This week, the results of accounting errors and poor financial controls reared their ugly heads for professional sports. The National Football League’s San Francisco 49ers, who appeared in Super Bowl LVIII last month, are having a 2025 fifth-round draft pick confiscated for submitting payroll documents that contained errors dating back to 2022.
And Major League Baseball star Shohei Ohtani, who recently signed the largest contract in MLB history with the Los Angeles Dodgers, is now wrapped up in a bizarre sports gambling ring investigation in California. An associate of Ohtani allegedly had been making payments from the baseball star’s account to an associate of a bookmaker under investigation by state authorities.
A failure to implement proper accounting controls is at the heart of both stories.
The 49ers’ Penalty Feels Like PCAOB Enforcement
“This action resulted from a league review that found administrative payroll accounting errors at the close of the 2022 league year that resulted in a misreporting of the club’s cumulative player compensation,” NFL spokesman Brian McCarthy said in a league statement. “The NFL determined that the club would have remained under the salary cap at all times regardless of the error and there was no intent to circumvent the cap.”
San Francisco 49ers’ CFO Peter Wilhelm was in his first year on the job for the team when the NFL said the accounting errors occurred. Wilhelm came into the job with plenty of experience in the front office of professional sports, serving as CFO for the Los Angeles Dodgers until 2012. He got the Dodgers job after working as a vice president at a professional sports advisory firm that helped facilitate the team’s sale in 2004.
While the NFL made it clear there was no intent by the team to alter its numbers to manipulate the salary cap (each team’s salary cap determines up to how much it is allowed to spend on cumulative players’ salaries each season), the forfeiture of a pick is a material, but not punitive, penalty for failure of proper accounting controls. In fact, the value of a fifth-round pick, which can be used to give a player a non-guaranteed contract of between $4 to $5 million, is similar to the fines imposed by the PCAOB on audit firms such as Withum earlier this year.
The 49ers will fall back five places in the round, moving from the 131st pick to the 136th pick. But, the NFL served notice that tighter controls will be necessary for the league’s teams going forward.
Ohtani’s Poor Financial Controls and Financial Management
Ohtani’s issues are not so much accounting errors but a failure of financial controls and management. Ohtani, who is set to earn a salary of just $2 million in 2024 before any endorsements in the U.S. and abroad, is kicking off the first year of an unprecedentedly back-loaded, 10-year, $700 million deal.
Ohtani is set to make this salary until 2033, when he will collect $68 million per year until 2043, 10 years after the contract expires. His off-field earnings are an estimated $35 million per year right now.
The investigation suggests Ohtani’s accounts were allegedly used to cover his interpreter's gambling losses, which reports indicate added up to $4.5 million. In an odd turn of events, the interpreter, Ippei Mizuhara, supposedly sat down with ESPN for 90 minutes on camera earlier this week, which was then not released due to Ohtani’s people discrediting Mizuhara’s account at the last minute. Rather than release the video, ESPN chose to release a statement from Ohtani’s legal team.
"In the course of responding to recent media inquiries, we discovered that Shohei has been the victim of a massive theft, and we are turning the matter over to the authorities," read the statement from Berk Brettler LLP.
Ohtani, like many globally recognized sports superstars, is essentially a micro-cap company. With some athletes grossing over $100 million in annual earnings nowadays, these figures require sound financial management. Not only is it reported that Ohtani didn’t know the $4.5 million was missing — although this is something Mizuhara’s account contradicts — but how the money was allowed to be moved in such a way reflects the necessity of tight financial management and oversight when it comes to decision-making in all industries.
Sports betting, despite its disruption of professional sports advertising, is still illegal in California. The MLB’s about-face on gambling has never been more evident, as the league’s historic anti-gambling stance is now in question after, like its fellow professional sports leagues, their part in incredibly lucrative deals with companies who operate in places where sports gambling is now legalized.