (football and basketball, that is) runs amok, and why a reckoning may be in store.

But after an inquiry that took me into locker rooms and ivory towers across the country, I have come to believe that sentiment blinds us to what’s before our eyes. Big-time college sports are fully commercialized. Billions of dollars flow through them each year. The NCAA makes money, and enables universities and corporations to make money, from the unpaid labor of young athletes.

Slavery analogies should be used carefully. College athletes are not slaves. Yet to survey the scene—corporations and universities enriching themselves on the backs of uncompensated young men, whose status as “student-athletes” deprives them of the right to due process guaranteed by the Constitution—is to catch an unmistakable whiff of the plantation. Perhaps a more apt metaphor is colonialism: college sports, as overseen by the NCAA, is a system imposed by well-meaning paternalists and rationalized with hoary sentiments about caring for the well-being of the colonized. But it is, nonetheless, unjust. The NCAA, in its zealous defense of bogus principles, sometimes destroys the dreams of innocent young athletes.

The NCAA today is in many ways a classic cartel. Efforts to reform it—most notably by the three Knight Commissions over the course of 20 years—have, while making changes around the edges, been largely fruitless. The time has come for a major overhaul. And whether the powers that be like it or not, big changes are coming. Threats loom on multiple fronts: in Congress, the courts, breakaway athletic conferences, student rebellion, and public disgust. Swaddled in gauzy clich├ęs, the NCAA presides over a vast, teetering glory.

It’s a very long read. But well worth it. Here’s hoping it sparks a discussion on how to change the system.

— Fox Business Network’s Charlie Gasparino gets a very interesting scoop today, reporting that New York Attorney General Eric Schneiderman, one of the few public officials trying to hold bankers to account, is still investigating Lehman Brothers executives in the collapse of their bank.

The New York Attorney General’s office is ramping up its investigation of the Lehman Brothers September 2008 bankruptcy, according to people with direct knowledge of the matter. These people say the office is preparing to take testimony from witnesses about how top executives managed the firm’s finances, including their use of a controversial accounting technique known as Repo 105 in the months prior to the bankruptcy filing…

Still, what makes a possible NY AG case problematic for former Lehman executives is a state law known as the Martin Act, in which the burden of proof for filing civil or even criminal charges is lower than under the federal securities laws.

Gasparino reports that Schneiderman is focusing on the Repo 105 scandal, in which Lehman execs cooked the books to conceal its increasingly precarious finances.

That’s bad news for Dick Fuld and Erin Callan.

The Wall Street Journal reports that municipal government in Pennsylvania are voting to ban shale-gas drilling in their communities.

Lots of them. More than a hundred have voted to restrict drilling, which is widespread in the Marcellus Shale region.

Steve Levine of Foreign Policy writes that this is another piece of evidence that the gas drillers have gone too far too fast:

Over the past week, I’ve heard from serious observers of the U.S. shale gas industry — from investment analysts, think-tank scholars and others — that we seem near a tipping point in the heated debate over the companies’ drilling methods: If there is another serious accident or two in which shale gas drillers appear to have polluted a water aquifer, look for significant regulatory curtailment of the industry, as one investment analyst put it.

If such a backlash occurs, it would be a significant turnaround for an industry that has been widely embraced as a savior, particularly for the possible role it could play in curtailing the emission of heat-trapping gases by allowing for a reduction of coal consumption.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,