In 2001, the NFL was rocked by a major scandal, "Cap Gate", where the Denver Broncos were found to be in violation of the salary cap rules. For their violations, the NFL fined the Broncos $968,000 and docked them a third round selection in the 2002 NFL Draft.
The Broncos were again fined in 2004 stemming from the violations. This time, it was a $950,000 fine and another third round selection in the 2005 draft. You might ask, what did the Broncos do that required such a steep punishment? The answer is complicated.
From 1996-98, the NFL found that the Broncos had agreed to defer payments to quarterback John Elway and running back Terrell Davis. The total amount of the payments was $29 million. As part of the agreement, the Broncos would pay both players in deferred payments, with interest.
The infractions included a 1997 agreement between the club and a former player to not waive the player prior to a certain date. "Both types of agreements raised salary cap accounting issues," the league said. In essence, a portion of the player's roster bonus was converted to guaranteed salary, which affected the timing of the salary cap treatment of a portion of the bonus.
So yes, the Broncos did circumvent the salary cap, but why did they do it? This answer is simple. Owner Pat Bowlen, and the team, were in the process of building a state of the art new stadium. The cost of this stadium was approximately $401 million, of which $100 million Pat Bowlen was responsible for. Denver's actions in circumventing the cap were a direct result of the stadium being built. In other words, no stadium would have meant no agreements, no deferred payments and no salary cap infractions.
In a written statement, Bowlen explained that the club gained no competitive advantage from the infractions."The non-disclosures brought to my attention by the National Football League took place in the mid-1990s," Bowlen said. "We cooperated with the NFL throughout their examination of the situation. While I regret that the circumstances took place, it is important to note that there was no competitive advantage gained by our organization, nor was there any involvement or responsibility by anyone who is currently with the Broncos in any capacity."
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"We accept our penalty," he continued, "and will pay our fine as directed and from this point on put the issue behind us. Our entire organization is working toward a great season in 2004."
Harold Henderson, the chairman of the Management Council and the NFL's Executive Vice President of Labor Relations, confirmed in a written statement released by the league that "the individuals responsible for the violations are no longer with the team" and that the Broncos "have been cooperative throughout the investigation."
"The investigation resulted in the discovery of undisclosed agreements between the club and Broncos players during the same period [1996-1998] pursuant to which various players agreed to defer certain compensation in exchange for a commitment to pay interest on the deferred amounts," Henderson said in the statement. "These agreements were plainly designed to help the club cope with seasonal cash flow problems exacerbated by the Broncos need to fund front-end expenditures associated with development of the new stadium in Denver."
It seems anytime league rules are broken, especially when it involves the New England Patriots, the Broncos infractions of the late '90s are brought up. The difference between the two couldn't be more stark, however. Denver's infractions were not about gaining a competitive advantage, as the recent Deflate Gate scenario was intended. The fact also remains that the entire Denver Broncos organization was fully cooperative through the entire process and accepted their penalty without dispute.
"If you have nothing to hide, you have nothing to fear."