Heard Off the Street: Some costs don't cost too much

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What does Detroit Lions defensive tackle Ndamukong Suh have in common with JPMorgan Chase, Citigroup and other Wall Street stalwarts?

If you said Mr. Suh is too big to fall while the financial giants are too big too fail, you'd be clever -- but only partially correct.

Mr. Suh, an accomplished practitioner of the gridiron arts, understands the costs of doing business, a concept practitioners of the financial arts are well acquainted with as well.

During last Sunday's season opener, the 307-pound Mr. Suh administered an illegal block to a like-sized member of the Minnesota Vikings, resulting in a $100,000 fine being imposed by the National Football League. The league can cite chapter and verse when it comes to the costs of doing business.

Mr. Suh is appealing the fine.

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Like his counterparts on Wall Street, the 2010 defensive rookie of the year knows how regulatory process works: When you get caught, you pay the man what sounds like an exorbitant sum, then you buckle up your chin strap and move on.

An Associated Press account last week of Mr. Suh's regulatory history cited an NFL-high five personal fouls in his rookie year. The following year, he stepped on the arm of a Green Bay Packers player during a game. The NFL stepped on Mr. Suh with a two-game suspension.

AP scribe Larry Lage calculated that six fines and the two-day suspension have cost Mr. Suh $342,794 over the course of his short career.

To the average working stiff who cannot afford the price of an NFL ticket, that sounds like an astronomical sum. It's just shy of seven years worth of median U.S. household income.

But to Mr. Suh, it's the cost of doing business. As Mr. Lage documents, Mr. Suh has a five-year contract worth up to $68 million, with $40 million of it guaranteed.

So even if he loses his appeal based on his latest indiscretion, the $100,000 is just another cost of Mr. Suh's doing business.

The NFL recorded a $765 million cost of doing business last month when it kicked off the 2013 season by settling a lawsuit brought by more than 4,500 of its retired players and the families of deceased players. They alleged the league failed to warn them prior to 2010 about the long-term impact concussions could have on their health. Those problems include a brain disease called chronic traumatic encephalopathy, or CTE. Evidence of the disease was found in former San Diego Chargers linebacker Junior Seau and former Chicago Bears safety David Duerson, both of whom committed suicide.

Mr. Duerson, suspecting playing football had damaged his brain, shot himself in the chest and left a note asking that his brain be donated to research.

The NFL's $765 million settlement will make that possible. It includes $10 million for medical research.

Again, that sounds like an enormous sum. But for the NFL, which collects about $10 billion in revenue annually, it's just another cost of doing business. It ends what could have been costly, embarrassing litigation for the league, whose corporate brand has been diminished by a number of other events, including the indictment of former New England Patriots tight end Aaron Hernandez for murder.

While Mr. Suh and his oft-flagged colleagues are regulated by the NFL, their corporate counterparts are regulated by the Securities and Exchange Commission and by federal jurists. One of those jurists, U.S. District Judge Jed S. Rakoff in New York, has shined a light on the cost of doing business on Wall Street.

Two years ago, the judge rejected a proposed $285 million settlement between the SEC and Citigroup involving the financial giant's alleged negligence in selling about $1 billion in dubious mortgage-backed securities to investors, then betting some of those mortgages would fail. The settlement did not require that Citigroup admit guilt.

Judge Rakoff referred to Citigroup as a "recidivist." At the time of his decision, the financial services provider had paid about $10 billion over the last decade to resolve legal and regulatory matters, according to banking analyst Michael Mayo.

"These regulatory and other infractions are treated like traffic tickets," Mr. Mayo, a longtime Citigroup critic, said at the time.

Judge Rakoff agreed, chastising SEC officials for settling for "very modest penalties." If what regulators had alleged was true, the $265 million was "a very good deal" for Citigroup, he stated. If the allegations were false, the $285 million was "a mild and modest cost of doing business," the judge added.

After he rejected the settlement, the SEC and Citigroup appealed. A ruling has not been issued.

More recently, JPMorgan Chase has been the exemplar when it comes to illustrating the cost of doing business. The financial titan's ledger items under that category include a $289.6 million offer to settle SEC allegations that it misled investors in offerings of mortgage-backed securities and the $410 million it will pay to settle charges by the Federal Energy Regulatory Commission that it manipulated electricity markets in California and the Midwest.

By way of perspective, JPMorgan posted profits of $21.3 billion last year, up from $19 billion the previous year. Those numbers put Mr. Suh in a much smaller ballpark, but you get the idea.

It's all part of the cost of doing business.

bizopinion

Len Boselovic: lboselovic@post-gazette.com or 412-263-1941.


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