The power structure of Australia's National Basketball League (NBL) is set to be tested as the off-court dispute between a pair of billionaires is bound for the NSW Supreme Court.
The case is being led by Illawarra Hawks owner Jared Novelly, who's raised numerous concerns over how the NBL has operated under the stewardship of Larry Kestelman. Novelly - an American billionaire, son of the late St Louis energy mogul Tony Novelly - has raised issues with the NBL's financial transparency, how finances are distributed to the league's 10 teams, business dealings between the league and companies owned by Kestelman, and clarity around gambling revenue.
The dispute will be heard at the NSW Supreme Court on Friday and comes two months after Novelly led a push for Kestelman to sell all his shares in the NBL equally to the league's 10 teams.
Kestelman - a Ukrainian-born, Australian tech entrepreneur and property developer, who bought the NBL in 2015 - said in a media availability on Monday that he was unfazed by the upcoming hearing.
"I have no concerns," Kestelman said.
"We've always done the right thing to grow the league. You'll have people that will want to ask questions and that's okay; that's fine by me. I'd prefer maybe they were asked in a different way, but we have no worries about where NBL is at.
"You'll have haters that will hate, and you've got us that will want to grow the product."
How we got here
This dispute first reached the general public in a material way when contents of a March email - from Novelly, sent to other team owners - was made public.
ESPN was among multiple outlets to report on the email, which opened with "I am taking one last shot to try to allow the current ownership to leave peacefully while saving face and reputation," before listing "secret Ambassador Agreements, gambling revenue, the sale of the JackJumpers, integrity concerns and financial transparency" as among the major concerns he has with Kestelman's ownership of the NBL. The email featured a draft term sheet, which proposed that Kestelman sell his shares in the NBL equally (10%) among the league's 10 teams.
In response to the email, Kestelman said in a statement: "We remain fully committed to the continued and unprecedented growth and success of the NBL. The NBL is not for sale."
NBA stars Josh Giddey and Dyson Daniels, as well as Australian sports and media personality Eddie McGuire, were among those who were quick to publicly voice their support for Kestelman's ownership of the NBL.
In the beginning of April, Novelly sent a letter to FIBA, basketball's international governing body, claiming Kestelman's alleged conflicts of interest and suspected violations of FIBA's Code of Conduct should result in a suspension until an investigation takes place. The letter - obtained by ESPN - raised concerns about "a remarkable accumulation of power by one individual within a league and its teams", claiming Kestelman turned the NBL into a personally lucrative endeavour via business dealings with his own companies, while its teams "receive a disproportionately small share of NBL's net profit 5 (i.e., only 2.45% per team), which is insufficient to cover operating costs, is financially unsustainable for most NBL teams and is also much less than what the profit share for teams in comparable leagues is."
FIBA deferred Novelly's concerns to Basketball Australia, which is now assessing the matter.
Those are the material steps that have brought this dispute to the upcoming NSW Supreme Court hearing, which will take place on Friday.
Background
- Prior to Kestelman purchasing the NBL in 2015, the league was on the brink of folding. Within the span of two weeks in March, 2015, a pair of teams - the Wollongong Hawks and Townsville Crocodiles - had entered voluntary administration. Since Kestelman bought the NBL, it's grown and developed to the point where it's achieved record attendances, a broadcast deal, and is widely regarded as the best marketed league outside the NBA. From a basketball standpoint, the NBL is considered a top-5-7 league outside of North America.
- In 2018, First Ever was made the official manufacturer and supplier of the NBL. First Ever was founded by Kestelman's son, Justin.
- Crest Sports and Entertainment - the firm headed by Novelly - is one of the largest shareholders in the East Asian Super League (EASL). Novelly has denied the assertion that he's attempting to destabilize the NBL in order to benefit the EASL.
- Novelly's ownership group bought the Hawks in 2020. In January, U.S. President Donald Trump announced Novelly as the next ambassador to New Zealand and Samoa.
- Kestelman has long owned shares in multiple teams in the NBL, along with his ownership of the league. Over the past 14 months, Kestelman has sold all of his remaining shares in teams. The one caveat is that Kestelman still owns shares in the JackJumpers, with the terms of the team's recent sale to Astor Capital indicating he'll sell those shares in the next two years.
Does Novelly have support from other team owners?
Novelly is the face of this push to seek financial transparency from the NBL, and ultimately oust Kestelman as owner of the league, but he's not alone.
Two other majority owners of NBL teams spoke with ESPN on the condition of anonymity, expressing support for Novelly's endeavour.
Romie Chaudhari - the majority owner of the South East Melbourne Phoenix - plans to publicly support Novelly in his Supreme Court case against the NBL.
Kestelman told AFR Weekend in late March: "We have spoken to every club. He has zero support for his proposal."
Terry Egger, the vice chairman of Crest Sport and Entertainment - the group, headed by Novelly, which owns the Hawks - disputed that claim in a statement provided to ESPN.
"Other clubs not being supportive of change? It's been widely reported and I can confirm having been on the call in January, 7 independent clubs voted in favour of a change of structure with Larry not involved," Egger said.
"That's certainly not zero support"
"Recently, NBLCo has been reaching out to individual team owners and explaining, disingenuously, that every other owner has sent a letter in support of NBLCo except for them. The problem is, this simply isn't true. It's just the NBL trying to use some smoke and mirrors and their typical divide and conquer approach to illicit this sort of faux support. Owners are sick of these dishonest tactics"