And The Rich Get Richer

Read through the article–there’s all sorts of shadiness around this deal, and you have to imagine that it’ll lead to some loopholes in the process being closed. This, of course, is nothing new for the Yankees, who signed Alfonso Soriano after he retired from the NBP (the Japanese league) at the ripe old age of 22, prompting MLB and NBP to create the posting system we’re all so familiar with today. To go one step further, I wonder whether Cashman had any qualms about this signing, given that he’s essentially screwing the GM of the Diamondbacks, Kevin Towers (reportedly one of his closest friends).

What’s more, it turns out the Yankees doubly benefited from this loophole. Carlos Martinez, previously calling himself Carlos Matias, signed with the Red Sox before being similarly annulled. He then ended up with a $1.5 million contract from the Cardinals–and a ranking of 52 on Keith Law’s top 100 prospect list (which Law himself calls extremely conservative).

And what’s even odder is that it appears that neither of these prospects had lied about their age–only their names–as the ages on both sets of contracts match. Which draws into question the purpose of suspending them to begin with.

While I’m happy to see the Yankees prosper and the Red Sox lose out on a serious talent, I’m left imagining how furious I’d be if the tables were turned.

About Will@IIATMS

Will is a lifelong New Yorker and Yankees fan who splits his time between finance, music, and baseball. He was one of the early contributors to IIATMS, though life took him away for some time. He is very excited to be back.

24 thoughts on “And The Rich Get Richer

  1. From the article: "Paniagua's case has brought out further frustration from teams who contend that MLB's rules can enable a player to use a suspension to make 65 times his original signing bonus, leaving the original signing team with nothing."

    I understand the frustration on the part of the Diamondbacks. I understand that Paniagua committed fraud, and was eventually rewarded with a much larger deal. But this is a kid coming from a country with a per capita GDP of around $8,600, and a 14.6% unemployment rate. So baseball issues aside, my heart just isn't breaking when I hear about a kid from a poor country managing to snag a huge guaranteed deal that could truly change his life and his family's life.

    This strikes me as a serious moral issue facing baseball. Writers on this blog have talked about the possibility of a global draft, and the myriad logistical difficulties. An international draft could help even the playing field between big money teams who have more dollars to sign free agent prospects. However, it could also reduce the amount of money flowing from some of the richest men on the planet, to some who may be coming from genuine poverty.

    It's the rare occasion when I will accept as morally sound a rule that takes away the power of a teenager from a developing nation to harness the free market, in order to give a billionaire a better deal.

  2. JP, thumbs up for me on an astute comment. Jason, the D-Backs went into their Paniagua deal with eyes wide open, knowing the deal could be voided depending on the results of the MLB's investigation. They took a risk, and they lost. The proposal to "reform" this situation is to give teams like the D-Backs a right of first refusal to resign the prospect to a second contract, after the first contract is voided. As you know, a right of first refusal tends to depress the value of whatever it is that is subject to that right — again making JP's point that we ought to favor anything that puts more money into the hands of these free agents.

    Jason, my first reaction was like yours, but I'm coming to see this differently. The MLB rules seem to require teams signing these Latin American kids to at least get their names and ages right. This seems to be part of MLB's effort to clean up the way these kids have been exploited by their agents and others in Latin America. I don't know all I should about baseball in Latin America, but it doesn't seem like much for a team like the D-Backs to do the work required to make sure they know who they are signing. I can't get too upset that the D-Backs are losing out on a kid they signed on the cheap without knowing the kid's name, particularly since nothing more happened to the D-Backs than is provided in the rules.

    • Larry,

      Mistaking my writing for Jason's must mean I'm doing something right. I take that error as high praise!

      As far as the transfer of cash from owner to kid goes, that I don't much mind. From the TEAM to the kid, well, that I mind because as a fan of teams, this is pretty frustrating. The Yankees aren't as impacted by this loss–but to many teams, $1.1 million is a lot of cash! Also, if you take that standpoint and run it to its logical conclusion (where players have adjustable salaries year to year) we no longer have baseball, because it's not a profitable sport for owners.

      I also don't think that it's as easy for teams to "do the work required to make sure they know who they are signing"–if that were the case, the age issues that are fairly rampant would have been fixed by now, wouldn't they have?

  3. How despicable – a team has to know the NAME and AGE of a player they sign? I know NOTHING about this story – but if a team doesn't even look into that – who knows what else is going on behind the scenes.

    As I read, I was actually expecting the guy to come back with a different name and id, to sign with a different team for more money. At least he's the same guy, and everyone knows it.

    I think the words Due Diligence would apply somewhere in this scenario.

  4. Jay–

    Here's my question. If it were easy to find out a player's name and age in these countries, don't you think the teams would do it? These stories are all over the place. Players as famous as Albert Pujols and David Ortiz (originally David Arias) have their ages in question. There's no actual way to "look into" it at this point.


  5. Seems like a tricky issue. Apart from seeming like the original team should have the right to straighten out the contract mess prior to another team being able to swoop in and sweep up the player.

    Beyond that that though, MLB (and the players' union) has to be careful to not encourage fraud in its contracts either by teams or the people they are hiring. I'm not exactly sure how they would do that though.

  6. Also, if you take that standpoint and run it to its logical conclusion (where players have adjustable salaries year to year) we no longer have baseball, because it’s not a profitable sport for owners.


    how does breaching a contract reach a logical conclusion for adjustable salaries? i can see the point of constantly changing salaries being bad for the owners, but i have no idea how you are getting from A to B. a handful of players breaching contracts due to false identification is not going to lead to adjustable salaries for every player in baseball and the owners going broke.

  7. Pirate,

    Well, my point was that the logical conclusion of this, assuming we agree it's better for the game and morally defensible, is that ALL players should be able to renegotiate their contracts. If you think it's okay for these guys to get away with it, shouldn't it be fine for the rest of them, as well? But heck, let's constrain it to IFAs, just to keep it more reasonable.

    From my perspective, either these changes in contract are good, or they aren't. If they are, everyone should be allowed to do similar, if they're not, no one should. Loopholes, in general, are kind of bad for business. It's just a theoretical exercise. And if you suddenly let every player who added a few MPH to their fastball (which happens at that age!) renegotiate, you'd be transferring a lot more than $1 million here or there. This would actually probably HELP the Yankees, by the way. With the largest payroll, they'd also be able to buy up all the talent, while other teams would get stuck with the lower ceiling players (even with rights of first refusal, the Marlins can only sign a few guys like this before they hit their payroll limitations).

    This ISN'T me begrudging Juan Carlos his payday. But I know if I was playing alongside him as a similar talent who wasn't able to renegotiate, it might erk me just a wee bit.

    • By the way, you're making a pretty effective argument for an international draft.

      • Maybe I am missing something.

        It seems Will has made a good argument for maintaining the integrity of contract. Baseball can have sensible rules about when and how these types of contracts are voided, what rights are retained by the ball club, and how to limit abuses of the prospects. With this story, it's just an issue of when the league will or will not automatically void the contract.

        We might agree that teams should get a right of first-refusal, or that other rules should be put in place that make it tougher for players to void their deals over things like using incorrect names or ages. But I don't see how that in and of itself is an argument for an international draft.

        • JP, part of the problem is that you have 30 teams running around third world countries trying to get kids as young as 16 to sign long-term contracts for as little money as the market will allow. The kids are in the terrible position of not knowing whether their first offer will be their last offer, plus accepting the offer may be what it takes for one of these kids to get the instruction and playing experience they need to get better.

          We don't know the whole story, but it looks like the D-Backs rushed to sign Juan Carlos even before his information was vetted by MLB, simply because they wanted to tie the kid up before any other team got wind of him. It's hard to know whether we should feel sorry for the D-Backs (because they have to be fast and stealthy to keep the Yankees and Red Sox from signing all the best players).

          With an international draft, this particular problem goes away. MLB will have the chance to vet the players, and the teams can scout and evaluate the players on a more even playing field. A kid like Juan Carlos will have an idea of what he's really worth from his draft position. The D-Backs won't have to rush to sign kids just to beat the Yankees' time.

          Yes, I know, a lot of people are strongly against an international draft, and I'm not trying to stake out a position one way or the other. I'm just pointing out that Will's problem disappears if all DR players are signed in the sunshine and not in secret.

  8. What's next? Voiding a player's contract because he didn't report his full name to the team? Would have been nice for us to void the contract of James Kevin Brown, the Sox with Michael Averett Lowell and Toronto with Robert Victor Ryan. Would have been nice if Henry Halladay became a free agent because Roy isn't his first name.

    The real age part is definitely acceptable, but the name part feels weird. It doesn't matter what you call a guy. For example, your boss might know your father as Mr. X, your father's friends know him as Bob, the guys down at the bar know him as Robert, and you know him as Father. It shouldn't matter what you call a person, as long as people know that who is being addressed, and it is appropriate and polite.

    • DPR, as I wrote above, I think that MLB has a legitimate concern here. We're not talking about nicknames here, we're talking about the flow of a serious amount of money. If I sign John Smith to a contract in the DR, but he tells me that his name is Joe Jones, the chances seem pretty good to me that John Smith is never going to see a dime of that money.

      And to be honest, I care less about the real age. If the D-Backs sign some kid to a contract thinking he's 16, when he's really 22, that's the D-Backs' problem.

      • People seem to be overlooking this point. The rule is intended to protect the players from being taken advantage of, and if the signing team ignores such rules they deserve to get screwed. If MLB was able to find out the kid's real name, the D-Backs could have found out the kid's real name. If they didn't care about his rights enough to do that, they deserve to lose out on his talent.

        • Allen,

          It took MLB nearly 6 months of investigating to find out that the kids name was incorrect. 6 months is a MASSIVE amount of time in the development of a prospect. And MLB has a group down there specifically to look into this sort of thing. Additionally, this loophole adds an "option" structure to prospects' payouts. SIgn on with some other name, if you get better, let slip you had the wrong name on your contract, and you've basically opted out with an opportunity to renegotiate your contract.

          I really don't think it's a "if they don't care enough" issue. The loophole is either right or wrong. How much they care about it doesn't really factor in.

          • I think the rule is meant to protect the players from being taken advantage of by local agents who control their identities and finances. That it appears to be a loophole opt-out is incidental, and frankly if it was used that way it would not have taken a 6 month investigation – the player would just have presented his actual birth certificate and been done with it. The fact that it took a 6 month investigation implies that the player didn't admit to using a fake name.

  9. But Jay, that was Colorado.

    We're talking about the Dominican Republic. To act as if there's not a gigantic difference between these two places seems….well, naive.

    The contract they signed him to was for $17,000. Semi-mega dollar contract? Now you're just trying to be difficult.

    • Will, you're right that determining someone's true identity in the DR is more difficult than in the CO (or should I say the OC?). Still, we have the rule that you have to correctly identify the DR player before you sign him, and I don't think this is a trivial rule. If the team gets the kid's name wrong, then it seems to me that the kid isn't going to get the team's money. It seems to me that the team's money is going to be deposited into some bank account in the name of the wrong person, and that this bank account is going to be controlled by someone else.

      All this is pushing me to learn more about baseball standard operating procedure in the DR.

      In any event, it all boils down to this: the D-Backs could have waited to sign Paniagua until after MLB completed its investigation. They didn't wait. They took a chance. It didn't pay off.

    • No – sorry, unclear, my bad. He could NOT get a license in CO without a BC. Period – I'm just guessing that NY would be the same, but then again – Arizona – maybe not so much. If an Iowan with a copy (but not the original) can't get a DL, where do they get off buying/signing someone with no background? (and, from the Dominican Republic – which is almost a foreign country)

      Agreed – 17k isn't even party money – I was referring to the second time around – I could get by on 1.1 mil for a week or two.

      • Jay–to be clear, this was getting signed *in the DR*, not here in the US. Here in the US, our records are filed neatly at the state and federal level, so they are checkable. In less developed countries, this isn't the case–

        I'm no expert on this subject–and I hope I'm not coming across as aggressive in my responses. But as someone who deals with sizable investments in the emerging and frontier markets, I can tell you we spend a LOT of time figuring out the ramifications of the investment environment. These are investments for millions and in some cases billions of dollars—and it's still difficult to get comfort aruond some of the data you find.

        A youngster signing for $17,000 isn't going to get nearly that in depth of a look–the expected payout just isn't high enough. The reason he originally was signable for that sum is simple: He wasn't expected to amount to much, otherwise he'd have been able to demand a more sizable number.

        • Your last response kind of suggests that teams just shouldn't swim in these waters–but think about how many Dominican stars there are in the game today. There is a bit of uncertainty around these players, and the teams recognize that they have to deal with it. In this case, unfortunately, MLB has added uncertainty at the management level–now you don't know, when you sign a player, whether you'll be allowed to keep his rights. Which seems kind of crazy, at least to me.

  10. Allen,

    But if the rule was meant to protect the player from being taken advantage of, why are you seeming behind the player essentially being allowed to break his contract using it?

    Don't get me wrong–if it comes out that the reason this occurred was that the player wasn't even getting paid, then you'd be exactly right. It seems to me that Badler would have included that in his article if it was so–he tends to be very thorough.

    • Will, I acknowledge that you're making a good point. But if I'm reading all this correctly, the rules don't provide for an "option" in favor of DR players who use a fictitious name to sign with an MLB team.

      First, the "option" you refer to exists only if a MLB team wants to take a risk and sign a player before MLB completes its investigation of that player. If the D-Backs had just waited for MLB to complete its investigation, then we would have had a different story.

      Second, the "option" you refer to is not really an option. Again if I'm understanding correctly, MLB WILL invalidate any contract with a player signed prior to its investigation of that player, if the player's name or age is not identified correctly in that contract (I think the league treats the contract as never having come into existence). Moreover, they'll suspend the impacted player for a year. No option there. During the suspension, it appears that the player is barred from any kind of MLB-affiliated organized baseball. Once the suspension is over, the team that originally signed the player has no obligation to the player — the team can walk away if it wants to.

      Yes, in Paniagua's case, this whole business worked out like an option: at the end of his suspension, Paniagua had the option to sign back up with the D-Backs or pursue other offers. But that's only because his market value happened to have grown during his suspension. If he's suffered an injury or if his skills had deteriorated during his suspension, the D-Backs would have been free to abandon the kid, or they could have signed Paniagua to a smaller bonus.