Agents and Athletes: What Jerry Maguire Didn't Tell You
by Jeff Ouellet, Esq.
TSL Extra, Issue #6

For the last two seasons, Virginia Tech football fans have truly been blessed. Through the hard work of the coaching staff and the efforts of the student-athletes, the Hokies have reached levels of success that even the most avid fans couldn’t have foreseen only a decade ago. Look at the recent accomplishments of the football program:

  1. a second straight 11-1 finish, with the only losses to Florida State in the national championship game and on the road at Miami;
  2. retaining Frank Beamer and his entire staff despite overtures from Alabama and North Carolina, among others;
  3. signing the greatest football recruiting class (admittedly a subjective determination) in school history, headlined by a young man that many talent evaluators consider the best player in the country, running back Kevin Jones of Cardinal O’Hara in Springfield, Pennsylvania; and
  4. not to be underestimated, having the nation’s most exciting player and one of its best at quarterback which, in many respects, helped to make the first three points on this list possible.

However, the early departure of Michael Vick for the professional ranks has engendered a range of emotions in the Hokie faithful, and led many to ask questions of his departure that center primarily around the role of sports agents in the realm of college football. My hope is that this piece will help to answer some of your questions about sports agents and their practices, so you will understand a little better the choices, both good and bad, facing some of Virginia Tech’s best student-athletes.

The Rules Governing Agents

First, it should be noted that agents "recruiting" college players is far different than college coaches recruiting high school players, because agents do not fall under NCAA jurisdiction like student-athletes and coaches. Consequently, the NCAA regulations on the issue focus on the conduct of the student-athletes and the coaches, with only a minimal amount of attention being paid to the agents.

There is no NCAA regulation prohibiting contact by an agent with a student-athlete presently enrolled in either high school or college, as long as that contact is limited to conversation without any benefit being conferred on the student-athlete. However, it should be noted that the NCAA does not "turn the other cheek" with respect to ANY gift, no matter how small. If an agent or his/her representative buys a student-athlete a soda, technically the student-athlete has taken an improper benefit and is ineligible to participate.

Even non-monetary gifts, such as free legal advice, are an improper benefit if the agent would typically charge a non-athlete for that advice. In the case of unintentional de minimus violations, the NCAA often only requires the student-athlete to pay the cost of the improper benefit, and then eligibility is immediately restored.

Because the NCAA does not have the time or authority to appropriately discipline agents, individual states started enacting agent laws that prohibit certain conduct within their borders and often require registration and/or the posting of a bond. In some cases, these laws not only provide for civil penalties, but also permit criminal penalties, including jail time.

As with many laws, a high profile case in which an athlete is declared ineligible for State U often is the impetus for the legislation. Nothing gets an alumnus of State U. in the legislature angrier than when a sports agent does something to jeopardize a high profile student-athlete at his or her alma mater.

For example, the Pennsylvania Agent Law didn’t get passed until Penn State had Curtis Enis declared ineligible for a bowl game a couple of years ago due to contact with an agent. After SMU got the death penalty for their football program, the agent law in Texas became one of the toughest in the country. Another agent that was a friend of mine jokingly said, when referencing the Texas law, "I was going to offer the kid a glass of water at our meeting, but I know I’d probably get the electric chair for it down there."

In my view, these agent laws are in theory a great idea, but haven’t helped solve the problem as a practical matter. It gives individual states enforcement mechanisms, which clearly is beneficial, but many states do not have the resources to properly enforce the existing laws. Also, the differing rules and registration requirements make it extremely difficult on agents. Agents have to register in each state in which they do business, and that can be both costly and time-consuming.

Ironically, these requirements are most beneficial to many of the more prominent agents that necessitated the enactment of the law. Only the most successful agents have the resources to become licensed all across the country, and consequently, the state agent laws have deterred competition and scared away many of the smaller, and I would argue more ethical, agents from soliciting clients.

Not all states have agent laws on the books, but the number is increasing constantly. And the Uniform Athlete Agents Act was approved by the National Conference of Commissioners on Uniform State Laws and has been introduced in either the House or Senate or both of 20 states (Virginia is not one of those states as of last week). Measure such as this should help alleviate some of the inconsistencies in the law and keep costs down for the smaller agents.

The NFL Players Association (NFLPA) also regulates the conduct of agents. Agents are required to file an application and pass a test. In truth, the test is very easy, so passing really is not a measure of competency.

The NFLPA has the authority to revoke an agent’s certification for improper conduct, but the NFLPA has not been extremely aggressive in pursuing agents. Most of the time the NFLPA only gets involved after the individual state has started an investigation. Additionally, there have been some systemic problems with enforcement.

For example, assume an agency has five partners that are all NFL licensed and all share equally in the profits under the partnership agreement. Also assume that partner 1 gets his license revoked by the NFLPA for improperly recruiting an athlete. If the contract has been negotiated with the NFL team, the partnership is still entitled to receive their fee for the contract regardless of whether the athlete was initially improperly solicited. Because the partnership receives the income, partner 1 would still receive a share of the contract even though he doesn’t have a license anymore and may even be in jail.

There are reforms that have attempted to resolve this problem and require disgorgement of profits, but this illustrates one of the problems with the business: as long as you have individuals willing to be "sacrificial lambs," you can still profit from illegal activity.

The Recruiting Process - College

More college institutions are trying to get a grip on the agent problem by having specific days in which licensed agents can visit the campus after receiving approval from the compliance department. The format of these "agent days" differs from school to school. Often, each agent or corporation is given a table in a large indoor facility (like Virginia Tech's Rector Field House) and the student-athletes are free to go from table to table to obtain information from registered agents and to speak briefly with them.

Some schools also request that agents not mail anything directly to a student-athlete without either directing it generally to the attention of the athletic department first, or, at the very least, sending the department a carbon copy of the letter. As a practical matter, most agents ignore those rules and mail information directly to the athletes. Agents also try to establish, as early as possible, a relationship with the prospect, frequently by calling them on the phone.

Many agents also use "runners." Runners are individuals, typically students, that are close enough to a football player or a football program to come into contact with a prospect. Through runners, some agents try to funnel money and/or other illegal benefits to an athlete. This is a game of Russian Roulette for the student-athlete. Once a benefit is consciously accepted, eligibility ends.

I’ve heard more than one story about a student-athlete being "forced out" of school early by an agent because the agent has given improper benefits and has threatened to expose the student-athlete. The agent tries to insulate himself with the runner (admittedly, this rarely works), but many student-athletes feel like they have to leave school because they don’t want to receive the public ridicule associated with taking benefits (or, alternatively, the student-athlete doesn’t have the resources to pay back the loan).

Runners can take many forms. Sometimes they room with an athlete or are a close friend. I’ve even heard of people within the football program serving as runners, such as equipment managers. Cases in which coaches become runners are extremely rare, but a few years ago there were some serious allegations of an SEC assistant "steering" players he recruited to a specific agent for a kickback.

Generally, the less money an individual has, the more likely they are to be subject to influence. Someone like Peyton Manning likely was not offered money in college not because he wasn’t talented enough, but rather because agents knew that he didn’t have any need for it. Moreover, Peyton understood the process well enough because of his father (former NFL QB Archie Manning), and he seemed like the type of individual that would report any suspect activity to the appropriate state agency and the NFL Players Association. He is one of the few recent college superstars that had "Do Not Touch" stamped all over him during his college days.

The Recruiting Process – After Eligibility is Completed

Once a player has completed his eligibility or declared early for the draft, you would think that recruiting would begin in earnest. Instead, in many cases, blue-chip student-athletes already have an agent in mind because the agent: (1) has helped to push them to go pro (if they are an underclassman); and/or (2) has already established ties through a runner or gifts to the student-athlete or his immediate family.

Assume for a moment, however, that a student-athlete has no ties and is going to interview agents. The first step in the process is for the agent to call the student-athlete, or the family member coordinating the recruiting, and set up a meeting time. I like to see a parent or parents involved because adults usually understand that there are no free lunches in this world, especially in the business of sports agency. If an agent offers a student-athlete something that is too good to be true, you can rest assured that a price will be exacted later.

Many people ask me how athletes get cars, homes, etc. before they sign their first pro contract. This happens in a number of ways. In certain rare instances, agents will simply pay blue-chip athletes money out of their own pocket in order to get their signature on a standard agent contract.

A more prominent method is for the agent to arrange for a bank to give the athlete a credit line commensurate with the athlete’s anticipated contract. The bank typically requires the agent to provide a guaranty. You may wonder why an agent would serve as a guarantor, but the reason is simple. Suppose an athlete gets a $100,000 credit line and then turns around and spends $80,000 before signing a contract. If the athlete has second thoughts about his agent and wants to terminate the representation contract (and the contract is terminable at either party’s option) prior to negotiation of the NFL contract, the agent can threaten to pull the guaranty Now the athlete is stuck. He either needs to come up with $80,000, find another agent willing to step into the guarantor’s shoes, or he will stay with the first agent until negotiation of the first contract is completed.

Just to give you an idea of how crazy the process is, the signing terms for one of the top picks a few drafts ago was as follows: a $500,000 credit line within a week of execution of the standard agent agreement; a guarantee of $1,000,000 annually in endorsement revenue to the athlete, and if there was a shortfall it would get paid by the agency; a $90,000 a year desk job for his brother; and certain other significant perks, including but not limited to a date with a supermodel to be named later (also represented, not so ironically, by the same agency).

The agency could afford to make these concessions though, because of the enormous money generated not by the athlete’s anticipated contract, although that was substantial, but instead because the athlete was likely to be a marketing superstar. Some agents charge up to a 25% commission on marketing and endorsement deals (the terms are not regulated anywhere), while agent fees on a player's contract with his team are capped at 3% by the NFLPA.

Ethics

There are many, many ethical issues associated with sports agents. For example, as a licensed attorney, I am prohibited from soliciting business in person, and that includes phone calls. I believe that my legal ethical obligations prohibit me from soliciting athletes in person. Most agents who are attorneys rationalize in-person solicitation by saying that they are acting only as an agent then, not as an attorney, so they no longer are bound by legal ethics. Such an interpretation is, in my mind, playing fast and loose with the rules, but it has yet to be challenged and is regularly ignored.

Also, as a matter of practice, I don’t contact underclassmen about representation until after they have declared for the draft. There is no surer way for an agent to irreparably harm his or her reputation with colleges than by "pushing" a prospect to turn professional early, especially when the player is not ready for the next level (and most underclassmen are not ready when they go pro).

I suspect at this point in the article you have a pretty dim view of the ethics of sports agents. I wouldn’t necessarily disagree with that assessment. However, there are some agents who really do try to follow the rules and keep the athlete’s best interest in mind when making decisions.

I would also remind you that college football is a big business, and ethics are a two way street. I’ve had the opportunity to work with a number of really bright, intelligent, outstanding young men. I also have faced situations in which prospects have made certain demands of an agent before the player would sign with that agent.

One young man I encountered from a Big Ten school was highly rated, but he suffered a knee injury in the last game of his senior year, thus clouding his pro future. I visited him, and he told me that I would have to provide a credit line of $100,000 to sign him. I then asked him why he needed a credit line of that magnitude to survive from February until May of his senior season. He didn’t provide an answer.

I also asked him why he would spend that type of money because, realistically, his pro future was uncertain with the injury. Again, no response. I think that the unspoken answer was that he wanted the nice car and the flashy jewelry because his roommate was going to be a first round draft choice, and he wanted to keep up with the Jones.

Unfortunately, the young man I visited was going to be a 5th to 7th round type of player, but he wanted a 1st-round lifestyle without any guarantee he would play professionally. I guess my point is that, unfortunately, there seems to be a growing sense of entitlement in athletics today, and nowhere is that more evident than in the field of sports agency.

I guess if I had to briefly summarize my experience as a sports agent, I could do it with a couple of Jerry Maguire references. For most agents and prospective professional football players, there really isn’t anything quite as important as showing them the money. But, just for the record, it’s rare for an agent to get them at hello.

Jeff Ouellet is a 1994 graduate of Virginia Tech and a 1997 graduate of the Washington and Lee School of Law. He has been practicing with Duane, Morris & Heckscher, LLP, a law firm with 20 officers and 430 attorneys nationwide, since graduating. Among other areas of expertise, Jeff practices sports law, and he is a licensed NFL, NBA and CFL agent. Questions or comments about this article are welcome. Jeff may be contacted via email at [email protected].

 

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