The overpayment scandal that cost two Pac-12 executives their jobs was more costly than initially reported.
In a court declaration, Pac-12 Commissioner George Kliavkoff said the exact amount overpaid by Comcast to the conference was $72 million.
Former CFO Brent Willman and Pac-12 Networks president Mark Shuken were let go this January. At the time, it was reported that a distributor (later revealed to be Comcast) had overpaid the Pac-12 over $50 million over several years and that Willman and Shuken were aware of the overpayments but didn’t inform the Pac-12 Board of Directors or the Pac-12’s external auditors.
Per the Mercury News, Kliavkoff said “the Pac-12 will (have) distributed more than $72 million less than previously budgeted … to our member institutions.” The Pac-12 has already begun withholding and reducing the $72 million, which should be completed by the end of the fiscal year.
However, that process has reportedly wiped out the conference’s emergency fund.
In other words, the liability should be off the books if Washington State and Oregon State attempt to rebuild the conference next summer, after the other 10 schools depart for their new conferences.
In order to offset the reduction in revenue, the Pac-12 trimmed its expenses and tapped its emergency reserve fund.
Multiple sources said the emergency reserves — a potential asset for the Cougars and Beavers if they attempt to rebuild — are fully exhausted.
“There’s nothing left,” one source said.
The Pac-12 became aware of the overpayments in 2017 during an audit, which was never published or finalized. The conference couldn’t firm the audit because it didn’t have access to Comcast’s subscriber information.
The Pac-12 was made aware of the error in late 2017, following an audit, but never alerted Comcast. The media giant discovered the overpayments years later, in the summer of 2022, following an internal audit.
Shuken’s declaration to the court indicated the Pac-12’s audit was conducted by Media Audits International, which “did not finalize or even publish its audit findings. The audit was left with Pac-12 to further investigate, or to devote resources to complete.”
The audit showed Comcast was overpaying the Pac-12 Networks by $5 million annually, but the conference had no way to confirm the findings because it lacked access to Comcast’s proprietary subscriber data.
“Due to Comcast’s own ability to determine proper payment and its own sophisticated infrastructure and internal controls,” Willman, the former CFO, said in his court declaration, “this raised extreme skepticism within Pac-12 about the audit findings.”
Shuken also pointed the finger at Comcast for not sharing subscriber data. Additionally, he claimed he told former commissioner Larry Scott about the audit’s results and Scott said they should be ignored.
“In fact, one of the reasons the Pac-12 overpayment allegedly occurred in the first place was because Comcast maintains its subscriber data strictly confidential, even from programmers like Pac-12. The contracts between Pac-12 and Comcast generally provide a rate per subscriber and distribution tiers based on the geographic location of each subscriber but only Comcast has information on subscriber counts and location.
“Because Comcast has complete insight into its subscriber obligations, Larry Scott and other individuals at Pac-12 assumed that Comcast regularly monitors the payments it is making.”
Shuken said he shared the findings with Scott “immediately following that summary from Budill” but Scott responded “that the audit findings were ‘preposterous’ and that we ‘should ignore them’ and not move forward with any further investigation or review. Therefore, at his direction, there was no further conversation on this topic, as Mr. Scott chose to close the matter.”
A firm hired by the Pac-12 in 2022 found that claim not credible.
On the matter of whether Scott knew about the overpayments and hid them from Comcast, Kliavkoff stated: “While Plaintiffs alleged they verbally reported the Comcast overpayment issue to Scott, Cooley did not find that claim to be credible.”
Just think: the Pac-12’s schools were disappointed with distributions from the Pac-12 Network over the years (which were lower than even the conference’s worst-case projections), and they were still getting overpaid!
While this overpayment scandal is clearly a huge deal and embarrassing for both the Pac-12 and Comcast, it surely would be viewed differently if the Pac-12 wasn’t collapsing into itself like a dying star.
