About Those Penalties...
26.13 (b) The System Arbitrator may find a Circumvention has occurred based on direct or circumstantial evidence, including without limitation, evidence that an SPC or any provision of an SPC cannot reasonably be explained in the absence of conduct prohibited by this Article 26. The investigation and findings of the Investigator pursuant to Section 26.10 shall be fully admissible in any proceeding before the System Arbitrator under this Section 26.13. (c) In the event that the System Arbitrator finds that a Circumvention has been committed by a Player or Player Actor, the System Arbitrator may impose any or all of the following penalties and/or remedies set forth below. In the event that the System Arbitrator finds that a Circumvention has been committed by a Club or a Club Actor, the Commissioner may impose any or all of the following penalties and/or remedies [...]
No matter what one's interpretation of the rest of the CBA is, we now know that there will be no fines or penalties assessed to Kovalchuk himself, or his agent, since the arbitrator is the one who would assess those, and he didn't.
However, I keep reading that the fact that Bloch said the Devils and IK acted in good faith that the contract was in compliance with the CBA somehow means that penalties can't therefore be assessed. This is simply not true. The CBA doesn't make any distinction between an intent to circumvent and an action that has the effect of circumventing. It does not say that an "effect of" circumvention is a lesser charge than an "intent to" circumvention. It does not say anything at all about a standard requiring "intent" be shown as a prerequisite for penalties. According to the CBA, if the arbitrator finds agrees that the league has properly rejected a contract for being in circumvention of Article 50 (which is what has occurred here) then, not only does the commissioner have any and all of the Article 26 penalties at his disposal, but he specifically may:
(i) Impose a fine of up to $5 million in the case of a Circumvention by a Club or Club Actor, but in no circumstances shall such fine be less than $1 million against any Club or Club Actor if such party is found to have violated Article 50 of this Agreement [...]
We can debate the Article 26 v. Article 11 process, and have, exhaustively (check the Kovalchuk section of this blog, at the left margin). But the bottom line is, either the commissioner may now impose penalties, or he can wade through a perfunctory Article 26 investigation of "whether or not he thinks the Kovalchuk contract is a circumvention," which, um, he already knows he thinks. So that ought to be a short investigation. Not to mention the fact (that I have mentioned a million times already) that such an investigation would lead to a second arbitration with the system arbitrator (Bloch) who would be limited to ruling on whether the contract was a circumvention...which he has already done. So let's just say that the whole 26/11 distinction doesn't do anything except potentially delay the penalty phase. Oh, and confuse a whole lot of people.
Bettman can have his penalties if he wants them. It's at his discretion. (again, there may be an additional process -- I think there is not, but there could be -- but in any case, it's purely procedural; there's no finding or ruling that could prevent Bettman from getting his penalties at the end of it.)
I don't know if he'll assess penalties or not. In the Toronto case, a couple of years ago, they docked the team a draft pick, and there was no intent to circumvent at all. That in and of itself is evidence that the intent issue is a non-starter. So it would be weird if he didn't levy some kind of punishment, but I understand why he might not. This case is a big deal. A new CBA has to be negotiated. He may want to bank some goodwill here. (Never a bad idea if you're Bettman.) Especially since I think everybody knows this contract wasn't Lou's idea. It seems to have been forced down his throat by management. And Bettman might (ahem) need Lou with 2012 rolls around.
So, as with this arbitration in the first place, I can see it going either way.