June 8th 1976: The New York Knicks draft Lonnie Shelton, but had to clear some loopholes in order to sign him
In the 1976 NBA Draft, the New York Knicks attracted some minor controversy after drafting Oregon State Junior Lonnie Shelton with the 25th pick (2nd round). At the time, the NBA was in discussions to merge with the American Basketball Association (ABA) but the terms were not final.
Shelton originally declared for the ABA draft in 1975 as a sophomore in college. The Memphis Sounds drafted him, but the team folded shortly before the season was to begin. His rights transferred to the Spirits of St. Louis and he ill-advisedly signed a contract with the team without having any intention to play for the team. Shelton never played for the ABA team and instead returned to Oregon State. However, a federal judge ruled that his eligibility was lost. The Spirits planned to relocate to Utah for the 1976-77 season to become the Utah Rockies
By the 1976 NBA Draft, the ABA-NBA merger was near finalization. 4 of the ABA teams (Denver Nuggets, Indiana Pacers, New York Nets, San Antonio Spurs) joined the NBA and the remaining two teams (Kentucky Colonels & Spirits of St. Louis) eventually folded. Shelton had undergone a lawsuit against the Spirits regarding the enforcement of his contract. The courts ruled that Shelton wasn’t officially signed with the team, but he did lose his college rights. The impending contract litigation led to many teams ignoring him, but the Knicks did their homework and drafted him in the 2nd round.
As for the 2 ABA teams that folded, the respective players were drafted in a supplementary dispersal draft in August 1976. The Knicks drafted Randy Denton in that dispersal draft.
Shelton was the Knicks’ first draft selection. The team forfeited their 1st round pick after the George McGinnis saga the year before. Shelton had a solid first two seasons with the Knicks, but was traded to the Seattle Supersonics as part of a compensation package in signing Marvin “Human Eraser” Webster as a free agent. Shelton eventually won an NBA championship with the Sonics in 1979.
As for the compensation package, the Knicks additionally sent over a 1979 1st round pick (via the Nets from acquiring Phil Jackson) and received a 1981 1st round pick in return. The Sonics used the 1979 1st round pick to draft Vinnie Johnson. The 1981 1st round pick eventually was traded in a three-way deal where the Knicks acquired Campy Russell.