Off-court battle: Inside the civil war dividing Australian basketball

On a WhatsApp group for the wealthy backers of National Basketball League teams and the NBL itself, the landscape of looming conflict off the court was laid bare.

It was little more than 24 hours earlier that an email from billionaire Illawarra Hawks owner Jared Novelly had landed with a thud in the inboxes of the nine other team owners, declaring he would file “multiple actions” against the NBLCo, the company that runs the league, by the end of March.

The NBL has been majority owned by Larry Kestelman since 2015.Credit: Matthew Absalom-Wong

Novelly, United States President Donald Trump’s newly appointed ambassador to New Zealand and Samoa, told the group he hadn’t leaked the explosive correspondence, which had swiftly been made public, and he did not believe the NBL had done so either.

But with a fight on its hands, the league was already on the front foot.

“It seems that overnight, the NBL has been reaching out to several owners to ‘pick a side’,” said Novelly, whose Hawks were crowned champions last week.

“No one has asked me, but I pick the side of basketball in Australia.”

That is a cause Larry Kestelman, the Ukraine-born Australian entrepreneur and property developer behind the NBL, has thrown his financial weight and reputation behind for more than a decade, pouring tens of millions of dollars into a regeneration that has led to the league breaking all-time attendance records and team values rocketing to $40 million.

Illawarra Hawks owner Jared Novelly pictured at a game against Cairns Taipans.Credit: Getty Images

But the 58-year-old co-founder of internet and phone service provider Dodo is now bracing for a high-stakes battle over the future of the competition, whose team owners range from sports stars to business high-flyers in Australia and the US.

The NBL’s hands-on majority owner – who took over the league when it was on its knees and who has had a stake in several of the teams himself – faces a campaign for drastic reform by owners fronted by Novelly, who has raised issues with the competition’s governance and operating model.

Novelly, in his email, proposed a buyout in which Kestelman sold his shares in the league equally among the 10 teams, citing concerns about distributions from the NBL, as well as over “secret ambassador agreements, gambling revenue, the sale of the [Tasmania] JackJumpers, integrity concerns and financial transparency”.

He also referenced Kestelman’s Melbourne-based private companies, saying a new KPMG report into NBL finances “reveals that there is a history of NBLCo calculating the club distribution incorrectly, the significant profits made by LK Group companies from NBL-related activities, discrepancies with related party transactions and opaque procurement processes which benefited LK Group entities”.

Larry Kestelman gives an interview during the NBL grand final series in Wollongong last week.Credit: Getty Images

Kestelman is not about to roll over, saying emphatically that the NBL was “not for sale”.

But Novelly, who was issued with a grievance notice by the NBL on Thursday, is not backing off, and he has support in agitating for change.

This masthead has spoken to owners among the NBL’s seven independent teams – those in which Kestelman has not had a stake – who confirmed there was unanimous agreement at a vote in January.

“It wasn’t about specifically voting Larry out,” said one owner, who, like others spoke on the condition of anonymity because of the sensitivity of the situation.

“We all believe that no one person should have total control and sole ownership of the league. Look at how the most successful leagues in the world, leagues we aspire to be like, are structured. It’s not hard to see what works and what doesn’t.”

Another owner said the majority of teams were losing money while the NBL and Kestelman’s businesses associated with the sport made profits, and the league deployed a divide and conquer approach with clubs.

“The NBL is a private business that runs a sport. And the clubs carry the bulk of the responsibilities. They employ the players and stage the games,” they said.

“This has been openly canvassed and discussed among the ownerships of clubs. I think Larry has vastly underestimated how serious Jared is about what he’s going to do.”

The NBL’s salary cap for the 2024-25 season was $1.95 million per team. With the league’s broadcasting and media deal worth $15 million a year, it’s a fraction of the payrolls of teams in Australia’s major football codes, but owners estimate that with exemptions, such as the successful Next Stars program, which caters for young, NBA-eligible talent, annual spending on player wages reaches at least $3 million for most teams.

Illawarra celebrate after their championship victory.Credit: Getty Images

Under their licence agreements, 24.5 per cent of the league’s profit is distributed to the teams. That amounted to a total of $1.48 million in the 2024 financial year as the NBL recorded a $6.1 million profit, according to the KPMG report. Split 10 ways, that was $148,000 each, although the NBL rounded it up to $200,000 per team as a show of support.

While such a top-up also occurred in the previous two financial years, the NBL’s promotion of its success has annoyed some owners, who Novelly estimates have ploughed more than $200 million into their teams between them.

While acknowledging Kestelman’s achievements, owners have also been aggrieved about a lack of visibility on what the NBL earned from betting turnover on the competition and want input into areas such as expansion and broadcast rights and collective bargaining talks with players.

Having rescued the financially stricken Melbourne Tigers, the club whose games he once attended with his son and other relatives and which he renamed Melbourne United, Kestelman bought a majority stake in the league for $7 million in 2015 at a time when it didn’t have a media rights deal and its only sponsor was a $40,000 contract with Wilson basketballs.

“Everyone thought I was completely nuts,” Kestelman said on Friday. “For me to pump in as much money as what ended up being required, including from my family and business partners … everyone looked at me and said, ‘Larry, you’re crazy.’

“Today, compared to what it was when I took over, it’s just night and day. When I took over, clubs were worth zero … today the clubs are worth anywhere between $30 million to $60 million. The league has never been healthier.”

The league has an eclectic mix of owners among its 10 teams.

They include NBA championship winners Luc Longley and Andrew Bogut, who are minority shareholders in the Sydney Kings, and Tesla chair Robyn Denholm, who is the harbour city franchise’s majority owner.

In Melbourne, tennis star Nick Kyrgios has a small stake in the South East Melbourne Phoenix, while in Brisbane the Bullets are co-owned by American investors behind Major League Soccer team DC United and English Championship soccer club Swansea City.

Luc Longley (right), pictured with former Chicago Bulls teammate Scottie Pippen, has a small stake in the Sydney Kings.Credit: Getty Images

As well as owning 94 per cent of the league, Kestelman has had a share in three teams – Brisbane, Melbourne United and the Tasmania JackJumpers.

According to the NBL, he recently offloaded his last piece in Melbourne United, having sold 10 per cent of the club last year for $4 million, and was in the process of divesting the NBL’s 25 per cent interest in the Bullets.

Kestelman also last month sold 51 per cent of the JackJumpers to private equity group Altor Capital as part of a two-year process in which the team will be fully sold for $35 million.

He will have an ongoing interest in Tasmania after the state government announced last month it would sell surplus Crown land to LK Group at Hobart’s Wilkinsons Point, where Kestelman’s company redeveloped the indoor arena that is home to the JackJumpers.

Under the deal, LK Group would invest $500 million to develop a retail precinct, hotel complex and a family resort.

The licence for the Tasmanian team was granted to Kestelman’s holding company for free, and Novelly has questioned whether profit from the property development should “sit within our shared bowl” while calling for the full proceeds from the JackJumpers sale to flow to the clubs and the game. The teams will share in 24.5 per cent of the sale price.

An NBL spokesperson said no NBL intellectual property or people from the NBL were involved in negotiations with the Tasmanian government, declaring Kestelman’s dealings were through his development company.

The KPMG report, which was commissioned by the clubs and covered three years of NBL financials, said “no significant issues were noted from the eight scope areas considered”.

It demonstrated the business links between the NBL and Kestelman’s LK Group, showing $15.6 million in related party transactions over the past three years.

Novelly said these were not adequately explained, but an NBL spokesperson said there were no adverse findings in the report.

The NBL said teams were provided fully audited financials from PWC, and betting revenue was part of the revenue-sharing arrangements with clubs, which didn’t exist before Kestelman took charge.

“Before Mr Kestelman assumed control of the NBL in 2015/16, clubs had to pay to participate in the league. Clubs now receive annual distributions, and will receive at least $10.5 million in total over the next three years,” the league spokesperson said. “The KPMG report also confirmed that the NBL has made distributions to clubs in excess of their contractual entitlements.”

The report showed eight players had ambassadorial contracts totalling $283,000 over the past three years, but the NBL denied there were secret deals, saying the agreements were part of its marketing strategy and were no different to other sporting competitions.

The league spokesperson said the NBL had spoken to clubs and “not one has signed up to [Novelly’s] proposal”.

“Mr Kestelman has said on multiple occasions he will always do what is in the best interests of the league and the clubs provided it’s a win-win. The current model was developed on that basis and has proven to be successful,” the spokesperson said.

A US Republican Party donor and the son of an American oil products mogul, the 50-year-old Novelly is no stranger to legal action.

In 2022, this masthead revealed he was suing the landlady of the $780,000-a-year penthouse he was renting in Sydney’s The Hyde tower, displeased that upgrades to the property such as the installation of two self-cleaning toilets and a home theatre had not occurred. This is a dispute on a larger scale.

Having turned the league around from the brink of collapsing, Kestelman has plenty of support. Eddie McGuire, whose company is a production partner of the NBL, told News Corp Kestelman had “literally turned the NBL into a powerhouse”, while former Sydney and Illawarra co-owner Dorry Kordahi said clubs retaking control would be a disaster.

Craig Hutchison, whose Sports Entertainment Network last year sold 90 per cent of the Perth Wildcats for $40 million, has also come out behind Kestelman, saying on his podcast, The Sounding Board, this week: “I think the league is in unbelievable hands with him leading it forward.”

The sport’s governing body, Basketball Australia, does not foresee a revamp of the NBL model.

“Our position is we’ve got contracts in place that allow the NBL to run that league in perpetuity and, in our view, the league is going very well,” BA chairman John Carey said. “We don’t see the status quo changing.”

There is a suspicion from within NBL circles that Novelly, who owns the Hawks through his company Crest Sports and Entertainment, has his eye on adding the NBL to basketball’s East Asia Super League, in which he is a shareholder.

That assumption is rejected by his point man in Wollongong, Crest vice-chairman and former US newspaper executive Terry Egger, who said the KPMG report was inadequate in its scope.

“There is no ambition for Jared and Crest to take over the league – that is the misnomer,” Egger said. “It’s just an ambition by not only Jared and Crest but others to see a better model.”

Whatever that looks like, Kestelman has made it clear he is going nowhere.

“I will do whatever it takes to protect the NBL,” he said. “That’s why I got into this 15 years ago, and that’s why I’m still here.”

With Jon Pierik

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