Is Alabama's Football Factory Fueled In Part With the Proceeds From Insurance Fraud?

Nick Saban

About 32,000 people turned out on Saturday at Bryant-Denny Stadium in Tuscaloosa to celebrate the University of Alabama's latest national championship in football. It was Alabama's second title in three years, so perhaps now is the time to ask this question: Why in the heck is UA such a power on the football field?

The simple answer is that the Crimson Tide has loads of talented players, sharp coaches, passionate fans, and state-of-the-art facilities. The more complicated answer, one that raises at least one troubling question, is that Alabama spends a ton of money on football.

Given that the Crimson Tide's most prominent booster has documented ties to large-scale insurance fraud, a reasonable person might ask, "Do the proceeds from criminal activities help fuel Alabama's football dominance?"

The question comes in the wake of a Birmingham News report on Saturday about just how much money is funneled into Alabama's title-churning football machine. The headline on the story, "Can't Put a Price Tag on Saban's Value," implies that head coach Nick Saban is the man who has Alabama at high tide.

But what about that booster with an unsavory past? His name is Paul W. Bryant Jr., the son of the late Hall of Fame coach Paul "Bear" Bryant and the CEO of Tuscaloosa-based Greene Group Inc. Has his father's legacy given Bryant Jr. some clout at UA? He serves as president pro tempore of the university's board of trustees, which means he essentially runs the place--so the answer is yes.

Is Bryant the kind of person you would expect to find leading an institution of higher learning? Well, he certainly has shown a knack for making money. Bryant's father long was known as an astute businessman, one who left behind a tidy family fortune. The son, it appears, has taken that money and run with it. Under the Greene Group banner, Bryant has an array of business interests--in dog tracks and gaming, catfish farming, cement, advertising, and insurance.

It's that last category that once caught the eyes of federal authorities. Alabama Reassurance, one of Bryant's companies, was implicated in a fraud scheme that netted a 15-year federal prison sentence in 1997 for a Pennsylvania lawyer/entrepreneur named Allen W. Stewart.

How often, and to what extent, did Alabama Re engage in financial fraud? We know that the Alabama-related fraud in the Stewart case was estimated at $15 million, but we might never know the answer to that question. Sources tell us that an investigation of the company was planned once convictions were secured in the Stewart case. By the time the Pennsylvania case had wrapped up, someone in the U.S. Department of Justice had called off the investigation in Alabama.

We do know this: According to a report from the Alabama Department of Insurance (DOI), Bryant planned to liquidate Alabama Reassurance in late 2007 and replace it with a company called Alabama Life Reinsurance. At the time of liquidation, Alabama Re had "admitted assets" of at least $238 million. (You can check out the full DOI report at the end of this post.)

What happened to the fraud-tainted assets of Alabama Re? The answer is unclear, but we do know that Bryant is perhaps the No. 1 investor in Alabama football. And $238 million will buy an awful lot of jock straps.

Nick Saban might be one of the sharpest football minds in the country. But it surely does not hurt that he works at a university that is willing to engage in big-time spending on football. Reports Jon Solomon of The Birmingham News:

Remember the criticism in 2007 when Alabama made Saban the first $4-million-a-year coach in college sports? At the time, Oklahoma's Bob Stoops had the nation's highest guaranteed annual football salary at $2.5 million.

Saban's salary was only $500,000 less than what he reportedly made with the Miami Dolphins. It was a staggering amount even to the bloated college sports industry, which creates an artificial market for coaches because players don't get paid.

Solomon says Alabama has gotten a solid return on its football investment, and he quotes extensively from the university's NCAA financial report that was filed this month. Solomon points to financial gains since Saban took over in 2007 from previous coach Mike Shula:

Football ticket sales improved by $1.6 million from 2009 to 2010. Last year's record of $29.3 million in tickets sold represented a 42 percent increase from Mike Shula's last season in 2006. Consider this: Saban's 10-win team from 2010 with seven home games in a 101,000-seat stadium sold $13.2 million more in tickets than Shula's 10-win team from 2005 with seven home games in an 83,000-seat stadium.

Alabama football produced $78.1 million in athletics department revenue in 2010-11, compared to $53.2 million in Shula's last season. Almost half of that increase came from the SEC's mega TV deals with ESPN and CBS. But a case could be made that Saban played a role in getting more TV money because his teams draw some of the league's highest ratings.

Alabama's revenue last year from royalties, licensing, advertisements and sponsorships increased by 208 percent from Shula's final season. The athletics department made $17 million in that category during the past two years, compared to $11.9 million in the previous four. Also, booster donations directly to football increased by 29 percent after Saban's first national title in Tuscaloosa.

Alabama clearly believes in spending money to make money. Reports Solomon:

Meanwhile, Alabama spent more on football, from $21.3 million in Shula's last year to $31.5 million in 2010-11. Saban and his coaches last year received $3.5 million more in compensation than Shula's final staff. Saban's recruiting expenses increased by 279 percent from Shula's last class.

Let's focus on that last sentence: Alabama's football-recruiting expenses have increased by 279 percent since Nick Saban took over in 2007. And that apparently coincides with the liquidation of Alabama Re, a company owned by Paul Bryant Jr. Is that a coincidence?

Well, let's consider that Bryant gave $10 million in 2002 to help launch the Crimson Tradition Fund, which he chaired. What was the fund's goal? From a press release:

Bryant, who chairs the Crimson Tradition Fund, made his gift at this time to offer leadership to the 27 members of the Crimson Tradition Fund Executive Committee who are also preparing their own gifts and beginning their soliciting of key supporters of the drive.

“This campaign will allow our fans, friends and alumni to support the Crimson Tide in a meaningful way,” said Bryant. “Our goal is to raise $50 million in commitments from the private sector.”

The other $50 million of the $100 million total will come from a public bond issue offered for the construction of the north end zone of Bryant-Denny Stadium. Bond monies would be repaid through ticket sales revenue.

Much remains unclear about Paul Bryant Jr.'s business activities. But we know one of his companies had clear ties to financial fraud, and that company was liquidated to the tune of $238 million in "admitted assets." We know that the Alabama football program has been in the midst of a spending spree that dates to 2002 and has generated two national championships--and counting. We also know that Bryant Jr., from his perch on the UA board of trustees, has been in the middle of it.

Do fraud and football mix at the University of Alabama? Information from public documents indicates that question needs to be addressed.

Here is the 2006 DOI report on Alabama Reassurance:


Alabama Reassurance Report