South East Melbourne Phoenix have joined Illawarra Hawks in Supreme Court action against the NBL and league supremo Larry Kestelman as the Adelaide 36ers throw their support behind the competition’s direction.
Phoenix’s managing owner, US entrepreneur Romie Chaudhari, confirmed in a statement to this masthead his club’s decision, which escalates the simmering off-court dispute between the league and certain owners.
South East Melbourne Phoenix owner Romie Chaudhari.Credit: Eddie Jim
Tennis star Nick Kyrgios and Australian Boomers guard Dante Exum are also part of South East Melbourne’s ownership group. The two clubs are seeking information and documents from the NBL.
It is unclear whether more clubs will follow, but Perth Wildcats majority owner Mark Arena is supportive of their cause, according to three sources familiar with Arena’s stance. This masthead contacted Arena on Sunday.
Chaudhari said he was “left with no other option” than to join his Illawarra counterpart, American billionaire Jared Novelly, in the NSW Supreme Court action after “years” of not receiving answers to his questions.
Novelly previously aired his displeasure with the NBL’s ownership structure and Kestelman’s financial transparency, proposing that the league’s majority owner should sell his shares equally to the competition’s 10 teams. Several clubs are valued at, or north of, $35 million.
Hawks owner Jared Novelly, left, is taking on the NBL’s Larry Kestelman.Credit: Australian Financial Review
“Buying into SE Melbourne was about seizing the opportunity to be part of building a world-class league with passionate fans,” Chaudhari said in the statement.
“So far, we’ve invested tens of millions of dollars but remain deeply concerned that we are potentially exposed to self-interest and integrity issues. For the league to reach its potential, it must be built on a bedrock of transparency and fairness, and that’s why we are taking this step.
“It is no way to run a junior amateur league, never mind a professional league with millions of fans.
“Earlier this year, the owners voted for change and were ignored. It’s a shame it has come to a legal process, but we consider it necessary to get the information we need as a first step to fixing the game.”
An email from Novelly to fellow club owners, seen by this masthead, referenced seven owners voting in January to “determine a new path forward” after issues with the NBL’s governance, particularly “integrity concerns and financial transparency”.
Novelly is also a shareholder in the East Asia Super League, which includes basketball teams from Japan, South Korea, Philippines, Taiwan, Hong Kong and Macau.
Each of the 10 NBL clubs paid $14,000 for accounting firm KPMG to complete an independent report into the league’s financial operations across the previous three years.
The KPMG report said “no significant issues were noted from the eight scope areas considered”. The report acknowledged the business links between the NBL and Kestelman’s LK Group, showing $15.6 million in related party transactions in the period investigated.
“The NBL remains committed to transparency and accountability in all of its operations as it continues its strong growth,” an NBL spokesperson told this masthead.
“Beyond the KPMG report, the NBL consistently subjects its financial statements to audits by PwC and maintains open lines of communication with clubs, encouraging feedback and discussions.
“The NBL welcomes questions from clubs, and will always respond when queries are submitted through the appropriate channels.”
Team owners, including Arena and Sydney Kings co-owner and ex-NBA star Andrew Bogut, were annoyed last month by the NBL’s plans, since called off, to use a travel agency part-owned by Kestelman and founded by a referee in the league. A lack of communication was among the concerns.
NBL owner Larry Kestelman continues to have the support of Adelaide 36ers executive chairman Grant Kelley (right).Credit: Getty Images for the NBL
However, Adelaide 36ers executive chairman Grant Kelley said he remained “firmly” in support of the NBL and its strategy, and the way Kestelman had nurtured the grassroots and professional game.
Kelley was also grateful for the exponential increase in the valuation of NBL clubs under Kestelman’s leadership, including the 36ers being valued at about $42.5 million last year.
“Everyone in this country has the right to their day in court. I’m an ex-lawyer, so I feel that’s only right – but speaking personally, I don’t understand the basis for the [Phoenix and Hawks] claims,” Kelley told this masthead.
“Of course, we’ll let the judicial process run its course, but I, directly, in 10 years, have seen no basis for the allegations which have been made.
“My personal style has always been, whenever we’ve had challenges with situations that arise in professional sport – and it’s not just me and Larry, it’s me and the other owners – we have talked openly about how to collectively solve those challenges.”
Kestelman, who has a 94 per cent stake in the NBL, previously had shares in three clubs: Brisbane, Melbourne United and Tasmania JackJumpers.
This masthead reported last month that the sport’s world governing body, FIBA, asked Basketball Australia to investigate conflict-of-interest claims about Kestelman.
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