THE INSURANCE MAN DID IT
Sunday, August 29th, 2010In what now seems like ancient history, Major League Baseball clubs were always careful during labor negotiations with the players union to avoid claiming that they were losing money. Had they made that claim, under labor law they would have been required to open their books. Opening their books was the last thing clubs wanted to do.
Last week half a dozen clubs had their books opened for them.
In as remarkable and stunning an exclusive baseball story as I have seen, a Web site, deadspin.com, disclosed the financial reports of half a dozen teams – Marlins, Pirates, Rays, Mariners, Rangers, Angels. Anything financial you might want to know is in those reports, and Deadspin posted them for everyone to read and download.
It’s an accountant’s dream but baseball’s nightmare. Just go to Deadspin and click on MLB confidential, and dive in.
In the immediate aftermath of the appearance of the reports, there were a lot of wild-eyed, off-base reactions in the news media. Many were off base and misguided because the writers leaping to conclusions lacked facts.
But while everyone else was focusing on the reports’ details and speculation of their ramifications, I prefered to peer behind the exclusive itself. Having spent many years developing exclusive newspaper stories and seeing others doing the same, I guess I am a fan of exclusives.
In this instance I was struck by two aspects of the exclusive – the content and the landing site, particularly the landing site. Why would financial reports of baseball teams appear at Deadspin?
“We’ve had this for a while,” said A.J. Daulerio, the site’s editor-in-chief the past two and a half years. “We had to show it to people to make sure we understood what we had.”
But why and how did they have it? Three people in baseball told me that baseball’s investigation of the leak led to the conclusion that the reports came from an insurance brokerage that writes insurance for club directors and officers.
Those people are required to have insurance to protect clubs against such things as tort claims, malfeasance, negligence and any violation of fiduciary responsibility.
Knowing which brokers wrote insurance for which clubs, baseball investigators were able to trace certain documents to certain brokerages and narrow their search for the person who leaked the reports.
At week’s end, the commissioner’s investigative team, which was initially formed to find steroids cheats, had not found its man, but it felt it had narrowed its search considerably.
Asked about the probe, Rob Manfred, MLB’s Executive Vice President for Labor and Human Resources said, “Arguably a crime was committed so we can’t say anything.”
When I presented the scenario to the Deadspin editor, he said, without confirming the source, “That’s very much how it went down. That’s pretty much all I can say. I don’t want to get the guy in trouble.”
Chances are strong that the leaker will be identified, fired and perhaps prosecuted. That’s a hefty price to pay for whatever his motive was in leaking the reports. But it has been a boon for Deadspin.
“This is not a typical story we do,” Daulerio said, “but we’ve gone this route before, maybe not to this extent. We’ve broken stories before, legitimate news stories. This is something we knew as soon as we got it that we have to be careful.
“Our hope from the beginning was to get this information out there and beat writers from different teams would take it from there. We felt the Pirates and Marlins would infuriate their fan bases and would be a nuisance for Major League Baseball. That’s what we do on an everyday basis.”
Having perused the Web site for the first time, I remarked to Daulerio that it seemed to be more raunchy than news oriented. “Yes,” he said. “We don’t shy away from a lot of things.”
But that explains why Deadspin was the beneficiary of the leak. The brokerage employee was most likely a fan of the Web site and delivered the reports to it. Somebody in or connected to baseball would have chosen a more typically baseball or news oriented outlet.
Deadspin is not exactly mlb.com or espn.com. It has baseball; Tony LaRussa and Terry Francona were subjects of articles that appeared simultaneously with the financial documents. But more routinely 5-year-old Deadspin has the kind of articles whose headlines adjoined “Baseball Confidential:”
Larissa Riquelme’s Boobs Now Holding Cellphones Professionally
Tiki Barber’s Young Girlfriend Pens Icky Memoir, Promptly Called Homewrecking Whore
The 10 Worst Masturbating Stories We’ve Ever Heard
“This has thrown people for a loop because it has generated a lot of talk,” Daulerio said.
Probably the most significant revelation in the reports is that the Marlins and the Pirates, supposedly the majors’ two poorest teams, made profits in the years covered in the reports.
In the immediate backlash, the Marlins suffered the most because government officials in the team’s home area responded bitterly, accusing the Marlins of misleading them in their difficult negotiations for a new ball park.
There was also much consternation and gnashing of teeth in the news media. Dire predictions were immediately forthcoming. The reports, instant experts proclaimed, would cause serious problems on two fronts:
- Baseball would have difficulties internally as owners of high and middle-revenue clubs would rebel against low-revenue clubs (I have always preferred these designations rather than large and small markets; they are more accurate). The clubs’ revenue-sharing plan would come under assault and have to be changed.
- The union would rise up in fury and make demands in the next negotiating period for a new collective bargaining agreement (post-2011) for significant economic changes. Labor peace that has existed for an unparalleled period since 1996 would be imperiled.
The concerns of the news media, however, are overblown. It seems much of the reaction came with an absence of knowledge of the reality of the financial reports and other facts.
For example, a column on espn.com made a big point of saying the revelation about the Marlins would have a major impact on the Oakland Athletics’ attempt to build a new park. And then Billy Beane, the A’s general manager, said he pointed out to the writer that “there’s a huge difference. We haven’t asked for public funding. It’s apples and oranges.”
That was one conclusion that would have better not jumped to.
There were other significant flaws in news media reaction to the reports. Apparently unknown to most reporters, the financial data are provided or are available to owners and the union.
“The union has all this information,” Manfred said. “They get it routinely so none of it is a surprise to the union. The clubs know the information so there are no surprises there.”
However, an executive of one club said he wasn’t aware that the Marlins received $50 million in revenue sharing one year. “Forty million maybe,” he said, “but not 50 million.”
But when asked specifically about that figure, Manfred said, “That information is routinely available to the clubs so there are no surprises. There’s no reason why it should cause any problems.”
Stan Kasten, the Washington Nationals’ president, confirmed that reality. Asked if he thought disclosure of the reports could cause problems among clubs, he said, “I really don’t think so because teams have a fairly high level of understanding of the economics.”
Michael Weiner, the union chief, was reluctant to talk about the reports because, he pointed out, the union has a confidentiality agreement with the clubs. But he said, “We’re satisfied, even after the leaks, that we have received the information we’re supposed to get under the agreement.”
That’s not to say the union and the clubs won’t encounter thorny junctures in their talks, especially about revenue sharing and how the recipient clubs spend the money. But those moments were a foregone conclusion before Deadspin disclosed the reports.
Revenue sharing will be a major subject of bargaining, but it was going to be before the financial documents were disclosed. Anybody who didn’t know that hasn’t been paying attention. Another item on the union agenda next year will be the clubs’ manipulation of players’ major league service time.
Meanwhile, the clubs will have their own internal debates prior to negotiations with the union. They, too, especially the high-revenue teams, will want to discuss the way revenue-sharing money is spent. That was an item on their early agenda before the reports surfaced.
“I think there will be a big discussion in 2011 to get to what it was intended,” a club executive said of revenue sharing.
He also noted that the Pirates have said that they used their money to build a player academy in the Dominican Republic as a way of upgrading their player development system.
“Building an academy is a capital expense,” he said, suggesting that wasn’t what revenue sharing was meant for.
Few club executives wanted to talk about the reports. Not returning telephone calls or responding to e-mail requests for comments were Jeffrey Loria and David Samson of the Marlins, Stu Sternberg of the Rays, Frank Coonelly of the Pirates and John Henry of the Red Sox, who has been critical of the revenue-sharing system.
Chuck Armstrong, president of the Mariners, said the Mariners have nothing to hide. “The Mariners review this information each year with auditors for the PFD (Public Facilities District), so we have nothing to hide,” Armstrong said in an e-mailed statement. “The bottom line numbers are made public each year. But it is a confidential report, shared only under confidentiality agreements, which appears to have been stolen. We do not want to perpetuate what may be a criminal act by commenting further on it.
“In terms of the greater impact, that’s really a question for Major League Baseball.”
Major League Baseball is not answering many questions about finances these days.
PRODUCT IMPROVEMENT NEEDED
They just aren’t making these young pitchers the way they used to. On the same day last week, the Washington Nationals learned that Stephen Strasburg needed Tommy John reconstructive elbow surgery and the Cincinnati Reds put Mike Leake on the disabled list with a tired shoulder.
Leake, who has started 22 games, has been the model used by those who have questioned the Nationals’ overly cautious use of Strasberg. The Nationals insisted that Strasburg had to pitch in the minors early this season because they didn’t want him going directly from college to the majors.
But that’s precisely what the Reds did with Leake, and he responded with an 8-4 record and a 3.78 earned run average until he was moved to the bullpen recently. Now the Reds hope he will be back on the mound before the end of the season to help them win the division title.
The Nationals will consider themselves lucky if Strasberg (5-3, 2.91 jn 12 starts and 68 innings) is back with them before the end of next season, but they will most likely keep him out until the 2012 season.
The Nationals say they were careful not to overextend Strasburg and that he tore his elbow ligament on a single pitch. But for all the precautions teams take with their young pitchers, the one thing they don’t consider is that more throwing may be more beneficial to a young pitcher than less throwing.
Not throwing 100 miles an hour, as Strasburg can do, but consistent throwing at moderate speeds. There aren’t many proponents of this theory left, but those who favor it – Tommy John was one – believe it is the best way to strengthen an arm. They believe that arms grow stronger from use and wither from lack of use.
Once upon a time young pitchers were allowed to pitch without being pampered. In their rookie years in the majors, for example, Don Sutton (1966) started 35 games and pitched 225 2/3 innings, and Tom Seaver (1967) started 34 games and pitched 251 innings. Sutton pitched 23 years, Seaver 20.
SPELLING LESSON
Names have always intrigued me, and three names of players jumped out of box scores last week: Marc Rzepczynski, Matt Tuiasosopo and Kila Ka’aihue. These are not Nellie Fox, Milt May and Ed Ott so study carefully. There may be a spelling test at the end of the column.
Marc Rzepczynski, who turned 25 Sunday, is a left-handed starting pitcher for Toronto. He’s a Californian whose name is pronounced Zep-CHIN-ski.
Matt Tuiasosopo is a right-hand hitting first baseman-outfielder for Seattle. A 24-year-old Seattle native, whose six-syllable name is pronounced TOO-ee-ah-so-SO-po, he is the son and brother of former National Football League players (Manu and Marques). The family is Samoan.
Kila Ka’aihue, a 26-year-old Kansas City first baseman, is a native Hawaiian. His name is pronounced KEY-luh kuh-eye-HOO-a, and his full name is Micah Kilakila Ka’aihue.
BASEBALL MAN SKATING TO HOCKEY
Donald Fehr, former head of the baseball players union, is on the verge of becoming executive director of the National Hockey League Players Association. When he and the union board reach agreement on a contract and the board elects him, Fehr will become the first person to head two professional sports unions. More on this development in the next column.