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Baseball on the International Front

By Rick Karcher, Michael McCann, Geoffrey Rapp, Greg Skidmore, and Howard Wasserman

Kevin Baxter, a writer for the Los Angeles Times, has an interesting piece in Baseball America this week about an ongoing federal investigation into bonus skimming in the Dominican Republic involving MLB club personnel. Federal investigators are interviewing personnel from all 30 teams. Bonus skimming is another term for receiving a "kickback" and the feds are investigating whether club personnel, mainly scouts in the Dominican, are either keeping a portion of the bonuses as a finder's fee or misleading their organizations about the size of bonuses and keeping the difference for themselves. The White Sox recently fired their international scouting director in connection with the investigation.

Some people in baseball are hinting that the recent escalation of bonuses in Latin America is what's fueling the problem because it has made it easier and more profitable to skim money from players and teams. According to Baxter, last year 511 Dominicans were signed for an average bonus of $65,82, which is double the average that teams paid three years ago and more than thirty times what the Athletics paid to sign Miguel Tejada in 1993. And just last week, Oakland gave a $4.25 million signing bonus to 16-year-old Dominican pitcher Michel Inoa, which is nearly $2 million higher than the previous record bonus for a Latin amateur not from Cuba. [The Reds and Rangers reportedly offered even more.]

I can't believe that people in baseball are blaming the high bonuses paid to amateur Latin players in a free agent market (Dominican players are not subject to the amateur draft) as a reason, or a contributing factor, for the illegal practice of bonus skimming. Don't blame bonus skimming on your inability to control your own purse strings! But it gets even worse, because now the federal investigation is being used to support the possible implementation of an international draft. According to Baxter, veteran Dodgers scout Ralph Avila, who helped open the floodgates to Dominican talent when he established the first training academy there 22 years ago, "fears things have gotten so out of hand that the only way to bring order would be to make Dominican players subject to the draft."

There has been a lot of discussion within baseball about implementing an international draft, making all of the Latin American countries subject to the annual MLB amateur draft in June. It's extremely difficult to predict the impact that an international draft would have on amateur players in the United States. Amateur players in the U.S. would be competing with all of the top Latin amateur players (not just from Puerto Rico anymore), so one thing we can say for certain is that fewer U.S. players would be drafted in the top rounds. The high school players in the U.S. would probably be the most adversely affected. Their bargaining leverage would become much weaker if the clubs can sign much cheaper a comparable player graduating from high school in Latin America who doesn't have a full ride scholarship to fall back on.

However, the "unknown" impact to U.S. amateur players is the overall effect that an international draft would have on the bonuses currently being paid in the draft. If overall bonuses did not substantially increase after an international draft, then U.S. players as a whole would obviously be paid much less because (in theory) a U.S. player who would otherwise be drafted in the second round or third round would be drafted in the fourth round or sixth round, respectively.

An international draft can't be unilaterally implemented by MLB. It would have to be negotiated with the union and it will be interesting to see how much MLB pushes for an international draft, as well as the union's position. One thing is for sure, the process of an international draft and its impact on U.S. amateur players will have to be thoroughly examined. If an international draft is going to be implemented and its terms negotiated, it would be an ideal time for MLB and the union to revisit the entire draft bonus structure and how bonuses are to be determined, including the issue of league-recommended "slot bonuses" and what those legally mean (which I've never understood).

Full post as published by Sports Law Blog on July 10, 2008 (boomark / email).