USA cricket crisis worsens as USAC files for bankruptcy

The crisis in USA Cricket has deepened, with the USAC initiating bankruptcy proceedings on Wednesday as part of what it said was a structural reorganisation. Terming it as an "aggressive" and "legal" move, the USAC said it was necessary to "ensure the future of American cricket."

The development was made public in a media release where the USAC said it had "voluntarily" filed for the financial reorganisation under Chapter 11 of the US Bankruptcy code. The USAC decision is concerning as it comes about a week since ICC suspended USAC on September 23 for serious breaches of membership criteria.

Communicating the suspension in an email to USAC chairman Venu Pisike on September 23 (accessed by ESPNcricinfo), the ICC chairman Jay Shah had warned USAC to "not take any steps to undermine the ICC or its Normalisation Committee in all aspects of the ICC's work related to the USA, including the LA28 Olympic Games."

However, USAC chief executive officer, Johnathan Atkeison, said in the media release that one of their motives behind the financial restructuring was to also address the ICC suspension. "The decision was not made lightly, but it is the best course of action to secure USA Cricket, and allow it the time and space it needs to successfully reorganize," Atkeison said.

The USAC release did not mention when the decision was taken and whether it was the USAC board that authorised the move. It is understood that the board met on September 30 when the nine directors were present to discuss the sole agenda of filing for bankruptcy. This was the second time the USAC board was meeting since the ICC suspension - the first being on September 28.

On Tuesday, when four directors questioned why filing for bankruptcy was a priority over discussing the ICC suspension, it is understood Pisike said "there is nothing to discuss."

It is learned those four directors - Nadia Gruny, Atul Rai, Arjun Gona and Kuljeet Singh Nijjar - left the meeting in protest of the proceedings and conduct of the meeting, including what one said was being "muted" by Pisike, before they got the opportunity to complete what they wanted to say.

Pisike could not be contacted for a comment. It could not also be confirmed if the remaining five directors - Pisike along with Anj Balusu, Srinivas Salver along with two independent directors Pintoo Shah and David Hauber - had decided they had the constitutional majority to authorise to financial restructuring move.

The "need" for financial restructuring, the USAC said, was due to a long-term contract it had signed in 2019 with American Cricket Enterprise (ACE), its primary commercial partner and owner of the Major League Cricket (MLC). In 2019, USAC signed a 50-year contract with ACE, which the former says "heavily favours" the latter.

"One factor to USA Cricket's need for financial reorganization was the financial strain and operational interference caused by the ACE agreement," USAC said in the release. " The original 50-year agreement, which heavily favors ACE, does not appear to have been completed at arm's length as understood by the USA Cricket Board. It was negotiated largely by one USA Cricket Board member who did not disclose certain conflicts of interest that both he and his employer had with ACE affiliates."

This individual was former USAC president Paraag Marathe, president of San Francisco 49ers Enterprises. However, it is understood Pisike was part of the USAC Board in 2018 that approved the ACE contract. As part of the deal, ACE is contracted to funnel a minimum of USD 1.2 million annually to the USAC to cover the contracts of the national team including support staff.

"The financial terms directly reflect this lack of arm's-length dealing. Instead of fair market value, USAC receives only a small percentage of ACE's gross cricket-related revenues. This arrangement purports to preclude USA Cricket from seeking team sponsors or broadcast partners, and effectively limits other events and competition from entering the market. USA Cricket's national team commercial rights are valued at over $5 million annually, a figure ACE has never come close to achieving, to the detriment of USA Cricket."

On August 21, the USAC said it was terminating its contract with ACE, who responded by saying the decision was "unlawful" and in September decided to trigger legal proceedings. On Wednesday, the Boulder County District Court in Colorado - where USAC is registered - was scheduled to start proceedings. About 18 minutes prior to that hearing, however, the court was updated on the bankruptcy filing.

Pisike had told ESPNcricinfo in September that the USAC was open to revoking the termination as long as ACE agreed to renegotiate the contract on fresh terms. In the media release on Wednesday, USAC said ACE attempted to "bully and coerce" it into "submission" using its "financial might", eventually forcing its hand to file for bankruptcy. "We have been forced into the protections of the U.S. Bankruptcy Court because ACE is well aware of its stature as an 800lb gorilla and has weaponized its financial muscle to frustrate our ability to govern the sport" Corey MacDonald, USA Cricket General Counsel, said in the media release.

ACE blamed USAC for "imperiling" cricket in the USA. "USAC could not bear for the preliminary injunction hearing to even begin, and knew the result was a forgone conclusion: it had no basis to terminate the parties' agreement and was recklessly imperiling the success of cricket in the U.S," an ACE representative said in a statement. "USAC has zero regard for the best interests of cricket and its players, and is only motivated by politics and its directors' personal agendas."

The USAC also partly pointed the finger at the ICC suspension and its "unfortunate timing" but remained confident it would revive itself via the revamp. "This Chapter 11 filing is a decisive move to secure our ability to address the patently inequitable contracts of the past, correct our financial situation, achieve governance reforms and finally build the world-class NGB America deserves, with an eye toward LA2028," Atkeison said.