How Much Can Allegations of Discrimination Cost You?

Discrimination is a serious issue for employers. It can lead to disputes, lawsuits and even forced business sales. Forced business sale, substantial fines and the disgrace of being ousted from the National Basketball Association (NBA) are the challenges Clippers owner Donald Sterling faced over racial comments he made in a taped conversation with his girlfriend, V. Stiviano.

CNN reports this is not the first time discrimination has been a issue for Mr. Sterling. In an earlier lawsuit, Sterling paid millions to settle a federal case where African American and Hispanic claimants accused him of excluding them from his rental properties.

Initially, Sterling agreed to have his wife, Shelly Sterling, handle negotiations to sell the Clippers. Various bidders came forward, such as CEOs of Microsoft and Oracle, Oprah Winfrey and film producer, David Geffen. Recently Forbes magazine reported that after negotiations were in progress, Sterling recanted on the agreement to allow Shelly to negotiate the sale. Subsequently, his estranged wife Shelly had Sterling, who is 80 years old, declared mentally incapacitated, which allowed her to control the trust. Recently, she announced the sale of the team to former Microsoft CEO Steve Ballmer for $2 billion, which is quadruple the highest price ever paid for an NBA team.

It has been decades since Sterling bought the Clippers in 1981 for $13.5 million. The family will lose millions of dollars through capital gains taxes from the sale, which would have been avoided by having the team ownership pass through Sterling’s trust to his estate upon his death. A stepped up basis (current market value at time of death, not time of purchase) is used for estate valuations.

After the sale announcement, Mr. Sterling filed a lawsuit, suing the NBA for damages. However, Shelly Sterling informed parties that the Sterling trust will indemnify the NBA for lawsuits being brought by Sterling.

Needless to say, most business owners do not have millions at stake, but the importance of adhering to anti-discrimination policies does not lack emphasis through this example, even for billionaires.

Stephen Hans & Associates, an employment litigation law firm that has served business clients in the Long Island City and New York area since 1979.

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