Rick Pitino's contract was controversial in 2001

On Wednesday, Louisville men's basketball coach Rick Pitino was placed on unpaid administrative leave after 16 seasons after an executive from Adidas, which outfits the school's athletic teams, and others were accused of conspiring to steer top recruits to Louisville via six-figure payments to their families. This article was originally published on April 2, 2001.

A watch and a handshake wouldn't do for Denny Crum.

When the celebrated University of Louisville basketball coach stepped down March 2 after 30 years and a pair of national championships, he received a $7 million buyout package – $2 million in contract obligations and another $5 million in consulting fees.

Three weeks later, Rick Pitino replaced Crum. Pitino's six-year deal includes $7.2 million in base pay, incentives that could earn him another $550,000 annually, a country-club membership, the use of two luxury cars and, should the peripatetic Pitino stay put for six years, a $5 million "loyalty bonus. "

In the time it took for the Louisville basketball coach's office door to swing open and shut, the university had committed at least $19 million to the two men. Even for Louisville , where basketball regularly earns multimillion-dollar profits and where the athletic department's nest egg exceeds $35 million, those numbers raised eyebrows.

"Some of the coaches' salaries . . . are obscene," said John DiBiaggio, president of Tufts University and a member of the Knight Commission, which is examining the state of college athletics.

The costly Crum-Pitino switch was just one of many major-college coaching changes leading up to the weekend's Final Four, a flurry of activity that has raised the ceiling on coaches' salaries and ratcheted up the financial pressures already gripping athletic departments across the nation.

In the last few weeks, a high-stakes game of dominoes has developed as a vacancy at one school invariably has created uncertainty at several others. James "Bruiser" Flint's resignation at Massachusetts, for example, affected Villanova, Hofstra and Drexel. Colleges have reacted by scrambling to hire or hold onto coaches, bidding up their asking prices in the process.

The trend is putting an additional squeeze on mid- and low-level Division I programs, which are being forced to bump up their coaches' compensation or risk losing them to larger universities.

St. Joseph's was forced last week to begin renegotiating Phil Martelli's contract after Rutgers tried to lure him to its program. Drexel and La Salle almost certainly will be forced either to pay more than they had planned to replace their fired coaches or settle for a little-known substitute without a reputation or a track record.

The new coaches recently hired came from the ranks of the unknown (Wisconsin's Bo Ryan) and the unemployed (Pitino), from among the interims (Indiana's Mike Davis) and the infamous (Texas Tech's Bobby Knight). Almost all came at a significantly higher price than their predecessors.

Still other schools, fearing the loss of a hot young coach, have renegotiated multimillion-dollar extensions. Iowa's Steve Alford, whose name had been mentioned in connection with the Indiana job, last week signed a five-year, $4.5 million deal. That same day, Providence extended Tim Welsh's deal by seven years.

The decisions, of course, were prompted primarily by wins and losses. But fear of falling revenues often was nearly as significant. When Louisville and Massachusetts – two schools where basketball brings in more cash than football – made their coaching changes, both athletic directors pointed to concerns about decreasing basketball revenues.

"We were in a deficit situation," Louisville 's Tom Jurich said regarding a budget shortfall exceeding $4 million.

But unlike many of the schools participating in this costly coaching carousel, Louisville could afford a celebrity coach like Pitino without slipping into red ink.

*

One of the surprising facets of Pitino's deal is that Louisville does not play in one of the so-called "major majors" – the Big Ten, Atlantic Coast Conference, Southeastern Conference, Pacific Ten and Big East. Instead, it plays a step down, league-wise, in Conference USA.

If a Conference USA school can guarantee more than $12 million, school presidents across the country were thinking last week, imagine what the price will be the next time Duke or Michigan State goes looking for a coach.

"We're just happy to have the resources to make it possible," John Shumaker, Louisville 's president, said at the news conference introducing Pitino.

That's because when it comes to basketball revenues, Louisville is in a league of its own.

According to figures filed under the Equity in Athletics Disclosure Act, in the 1998-99 season the Cardinals made more money from basketball than any school in the nation.

That year, Louisville 's basketball revenue was $10.8 million. After expenses of $2.1 million, the school was left with a profit of $8.7 million. A year later, revenues rose to a little more than $11 million, and the profit to $8.9 million.

By way of comparison, 1998-99 basketball revenue at UMass – in its own right a profitable and successful program – was $3.7 million, and its profit was $1.6 million.

Though other schools often carry burdensome debt service on new facilities, the Cardinals play virtually free in state-owned Freedom Hall, an old arena that has been expanded and refitted with luxury suites and other upscale amenities.

Of the 18,000 seats in Freedom Hall, 14,000 require contributions to the athletic program. The larger the donation, of course, the better the seats. The Louisville Athletic Association – the name of the school's athletic department since it incorporated in 1984 – took in $11.7 million in contributions in 1999, according to its tax return, much of it from its basketball-seating program.

"Back in 1980, we were averaging only 12,000 or so a game," Kevin Miller, an associate athletic director, said. "A few years later, the athletic department became a separate corporation and we started getting real aggressive with our marketing. . . . We're fortunate. We don't have any professional teams in the area. We're the only show in town. "

The Louisville Athletic Association listed assets of $130 million on its 1999 tax return, including $67 million in revenue. If Louisville needs money for a new facility or a new coach's contract, it doesn't have to go through normal university channels. It simply dips into its big bank account.

"By forming a corporation, we're able to keep all of our revenue," Miller said. "That's different from state schools where it goes back into the general fund. Anything we generate over and above our expenses, we keep. Today we have a big reserve. . . . We keep rolling over the profits. "

If Pitino stays for the length of his contract, that $5 million "loyalty bonus" will come from a $3 million annuity provided by anonymous private donors, according to details of the contract made public last week by the university.

Pitino also will get 40 tickets to every Louisville home game, which he is expected to split with his assistants. He is free to keep all the endorsement money he and his agent can find, as well as all the revenue from his summer camps. Though the amount of money included in shoe contracts has dropped at many schools, celebrity coaches such as Pitino still warrant substantial salary supplements from Nike, adidas and other major companies.

All of that flies in the face of recommendations recently made by academics to the Knight Commission, which has decried the influence of money on college athletics.

"Throttle back the salaries of coaches, athletic directors, and other athletic department staff to levels comparable to faculty and other university staff," recommended James J. Duderstadt, former University of Michigan president, in October testimony to the commission. "Subject coaches to the same conflict-of-interest policies that govern other faculty and staff [when it comes to shoe contracts, and the use of the university's name and reputation for personal gain]. "

Miller said Pitino's hiring already has paid dividends for the school. Donations and requests to buy tickets and sponsorships have increased substantially in recent days.

One of Pitino's incentives calls for him to earn an extra $25,000 to $100,000 depending on the collective grade point average and graduation rate of his scholarship players.

The graduation goal might not be so easily achieved. According to the most recent NCAA statistics, Louisville 's graduation rate for basketball players is among the lowest in the nation.

Here is a look at the six-year contract Rick Pitino signed to become head coach at Louisville

2001-02: $1,075,000

2002-03: $1,075,000

2003-04: $1,275,000

2004-05: $1,275,000

2005-06: $1,275,000

2006-07: $1,275,000

Plus, Pitino is to receive a bonus of $5 million if he stays all six years, making the total base value of the contract $12.25 million.

* In addition, Pitino is eligible for other bonuses, potentially totalling $550,000.

These include competition bonuses, ranging from $50,000 to $150,000 for such achievements as winning the Conference USA Tournament, advancing to the NCAA Sweet 16, Elite Eight and Final Four, and winning the NCAA tournament.

They also include academic bonuses, ranging from $25,000 to $100,000, based on the grade point averages and graduation rate of scholarship players.

* Pitino also is to receive money from shoe and apparel contracts, summer camps and commercial endorsements, plus the use of two automobiles and a membership at a local country club.

SOURCE: University of Louisville