Lets see where (or if) any proponet of paying to be seen will draw a line.
#1 A dad coached team - where dad had been a pro player - pays a coach $1,000 to watch his team (with his son on the team) workout.
#2 A dad - where dad had not been a pro player - pays a coach $1,000 to come to watch his kid pitch in a tournament game.
#3 A dad - who is rich - pays a coach $50,000 to give his kid an offer (but only after seeing the kid pitch). The kid has the same velo as other recruited pitchers.
#4 A mom - who is rich - gives a program $100,000 to give her kid a walk-on spot. (The team never carries 35, so no-one is cut to make room.) Kid was a decent HS player.
(Am I getting closer to the Varsity Blues story? There is no argument to be made that a coach can equally serve both employers.)
A coach who takes money for a private event is, by definition, not scouting other players not at the private event. Moreover, I am assuming the money paid was disclosed and approved in advance by the compliance office; if not approved, the coach is serving two masters and has a clear conflict of interest.
There is a clear difference between a travel ball organization, which exists to coach and give players exposure, and a PG organization which exists to provide venues to players to strut their stuff.