The Business of Sports Agents

11. The Laws

Chapter 11 The Laws In a recruiting pitch to an athlete, Norby Walters said, “The normal sports agent . . . he’s not gonna shake white America. I have been shaking those people for years in that music side of entertainment. Now it’s time to shake ’em hard in the sports side of entertainment.”1 The “shaking ” needs to come from the regulators of the sports agent industry. This chapter examines public attempts to regulate sports agents. In examining the problems that may restrict the effectiveness of existing public regulatory schemes, it looks at changes, such as the Uniform Athlete Agents Act, that may ameliorate certain of the impediments to effectively using existing laws to hold sports agents accountable to their clients and other persons and entities (the following chapter fully explores that act). It also considers the need for more rigorous enforcement of existing regulations and looks at the necessity for a uniform sports agent law. With varying degrees of success, individual states attempted to arrest the athlete/agent problems for decades. This chapter briefly describes state legislative efforts and addresses the issues that arise out of such legislation . A uniform law that regulates athlete agents at the state level has been promulgated and adopted by the majority of state legislatures.2 As discussed in Chapter 12, uniform legislation addresses some of the problems that imbue pre-uniform state agent acts. Federal Regulation Although sports topics tend to generate a great deal of public and political interest, federal legislative intervention into the sports realm is rare. Examples of such legislation include the Amateur Sports Act and the Curt Flood Act. Prior to 2004, no federal legislation had been promulgated that specifically addressed the athlete agent industry. Nevertheless , federal law played an important, albeit sporadic, role in regulating agents. As previously discussed in Chapter 4, federal mail fraud and tax statutes were used in the successful 2001 prosecution of Myron Piggie. Federal charges of mismanagement of funds, fraud, and racketeering were made in the Walters-Bloom trial. The prosecuting tool used in that trial was the Racketeer Influenced and Corrupt Organizations Act, commonly referred to as RICO,3 which is especially noted for the broad range of factual contexts in which it has been asserted by prosecutors. RICO was initially designed to attack organized crime and to stymie political corruption. Since its enactment in 1970, RICO’s scope has expanded significantly beyond those factual contexts. Indeed, RICO’s applicability to agent/athlete contracts surprised commentators and agents. Lonn Trost, then head of the sports department at the national law firm of Shea & Gould, testified at the Walters-Bloom trial that he had informed agents that signing student athletes to contracts before their eligibility expired did not violate any criminal statutes.4 Walters, Bloom, and Trost all turned out to be incorrect. RICO created three criminal offenses. If a party violates two or more from a list of approximately thirty criminal statutes over a period of ten years, he or she may be found guilty of acquiring, controlling, or operating an “enterprise” through “a pattern of racketeering activity.” If the party is convicted, the penalty for the RICO violation alone is seizure and forfeiture of the assets from the illegal enterprise and a fine of up to $25,000. In addition, under RICO, not only can the government bring an action but also the civil provisions allow private citizens to bring actions and give them the right to recover three times their actual damages and reasonable attorneys’ fees. The most notorious case involving the application of the federal RICO statutes to sanction agents was the Norby Walters matter. In U.S. v. Walters -Bloom, criminal application of the RICO Act was deemed appropriate by the jury. In that case, the “pattern of racketeering” was the mail fraud perpetrated against the NCAA when the student athletes, paid by Walters and Bloom, had letters sent to the NCAA by their schools proclaiming that they were eligible to compete under NCAA rules when, in fact, they were not. U.S. v. Walters-Bloom also involved a reputed organized crime figure, Michael Franzese, who allegedly helped finance Walters and Bloom’s venture into the sports agent business in exchange for a 25 percent share.5 It does not seem, however, that Franzese’s involvement was an essential element in the jury’s determination. Thus, as is the case with many RICO actions to date, the organized-crime component need not be present; all that apparently must occur...