Not sure if you guys have heard about this but it pays to read the fine print.
https://theathletic.com/322664...iny-within-baseball/
Fernando Tatis Jr., the game’s No. 8 prospect according to MLBPipeline.com, wanted to give himself every possible chance to succeed.
For Tatis, a shortstop at Double A with the San Diego Padres organization, that meant hiring a personal trainer, eating better food, getting a better apartment — things that all cost money. So last off-season, he agreed to a contract with Big League Advance (BLA), a company that offers select minor leaguers upfront payments in exchange for a percentage of their future MLB earnings.
Jóse Osuna, a Triple A outfielder with the Pittsburgh Pirates, made the same financial choice as Tatis in the spring of 2017, saying the additional money from BLA enables him to play under less pressure while supporting his wife, Karla, and daughter, Karla Sophia, 3.
Another Triple A player, who requested that his name not be used, signed with BLA while at High A at the start of the 2017 season, then enlisted a financial advisor to help him make investments with that money to secure his long-term future even if he fails to reach the majors.
Michael Schwimer, a 32-year-old former pitcher for the Philadelphia Phillies who is the president and CEO of BLA, said the goal of his company is to help minor leaguers guard against uncertain futures. The upfront payment from BLA is not a loan — if a player busts, he owes the company nothing.
“I tell every investor, ‘If you invest in the stock market and you lose, you’re losing money on Apple stock or whatever,” Schwimer said. “If you invest in Big League Advance and lose, you have changed someone’s life.”
Yet, in the view of many player agents, the players’ union and Cleveland Indians catching prospect Francisco Mejia, who is suing BLA, the company is far from an altruistic venture. Mejia’s suit, first reported by ESPN.com, alleges that BLA used “unconscionable” tactics to persuade him to give up 10 percent of his future earnings for three separate payments totaling $360,000. BLA, which denies any wrongdoing, filed a counterclaim asking the court to dismiss Mejia’s case, uphold his contract, award damages caused by the public disclosure of his contract provisions and issue a permanent injunction against Mejia prohibiting him from further revealing details of the contract, Schwimer said.
At least two other agencies also are considering filing suit against BLA on behalf of clients, according to sources. One prominent agent, who spoke on condition of anonymity as his agency considers whether to take legal action against BLA, called the company, “a very, very bad thing for players that needs to be regulated by the league and the union.”
“They use predatory tactics against certain types of players,” the agent said. “We find it offensive and detrimental to the players in many ways. I predict it’s going to lead to an abundance of lawsuits and turmoil in these players’ lives when they realize what they’ve been talked into, often against their agents’ advice.”
The union, responding to inquiries from agents, issued a memo — a copy of which was obtained by The Athletic — to all certified and limited certified agents on Jan. 19, 2016. David Prouty, then the union’s general counsel, said in the memo that the union “categorically” did not endorse or approve of BLA and its products and warned the future earnings the company sought from players were “significant.”
BLA’s actions, which sometimes include bypassing agents and contacting players directly, also have drawn attention from Major League Baseball.
Responding to complaints from players, MLB informed Baseball America during the 2017 Arizona Fall League season that BLA representatives were using media credentials issued by the publication to recruit players, sources said. Schwimer said MLB told him only that BLA “falsely impersonated Baseball America employees,” a charge both Schwimer and officials at the publication said was not true.
Baseball America, they said, had hired BLA to conduct video interviews and provide other content. After hearing from MLB, Baseball America asked BLA to return the credentials, and BLA complied. MLB then informed BLA that its reps were not allowed in areas with private access to players at major league ballparks, sources said; agents often face similar restrictions, depending upon the park.
In a letter to Dan Halem, MLB’s deputy commissioner for baseball administration and chief legal officer, Schwimer said, “at no point did any BLA representatives use the access granted to them by the media credentials to sell the BLA product or otherwise solicit AFL players.” Schwimer told The Athletic he has sought repeatedly to meet with MLB officials to discuss the matter and explain how his company works. MLB will consider meeting with BLA in the future, sources said.
“We were unaware of any players complaining about our behavior to MLB, but it is something we take very seriously as we pride ourselves in our relationships with players,” Schwimer said. “We will work with MLB to address and resolve the issue. It is certainly never our intention to inappropriately communicate with any player.”
Schwimer said BLA recently signed its 100th player and has raised more than $100 million from investors since 2014. The company’s board includes Paul DePodesta, a former major league executive who is now the chief strategy officer for the NFL’s Cleveland Browns, and Marvin Bush, the son of former President George H.W. Bush and former First Lady Barbara Bush, who is the managing partner of Winston Partners, a private equity firm.
“Any allegation or accusation that would suggest we have ever acted in an unethical or unprofessional manner is simply not true,” Schwimer said. “The reason we have such an incredible board and investor base is because they understand we act with total integrity and total honesty at all times.”
Schwimer said the saddest thing he saw during his professional career was after a game in 2009, when he was pitching for the Phillies’ Class A affiliate in Clearwater, Fla.
He had worked out following the game and was one of the last to leave the park. As Schwimer walked to his car in the poorly-lit parking lot he heard a curious rumbling. What he saw shocked him.
“It was one of my teammates in the dumpster looking for food so he could eat the next day,” Schwimer said.
Schwimer, who had received a mere $5,000 bonus as the Phillies’ 14th-round pick out of the University of Virginia in 2008, already was acutely aware of the financial challenges minor leaguers faced.
Those challenges drew increased attention last month when Congress, as part of a $1.3 million trillion spending bill, decreed minor leaguers to be seasonal employees not subject to overtime laws. The section of the bill known as the “Save America’s Pastime Act” requires minor leaguers to be paid minimum wage for 40 hours a week during the regular season. Such players, like their major league counterparts, are not paid during spring training.
The difference is that the major league minimum salary is $545,000, while minor league salaries are a tiny fraction of that amount. Triple A salaries range from $11,825 to $14,850 for a 5 1/2 month season, depending upon a player’s experience. Double A salaries start at $9,350, while High A and Low A salaries range from $6,050 to $8,400. As recently noted by The Athletic’s Levi Weaver, the federally-recognized poverty line for single-individual households is $12,140 per year.
The disparity in major- and minor-league pay gnawed at Schwimer during his playing career. At one point, he approached the late Michael Weiner, then the head of the players’ union, about “bridging the gap.”
According to Schwimer, Weiner told him, “I’m sorry. We don’t deal with that. Part of our job as a union is to protect the players we serve. And we serve major league players, not minor leaguers.”
Schwimer, who majored in sociology at Virginia but had a passion and aptitude for statistics, said he developed the idea for Big League Advance in 2013, the year he suffered a torn labrum after getting traded by the Phillies to the Toronto Blue Jays. He began raising money for the company in 2014-15 and offering deals to minor leaguers in ‘16.
The idea of helping minor leaguers achieve a measure of financial security also appealed to DePodesta, the former GM of the Dodgers who is perhaps known for his time as Billy Beane’s assistant with the Oakland Athletics during the “Moneyball” years.
“Professional baseball players accept an enormous amount of career risk to pursue a dream,” DePodesta said. “It’s a dream many of us have, but few have the chance to pursue, so these guys chase it. Their sacrifice is startling — school, friends, family and even things like having a say over where you can live — and the tough part is that so few of them actually make it. So few!
“For me, some of my most cherished takeaways from baseball were conversations with or notes from players who didn’t make it. Players who told me they treasured their time as part of the organization, that they greatly appreciated all that was done for them both on the field and off, that they knew how much we cared about them and that they will continue to look upon it as the most formative experience of their lives going forward. That’s just special. I wanted to be able to continue to help those guys who have both the boldness and passion to chase that brass ring, even if they fall short.”
The concept behind BLA is similar to that of Fantex, a company that awarded upfront money to major leaguers such as Los Angeles Angels left-hander Andrew Heaney, Baltimore Orioles second baseman Jonathan Schoop and Philadelphia Phillies third baseman Maikel Franco in exchange for a portion of future earnings both on and off the field. The union does not formally object to such deals but advises members who are considering them to hire a financial advisor and securities lawyer in addition to an agent.
Schwimer said BLA uses a proprietary algorithm to value every player in the minors. The system might determine that a player merits an $800,000 offer in exchange for the maximum 10 percent of his future earnings. The player might opt to accept a lesser payment at a lower proportional percentage – say, $160,000 for 2 percent or $80,000 for one percent.
Whatever the player decides, the more money he earns, the more he must return to BLA — a player who signs for 10 percent of his future earnings will owe the company $10 million if he earns $100 million, $20 million if he earns $200 million, and so on. Tatis, who did not reveal the terms of his deal, said, “If I’m a successful player and make big money, I’m not going to care about giving that money away. That will be nothing if I make all that big money.”
Schwimer, who said he requires all potential signees to review BLA contracts with an attorney, compared his company’s business plan to that of a Silicon Valley startup.
“In just about all of our deals, if a player doesn’t make it to the middle of arbitration, play four or five years, he is still making money on this deal,” Schwimer said. “Really the only way to lose money on the deal is if you play five years or more, become a superstar. Then you’re going to be paying for all the other players.
“It’s the exact same thing as a Silicon Valley startup, where if you’re a tech investor, you’re going to invest in a hundred tech startups hoping to find the next Facebook or Google or whatever. You’re going to lose money on 90 percent of them. But the 10 percent should pay for them, plus a lot more money than you lost.
“We know we’re going to lose money on the vast majority of deals we sign with players — we know that. But we hope to hit on a few guys who are wildly successful.”
A player’s deal with BLA does not affect his agent’s commission; the player will pay the agent the same fee, generally between 3 and 5 percent of his earnings. Yet, Schwimer acknowledges that, “all agents hate us,” exaggerating perhaps only slightly.
The complaints of player representatives include:
*The potential for exploitation.
Some agents say young players often fail to see the big picture — the future income tax they must pay, the agent fees that no longer might be deductible, the payments to BLA they will need to make not just once, but every year.
Schwimer disputes any notion that his company misleads players, saying he wants the players to have as much information as possible. Agent Storm Kirschenbaum, whose clients include Colorado Rockies outfielder Mike Tauchman, Boston Red Sox right-hander Marcus Walden and Detroit Tigers right-hander Warwick Saupold, said Schwimer takes a professional approach.
“He is not a pushy salesman,” said Kirschenbaum, who has clients working with BLA. “He played the game. He understands the risk and benefit of doing the deal. He presents the offer and that is it.
“He takes a step back. He will answer questions for you. But they are not going to put the player in an uncomfortable position. I think that is why they’ve had success.”
*The targeting of Latin players.
The agent who talked about “predatory tactics against certain types of players” was referring to Latins who come from disadvantaged backgrounds and might be more vulnerable to short-term financial inducements at the expense of long-term earnings.
Schwimer does not deny the BLA roster is heavy on Latin talent, but declined to reveal the exact percentages of Latins compared to North American-born players. He did say that the numbers would be more proportional if Latins and North Americans were subject to the same entry rules as amateurs.
Latins are eligible to sign with major league clubs when they are 16, while North Americans do not become draft-eligible until their senior year of high school.
*BLA’s bypassing of agents to make direct contact with players and their families.
Schwimer said the company will talk with family members at a player’s request, adding parents occasionally will contact the company seeking offers for their sons. But he could not recall an instance of BLA initiating such a conversation.
Schwimer, however, does not deny bypassing agents, saying they were “bold-face lying” to players to dissuade them from taking his deals.
“We started going directly to players. We did this to make sure they understood,” Schwimer said. “Keep in mind, the very first thing we told the player is, ‘We want to work with your agent. I just want to let you know what we have on the table.’
“At those meetings, I’ve had players tell me, ‘OK, I’m ready to sign this.’ We say, ‘Absolutely not. We will not sign you now. You need to get advice from your family, your agent, representatives’ . . . We’ve lost players because of it, but I don’t care. That does not bother me. What bothers me is if any player ever would sign with us without really understanding it.”
Many players reject BLA deals. They might consider the offer too low. They might prefer to bet on themselves rather than sacrifice future earnings. Not every agent, however, opposes the concept. Kirschenbaum and others believe it can be quite beneficial for players in certain circumstances.
“It’s clever,” Kirschenbaum said. “It’s a great idea to have outside-the-box financial options for players. It’s their money. It’s their ability to take that risk, their option to entertain and accept that risk.
“If they understand and become educated, after going through the exercise of reviewing the contract with Big League Advance, go through our analytics of what we think they will earn throughout their career and what money could potentially be left on the table — it’s ultimately their decision.
“I’m not going to be the one to say no to a player who may be in a financial crisis, who may have a family issue or may have his own family that he wants to build a house for. Life is going to throw curveballs at you all day long. Sometimes a baseball career is not going to afford you the opportunity to do things at that time in your life where Big League Advance would step in and provide that opportunity.”
The agents who dislike BLA, Schwimer said, are afraid of losing clients, afraid that a rival agent eventually will tell a player — in Schwimer’s words — “Your idiot agent told you to do this deal with Big League Advance. Now you’re going to lose so much money. Come sign with me. I would have never told you to do that.”
Lost in the argument, Schwimer said, are the players who will not reach the majors after signing with BLA, but leave baseball in a better financial position.
“All the agents care about are the players who make it. They don’t care about the players who don’t,” Schwimer said. “We are the only people who care about the 90-plus percent who don’t.”
To an extent that might be true, considering that only players on 40-man rosters are eligible to join the union. BLA, however, is not offering deals to most of the 90-plus percent. One agent said BLA has shown a knack for identifying lesser prospects who reach the majors, as well as potential stars such as Tatis and Mejia.
Tatis, the son of former major leaguer Fernando Tatis, signed with the Chicago White Sox for $700,000 in July 2015, then was sent to the Padres in the James Shields trade in June 2016. He is off to a slow start at Double A, batting .196 with one homer and a .541 OPS through 53 plate appearances. But with his BLA money, he upgraded not only his training regimen in the U.S. but also his off-season practice field in his native Dominican Republic.
He will worry later about any future obligation to BLA.
“I’m not afraid,” Tatis said. “I’m not going to spend that money stupidly. You’ve got to be smart with your decisions, with what you’re going to do.”