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80–675PS 2002

SPORTS AGENT RESPONSIBILITY AND TRUST ACT

HEARING

BEFORE THE

SUBCOMMITTEE ON

COMMERCE, TRADE, AND CONSUMER PROTECTION

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

ON

H.R. 4701

JUNE 5, 2002

Serial No. 107–125

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

2

COMMITTEE ON ENERGY AND COMMERCE

W.J. ‘‘BILLY’’ TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida

JOE BARTON, Texas

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES ‘‘CHIP’’ PICKERING, Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

TOM DAVIS, Virginia

ED BRYANT, Tennessee

ROBERT L. EHRLICH, Jr., Maryland

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

ERNIE FLETCHER, Kentucky

JOHN D. DINGELL, Michigan

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RALPH M. HALL, Texas

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

TOM SAWYER, Ohio

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

JANE HARMAN, California

DAVID V. MARVENTANO, Staff Director

JAMES D. BARNETTE, General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON COMMERCE, TRADE, AND CONSUMER PROTECTION

CLIFF STEARNS, Florida, Chairman

FRED UPTON, Michigan

NATHAN DEAL, Georgia

Vice Chairman

ED WHITFIELD, Kentucky

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

JOHN B. SHADEGG, Arizona

ED BRYANT, Tennessee

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

ERNIE FLETCHER, Kentucky

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

(Ex Officio)

EDOLPHUS TOWNS, New York

DIANA DEGETTE, Colorado

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

JANE HARMAN, California

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

3

C O N T E N T S

Page

Testimony of:

Beales, Howard, Director, Bureau of Consumer Protection, Federal Trade

Commission ................................................................................................... 19

Donnelly, James F. ‘‘Boots,’’ Athletic Director, Middle Tennessee State

University ...................................................................................................... 24

Osborne, Hon. Tom, a Representative in Congress from the State of

Nebraska ........................................................................................................ 6

Saum, William S., Director of Agent, Gambling and Amateurism Activities, National Collegiate Athletic Association ............................................ 28

(III)

(1)

SPORTS AGENT RESPONSIBILITY AND TRUST

ACT

WEDNESDAY, JUNE 5, 2002

HOUSE OF REPRESENTATIVES, COMMITTEE ON ENERGY AND COMMERCE, SUBCOMMITTEE ON COMMERCE, TRADE, AND CONSUMER PROTECTION, Washington, DC.

The subcommittee met, pursuant to notice, at 10 a.m., in room

2322 Rayburn House Office Building, Hon. Cliff Stearns (chairman)

presiding.

Members present: Representatives Stearns, Shadegg, Towns,

DeGette, Capps, and Gordon.

Staff present: Brian McCullough, majority counsel; Ramsen

Betfarhad, policy coordinator; and Will Carty, legislative clerk.

Mr. STEARNS. Good morning. The Subcommittee on Commerce,

Trade, and Consumer Protection will convene.

We will receive now testimony on H.R. 4701, the Sports Agent

Responsibility and Trust Act.

My good friend, the gentleman from Tennessee, Mr. Gordon, introduced the legislation to address problems associated with unscrupulous sports agents that use deceptive tactics to sign collegiate athletes to contracts. I am pleased to be a co-sponsor of the

legislation, because I think H.R. 4701 addresses a very significant

problem where the Federal Government can and should play a constructive role.

Sports agents provide a valuable service to their athlete clients.

This legislation is not directed at the legitimate professionals who

abide by the rules. This legislation is directed at those individuals

who do not follow the rules and willingly jeopardize the careers of

collegiate athletes and their school’s program.

Today’s witnesses include our colleague from Nebraska, who also

co-sponsored H.R. 4701, Mr. Osborne from Nebraska. The distinguished former coach of the University of Nebraska’s football team

that won three national championships under his tenure can elaborate on the problems the legislation seeks to address.

I am also glad to see Mr. Saum from the NCAA has returned to

discuss this issue that was briefly touched upon at our previous

sports hearing. I am pleased to see that any differences of opinion

have been resolved and that the NCAA is now supportive of the

legislation.

Given the enormous contracts and signing bonuses of today’s

elite professional athletes, it is not surprising that an element of

society will do anything to court promising collegiate athletes with

2

the hope of being their agent and riding their coattails to future

riches.

Talented collegiate athletes that hold even the slightest promise

of professional stardom are targeted by these individuals. Unfortunately, odds are against most collegiate athletes reaching the professional ranks and the accompanying fame and fortune.

Instead, what is left in the wake of some of the purported agents’ activities are all too often athletes who have lost their collegiate

eligibility and the schools left to deal with possible violations. And

let us be clear: the consequences for the athlete and the school can

be serious and have lasting effect.

Sanctions for violations can include the return of post-season appearance money, forfeiture of games played with ineligible athletes,

loss of scholarships, and ban on televised games. These are the

rules and the penalties the schools have imposed upon themselves,

and I understand why they exist. Yet despite the stiff penalties for

the school and the athlete, the repercussions for the perpetrator

range from minimal to nonexistence.

Because the States recognize this problem, many have enacted

laws to curb the abuses. Unfortunately, the patchwork of varying

laws is not currently sufficient to deal with this problem. While

progress is being made by many States to enact the Uniform Athlete Agent Act, it can only be a true countermeasure once all the

States have enacted it.

Currently, only 16 States—my home State of Florida is included—have taken that step. And while another 12 States have

introduced the legislation, over a dozen States remain without any

law to address this problem.

H.R. 4701 will provide an additional remedy for the States that

already have an existing athlete agent law. More significantly, it

will provide a new enforcement mechanism at the Federal and

State level where none currently exists. State attorneys general are

given the authority to bring civil action in Federal district court.

The FTC has all its available powers and authority to bring action against a violator under the legislation, including the ability

to fine a violator up to the maximum of $11,000 per violation per

day and to seek restitution to the injured.

It is clear that Federal legislation is required in order to provide

the State attorneys general with the authority to bring action

under a Federal statute. My colleagues, what is not clear to me entirely is whether the Federal Trade Commission requires legislation to enunciate certain conduct as unfair, deceptive, or if its existing authority under Section 5 already accords it the necessary authority to bring action against violators.

So I look forward to comments of our witnesses today and thank

them for their participation.

With that, my distinguished colleague from New York, the ranking member, Mr. Towns.

Mr. TOWNS. Thank you very much, Mr. Chairman, and I would

also like to thank you for holding this hearing. As an original cosponsor of the bill, I am very pleased that, in our previous sports

hearings, my friend from Tennessee, Bart Gordon, was able to push

this piece of legislation forward. I have heard of the horror stories

out there and realize that something needs to be done.

3

This legislation is a significant step in the right direction. It not

only protects young people, who seemingly need representation at

a younger age every day, but also ensures that bad actors in the

sports agent business are held accountable when they illegally solicit those whom they hope to one day represent. The bill would

create a Better Business Bureau for agents, through which amateur athletes and their families could file complaints and gain recompense from those who do harm to their careers.

I would like to make it clear not all sports agents are bad actors,

and I hope that those agents who play by the rules and who represent their clients ethically will come forward and support this

legislation. I also hope that all of my colleagues support this bill,

and that we can mark this bill up for consideration by the full committee as early as possible.

Let us face it, something has to be done, and it has to be done

now.

I yield back the balance of my time, and I look forward to hearing from the witnesses and, from of course, my colleague, Mr.

Osborne, who has been very, very involved in these issues throughout the years. On that note, I yield back.

Mr. STEARNS. I thank the gentleman, and now we will recognize

the author of the bill, Mr. Gordon from Tennessee.

Mr. GORDON. Thank you, Mr. Chairman, and also thank you very

much for not only co-sponsoring but for giving this a prompt hearing. You certainly have been cooperative, and I do appreciate that.

Our hearing today, as our chairman said, is on H.R. 4701, the

Sports Agent Responsibility and Trust Act, or SPARTA. I appreciate the support of so many folks here that have made this possible.

First, I want to take a moment to introduce one of the witnesses

that we have today. He is a friend of mine from my district and

also my alma mater. Coach Boots Donnelly is our former successful

football coach at MTSU and now our athletic director, and I appreciate Coach Donnelly taking the time to come up here and being

part of this and bringing some real-world advice and information

to this hearing.

I also want to thank my distinguished colleague, Representative

Tom Osborne from Nebraska, for his support in putting this legislation together. I have been working on the problem of predatory

sports agents since 1996 when a friend and constituent of mine,

Coach Ken Ship, came to see me about the need for uniform Federal law to protect kids from unscrupulous sports agents.

The agent problem has only grown worse since 1996. With professional signing bonuses in the millions, it has become open season on our young men and women. Agents hoping to cash in on the

next NFL or WNBA or NBA star will promise anything to student

athletes with even a remote chance of playing professional sports

to get them to end their college careers and sign with them so they

can get a piece of the potential windfall.

Agents offer athletes cash, cars, cell phones. They pay runners

to curry favor with star athletes. They give free trips to their

friends and offer jobs to their family members, who are in a position to influence the athlete. They harass them by telephone, stalk

them at hotels and dorm lobbies. Coaches from the University of

4

Tennessee tell me that when they have to—or when they have bowl

games, they have to post guards to keep the sports agents away

from their players.

Agents know it is against NCAA rules for kids to sign with an

agent while they are still eligible to play college sports. It is also

against NCAA rules and many State laws for them to offer anything of value to a student athlete. Yet agents continue to aggressively pursue student athletes with little regard for their future or

the school’s athletic program.

And why? Under the current rules, when an agent crosses the

lines and gives gifts or money to a student athlete, the only person

who is not held accountable is the sports agent. The student athlete loses his or her scholarship. The university faces fines and

sanctions. The agent generally faces no consequences from the

damage they cause.

If it is illegal in the student’s home State, it is easy enough to

contact the student athlete when they are on the road. When sports

agents give money and gifts to student athletes, it threatens the

athlete’s educational experience and the integrity of the amateur

athletes.

I introduced the Sports Agent Responsibility and Trust Act with

Representative Osborne to shift the burden of responsibility and

hold sports agents accountable for their behavior. SPARTA would

make it unfair—it would make it an unfair and deceptive business

practice for sports agents to give anything of value to student athletes in order to entice them into signing an agency contract.

The bill would also prohibit agents from giving false or misleading information to athletes and from failing to tell athletes in

writing that they may lose their NCAA eligibility if they sign a contract. The bill would cover not only agents but also runners and

other individuals connected to the agents.

The bill deputizes State attorney generals to prosecute violators in Federal district court on behalf of the FTC with fines of $11,000

per offense per day the violation continues. Finally, the bill requires sports agents to immediately notify a student athlete’s

school in writing when an athlete signs an agency contract, so that

the athlete is not unknowingly played in a game and subjecting the

school to sanctions and disqualifications.

Schools will be given their right to pursue civil remedies if they

are harmed by illegal recruiting activities of the sports agent. The

pressures on student athletes and colleges are tremendous. I believe we have a responsibility to educating our student athlete and

protecting them from the unscrupulous sports agents whose bottom

line is their own financial gain.

Our student athletes need to make good, informed decisions

about their future. This legislation will send a loud signal to bad

apple agents that they will be held accountable for unethical recruiting practices. The bill is supported by the NCAA and a growing list of coaches and athletic directors across the nation.

So once again, thank you, Mr. Chairman, for bringing this bill to

a prompt hearing.

Mr. STEARNS. I thank my colleague.

Unfortunately, we have a vote, and then there will be a picture

on the House floor. So I appreciate your indulgence and patience.

5

We are going to reconvene the committee after we have this picture

and this vote. So the subcommittee will recess.

[Brief recess.]

Mr. STEARNS. The subcommittee will reconvene.

We had our opening statements.

[Additional statements submitted for the record follow:]

PREPARED STATEMENT OF HON. GEORGE RADANOVICH, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Chairman, thank you for holding this hearing today to discuss H.R. 4701 and

the associated problems that give rise to the need for Federal legislation.

Today, we will here testimony regarding sports agents using fraudulent and deceptive conduct to sign collegiate student athletes to a professional sports contract.

As the salaries of our professional athletes have magnified over the years, the number of deceitful sports agents has also multiplied. These worthless agents have often

broken the rules and suffered little or no consequence compared to the athlete and

the school. Many of these violations have led to schools bearing the large financial

impacts.

These agents, who only care about money, are willing to do whatever it takes to

represent any student-athlete who has even a slim chance of playing professional

sports in order to acquire the enormous fees that accompany the representation of

professional athletes. It is time to end all of the secret payments and gifts that are

given to athletes, friends or relatives who have the ability to influence the athlete.

In the end, I hope we can work together to forge bipartisan legislation that will

build on our Committees’ recent progress and result in continued improvements in

our collegiate athletics.

Thank you, Mr. Chairman, for holding this hearing today. I look forward to the

witnesses’ testimony.

PREPARED STATEMENT OF HON. W.J. ‘‘BILLY’’ TAUZIN, CHAIRMAN, COMMITTEE ON

ENERGY AND COMMERCE

Thank you Chairman Stearns for holding this legislative hearing this morning.

And let me also to take a moment to thank the sponsor of this bill, Mr. Bart Gordon,

of Tennessee, for being concerned enough about our young collegiate athletes to pursue a legislative remedy. I know this has been a longstanding concern of his and

I share the concern that young athletes are too often preyed upon by unscrupulous

sports agents.

With the amount of television exposure of college athletics, we sometimes forget

that these young athletes are just that—young and often naı ̈ve, without the benefit

of the wisdom and experience that comes with age. Unfortunately, a few of these

so-called sports agents—vultures really—know this fact well, and will exploit it for

their own personal gain with little regard for the athlete. Sign a young collegiate

star who makes it big as a professional and the windfall to the agent is tremendous.

Fortunately, we can set rules of fair play and set penalties for those who choose

to break them. I know that many states, including Louisiana, already have laws to

address the conduct of sports agents. I am also aware that a uniform state law has

been enacted by a number of states and is moving through several other state legislatures. So there has been some recognition at the state level that there is a problem and some attempts have been made to address it.

The questions I have this morning relate to why current laws are insufficient. Is

it a matter of states enforcing the laws they have? Or is the system only as strong

as its weakest link? Why have some states never enacted a law to address sports

agents?

Given that some states have yet to enact a law or move the uniform state act,

it appears the state efforts will be a lengthy process. It seems logical that the Federal government could play a role that would provide a remedy and deterrent where

none currently exists.

That being said, human nature is susceptible to greed and we cannot change the

fact that some people will do anything for the lure of a quick dollar—or in the case

of multimillion-dollar sports contracts, quite a few quick dollars. For that reason

alone, I think it will require tremendous effort and vigilance to minimize current

abuses under any regulatory environment.

I am very interested in hearing answers to my questions and look forward to a

discussion of these issues.

6

Thank you, Mr. Chairman, and I yield back my remaining time.

Mr. STEARNS. We will welcome Coach Osborne, the Congressman

from the 3rd District of Nebraska, and appreciate his attendance,

and we look forward to your testimony. Thank you.

STATEMENT OF HON. TOM OSBORNE, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NEBRASKA

Mr. OSBORNE. Thank you, Mr. Chairman, and appreciate Mr.

Gordon’s work on this bill, his attendance.

Mr. Terry, good to have you here today.

And I am a co-sponsor of H.R. 4701, the SPARTA Act. Mr. Gordon really took the lead on it, and I guess the only thing I bring

to the table is maybe a little bit of firsthand experience with what

goes on out there.

And, you know, things have changed a lot. In 1961, I played here

in this town with a guy who was a first round draft pick. He was

the No. 1 of all No. 1s, and his total salary that year was about

$16,000. And today the No. 1 pick would probably be more like $16

million.

Nobody at that time had an agent. A lot of all pros played for $10,000 or $12,000 a year. So as the money escalated, the interest

in making off of players and agents began to proliferate. So today

an agent can make several thousand dollars or maybe several hundred thousand dollars or even a million for very little work. And

so it has really changed things.

Ed Garvey, who used to be the head of the Players Association,

at one time made a stab at regulating the thing a little bit by, at

the University of Wisconsin Law School where he was a faculty

member, said that they were going to set up a training course,

which they did, and you had to have some qualifications to pass the

course. You had to know something about contracts. You had to

have some expertise.

And what it advocated was an hourly wage. And, you know, you

can hire a pretty good attorney for $300 or $400 an hour, and most

people wouldn’t have to pay more than $5,000 or $10,000, even a

first round pick, at an hourly rate. But that isn’t the way most of

these guys operate, so they are making hundreds of thousands off

of the top picks.

There are some effective sports agents, and I think it is important we say that up front. They are well trained. They are registered. Many of them are attorneys. They follow NCAA rules and

State and Federal laws, and I think they perform a service. I was

never crazy about the profession, but I do recognize that there are

some good people out there.

The main problem that we are facing is that in 2002 the NFL

Players Association said that they had 1,196 registered agents. And

the thing about it, these are people who are qualified to negotiate

a contract for somebody in the NFL. The problem is that of those

1,196, more than 800 did not have a client, and there are several

hundred more out there who are not registered.

So you can represent a player coming out of college and not be

registered with the National Football League Players Association.

All you have to do to be an agent is say you are one. And so we

have guys who have no training, don’t even have a college degree,

7

who are telling guys that they can handle their contracts, do their

taxes, handle all of their public relations, and, you know, they have

no training in any of these issues.

A marginal agent can’t compete. Obviously, when you have got

that proliferation of people out there, a guy who has no expertise,

who has no training, is not going to be able to wait until the young

man or young man has graduated from college and do things the

right way. So the only chance they have is to approach a lot of

these young people while they are still in school, while they still

have eligibility remaining.

And so they will use a variety of tactics. One is simply trying to

beat the door down, and so most of our better players in Nebraska

ended up having to get unlisted numbers in their junior and senior

years, mainly because of agents. The agents were so numerous and

calling them every night that they just finally decided they couldn’t

handle it anymore. So that is one of the things that happened.

And I remember one time getting ready to go to a bowl game

down in the Orange Bowl, and we were getting ready to get on the

bus and I couldn’t find my quarterback and found him in the lobby

of the hotel between two agents who were browbeating him 2 hours

before the kickoff.

Well, that didn’t set real well with me. And, of course, I mean,

it was sort of a deal where they just grabbed him coming off the

elevator, and he didn’t want to be discourteous, and so he sat

down. But that type of thing does happen.

Sometimes they sign a player to a contract before eligibility expires, and they often times will ask—or will add an inducement

such as some cash, cars, clothes. We had one player who was taken

out to Los Angeles and met some Hollywood stars, and he was told

there was nothing illegal about the trip.

And, of course, when he took the trip he became ineligible, and

that player suffered an injury and subsequently never did play for

us, but he would not have been eligible anyway. And he met Patti

LaBelle and some people, and it really, you know, turned his head

a little bit.

So, anyway, that was—that is something that sometimes happened. And the problem is that when a player takes something

early, such as cash or cars or clothes, or whatever, to some degree

he belongs to that agent, because the agent can then say, ‘‘Well,

listen, if you don’t go along with me, if you don’t cooperate, I am

going to blow the whistle on you, and you are going to lose your

eligibility, and your school is going to get in trouble, and your

school is going to have to forfeit some games.’’ The school may not

have to forfeit, but that is often said.

And so, as a result, the agent becomes a more dominant person

in that player’s life than the coach does. And to some degree, the

agent owns the player. And he may have inadvertently gotten into

it, but once he is into it it is pretty tough.

Sometimes there is misrepresentation. On a couple of occasions

we had young men who had been former players who showed up,

maybe after 10 years, and we hadn’t seem him for a while, and

they seemed to be very interested in the program. And they would

hang around and befriend the players, and the first thing we would

know they were runners. They are working for an agent, and they

8

try to sort of infiltrate the program. And because of their previous

player status, they were certainly welcomed back, because nobody

knew what they were doing.

And so some of that happened, and we had one or two unfortunate incidents where players got involved, in some cases not even

knowing for sure what they were getting involved with because of

the runner situation.

The other thing that is particularly insidious about the agent

business is they many times will misrepresent what they can deliver, and the most common ploy at the present time is to assure

a player that the agent somehow will get him drafted higher.

And so, in recent years, Nebraska had a couple of players who

were very good players, and there is a committee in the National

Football League that you can call that consists of player personnel

people, and they can give you a pretty good idea of whether you

are going to be drafted early—I mean, before the draft ever occurs.

And so for one of these young men I called that committee, and

I put the young man on the phone with the chairman of the committee, and the committee told him that he would be drafted in the

third round. And he was a junior, and so, you know, we said, ‘‘Well,

you do what you have got to do. But, you know, you stick around;

there is a pretty good chance you are going to be first round pick

next year.’’ And the difference between a third round pick and a

first round pick is probably $800,000 for a third round pick and $6-

, $7-, $8 million average for a first round. Well, you know, usually

that is worth a year’s wait.

But the young man was told—and I think his family was told—

that that was a lot of malarkey. They were just trying to keep him

around and that he was going to be a first round pick. Well, the

draft came, and he was third round pick. And there was a lot of

consternation, some folks, you know, that were really unhappy, and

they said that the coaching staff had badmouthed the player. Nobody had done anything like that.

So sometimes when the player—when the agent makes that kind

of a promise, and then it doesn’t come true, then he will point the

finger at others. But anyway, that is something that is very commonly done at the present time, and many times it results in a

player coming out early who shouldn’t come out.

And each year there are some players who actually declare for

the draft, lose their eligibility, and then aren’t drafted at all. So

they lose their education, they lose dollars, and all of this, of

course, works against the school and the player.

And then, of course, sometimes there is folks who are pre-dating

and post-dating contracts. We had a player, two players actually,

who were contacted at their home in the summer, quite a distance

from Nebraska, and were convinced that they should sign contracts

that would be post-dated.

They did so, and then, as we were down at a bowl game, that

same agent was harassing those guys all week telling them that if

they didn’t honor that contract that he was going to blow the whistle on them. And so their mind was not on the football game, and

I didn’t find out about it until months later. But they didn’t have

their best game, and we were playing for the national championVerDate 11-MAY-2000 08:55 Oct 04, 2002 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 80675.TXT HCOM1 PsN: HCOM1
9

ship. So that is one reason I am not real thrilled about some

agents, not all, but some.

So let me conclude by saying this. I think the legislation is needed because there are currently 17 States that have no regulation

of sports agents, and I think Mr. Gordon and I both agree that we

are not trying to supersede State law. We would like to see every

State with regulation, but right now we have a hodgepodge.

Some States cover this; some cover that. Seventeen have no regulation. And most of these guys, these agents, operate across State

lines. And so you had Norby Walters, Lloyd Bloom, who went to

prison, Tank Black recently, and they had multiple people that

were involved illegally across many different lines.

So what this does, it provides a uniform Federal backstop, which

we think will serve athletes well. It serves the schools well, and it

allows the States, and the schools particularly, to go after an agent

who has done something deliberately in violation of NCAA rules,

because the school, not just the player—the player suffers certainly—but if the school loses a good player prematurely, the school

gets a black eye. It is almost as though somehow the school wasn’t

doing their job, but it is very hard to keep a finger on all of this.

And then they lose a good player.

So, anyway, I think it is certainly legislation that is needed, and

we appreciate this subcommittee addressing the issue. I would be

more than happy to answer any questions that any of you have regarding the issue that we are talking about.

[The prepared statement of Hon. Tom Osborne follows:]

PREPARED STATEMENT OF HON. TOM OSBORNE, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF NEBRASKA

Thank you Chairman Stearns, Ranking Member Towns, and Members of the

Committee. I appreciate the opportunity to come and speak with you today about

legislation that the gentleman from Tennessee, Mr. Gordon, has introduced. I am

pleased to join him in support of H.R. 4701, the Sports Agent Responsibility and

Trust Act, or SPARTA.

Each year, hundreds of college athletes are offered illegal inducements to enter

into contracts prior to the exhaustion of the athletes’ eligibility by unscrupulous

sports agents. During my 36 years as a football coach, I was deeply concerned by

overly aggressive, unethical sports agents who compromised a student-athlete’s eligibility or took financial advantage of student-athletes and their families. With the

lure of big money involved in professional sports, I witnessed first-hand the difficulty in trying to keep agents and their runners from attempting to illegally recruit my players with cash and gifts. In pursuit of the hefty fees that are associated

with representing professional athletes, sports agents engage in unethical behavior

that undermines the integrity of college sports.

In addition, when sports agents engage in this type of impermissible behavior,

their actions often result in three major problems for student-athletes and the

schools they attend, while sports agents themselves often face little or no consequences.

First, when sports agents provide inducements to student-athletes and therefore

break NCAA rules, the student-athletes lose his eligibility to compete in collegiate

competitions, and often times lose his scholarships. For many of these collegiate athletes enticed into forfeiting eligibility, the loss of eligibility means the loss of a college education if they cannot afford to pay their own way. In addition to facing sanctions they may not expect, these athletes often times damage promising professional

careers. When a sports agent promises a student-athlete fame and fortune—or a

first-round draft selection—a focus on superstardom and wealth may prevent them

from considering the consequences of signing away their NCAA eligibility.

Personally, I experienced having a player in the 1980s who was offered some illegal inducements, and in turn lost his eligibility, which for the most part ruined his

career. This particular player was involved with agents who had already given illegal inducements to players across the country. Eventually, these agents were inVerDate 11-MAY-2000 08:55 Oct 04, 2002 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6621 80675.TXT HCOM1 PsN: HCOM1
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dicted on a number of felonies, leading them to go as far as threaten some of the

players with bodily harm. At the time, however, we lacked the laws to pursue these

agents in the State of Nebraska, and these loopholes still exist today.

Unscrupulous agents often take advantage of students who have little or no experience in contract negotiations, potentially causing financial harm for student-athletes, their teams, and their respective schools. On a personal note, I had a player

back in the 1980s that thought he signed a contract giving 3 percent of his earnings

to the agent, but somewhere buried in the contract was a much larger figure of 13

percent of his earnings, causing him to lose thousands of dollars. Fortunately, this

player was able to recover more than $300,000 under California state law where

this agent originated. In my home state of Nebraska, however, we did not have the

laws to go after this agent.

Schools also stand to lose financially from the deceptive actions of sports agents.

If a student-athlete loses his eligibility because he accepted inducements from an

agent, and his ineligibility is not disclosed to the school and the ineligible student

is allowed to compete in violation of the rules, that school may face a number of

sanctions, including suspensions, fines, and the possible loss of post-season play and

all the revenue that this might represent.

When student-athletes lose their eligibility by entering into an agency contract

with unethical agents, intercollegiate athletics suffers because of the negative perception that is often associated with this type of activity. In recent years, the number of incidents where student-athletes were persuaded by unscrupulous agents to

accept payment or other consideration in exchange for exclusive representation has

created a negative perception that threatens the integrity of college athletics and

the educational institution involved. While colleges and universities rarely do anything wrong in these situations, the mere fact that their student-athlete entered

into such an agent contract reflects negatively on the school.

Why is this legislation necessary? As of April 2002, the National Football League

Players Association reported that there were 1,196 certified football agents, almost

double the number from 10 years ago. But, more than 800 of these agents have no

clients. Hundreds of these so-called ‘‘agents’’ lack both certification and qualification.

Unethical sports agents, often motivated purely by greed, will use any means necessary to represent a student-athlete who has even a remote chance of playing professional sports.

Currently, 17 states in our country, including my home state of Nebraska, have

no regulations governing the conduct of sports agents, while many other states have

a patchwork of vague and differing agent regulations. Until all 50 states adopt the

same standards for regulating sports agents, there will be no uniformity in the laws

governing sports agents. SPARTA would provide a minimum federal backstop for

regulating sports agent conduct, while at the same time respecting tough state laws.

SPARTA would make it unlawful for an agent to give false or misleading information or make false promises or representations in order to entice a student-athlete

into signing an agency contract. This legislation would also make it unlawful for an

agent to fail to disclose to the student in writing before signing a contract that the

student may lose his eligibility to compete in collegiate athletics. SPARTA requires

sports agents and student-athletes to notify the school’s athletic director within 72

hours—or before the student-athlete’s next sporting event—of signing an agency

contract. This legislation is needed in order to protect our student-athletes from unscrupulous sports agents.

The bottom line is, most student-athletes do not make it in professional sports.

But, they may have been enticed to leave school early only later to realize that their

agents acted solely for their own financial benefit, with no concern for the athletes’

future. Over 36 years of coaching I saw too many student-athletes taken advantage

of by sports agents looking out for their own bottom lines. I firmly believe we need

to treat sports agents who lie, cheat and deceive, as we would treat any other

businessperson who promises the world but delivers only heartache.

Thank you again for the opportunity to be here today to offer my thoughts about

this important legislation.

Mr. STEARNS. Coach, thank you very much. I think it has been

very enlightening for all of us to hear this, and particularly from

your standpoint. Most of us have not had the distinguished career

that you have had in athletics. So for you to step forward and to

not only endorse this bill but to go out and speak in a proactive

manner is very helpful.

11

You can bring keen insight that many of us don’t have. I mean,

you can name agents and players, and you know the history. So it

is very important that you participate, so I want to thank you for

doing that.

When I was thinking about this hearing, I was sort of appalled,

just like you are, how agents are—it is sort of like the Wild West.

They can do almost anything they want. Now, it appears—I asked

staff—that Nebraska has yet to enact this—a State law. If I am

correct, that is correct, isn’t it?

Mr. OSBORNE. Right. There have been numerous attempts in the

State legislature to enact some type of law, and it is has been

blocked every time and for various reasons. And one thing I would

like to point out is that this really shouldn’t alarm attorneys.

Sometimes attorneys get worried about things, but most of—there

are very few of the agents that we are talking about are not—are

attorneys. You know, most of these people have no training at all.

Mr. STEARNS. You say they don’t have a college degree, a lot of

them? No training?

Mr. OSBORNE. Some of them don’t, yes. Right.

Mr. STEARNS. And they are saying, ‘‘I am an expert on PR. I am

an expert on taxes,’’ and so forth.

Mr. OSBORNE. Yes.

Mr. STEARNS. But I guess what I am trying to understand, why

hasn’t this been solved sooner? I think my colleague from Tennessee has done a great bill here, but I am really—from what you

just said this morning, what the staff has told me earlier, it is— I just can’t understand why the State of Nebraska has not done it.

Has it been politics, do you think? Or is there anything you could

reveal to us that—why the State of Nebraska has not done something about which is so corrupting and is so omnipresent?

Mr. OSBORNE. Well, you know, the difficulty has been that we

have had an influence in the State legislature that says that if a

player—you know, the NCAA and colleges exploit players. Therefore, if a player can get something, even if it is illegal, he ought

to be allowed to do it. And that has been one of the arguments, and

so I—you know, this is obviously something I have not adhered to.

But every State has their own reason. Sometimes it can be an

individual who blocks it. Sometimes it can be, you know, several.

But, obviously, it does seem to make sense to us that we need an

overall Federal umbrella that would at least give some safety net.

Mr. STEARNS. And that is probably another reason why we

should go ahead with this, is because we have got States that are

reluctant to do it because of maybe political reasons, so maybe on

the Federal side that we could solve that.

When these agents do some of the things you talk about, these

deceptive practices, that perhaps lose the eligibility for the player,

is it—are there any laws that they are breaking at all in terms of

something fraudulent or deceptive that would break any known

rules? Or is this—there is no known rules existing other than the

player loses his eligibility if he or she takes a gift.

Mr. OSBORNE. Yes. And many agents have said, ‘‘Look, I didn’t

break any laws. You know, NCAA rules don’t affect me.’’

Mr. STEARNS. So the player gets hit, but the agent never gets hit

because——

12

Mr. OSBORNE. Yes, the player in school, right.

Mr. STEARNS. So there is no laws at all on the agents. So they

are free—— Mr. OSBORNE. Well, some of the individuals I mentioned previously went to prison because they had violated some laws. In one

case, I know that they actually used physical threats against players and threatened to break their leg or something like that, which

probably isn’t something you ought to be doing.

And we did have one case where we had a player who ended up

signing with an agent that was rather unscrupulous, and the player thought he was signing for a 3 percent agent fee, and somewhere buried in the contract was 13 percent. So he ended up paying 13 percent, and this particular agent was from California.

California did have a State law. The agent did not register in

California, which he should have. Therefore, there was some redress, and the player was able to recover about $300,000 in excess

fees because California had a law. In Nebraska we couldn’t touch

him, and so it does show you how a law can work. It can help, and

in some cases does. But since we have no uniform standard, we

have got a problem.

Mr. STEARNS. My last question, Coach, is a lot of these players

are very susceptible. And, as you pointed out, this one player went

out to Los Angeles and the bright lights turned his head. The question of the player knowingly or not knowing—I mean, do you think

that we should be clear that some of these players are so naive,

and they are so wishing to believe that a statute should provide

whether he knew or not what was happening—in other words, how

do we protect from those people that are just naive and go out

there and an agent comes up to him—I am sure if an agent came

up to me in high school and said something, I would just say ‘‘gosh’’ and go along.

Mr. OSBORNE. Well, you know, unfortunately, people tend to believe what they want to hear.

Mr. STEARNS. Yes.

Mr. OSBORNE. And so you can have a very good relationship with

a player. You may have recruited him. You have been with him for

4 years. And yet when it comes to professional athletics, sometimes

he will trust the word of somebody that he met 2 hours before more

than he will the coach.

Mr. STEARNS. Right.

Mr. OSBORNE. And it is unbelievable. To me, it was genuinely

unbelievable. And I don’t want to say that the players have no responsibility, because the players are told over and over and over

again what the rules are. But there are a few times when an agent

can come in and say, ‘‘Look, you know, if you sign this, it really

doesn’t mean anything because it isn’t dated until 6 months from

now.’’ So it really doesn’t go into effect, so you are really not obligated.

But when you make a verbal or a written agreement, you have

compromised your eligibility. And so then the agent can come back

and say, ‘‘Well, you signed it, and we have an agreement, and you

are in trouble. And, therefore, you better go along with me.’’ So there is some naivete here, and then there are some cases

where the player just becomes a little greedy. But in any case, it

13

doesn’t work out well. I would say 95 percent of the time a player

that has signed early will become disenchanted and will try to get

out of that contract, if not before he leaves school, after. None of

these relationships last very long.

And as I mentioned, usually it is—the agent that comes in early

is not a very competent agent. The only chance he has to sign a

player is to come in early.

Mr. STEARNS. I am going to ask you one last question. It is a little more difficult, and it is asking you to really keep your hat on

as coach and not as a Congressman. Mr. Gordon has done a great

job on this bill. But if you could be the Speaker of the House, and

you are sitting out there, and this bill has passed the House and

it has passed the Senate—it has gone to conference—is there anything you would add to this bill to make it stronger?

You know, there is a question of preempting States’ laws so that

we have one Federal national law, so that we don’t have 50 courts

deciding in 50 States. You know, that is one possibility. Or, you

know, I mean, so you are the Speaker of the House. It is in conference. What would you do? Anything different to the bill? I mean,

in the early stages here, without—— Mr. OSBORNE. I don’t think that I have anything, Mr. Chairman,

I would add. Mr. Gordon and I have talked. We have worked together. We made a couple of minor changes, which I suggested. I

think at one point there was an opportunity for the school to sue

the player. I didn’t think that would probably play very well in

some regards, and so we took that out, because sometimes a player

does something knowingly, sometimes he doesn’t.

And so, anyway, we have made some changes. But my problem

is I am not an attorney. I am not an expert in legal affairs. Therefore, I may be missing something there. I do know pretty much the

ins and outs of the agent game from the college coaching side of

it.

Mr. STEARNS. I think my time has expired.

The gentleman from Tennessee.

Mr. GORDON. Speaker Osborne, congratulations for your promotion. A lot of us had to stay around a lot longer to reach that.

And I also thank you so much for all your expertise in what you

have brought to this bill. Let me address a couple of things that

were brought up.

I guess one question—why not before? I think part of it is, as you

pointed out, the dollar figures have escalated so dramatically in the

last few years that it is a different problem than it was before.

I think the other thing, as I have talked with sports writers

around here and there, there is a natural inclination to be skeptical, particularly in the sports community, for anything with the

Federal Government, any kind of regulation, more than probably

even the business community or anywhere else. So there has been

a reticence. And even when I first introduced it, the NCAA was opposing the bill, not the concept but preferring that it be done on

a State level.

Well, I think now we have seen the problem has only gotten

worse, that some States have moved forward, some haven’t. And

there has got to be some kind of uniformity, and there are different

rules. And another question you asked, ‘‘Is there nothing you can

14

do?’’ Yes, there are some fraud type of laws that they are violating.

But it is in a broad sense, and this I think narrows it, gives more

remedies, and also things like notifying the school. This law will

require the schools be notified.

Besides the student being disadvantaged, here you are as a

coach, I mean, how many times have you told the players—you

know, you are really trying to get them to act right, and then all

of a sudden somebody comes in, a runner that pretended like they

were a friend, an uncle, or whatever they might have been influenced, and they undo all the work that you have done. And so

there is just a lot of things that can be done there.

I want to go back to another point, Representative Osborne, that

you made, and that is that a lot of agents are good and decent, obviously, and serve a good purpose. But what has happened now I

think is that you are brought down to the lowest common denominator. As a football coach, if the rest of the folks in your conference

are cheating in some way and winning, it puts a lot of pressure on

you, you know, not to do whatever they are doing, you know, and

maybe lose.

So I think that the good sports agents are going to say thank you

for bringing this in, so that it helps us do our job better and takes

the pressure off of these other folks.

Mr. OSBORNE. I think you are correct. If I might interject there,

a lot of the more reputable agents have gone to something recently

simply to survive, and that is that once a player has completed

their eligibility they have had to say play the game, that we are

going to get you drafted higher.

And so they will say, ‘‘Well, now that you have finished, what we

need to do is we need to take you to Los Angeles. And we are going

to get you a personal trainer, and this guy is going to work with

you every day. And we are going to get you a nutritionist, and we

are going to work out with you. And when you go to that combine

in Indianapolis, you are going to be faster and bigger and stronger

than ever. And we are going to get you drafted higher. You know,

you will be a first round pick.’’

So even the good guys are saying that kind of thing, and the

problem is that that is a lot of malarkey. I mean, in Nebraska, we

have got a better weight program, we have got a better nutritionist, we have got a better everything than what they have got

in Los Angeles. And usually within two or 3 weeks these guys are

disillusioned, and they say, ‘‘Hey, I left a place that prepared me

better than any place could have.’’

They come back, but in the meantime they have dropped out of

school. And they may only need 3 hours to graduation, and some

of them never complete their degree. And so it is something that

drove me crazy from an academic standpoint, even with a guy that

had legitimately approached a player at the right time.

Mr. GORDON. I mean, these are 20-year olds that really, in this

situation, don’t have a second chance. One bad decision and they

are out.

Mr. OSBORNE. Right. Yes, you can pretty well ruin your career

in about 10 minutes.

Mr. GORDON. Yes. We have received a number—and we should—

we will be getting those out later on, but a number of endorseVerDate 11-MAY-2000 08:55 Oct 04, 2002 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6602 80675.TXT HCOM1 PsN: HCOM1
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ments from different coaches, from athletic directors, from all

across the country. Can you—I mean, is there any reason that

some—that a coach would not want this? I mean, is there—you

know, why wouldn’t we do this?

Mr. OSBORNE. I can see no reason. I don’t know of any coach who

would oppose it. I don’t know any athletic director who would oppose it. I don’t know any player that would oppose it if he had the

big picture. And I think the NCAA at one point thought that it

would be better to do it through the States, and it would be ideal

if we could get all States to do it. But we have been at this a long

time.

I mean, we have had State laws on the books for—in some States

for 15 years. And, you know, we had the case at Penn State with

Enos Sudaclose, who lost his eligibility, the FootLocker deal, Florida State—you know, some guy took some players down, and they

thought they were just getting a free pair of tennis shoes. Well, a

whole bunch of guys were all of a sudden obligated, and in some

cases a State had a redress, and in some cases a State all of a sudden decided they were going to pass a law because they lost a highprofile player. But until something like that happens you just can’t

get their attention.

Mr. GORDON. If I could just real quickly close. Let me—I just

want to point out also, we are not setting up a Federal sports police

operation here. By and large, what this bill does is it deputizes the

State attorney generals, and so the FTC—or no one else is going

to be going out and doing this.

But it allows a coach or an athletic director, or whatever, in a

particular State to go to their attorney general and say, ‘‘We have

got this problem. You have got the authority. Take care of it.’’ There is not a Federal police force for this.

Thank you.

Mr. OSBORNE. I might just add, you mentioned the part of the

bill that requires the agent and the player to notify the school

within 72 hours of signing a contract. That gives some legal foothold for the attorney general of the State or the school, because if

a guy signs early, you know, and he hasn’t reported it, and obviously he is not going to report it, you know, the agent and the player are in a catch 22 also, particularly the agent. And so I think

that is a very good provision of the bill, that they have to notify

the athletic director in writing within 72 hours or the next game

before—after signing.

Mr. STEARNS. I thank the gentleman.

The gentleman from Arizona, Mr. Shadegg.

Mr. SHADEGG. Thank you, Mr. Chairman. I thank you for holding

this hearing, and I compliment both you, Coach Osborne, and Mr.

Gordon for offering this legislation.

I want to follow up on a point you just made with regard to the

remedy for the university and some of the questions that the chairman asked with regard to the remedy. I guess one of the things

that I am curious about would be the remedies under the bill. I see

that, at least in the language of the bill, it makes this conduct unlawful, and it imposes what appear to be quasi-criminal penalties,

including, as I—a summary that was given to me says $11,000 per

incident per day.

16

One of the questions that I would have would be, it seems to me

there are a number of victims in this circumstance. Obviously, the

young 20-year old athlete is a victim of an unscrupulous agent in

this circumstance. It seems to me that an athletic program can also

be a victim, if that athlete loses eligibility.

And I guess the question I would have for you or Mr. Gordon either one, or maybe staff, was there any thought given—and I just

skimmed through the language of the bill and didn’t see it—of inserting a declaration that it is against public policy for athletes to

be induced to enter these contracts based on false representations

or upon gratuities? And that upon any finding that that has happened that the contract itself is null and void as violative of public

policy?

And I guess my thought there is, if you could declare the contract

void, the contract that the athlete entered into with the agent,

maybe you could then escape the athlete’s ineligibility, since at

least under these circumstances the athlete is induced to sign an

agent’s contract under circumstances that are either deceptive or

violative of public policy.

That is, he was lied to or misrepresented about what signing the

contract would mean, lied to about, for example, post-dating it, that

that wouldn’t have any effect, or lied to that taking the gratuity

wouldn’t violate his eligibility. And it seems to me if you could insert language saying this is against public policy, and, therefore,

the contract is void, you might be able to undo the damage done

to that athlete, and it seems to me also possibly undo the damage

done to the athletic program, because if you can undo the contract,

you render it void, maybe that athlete doesn’t lose his or her eligibility. And I just wondered if any thought was given to that as a

remedy.

Mr. OSBORNE. Well, that is a very good point. And I think the

NCAA will be testifying, I believe, in some of their State—the legislation that they have tried to initiate at the State level. That provision may be there and——

Mr. GORDON. If I might help, Representative Osborne, on this.

Mr. OSBORNE. Yes, go ahead.

Mr. GORDON. As I understand it, to—— Mr. STEARNS. The gentleman yields to the gentleman from—— Mr. SHADEGG. Be happy to yield.

Mr. GORDON. The contract law really is a State jurisdiction, and

so with Federal law we don’t have the authority to make it null

and void. But also, the other—you really want to stop this in the

front end. The other problem that you have is, even having these

kind of conversations, much less the signing, against—they can

lose their eligibility through the NCAA.

The other sort of—an earlier part of your question about the

school’s sort of helplessness—under this law, the schools also have

a right of litigation against the sports athlete. If they are penalized, if—you know, if—for some illegal activity, that they can’t go

to a bowl game, or this player can’t play, they can take action also

against the agent.

Mr. SHADEGG. Well, maybe it is better for me to ask somebody

from the NCAA. But it seems to me that if we are going to pass

a Federal law, if there is a need for a Federal statute, it seems to

17

me that Congress ought to have the right to declare something

against public policy, and maybe there is a thought that we should

put some injunctive right in there against—for a university or even

the NCAA to go after agents and enjoin them from this conduct if

they know there are agents out there doing it.

Mr. GORDON. If you would yield once again.

Mr. SHADEGG. I would be happy to yield.

Mr. GORDON. I think these are good ideas, and that we need to

take this and see if it can be incorporated. Our earlier first shot

at this through a—through not necessarily logic or good sense, but

there are different jurisdictional matters for different purposes.

There really ought to be criminal activity here, but we are—since

we are going through the FTC, they only have jurisdiction really

for civil.

All of those are good questions that need to be reviewed, and I

think it, once again, goes to the reason or to our—the bill also encourages the States to move forward with their own——

Mr. SHADEGG. I see that.

Mr. GORDON. [continuing] criminal legislation. So I think it is

going to be a combination. All of this will be reviewed, and we will

take another shot at it, because I think you have raised some very

good points.

Mr. SHADEGG. I throw those thoughts out and compliment you on

your efforts.

Mr. OSBORNE. Yes. It would be ideal if we could just undo what

had been done. And it is a little bit complex, because then the

NCAA would also have to say, well, okay, we are going to exonerate you and give you your eligibility back, and we can’t speak for

the NCAA.

Mr. SHADEGG. Clearly, they have the jurisdiction to make that

decision.

Mr. OSBORNE. Right.

Mr. SHADEGG. Thank you, Mr. Chairman. I yield back my time.

Mr. STEARNS. The gentleman yields back.

The gentlelady from California, Ms. Capps.

Ms. CAPPS. Thank you, Mr. Chairman. Thank you for holding

this hearing, and I am pleased to be a part of a hearing where my

colleague, Mr. Osborne, is testifying. And as he knows, I have relatives in the State of Nebraska, and some of your shine can rub

off onto me. Being here in the presence of Coach Osborne, as he

is known throughout the State that loves him so much for what he

has done for athletics, is a great honor.

Mr. OSBORNE. Thank you.

Ms. CAPPS. We have a valuable witness here today who holds the

idea of college athletics in the high and lofty view that it should

be.

Mr. OSBORNE. Thank you.

Ms. CAPPS. I want to take advantage of your expertise and your

relationship with the NCAA over the years and talk to us about the

NCAA can become more empowered to educate, along with the colleges, young athletes.

Maybe we need to start in our secondary schools, as some of the

sports agents, reach down into the high schools. We need an eduVerDate 11-MAY-2000 08:55 Oct 04, 2002 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6602 80675.TXT HCOM1 PsN: HCOM1
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cated athlete, don’t we, in terms of what their responsibility is. Is

there any way that we can help to foster that within NCAA?

Mr. OSBORNE. Well, the NCAA can probably speak to that. I

don’t know that they have a formal educational program. You

know, they certainly talk to the schools, and we talk to our players

continually. We bring in former players. We bring in former agents.

We had—you know, I don’t think many of our players could say

they weren’t informed.

Ms. CAPPS. Right.

Mr. OSBORNE. But I think it is symptomatic of the culture that

we tend to be very materialistic, and a lot of times if enough money

is waved in front of a player, even a fairly ethical person sometimes will waiver. And I think the NCAA recognizes that. But I

think you are correct that if you had every player doing the right

thing, then this would not be a problem.

Ms. CAPPS. That is right.

Mr. OSBORNE. But, you know, the temptation is great. And I

would have to say that probably in 30 or 40 percent of the cases

there is some way that the agent has convinced the player that he

is not doing anything wrong.

Ms. CAPPS. Right.

Mr. OSBORNE. Even though he has been educated, still that the

idea——

Ms. CAPPS. Right.

Mr. OSBORNE. [continuing] Well, there is another angle here. So

it is a problem, and I think that would be a question that would

be well put to the NCAA.

I know the NFL has an organized program of different speakers

who come around and talk to players about staying in school. You

know, and they do talk about the agent issue, and they have done

a pretty good proactive job. But still, it isn’t enough.

Ms. CAPPS. So do you think the NCAA could model a progam

after the NFL?

Mr. OSBORNE. I have been out of it now for 4 years. Maybe they

are doing something I don’t know about, but I don’t remember any

speaker from the NCAA coming in and saying, you know, we really

want to talk to your players, and we have got this organized program.

Ms. CAPPS. Right.

Mr. OSBORNE. But, you know, a lot of times people take shots at

the NCAA, and some of their rules are pretty restrictive. But the

NCAA—as we used to say, the NCAA is us. The NCAA isn’t out

there. It is not some foreign agency. It is really composed of the

member institutions, and somebody has got to do the dirty work of

policing the thing, and nobody likes the police when you are doing

something wrong.

So he gets a bad name, but it is an effective organization. They

do a good job. And it is voluntary, too.

Ms. CAPPS. Well, I do appreciate the work that you have done on

this legislation of which I am happy to be a co-sponsor. What we

are talking about today is a very big issue in colleges across this

country. And whatever we can do to support good ethical behavior

we want to do.

19

Mr. OSBORNE. They are very interested in it. And as I said earlier, they would like to do it at the State level, but it just hasn’t

gotten done. So I think this is needed. And, fortunately, you have

a great university, and they may do some great things academically. And yet, if your football team gets in trouble, on a national

scene it maybe does more damage to that university than, you

know, if the chemistry department falls apart. It shouldn’t be that

way.

Ms. CAPPS. No.

Mr. OSBORNE. But that is kind of the hard, cold facts of the way

things are right now.

Ms. CAPPS. And, in fact, at some universities they do away with

organized athletics because they have gotten into so much trouble.

And in the end, we all suffer as a result of that, because when done

right it is an asset to higher education.

Mr. OSBORNE. That is right. And, of course, the sudden death

penalty at SMU kind of raised the bar a little bit, and I think did

help greatly. But it was very painful to SMU.

Ms. CAPPS. Thank you very much. I yield back.

Mr. STEARNS. I thank my colleague.

Coach, thank you very much for coming. We appreciate your testimony.

Mr. OSBORNE. Ookay. Thank you.

Mr. STEARNS. And now we will go to panel No. 2. We have Howard Beales, Director of the Bureau of Consumer Protection, Federal

Trade Commission; James F. ‘‘Boots’’ Donnelly, the Athletic Director of Middle Tennessee State University; and William S. Saum,

Director of Agent, Gambling and Amateurism Activities at The National Collegiate Athletic Association.

Let me welcome all of you folks here, and we look forward to

your opening statement. And I think we will go from my left to my

right, and we will start off with Mr. Beales, Director of Consumer

Protection of the Federal Trade Commission.

STATEMENTS OF HOWARD BEALES, DIRECTOR, BUREAU OF

CONSUMER PROTECTION, FEDERAL TRADE COMMISSION;

JAMES F. ‘‘BOOTS’’ DONNELLY, ATHLETIC DIRECTOR, MIDDLE TENNESSEE STATE UNIVERSITY; AND WILLIAM S. SAUM,

DIRECTOR OF AGENT, GAMBLING AND AMATEURISM ACTIVITIES, THE NATIONAL COLLEGIATE ATHLETIC ASSOCIATION

Mr. BEALES. Thank you, Mr. Chairman, and members of the subcommittee. I am pleased to be here today to discuss the Sports

Agent Responsibility and Trust Act, which designates as deceptive

or unfair certain conduct by sports agents relating to the signing

of contracts with student athletes.

The written statement presents the views of the Federal Trade

Commission. My oral statement and responses to questions are my

own and not necessarily those of the Commission or any individual

commissioner.

The FTC has been directed by Congress to act in the public interest. The Commission continually monitors trends and developing

issues in the marketplace to determine the most effective use of its

resources. The Commission, therefore, focuses its resources on

cases involving a large number of complaints or other evidence that

20

deceptive or unfair practices are widespread or an emerging trend.

It does not generally focus on individual disputes.

We have some threshold concerns about this bill. Certain provisions appear to endorse and strengthen private restraints contained primarily in the NCAA’s rules on student athlete eligibility

to participate in collegiate sports. The proposed legislation furthers

the NCAA’s rules prohibiting student athletes who wish to maintain their college eligibility from entering into sports agency contracts.

Our general experience is that although many industry self-regulatory programs provide significant and desirable protections for

consumers, it is important to consider whether particular private

restraints may function to protect the industry rather than consumers.

For example, some have questioned the underlying basis of the

NCAA’s eligibility rules and how much of the revenue generated by

college sports should flow to the students. Similarly, one might ask

whether the government should endorse private NCAA rules that

can result in the permanent loss of eligibility for even inadvertent

violations.

Losing eligibility can reduce the athlete’s chances of playing professionally and cost the athlete a scholarship that provides an opportunity for a college education. Because of such questions, it is

important that Congress carefully examine the effects of the underlying private restraints before adopting legislation that supports

them.

We are also concerned that some of the requirements in the proposed legislation are static. In particular, the required disclosure in

the sports agent contract will apparently remain the same, absent

additional Congressional action, even if at some future time the

NCAA’s eligibility rules change as the Olympic eligibility rules

have changed. In such a case, not only may the disclosure itself become misleading, but the disclosure requirement could hamper otherwise worthwhile changes in the rules.

Furthermore, although there is clearly no room in any transaction for the false or misleading statements the proposed legislation would prohibit, some conduct addressed in the legislation is acceptable in many other markets. It is problematic here only because of the NCAA rules.

In particular, incentives as inducements to signing a contract are

a common feature of marketing in many industries. Even understanding the vulnerability of many college athletes to tempting

sales presentations with financial inducements, it may be possible

to craft a less restrictive legislative proposal to address this concern.

We would urge the subcommittee to examine these issues before

enacting legislation. We have some suggestions to modify the proposed legislation to better achieve its objectives. First, Section 3 of

the bill prohibits sports agents from giving false or misleading information. Such deceptive statements are already prohibited by

Section 5 of the FTC Act and numerous little FTC acts.

If Congress sees a need for additional avenues to challenge such

practices, we believe that the most appropriate avenue would be a

private right of action rather than additional public enforcement

21

1This written statement presents the views of the Federal Trade Commission. My oral statement and responses to questions are my own and are not necessarily those of the Commission

or any individual Commissioner.

provisions. A private right of action for student athletes would enable individuals to vindicate their rights in specific cases that

might not be appropriate for Commission action taken in the

broader public interest.

In addition, given the apparent close relationship between the

proposed legislation and the existing NCAA rules, we suggest requiring a more complete disclosure of the circumstances that may

lead to loss of eligibility under the rules. For example, we recommend amending several provisions of the legislation to clarify

that a student athlete can lose eligibility by agreeing orally or in

writing to enter into an agency agreement.

The suggested changes to these provisions, as well as other suggestions to more closely conform the legislation to the NCAA rules

or to State law, are set forth in more detail in the Commission’s

written statement.

In sum, the FTC protects consumers from deceptive or unfair

practices, but it generally focuses on acts and practices that affect

a significant number of consumers or signify an emerging trend.

We ask this subcommittee to examine carefully the need for and

appropriateness of the underlying private restraint before enacting

it into law.

In the event this subcommittee continues with the proposed legislation, we have provided suggestions on how the legislation can

be revised to better achieve its stated goals.

Mr. Chairman, the FTC greatly appreciates this opportunity to

testify, and I look forward to answering any questions you and the

other members may have.

[The prepared statement of Howard Beales follows:]

PREPARED STATEMENT OF HOWARD BEALES, DIRECTOR, BUREAU OF CONSUMER

PROTECTION, FEDERAL TRADE COMMISSION

I. INTRODUCTION

Mr. Chairman and members of the Subcommittee, I am Howard Beales, Director

of the Bureau of Consumer Protection at the Federal Trade Commission (FTC). I

am pleased to be here today to discuss H.R. 4701, a bill known as the ‘‘Sports Agent

Responsibility and Trust Act’’ that designates as deceptive or unfair certain conduct

by sports agents relating to the signing of contracts with student athletes.1 This testimony begins with a general overview of the FTC and its enforcement authority.

Second, it discusses the criteria the Commission considers in deciding whether to

challenge deceptive or unfair practices under existing authority. Third, it notes the

Commission’s concerns about certain provisions of H.R. 4701. Fourth, it suggests

possible revisions to enable the legislation to better achieve its stated goal.

II. THE COMMISSION’S CONSUMER PROTECTION MISSION

The FTC is charged with protecting consumers and promoting a competitive marketplace. The cornerstone of the Commission’s mandate is Section 5 of the FTC Act,

15 U.S.C. § 45, which prohibits ‘‘unfair methods of competition’’ and ‘‘unfair or deceptive acts or practices.’’ The FTC’s consumer protection mission focuses on stopping actions that threaten consumers’ opportunities to exercise informed choice. The

FTC Act authorizes the Commission to halt deceptive or unfair practices through

administrative cease and desist actions and equitable actions filed by FTC attorneys

in federal district court. In appropriate cases, the Commission also may seek civil

penalties, restitution to injured consumers, or disgorgement to the U.S. Treasury of

defendants’ ill-gotten gains.

22

2Section 5(b) of the FTC Act, 15 U.S.C. § 45(b), provides that

Whenever the Commission shall have reason to believe that any such person, partnership, or

corporation has been or is using any unfair method of competition or unfair or deceptive act

or practice in or affecting commerce, and if it shall appear to the Commission that a proceeding

by it in respect thereof would be to the interest of the public, it shall issue . . . a complaint stating

its charges. 3See, e.g., United States v. National Talent Associates, Civ. Action No. 96-2617 (D.N.J.); FTC

v. Screen Test U.S.A., Civ. Action No. 99-2371 (WGB) (D.N.J.); FTC v. Model 1, Inc., Civ. Action

No. 99-737-A (E.D.Va.) (the local Better Business Bureau had received more complaints about

this company than any other in its history). 4FTC v. Career Assistance Planning, Inc., Civil Action No. 1:96-CV-2187-MHS (N.D. Ga.); FTC

v. College Assistance Services, Inc., Case No. 96-6996-CIV-Highsmith (S.D. Fla.); FTC v. Deco

Consulting Services, Inc., Case No. 96-7196-CIV-Nesbitt (S.D. Fla.); FTC v. National Grant

Foundation, Inc., Case No. 97-7339-CIV-Lenard (S.D. Fla.); FTC v. National Scholarship Foundation, Inc., Case No. 97-8836-CIV-Ferguson (S.D. Fla.); FTC v. Christopher Nwaigwe, Case No.

96-CV-2690 (D. Md); FTC v. Student Assistance Services, Inc., Case No. 96-6995-CIV-Roettger

(S.D. Fla.); FTC v. Student Aid Incorporated, Case No. 96-CIV-6548 (S.D.N.Y.); and FTC v. College Resource Management, Inc., Civil Action No. 3-01-CV-0828-G (N.D. Tex.). 5 It is our understanding that the Uniform Athlete Agents Act of 2000, which has been adopted by a number of states, similarly endorses NCAA rules on agent contracts. 6See, e.g., Arthur A. Fleisher III, Brian L. Goff, and Robert D. Tollison, The National Collegiate Athletic Association, A Study in Cartel Behavior (1992); Gary Roberts, The NCAA, Antitrust, and Consumer Welfare, 70 Tul. L. Rev. 2631 (1996); Kevin E. Broyles, NCAA Regulation

of Intercollegiate Athletics: Time for a New Game Plan, 46 Ala. L. Rev. 487 (1995); Lee Goldman,

Sports and Antitrust: Should College Students be Paid to Play?, 65 Notre Dame L. Rev. 206

(1990). 7 Cf. United States v. Walters, 997 F.2d 1219, 1224-25 (7th Cir. 1993) (Court rejected use of

the mail fraud statute ‘‘to shore up the rules of an influential private association’’’ against a

III. THE PUBLIC INTEREST

The FTC has been directed by Congress to act in the public interest.2 When determining whether to initiate a law enforcement action, the Commission considers a

number of factors, including: the type of violation alleged; the nature and amount

of consumer injury at issue and the number of consumers affected; the likelihood

of preventing future unlawful conduct; and the likelihood of securing appropriate relief, including redress. The Commission also considers to what extent states have

regulated the area and the existence and effectiveness of appropriate voluntary industry standards and self-regulation.

The Commission continually monitors trends and developing issues in the marketplace to determine the most effective use of its resources. The Commission, therefore, focuses its resources on cases involving a large number of complaints or other

evidence that the deceptive or unfair act or practice is widespread or an emerging

trend, rather than individual disputes. For example, because of numerous complaints regarding deceptive practices used by modeling scams to persuade young

consumers or their parents to pay exorbitant up-front fees for unnecessary services,

the Commission has brought a number of cases against these types of scams.3 Similarly, because of large numbers of complaints regarding scholarship service scams

proclaiming ‘‘FREE MONEY FOR COLLEGE,’’ the Commission has filed nine cases

against 11 companies and 30 individuals to combat this fraud.4

IV. THRESHOLD CONCERNS ABOUT CERTAIN PROVISIONS OF H.R. 4701

Certain provisions of H.R. 4701 appear to endorse and strengthen private restraints contained primarily in the NCAA’s rules on student athletes’ eligibility to

participate in collegiate sports.5 The proposed legislation furthers the NCAA’s rules

prohibiting student athletes who wish to maintain their collegiate eligibility from

entering into sports agency contracts. Specifically, the bill requires that any sports

agency/representation contract include a disclosure clearly stating that the student

athlete may lose eligibility if he or she signs the contract. The legislation also enacts

a substantive ban on any gifts by sports agents to student athletes prior to the signing of a contract.

Our general experience is that, although many industry self-regulatory programs

provide significant and desirable protection for consumers, it is important to consider whether particular private restraints may function to protect the industry

rather than consumers. The Commission’s extensive enforcement and oversight history with other self-regulatory industry organizations counsels us to advise caution

before Congress enacts federal legislation to support or endorse specific non-public

regulation. Academic articles on the effects of NCAA eligibility rules reveal diversity

of opinion on their fairness and application.6 The public debate surrounding NCAA

eligibility rules underscores the need for the careful examination of the effects of

underlying private restraints before enacting legislation that supports them.7

23

sports agent who secretly signed college football players to agency contracts before their college

eligibility expired).

We also are concerned that some of the requirements of the proposed legislation

are static. In particular, the required disclosure in sports agent contracts will apparently remain the same, absent additional Congressional action, even if, at some time

in the future, the NCAA’s eligibility rules change, as the Olympic eligibility rules

have changed. In such a case, not only may the disclosure itself become misleading,

but the disclosure requirement could hamper worthwhile changes in the rules.

Furthermore, although there is clearly no room in any consumer or commercial

transaction for the false or misleading statements the proposed legislation would

prohibit, some conduct addressed in the legislation is acceptable in many other markets. In particular, the use of incentives as inducements to signing a contract are

common features of marketing in many industries. Even understanding the vulnerability of many college student athletes to tempting sales presentations with financial inducements, it may be possible to craft a less restrictive legislative provision

to address this concern. We would urge the Subcommittee to examine these issues

before enacting legislation.

V. SUGGESTIONS TO MODIFY THE PROPOSED LEGISLATION

We have some suggestions to modify the proposed legislation. First, Section 3 of

H.R. 4701 prohibits sports agents from giving false or misleading information—such

deceptive statements that already are prohibited by Section 5 of the FTC Act and

numerous state ‘‘Little FTC’’ Acts. If Congress sees a need for additional avenues

to challenge such practices, we believe that the most appropriate avenue would be

a private right of action rather than additional public enforcement provisions. A private right of action would enable individuals to vindicate their rights in specific

cases that might not be appropriate for Commission action taken in the public interest. We note, however, that although Section 6 of H.R. 4701 provides for a private

right of action to universities injured as a result of an agent’s conduct, there is no

similar private right of action provided to injured individual student athletes. Adding such a cause of action would further the proposed legislation’s purpose to protect

student athletes.

In addition, given the apparent close relationship between the proposed legislation

and the existing NCAA rules, we suggest requiring a more complete disclosure of

those circumstances that may lead to loss of eligibility under the rules. Such a fuller

disclosure would better provide student athletes with opportunities to exercise informed choices. For example, it is our understanding that the NCAA rules prohibit

a high school or college student athlete from agreeing, either orally or in writing,

to be represented by an agent (regardless of when the contract becomes effective).

Accordingly, to better protect student athletes from unwittingly losing eligibility, the

definition of ‘‘agency contract,’’ which currently refers only to written contracts,

should be amended to clarify that the agreement may be oral or written.

In addition, Section 3(b) of the proposed legislation requires the agent to provide

a written disclosure that the student athlete must sign before the student athlete

signs an agency contract. Because NCAA rules prohibit a verbal commitment as

well as a written commitment, we recommend modifying the language to require the

disclosure before there are any substantive discussions regarding possible representation that might give rise to commitment.

As another example, it is our understanding that NCAA rules prohibit student

athletes, as well as family members and friends who may be able to influence a student athlete, from receiving any benefits or gifts from an agent. Accordingly, we recommend modifying Section 3(a)(1)(B) to include providing anything of value to student athletes, family members, or friends who may influence a decision.

Further, it is our understanding that state law may restrict some student athletes’ ability to enter into a contract on their own due to their age, and that a parent

or guardian must sign the contract on their behalf. To ensure the proposed legislation protects all student athletes, regardless of age, we recommend inserting ‘‘or

parent or guardian’’ after ‘‘student athlete’’ in proposed Section 3(a)(2).

Finally, we recommend that the Congress consider three modifications to the required disclosure set forth in Section 3(b). First, as a general matter, it has been

our experience that disclosures in ‘‘plain English,’’ so consumers can easily understand them, are the most effective. Second, to avoid inadvertently misleading student athletes, the disclosure should both track the NCAA’s current rules regarding

oral or written commitments and provide for adjustments should the rules change.

Third, although section 6 of the proposed legislation imposes on student athletes the

obligation to notify their educational institutions within 72 hours after they have

24

entered into an agency contract, the proposed legislation takes no steps to ensure

student athletes are aware of this obligation. The required disclosure, therefore,

should alert student athletes of their notification obligations under the proposed legislation.

VI. CONCLUSION

In sum, the FTC protects consumers from deceptive or unfair acts and practices,

but it generally focuses on acts and practices that affect a significant number of consumers or signify an emerging trend. We ask this Subcommittee to examine carefully the need for and the appropriateness of the underlying private restraint before

enacting it into law. In the event this Subcommittee continues with the proposed

legislation, we have provided suggestions, based on our experience with consumer

disclosures, on how the legislation can be revised to better achieve its stated goal.

Mr. Chairman, the FTC greatly appreciates this opportunity to testify. I would be

happy to answer any questions that you and other Members may have.

Mr. STEARNS. I thank the gentleman.

Mr. Donnelly, we welcome your opening statement.

STATEMENT OF JAMES F. ‘‘BOOTS’’ DONNELLY

Mr. DONNELLY. Before I begin, let me also thank Congressman

Gordon and Congressman Osborne for their leadership in introducing the Sports Agent Responsibility and Trust Act.

You know, I basically come as an athletic director, ex-head football coach for well over 22 years. The sports agent is a problem.

It is a major problem. Congressman Osborne touched on just about

everything that I will be touching on, but I can give you examples.

He spoke earlier about an agent by the name of Bloom, who is—

I believe he is still in prison.

The sports agent Bloom was on my campus as far back as 1986-

87. He came in at 10:30 at night, went directly to an athlete that

I had room, would not leave the room. We came very close to having a physical confrontation, not only a heated conversation with

him. There were stretch limos, bodyguards, threats of physical

harm to players, and later he ended up in prison.

I come before you as a coach, as a member of Middle Tennessee

State University, and we know what the problem is, because we

have been there. We don’t know what the solutions are.

The biggest headaches that we have is Congressman Gordon—

Osborne, excuse me, spoke about the athlete and the agent. What

it really brings down the pike is a tremendous amount of terrible

publicity for the individual, university, and also for the athletic department at any university. And, you know, there are so many horror stories out there, and all of them are basically true.

We even had a young man come to our campus and walk on, ask

permission to walk on as a kicker, and stayed and befriended our

players, took them to dinner, paid for movies, even went to Florida

and different locations for vacation and became obligated, became

very, very close friends of our players. And later on down the road

they found out that he was a runner.

Some of you may not understand who the runners are. The runners can be ex-players. The runners can be people that is in the

community. Runners can be students. Runners can basically be

anywhere, and we cannot get our hands on all of them. We have

even had—agents have runners. Any time our basketball teams or

whatever would fly commercially, they would get on the commercial flight to every location that you would play.

25

Congressman Osborne spoke about agents being in the lobby.

They are free to do that. They are free to get on commercial flights.

They know exactly what they can and what they cannot do.

He touched on also the athlete leaving school early. We have one

currently left school at the end of the fall semester because he was

drafted. The agent that he signed with convinced him that he needed to leave, go to the State of Florida, and spend the rest of the

spring working out with a trainer or whatever it may be. And they

get themselves obligated, and they get themselves in these binds,

and they lose out for the last semester of school.

So many things—so many ways they get to our athletes. We keep

speaking of a runner. Does the athlete know what he is doing is

right or wrong? In most of the cases they—probably all of the

cases, the point that I want to touch on is that if you will look at

where money is coming from—and there is millions of dollars in

signing in the first round, the second round, and it is reduced down

for the third. But where the majority of the money is made is in

the first three rounds in the NFL draft.

But you have 30 NFL football teams, so you are talking about

90 top athletes who are going to have the opportunity to make a

large sum of money. But you have approximately 2,000 agents that

are registered with the NFL; 800 of them don’t have an agent. So

that is where everything starts trying to figure how, do you go

about getting the upper hand on signing one of these top athletes,

and they go through aunts, they go through uncles.

And if you have ever gone into the inner cities down in the south,

Georgia, the mountains of Tennessee, and see the economic background of these people, then you start understanding why it is

pretty easy for these agents to entice them to get them to come and

sign early with them, to take clothing or whatever it may be.

So I am here to ask that you strongly consider this bill, pass this

bill. There is no AD that I know, there is no university president

that I know, there is no coach, that will not endorse this. And we

need this bill passed as quickly as we can possibly get it passed,

and I do thank you for my time.

Thank you very much.

[The prepared statement of James F. Donnelly follows:]

PREPARED STATEMENT OF JAMES F. DONNELLY, ATHLETICS DIRECTOR, MIDDLE

TENNESSEE STATE UNIVERSITY

I am James F. Donnelly, current athletic director and former head football coach

for 22 years at Middle Tennessee State University. Middle Tennessee State University is located in Murfreesboro, Tennessee and is regarded as one of the leading universities in the region. Middle Tennessee competes at the highest level of intercollegiate athletics in 17 sports and is a member of the Sun Belt Conference. The university has an enrollment of over 20,000 students.

Before I begin, I would like to thank Congressman Gordon and Congressman

Osborne for their leadership in introducing the Sports Agent Responsibility and

Trust Act (SPARTA).

As of April 2002, the National Football League Players Association reported that

there were 1,196 certified football agents, almost double the number from 10 years

ago—over 800 of them, however, have no clients.

WHY COACHES AND UNIVERSITIES ARE CONCERNED ABOUT SPORTS

AGENTS?

1. In today’s society, professional athletes are highly compensated and most have

agents that perform valuable services.

26

2. Unfortunately, the illicit practices of some of these agents, would-be agents and

their runners have caused serious problems for student-athletes and educational institutions as these agents aggressively pursue the substantial fees that accompany

the representation of professional athletes.

3. These agents, motivated largely by financial considerations, are willing to use

any means necessary to represent a student-athlete who has even a remote chance

of playing professional sports. They frequently employ tactics that involve secret

payments to friends and relatives who may be in a position to influence the athlete,

unrealistic promises, and considerable arm-twisting.

4. There can be significant damage that results from these impermissible and oftentimes illegal practices. Impermissible benefits provided by agents violate NCAA

rules and may result in the following:

a. Student-athlete ineligibility for participation in NCAA competition.

b. Harsh penalties on the team and the university (including the imposition of

NCAA sanctions that have resulted in the repayment of monies received from

NCAA championship competition, forfeiture of contests and other penalties).

c. Student-athletes may be enticed to pursue a professional career and leave school

early only to later realize that their agent gave them bad advice.

WHY WE NEED TO ADOPT THE SPORTS AGENT RESPONSIBILITY AND

TRUST ACT (SPARTA).

H.R. 4701 has many important features:

• The adoption of the Act will make it unlawful for an agent to: Provide false or

misleading information; Make false or misleading promises or representations;

Provide anything of value to the student-athlete or anyone associated with the

athlete; Fail to disclose to the student in writing that they may lose their eligibility to compete in collegiate sports before signing a contract; or Predate or

postdate contracts.

EXAMPLE #1

Facts: In the mid-1980s, a high profile athlete was resting in his dorm room at

approximately 10-10:30 p.m. when a sports agent and his entourage parked a limousine in front of the athletic dorm. The sports agent then walked into the dorm

and went directly to the student-athlete’s room and knocked on the door. The student-athlete closed the door, then immediately called the head coach. The head

coach went to the dorm and had a heated conversation with the agent, and eventually the agent left campus. Not only did the agent know the student-athlete’s room

number, but he also had his phone number and he continued to call and harass the

student-athlete.

Institutional Action: During this time, an athlete was declared ineligible for the

remainder of the athletic season if he had any lengthy conversations with a sports

agent. The rule has now been changed to where the penalty is for signing with a

sports agent.

EXAMPLE #2

Facts: A student asked permission to become a walk-on for the football program.

The student is full-time, joins the team and becomes friends with a number of team

members. The student then pays for various meals, movies, and other entertainment as a friend of certain players. Later, the players and staff find out the student

is actually a runner for a sports agent.

Institutional Action: No action was taken since the athlete never met the agent.

EXAMPLE #3

Facts: Student-athlete and his roommate traveled via automobile from certifying

institution’s community to Las Vegas, NV. Student-athlete and his roommate stayed

in Las Vegas April 6-10, 2001. Institution noted that student-athlete stayed in one

hotel, and his roommate stayed at another hotel. A representative of a sports agency

paid for student-athlete’s roommate’s hotel bill ($268.02). Student-athlete noted that

he was not aware that his roommate’s hotel was paid for by the representative and

did not become aware of the violation until he was questioned by institution. Institution noted that the representative was not aware that student-athlete and/or his

roommate would be in Las Vegas during the time period in question. While in Las

Vegas, student-athlete engaged in pick-up contests with other individuals. Studentathlete did not know the other individuals who participated in the pick-up basketball contests, except for one individual. Two professional sports agents were present

at the pick-up basketball game. Student-athlete knew that the two individuals

watching the pick-up basketball contests were professional sports agents, since he

was previously introduced to the agents by a former teammate.

27

Institutional Action: Institution required student-athlete to repay the value of

the impermissible benefit to a charity of student-athlete’s choice.

EXAMPLE #4

Facts: Student-athlete accepted transportation (13 blocks) from an individual who

student-athlete knew was a runner for a sports agent. Student-athlete was also provided with the use of a leased 2002 Ford Expedition for approximately six weeks

by an individual who met student-athlete during his freshman year at institution.

Institution has valued the use of the vehicle at $807.57 due to the monthly lease

payments of $538.38. Early in August, student-athlete had previously driven a 1994

Chrysler Sebring, which was owned by his mother until the brakes failed, and the

car was towed for repairs. Early in September, student-athlete asked his roommate

to give him a ride to a car dealership where student-athlete was dropped off. Student-athlete, the runner and a former student-athlete, now institutional

groundskeeper, were at the dealership on the same day. Student-athlete states that

the runner was not near student-athlete when he was looking at various cars and

had a conversation with a sales manager. Student-athlete and former student-athlete left the dealership after looking at a number of cars. The runner and the sales

manager then were engaged in conversation. After the conversation, a 2002 Ford

Expedition was put on hold until November 18 in the runner’s name. The runner

then transported student-athlete to his apartment from the dealership. Several days

later the runner was with the individual at the dealership and the individual leased

the same Expedition on September 15. Individual and student-athlete then had a

telephone conversation where the individual offered the use of the Expedition to student-athlete in light of student-athlete’s car being repaired. Several days later the

individual dropped off the Expedition of student-athlete’s apartment for student-athlete to use until student-athlete got his car back from being repaired. Student-athlete had use of the car for approximately six weeks.

Institutional Action: Institution required repayment for use of the vehicle

($807.57). The student-athlete was withheld from 60 percent of the season.

EXAMPLE #5

Facts: Prior to initial collegiate enrollment, student-athlete signed a contract with

a sports management group. Student-athlete signed the contract in December 2000,

at the age of 19. Under the terms of the contract the sports management group was

to act as student-athlete’s manager and advisor. Student-athlete, a foreign student,

signed the contract in an attempt to gain entry into higher caliber track meets. Specifically, the owner of the sports management group also serves as the media officer

for the foreign country’s Olympic team. Student-athlete hoped that his association

with the sports management groups owner would assist him in gaining access to

track meets that he would not have otherwise been invited to. Student-athlete did

not receive any compensation or sponsorship agreements from the contract. Further,

student-athlete did not gain entry to any track events. The contract was terminated

as soon as the student-athlete learned that such a contract was not permissible

under NCAA regulations.

EXAMPLE #6

Facts: Student-athlete accepted a plane ticket ($339), transportation ($18.60) and

a meal ($6.00) from an acquaintance that was a runner for an agent. While speaking to the acquaintance via telephone during the 2000 fall semester, student-athlete

stated his desire to go a different city for the weekend because once applicant institution’s basketball season began there would not be a break until the end of the

season. Student-athlete’s acquaintance purchased student-athlete an electronic

plane ticket and met student-athlete at his arrival at the airport of the different

city. Student-athlete’s former high school classmate, also an elite Division I men’s

basketball student-athlete currently attending a separate institution located in a

different city, was with student-athlete’s acquaintance when acquaintance picked

student-athlete up at the airport. Student-athlete’s acquaintance provided studentathlete with transportation and a meal during the weekend. At some point during

the weekend student-athlete’s acquaintance informed student-athlete that he wished

for student-athlete to meet an agent. After breakfast on Sunday morning, studentathlete’s acquaintance transported student-athlete to the agent’s home and introduced student-athlete to agent. The agent informed student-athlete that he wished

to represent him when he became a professional athlete and student-athlete informed the agent that he would consider it. Student-athlete was interviewed three

times and provided false and misleading information to institution and NCAA enforcement officials during first two interviews.

28

Institutional Action: Institution withheld student-athlete from one exhibition

contest, six regular season contests and required student-athlete to repay benefits

received from agent and/or runner.

CONCLUSION—I URGE CONGRESS TO ADOPT THE SPORTS AGENT RESPONSIBILITY AND TRUST ACT (SPARTA)

1. The Sports Agent Responsibility and Trust Act is strongly supported by the

NCAA and its 1,000 member institutions. I think I speak for all my administrative

and coaching colleagues in Tennessee when I say that we strongly urge Congress

to adopt H.R. 4701 as quickly as possible.

2. Will this be a panacea for all athlete agent problems? No. However, there is

no question that the act will provide protections for student-athletes and institutions while also providing uniform rules across all states for agents to conduct their

business.

THERE’S NOT ENOUGH CATS (NCAA AND COACHES) TO CATCH ALL

THE RATS (SPORTS AGENTS AND RUNNERS) IN INTERCOLLEGIATE

ATHLETICS.

FOR PROTECTION OF OUR ATHLETES ACROSS THE COUNTRY, I

STRONGLY ENCOURAGE THE PASSAGE OF H.R. 4701.

Mr. STEARNS. Thank you, Mr. Donnelly.

Mr. Saum, we welcome your opening statement.

STATEMENT OF WILLIAM S. SAUM

Mr. SAUM. Good morning. Thank you for opportunity to testify on

behalf of The National Collegiate Athletic Association and to express our support for H.R. 4701, the Sports Agent Responsibility

and Trust Act.

The NCAA is a tax-exempt, unincorporated association of approximately 1,260 colleges, universities, athletic conferences, and

related organizations devoted to the regulation and promotion of

intercollege athletics for both male and female student athletes.

As Director of Agent, Gambling and Amateurism Activities, and

a former campus administrator and coach, I am acutely aware of

the impact that the unscrupulous athlete agent can have on the

lives of college student athletes. In today’s society, professional athletes are highly compensated, and most have agents that perform

valuable services.

Unfortunately, the illicit practices of some of these agents,

would-be agents, and their runners have caused serious problems

for student athletes and our educational institutions as these folks

have aggressively pursued the substantial fees that accompany the

representation of professional athletes.

These agents, motivated largely by financial considerations, are

willing to use any means necessary to represent a student athlete

who has even a remote chance of playing a professional sport. They

frequently employ tactics that include secret payments or gifts, including autos, cash, clothing, and trips, given to the athlete, or undisclosed payments to friends and relatives who may be in a position to influence the athlete, or provide unrealistic promises and

considerable arm twisting.

There can be significant damage that results from these impermissible and often times illegal practices. Impermissible benefits

provided by agents violate NCAA rules and may result in the following: student athlete ineligibility for participation in NCAA competition, harsh penalties on the team, the university, including the

imposition of NCAA sanctions that have resulted in the repayment

of monies received from participation in NCAA championships, and

the forfeiture of contests and other penalties.

29

SPARTA would make it unlawful for an agent to give false or

misleading information, to make false or misleading promises, and

to provide anything of value to the student or any individual associated with the student; fail to disclose in writing to the student

that they may lose their eligibility to compete as a student athlete

if they sign an agency contract; or pre-date or post-date contracts.

All of these activities are necessary to protect our student athletes

from unscrupulous sports agents.

In addition, the NCAA strongly supports Section 7 of SPARTA

that recommends States pass the Uniform Athlete Agent Act. The

adoption of the State model creates a comprehensive uniform registration process that will provide important consumer information

for student athletes, parents, and institutions, as they will have access to the detailed information contained in the agent application.

Currently, the Uniform Athlete Agent Act has passed in 16 jurisdictions, and we plan to work hard in the coming year to get it

passed in more States. The NCAA has developed an arsenal of educational information on athlete agents, including videos that raise

awareness about agents and NCAA rules, an NCAA information

packet, including a list of questions that student athletes should

ask when interviewing agents. Also, an important brochure entitled

‘‘A Career in Professional Athletics’’ is available to our member

schools.

The NCAA’s Agent, Gambling and Amateurism Activities staff

works closely with high school athletes, member institutions, and

even sports agents organizations through the professional players

associations. In short, we want to educate student athletes, athletic

administrators, and agents, to prevent violations of NCAA rules

and enforce the current agent regulations.

Our member schools have developed a variety of programs to

achieve these results. Several schools conduct agent days where a

student athlete can meet with an agent in an organized and monitored manner. Many of our schools also conduct educational seminars for their elite athletes, which include alumni who have participated at the professional level. These alumni provide firsthand

experiences for the enrolled student athletes to learn from.

Finally, our schools provide a panel of experts that we call the

Pro Sports Counseling Panel, for athletes to visit with regarding

the search for an agent. SPARTA, in conjunction with the Uniform

Athlete Agent Act in all 50 States, will provide important and necessary steps to address the problem of the unscrupulous athlete

agent. The NCAA plans to continue its strong efforts and use its

resources to pass the UAAA in the remaining States.

Thank you for this opportunity, and we would be happy to answer any of your questions.

[The prepared statement of William S. Saum follows:]

PREPARED STATEMENT OF WILLIAM S. SAUM, DIRECTOR OF AGENT, GAMBLING AND

AMATEURISM ACTIVITIES, NATIONAL COLLEGIATE ATHLETIC ASSOCIATION

I appreciate the opportunity to testify on behalf of the National Collegiate Athletic

Association (NCAA) and to express our support for H.R. 4701, the Sports Agent Responsibility and Trust Act (SPARTA). The NCAA is a tax-exempt, unincorporated

association of approximately 1,260 colleges, universities, athletics conferences and

related organizations devoted to the regulation and promotion of intercollegiate athletics for male and female student-athletes.

30

As director of agent, gambling and amateurism activities, and a former campus

administrator and coach, I am acutely aware of the impact that unscrupulous athlete agents can have on the lives of college student-athletes. In today’s society, professional athletes are highly compensated and most have agents that perform valuable services. Unfortunately, the illicit practices of some of these agents, would-be

agents and their runners have caused serious problems for student-athletes and

educational institutions as these agents aggressively pursue the substantial fees

that accompany the representation of professional athletes. These agents, motivated

largely by financial considerations, are willing to use any means necessary to represent a student-athlete who has even a remote chance of playing professional

sports. They frequently employ tactics that involve secret payments or gifts (goods,

autos, cash, clothing) to the athlete, undisclosed payments to friends and relatives

who may be in a position to influence the athlete, unrealistic promises and considerable arm-twisting.

There can be significant damage that results from these impermissible and oftentimes illegal practices. Impermissible benefits provided by agents violate NCAA

rules and may result in the following: student-athlete ineligibility for participation

in NCAA competition, harsh penalties on the team and the university (including the

imposition of NCAA sanctions that have resulted in the repayment of monies received from NCAA championship competition, forfeiture of contests and other penalties.)

The SPARTA would make it unlawful for an agent to give false or misleading information or make false or misleading promises or representations; provide anything

of value to students or any individuals associated with these students; fail to disclose in writing to students that they may lose their eligibility to compete as student-athletes if they sign an agency contract; or to predate or postdate contracts.

All of these activities are necessary to protect our student-athletes from unscrupulous agents.

In addition, the NCAA strongly supports Section 7 of SPARTA that recommends

states pass the Uniform Athlete Agent Act. The adoption of the state model bill creates a comprehensive, uniform registration process that will provide important consumer information for student-athletes, parents and institutions, as they will have

access to the detailed information contained in the agent application. Currently, the

Uniform Athlete Agent Act (UAAA) has been passed in 16 jurisdictions; we plan to

work hard in the coming year to get it passed in many more states.

The NCAA has developed an arsenal of educational information on athlete agents,

including videos that raise the awareness about agents and NCAA regulations, an

NCAA information packet and a list of questions that student-athletes should ask

agents. Also, an important brochure entitled ‘‘A Career in Professional Athletics’’ is

available to member schools.

The NCAA’s agent, gambling and amateurism activities staff works closely with

high school athletes, member institutions and even agent groups, through the professional players associations. In short, we want to educate student-athletes, athletics administrators and agents, prevent violations of NCAA regulations, and enforce the current agent rules.

Our member institutions have developed a variety of programs to achieve these

results. Several schools conduct agent days where a student-athlete can meet with

an agent in an organized and monitored manner. Many of our schools also conduct

educational seminars for their elite athletes, which include alumni who have participated at the professional level. These alumni provide first-hand experiences from

which enrolled athletes can learn. Finally, our schools provide a panel of experts

(Pro Sports Counseling Panel) for athletes to visit with regarding the search for an

agent.

The SPARTA, in conjunction with the UAAA in all 50 states, will provide important and necessary steps to address the problem of unscrupulous athlete agents. The

NCAA plans to continue its strong efforts and use its resources to pass the UAAA

in the remaining states.

Mr. STEARNS. Thank you, Mr. Saum. I will start with my opening

questions.

Mr. Beales, in your opening statement, you talked about the FTC

has the responsibility, is charged with protecting consumers, and,

of course, at the same time promoting a competitive marketplace.

You said the cornerstone of your responsibility is the implementing

and enforcing of Section 5 of the FTC Act, 15 U.S.C. 45, which proVerDate 11-MAY-2000 08:55 Oct 04, 2002 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6602 80675.TXT HCOM1 PsN: HCOM1
31

hibits unfair methods of competition and unfair or deceptive acts

or practices.

Now, has the FTC has been asleep at the wheel here? You heard

two coaches talk. Why hasn’t the Commission pursued any action

against sports agents under Section 5, like you said in your opening statement?

Mr. BEALES. Typically, the way we approach case selection is we

look for places where there are relatively widespread problems

involving—— Mr. STEARNS. Obviously, there is widespread problem.

Mr. BEALES. [continuing] in particular a particular company. It

may be that the heart of the difficulty here is that there is sort of

one problem per agent because that is all the students that they

represent. But in terms of the complaints that come to us, we don’t

have any complaints about problems that have involved sports

agents.

Mr. STEARNS. We have heard complaints today.

Mr. BEALES. We certainly have.

Mr. STEARNS. Okay. You would agree on that.

Mr. BEALES. Yes.

Mr. STEARNS. Okay. Does that mean today you are going to go

back and do something?

Mr. BEALES. Well, we haven’t heard—and this is an area where

if there was an agent that was systematically making misrepresentations to potential student athlete clients, we would certainly be

interested in a case like that. That would be a violation of Section

5. It is something we would want to pursue.

Mr. STEARNS. But what do you have to do? What has to be initiated to get your attention? What do you consider in determining

whether or not there is enforcement of Section 5? I mean, is there

something that has not been brought here in this hearing that— are there other considerations that would get you folks galvanized

to do something?

Mr. BEALES. Well, there are two primary considerations that go

into all of our case selection decisions. One is the number of people

affected, the number of——

Mr. STEARNS. It has to be more than one, two, five, a hundred?

How many people have to be affected?

Mr. BEALES. There is not a bright line, but our alternative case

might be something where there are millions of consumers affected.

Mr. STEARNS. Okay. So if——

Mr. BEALES. And there is a small resource allocation budget.

Mr. STEARNS. You wouldn’t be concerned with a small number.

Mr. BEALES. Well, sometimes we do pursue cases where there are

small numbers, where we see an emerging trend or a new practice

that is—that we need to address as the particular practice. So it

is not—I mean, there is not a bright line standard. But in terms

of how we allocate our resources, we are looking for cases where

there are larger numbers of people affected and larger injury per

person affected. And that is—there is nothing distinct about any

particular industry that says it is in or it is out.

Mr. STEARNS. So that is the sum summary of whether you determine whether to act under Section 5, whether there is a lot of people and there is financial damage.

32

Mr. BEALES. Well, the damage doesn’t have to be financial. The

injury can occur in many sorts of ways. But whether—the number

of people affected and the extent of injury, absolutely.

Mr. STEARNS. Has there been any case in which you have pursued, under Section 5 pertaining to this sports agent, in the history

of the FTC?

Mr. BEALES. Not to my knowledge.

Mr. STEARNS. And why do you think that is? I guess because

there has been no infractions?

Mr. BEALES. I don’t think there have been any—we don’t know

of any infractions that have risen to a level that any prior Bureau

director or Commission has thought warranted FTC action.

Mr. STEARNS. So the FTC’s position, then, is that there has been

no infractions that occurred that have—that would require your attention at this time. Am I pretty much putting into words what you

are just saying?

Mr. BEALES. Not that there have been none, because we don’t

know that. But none that have come to our attention, I mean,

which is a different statement.

Mr. STEARNS. You had mentioned in your testimony that you are

afraid that H.R. 4701 is endorsing and strengthening the restraints

imposed by a self-regulatory organization, namely the NCAA. Can

you please explain what you mean by that?

Mr. BEALES. Well, the NCAA is a private organization. It represents, I am certain ably, the interests of the institutions that are

part of it. It does not include other people who have an interest in

the outcome of its rules and are affected by its rules, and it makes

decisions based on what it sees as the public interest. But it is a

private organization making that decision.

It may be the right answer. Our only question—our only comment was that we think it makes sense for the Congress to look

at whether those rules are the right rules before it enacts laws

based on those rules.

Mr. STEARNS. Seventeen States have passed similar laws to this,

like this, which, you know, implicit in these laws that they pass are

the same thing they are endorsing and strengthening restraints imposed upon a self-regulatory organization. Do you think they are

wrong in doing that?

Mr. BEALES. I have no idea the extent to which they looked at

the rules, and that is all we are saying. If you assume the rules

are the right rules, then a lot of this makes sense. That is—but our

point is we don’t have—we don’t know that these are the right

rules. It is not an area in which we have devoted any particular

attention.

We do know that private restraints tend to look out for the people who wrote the restraint, and they don’t always serve the interests of consumers.

Mr. STEARNS. So, then, the position of the FTC, as I understand

it this morning, is you do not endorse this bill.

Mr. BEALES. I think that is correct, yes, sir.

Mr. STEARNS. So you would say that we should rewrite it, or are

you saying—are you saying that the FTC, under Section 5, can

take care of this, and we need no legislation?

33

Mr. BEALES. For the parts that are deceptive or unfair practices,

that we can do without legislation, if there are problems that are

out there that would warrant our attention. Some parts of this,

like, for example, the prohibition on gifts, would not, in ordinary

circumstances, violate Section 5. I mean, that is a common practice,

as I said, in a number of industries.

So in other places, if you want to achieve that result, then you

do need legislation. I think our comment is—goes mostly to what

we think you should look at in making that decision, which is to

look at the rules themselves as well as the conduct of the agents.

Mr. STEARNS. Okay. My last question. Mr. Donnelly, you had

mentioned some of these problems. But as I understand from staff,

the State of Tennessee passed a bill. Now, has that affected you in

any way? I mean, has that—what they passed in the

legislature—— Mr. DONNELLY. Well, they basically—— Mr. STEARNS. [continuing] made the problem go away for you as

a coach?

Mr. DONNELLY. No, sir, it has not.

Mr. STEARNS. And why is that?

Mr. DONNELLY. Because the teeth of that law, they basically

asked that each agent register with the State. The agents that

have absolutely nothing to hide, the good agents—— Mr. STEARNS. They register. The runners and the illegal agents

don’t.

Mr. DONNELLY. The others don’t. They don’t.

Mr. STEARNS. So it still—the law has had no effect.

Mr. DONNELLY. It has no effect as—on the local level in our

State. There is X number of very fine quality agents that come directly to you, directly to your office, or go by—however you want

it to be handled they will go by it. The others, they are like in the

still of the night that they come in, and they go out. And once they

get the athlete committed, then the athlete is not going to talk either, because they start threatening with whatever it may be.

Mr. STEARNS. Wow, what an awful scene to have a guy with a

stretch limousine out there sitting in the locker—in the dorm talking to one of your key players, and you can’t even get him out.

Mr. DONNELLY. Not only can you get him out, legality-wise he is

free to come on our campus.

Mr. STEARNS. And go into the dorm like that and wake the player up and say, ‘‘This is’’——

Mr. DONNELLY. They can go up and down the halls, other than

knocking on the door, and then intruding on a student, that became illegal. The problem at that time was that if our athletes

spent any time whatsoever face to face talking with him, then he

could have been declared ineligible.

Mr. STEARNS. And you as a coach can go into that dorm and tell

him to leave and he won’t leave.

Mr. DONNELLY. And he had the henchman or a muscle man with

him and—— Mr. STEARNS. Body guards.

Mr. DONNELLY. [continuing] they later went on to become notorious in Sports Illustrated and—— Mr. STEARNS. I understand.

34

Mr. DONNELLY. [continuing] ended up serving some time.

Mr. STEARNS. Okay. Thank you.

The ranking member, Mr. Towns.

Mr. TOWNS. Thank you, Mr. Chairman.

Mr. Saum, the last time you were here discussing the commercialization of amateur athletics, you stated that the NCAA has the

ability to actually police itself. What brought about your change of

heart?

Mr. SAUM. Change of heart in regards to this bill?

Mr. TOWNS. Yes.

Mr. SAUM. There really has never been a change in heart. We

have had a great couple months working with Representative Gordon and his staff in trying to work together in creating a bill that

would meet his goals and also fit into some of our experiences of

intercollegiate athletics.

We found that by working with him that we could—we believe

that this bill would be a very good Federal backstop to help prop

up the State laws and work with our elite student athletes to assist

them in working against the agents with the stories you have

heard today that—and I can assure you from an angle of Coach

Donnelly and Coach Osborne, I was a coach, and now my many

years at the NCAA, those are very much true stories.

Mr. TOWNS. In your opinion, is there such thing as a good agent?

Mr. SAUM. Well, I have heard Coach Osborne and Coach Donnelly say that there are. I suppose it is because of my job description, I would say I haven’t met very many, because I work on—as

Coach Osborne said, I am kind of the cop of the agent world for

the NCAA. So I have not met very many good ones.

Mr. TOWNS. How about you, Coach Donnelly?

Mr. DONNELLY. Let me add what we consider integrity of the

sports agent is when we simply ask the agent, ‘‘When you contact

our players, please come through us,’’ and the good ones do that.

The others are not going to do that. That is what we consider a

fine agent.

Mr. TOWNS. Let me ask this question then. Do you think that

paying these athletes might cut down on some of the misbehavior?

I have heard of stories where an athlete’s uncle or aunt dies, and

they don’t have the money to return home. This agent gives them

the money and violates NCAA rules.

If they were paid, they would probably have the money to go

home and do whatever else they wanted to do. They could get in

a taxi and ride wherever they want to go and avoid a ride from

somebody they shouldn’t be riding with.

So what do you think about athletes being paid?

Mr. DONNELLY. Well, I am—let me say this first. We have an

emergency loan situation for our student athletes now that we did

not have 5 years ago, 6 years ago.

Mr. TOWNS. How does that work, Coach?

Mr. DONNELLY. It works great. It works unbelievably well for the

athletes. If you do have an emergency and you need to get home,

they make it home now. And you are correct, 10 years ago or so,

or 8 years ago, you could not do that.

To pay an athlete, where do you start? Where do you stop? I am

from basically the old school. We have got an awful lot of students

35

that they pay their way to go to college, and they work at the 7-

Eleven, or they work at wherever, the pizza place, and they pay the

money to get the education. We pay other students to come to our

university to play sports.

How much money do you want in their back pocket? And the bottom line is agents will just escalate the amount of money that they

are going to give. As opposed to giving X number of dollars, they

are just going to move it up if a kid has got a little bit more money

in their pocket.

Ninety-nine percent of your problem is they come from broken

homes, they come from low economic areas, where the flash, people

driving around with the stretch limos with the Mr. T starter kits

around their neck, showing a lot of hundred dollar bills, impressive, 19-, 20-, 21-, 22-year old kids. And paying them X number of

dollars is not going to solve our problem.

Mr. TOWNS. Mr. Saum?

Mr. SAUM. Mr. Towns, Coach Donnelly began with the explanation of the emergency student loan program, and that is not only

individual campuses but that comes from the television contract.

We talked about that last time we were here. There is over $15

million in that fund, and our student athletes can ask for money

to do just about anything they need that they believe is an emergency.

Our student athletes also at our Division I institutions receive

their Pell money. And then, finally, we—I am happy to say that

one thing that has changed since the last time that I was fortunate

enough to testify here is that we now have what we call fee for lesson that has been okayed at the Division I level.

And to explain it very simply, it is where a quarterback can go

out this summer and teach young kids how to throw the football

and be paid for it. Now, in the past, we had a rule that prohibited

basically—and, again, I am simplifying this—prohibiting the athlete to use their ability to make money during the summer. So we

have now found another way that I think can be a benefit to them.

The other quick item, if you would permit me to say, is that in

my experiences over the last 14 years, student athletes who have

received benefits from agents didn’t take meal money, laundry

money, or pizza money. They are taking SUVs. They are taking

women. They are taking limos, hotels, airline trips, trips to Vegas,

etcetera. So paying a student athlete a nominal amount would not

solve this issue at all.

Mr. TOWNS. In your testimony, Mr. Beales, you cite specific concerns, but you also give some suggestions for improving the bill. If

those cited provisions were altered, would the Commission be inclined to support this legislation?

Mr. BEALES. Well, I don’t think the Commission has a position

either for or against the legislation. I think our threshold reservation goes to what should be examined in—to what Congress should

examine in deciding about this legislation, and that is that it

should look at the underlying rules that the legislation would help

enforce.

Mr. TOWNS. Let me just ask one last question. I am just trying

to figure out an effective way to deal with these agents. Is the penalty in the legislation harsh enough? Either one of you.

36

Mr. DONNELLY. I think it is a great start as opposed to where

the penalties could end up. But right now, I think it gives us a little bit of teeth in being able to sit down with our athletes knowing

that the agent is going to have to expose if he doesn’t, and is going

to end up being, if I am reading it correctly, $11,000 for each offense each day, or whatever it may be.

It is better than what we have had it. It has not worked on the

individual State level. And, again, I strongly—we need to get something enacted as quickly as we possibly can. August camps are

starting. We need to go back and start pushing, because agents

have been on my campus this summer. We have a couple of highprofile athletes. They have been in the dorm. They have already

spoken to them, and they have the telephone numbers of the girls,

aunts, uncles, cousins. They have got it all, and we need to get

something out there as quickly as we possibly can.

Mr. TOWNS. Let me say this in closing. I think this is very serious, and I find it upsetting——

Mr. DONNELLY. It is serious.

Mr. TOWNS. [continuing] that both the success of a program and

the career of an athlete can be jeopardized by the tampering of an

unscrupulous agent. I hope that we really move forward with the

legislation and clean this whole mess up. Those agents out there

have to be held accountable, and I am not sure that the existing

penalties are sufficient to do so.

Anyway, the bill is a step in the right direction, and I am for it.

Mr. STEARNS. I thank my colleague and recognize the gentleman

from Tennessee.

Mr. GORDON. Thank you.

The last time the NCAA was here my good chairman and friend

pointed out to me after the hearing that I was a little obnoxious.

I think that he was more courteous and said aggressive. So let me

today say, Mr. Saum, that I appreciate your cooperation and work.

I think we have come up with a good product, and you have been

helpful, and so, again, I thank you for that.

And, Mr. Beales, sort of understanding where you come from, I

don’t—I will just paraphrase. If I am off base, you can tell me. But

it was—FTC has to sort of look at the big picture. You know, if

there is telecommunication fraud, or whatever, and there is millions of people involved, you have got so many folks, so much time,

and that is simply where you have got to put your, you know, time

rather than a few hundred that might be affected with this sports

agent bill.

I would point out a couple of things. One, my grandfather used

to tell me that the most important road in the county was the one

in front of your house. So, you know, for these kids and their parents and the schools, it is pretty important to them.

I would also point out that, really, you are a conduit, in that we

are using your authority to deputize State attorney generals, and

that it is really not going to be taking a lot of the FTC’s time, or

any for that matter. So I would point that out.

Also, you mentioned that there is already laws against—or that

the FTC has authority against giving false or misleading information. That is correct. However, it is only a cease and desist, at least

37

on the first time out. So I think this gives more teeth and provides

a number of other types of remedies.

So with that said, let me move to Coach Donnelly. Coach Donnelly, you I think made a good point, and I want to be sure that

everybody understands. This is really more than the sports agents.

Sports agents I guess is where it all starts, but the real problem,

or everyday problem, are these runners. And they are the ones that

are coming in and really causing the problems or being the closest

on campus.

This legislation extends to those runners. So it is not just the

sports agent, but it extends to the runners or any type of person

that may be carrying their water. I wanted to point that out.

And, finally, you know, trying to—you know, again, this—everybody sort of says, ‘‘Well, golly, let us get on with this. What is— you know, why wouldn’t you do this?’’ I guess the best case that

I can think of why you wouldn’t do this was raised the other day

with me, and a sports writer said, ‘‘Well, listen, you know, these

are 20-year old kids. They know the rules. You know, the coaches

have told them this over and over. The NCAA tells them what they

are supposed to do.’’ I mean, how much hand-holding, you know,

do we really need to do?

So I will—if that is the best case, what is the best answer?

Mr. DONNELLY. Well, you know, I don’t know if there will ever

be a best answer or an absolute answer. But regardless of whether

they are 20, 21, 22, the education is there, through the universities,

through the NCAA—— Mr. GORDON. I am sorry, Coach. What I mean is, what is the answer to folks that say, ‘‘Don’t pass this because these kids know

what they are getting into, and we can’t hold their hand for the

rest of their life’’?

Mr. DONNELLY. Well, no, we can’t hold their hands for the rest

of their lives, but we can continue to put the teeth into a bill that

will take a 35-, 40-year old that continuously impresses, induces,

lies to, whatever it may be, a 20-, 21-, 22-year old. And you have

got to remember this, in my opinion: they are not going after the

highly intelligent No. 1 draft choice in the country.

They are going after the people that they know that they can induce because of the socioeconomic background of which these people come from. Regardless of whether you are 22 years old, if you

are living in a double-wide trailer, and you don’t have the accommodations of other people, you are going to help your mother out

if you get an opportunity.

And that is where they bleed you. They go through the back

door. They don’t come through the front door. ‘‘By signing with us

early, we will help pay for your rent. Your mother is getting ready

to be evicted.’’ Whatever it may be. That is tough for a 21- or 22-

year old not to accept. Even—they state to them, ‘‘Even if you lose

your eligibility, you are going to still be a No. 1 draft choice, No.

2, No. 3.’’

Whether it materializes or not, I don’t think there is a person in

here that, if you have ever been raised that way, would not understand why they take it, regardless of what and how you have educated them. It is just they have to get out of that environment.

That is the quickest and easiest way to do that.

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So that is the reason the teeth has to be in the bill to punish

the runner and to punish the people that are trying to induce them

to take what is not right.

Hopefully, I answered that correctly. I don’t know.

Mr. GORDON. Thank you, sir.

I think my light went on.

Mr. STEARNS. I thank the gentleman.

The gentlelady from Colorado, Ms. DeGette.

Ms. DEGETTE. Thank you, Mr. Chairman. And first, let me apologize for my tardiness. As usual, I am double set with hearings this

morning, so I was at another hearing.

I just have a couple of quick questions to follow up on some of

the earlier questioning. I would like to welcome our witnesses. I

know that the chairman posed the question about whether Federal

legislation was really necessary to enact these kind of non-public

regulations. And I am wondering if perhaps, Mr. Beales, you could

address the issue of what harm there might be in enacting this

type of regulation, and if there is any precedent for this that we

know of.

Mr. BEALES. Well, you would have to look more closely at the

rules themselves to say what harm there might be. But the potential harm is there are things that the rules prohibit, which may or

may not be good things to prohibit, that you are writing into Federal law. And I think our point is that you should think about the

underlying conduct that the rules restrict and not just the fact that

it is an NCAA rule.

I mean, the damage to the institution, for example, of the institution getting suspended for the conduct of student athletes is a consequence of the rule. It is not a consequence of the conduct, and

maybe that is a good thing, but maybe not, but that is what the

question ought to be.

Ms. DEGETTE. I mean, don’t we have other legislation, though,

where you might want—where the actual legislation is stating the

policy, and you might have to change the rules in some way to

enact the policy?

Mr. BEALES. Sure. But those are usually cases where the rules

are written by some governmental agency, as opposed to a private

party.

Ms. DEGETTE. I see. Do you know of any other precedent where

there is a law enacted that promulgates privately enacted rules?

That is exactly the issue here.

Mr. BEALES. There are—not that I know of. It is conceivable that

there are some. I don’t know of any off the top of my head.

Ms. DEGETTE. Okay. Mr. Saum, do you know of any situations

like this, where there is a statute that is basically enacting private—rules of a private organization?

Mr. SAUM. Well, my answer to that is no, but I am also not qualified to answer that question.

Mr. GORDON. If my colleague would—— Ms. DEGETTE. Happy to.

Mr. GORDON. Most recently, the Gram-Leach-Bliley legislation

that we passed gave their regulators the ability to regulate within

their own industry and gave them penalties to go forward with

that——

39

Ms. DEGETTE. But those—— Mr. GORDON. [continuing] an insurance regulation.

Ms. DEGETTE. But that was over—you are exactly right.

Mr. GORDON. In other words, it gave them the Federal authority

to regulate—to enforce their regulations that they put forth.

Ms. DEGETTE. Right. But the reason we did that in Gram-LeachBliley, as I recall—I, by the way, am not taking—— Mr. GORDON. Surely. Sure.

Ms. DEGETTE. As a matter of fact, my own State of Colorado has

this law on the books. But what we did in Gram-Leach-Bliley, as

I recall, because we didn’t want to set up a whole new insurance

regulatory agency, we allowed the current regulatory structure to

stay in place. But I think that is different than just wholesale enacting these private rules that apply to student athletes, but I

might be wrong, and I think that is a really good example of a

place that we did it.

Let me ask both the coach and also Mr. Saum this question. You

know, I understand the need to protect student athletes from unfair and deceptive acts and practices of agents. But under this legislation, colleges and universities also would be protected if this

conduct occurred. And I am wondering, what is the public policy

reason to do that? What is the public policy reason to protect the

colleges and universities?

Mr. DONNELLY. If we find that a basketball player has signed

early and that basketball team wins the NCAA Final Four, that

money is returned, and it is an astronomical amount of money that

they would garner from winning the championship.

The NCAA strips them of the championship. The university receives a tremendous amount of very poor publicity. The athletic director, the coach, is held responsible. The player, again, can go on

and be drafted No. 1 in the NBA. He is not hurt. The money that

is lost to the university, the prestige that is lost to the university,

the criticism that the coach and the athletic department gets is severe.

Ms. DEGETTE. If I just may follow up on that, but—but the whole

concept is we need to protect these unsophisticated athletes. Certainly, you would not argue that the colleges and universities are

also——

Mr. GORDON. If you would yield, I think I can answer that. The

purpose was not so much to protect the colleges and universities,

but another vehicle for enforcement. In other words, certainly the

colleges and universities had damages, and it would be good for

them I guess to be reimbursed.

What you have is the FTC is going to say, ‘‘We don’t have time

to go after all of these sports agents.’’ Other people may say, ‘‘We

don’t have time to go after all of these sports agents.’’ So by virtue

of giving the universities the right of action, then they can go after

the agents, and that is another way to help control them. And so,

really, it is not a matter of protecting universities. It is giving a

right of action so you have one more policeman on the street trying

to stop this activity.

Ms. DEGETTE. Right. I think the right of—reclaiming my time,

I think the right of action is a good thing. But doesn’t the legislation also protect them from liability?

40

Mr. GORDON. No. If you would yield, no. I don’t think it protects

them from liability. It gives them a right of action to collect damages.

Ms. DEGETTE. Okay. All right.

Mr. GORDON. And so that is what—you know, and, again, I think

those damages are real. But the purpose—the real purpose in this

really is more the additional policemen than it is to protect the university.

Ms. DEGETTE. That is not how I read the bill, but I will take

your assurances, Mr. Gordon.

Thank you, and I will yield back.

Mr. STEARNS. Yields back. Would my colleagues—any other questions that they would have?

If not, let me just sum up and thank the witnesses. Mr. Beales,

I think I am trying to sort of sum up what you said when you said

your extensive enforcement and oversight history with self-regulatory industries, organization, you sort of counseled the committee

to use caution before Congress enacts Federal legislation to support

or endorse specific non-public regulation. I think that sort of sums

up what you say—to use caution.

Mr. BEALES. I think that is a fair summary. Many times those

private restrictions are very useful and very good, and sometimes

they are not.

Mr. STEARNS. Yes. But wouldn’t you also agree that if Congress

deems a specific non-public regulation good public policy, it could

actually codify such regulation?

Mr. BEALES. Sure. If indeed it deems it good public policy, but

that I think is the question.

Mr. STEARNS. Yes. So I think that is where perhaps our hearing

sort of hinges on, and that is where we are at.

Yes?

Mr. GORDON. Just one final thing. Let me just say that I am

thoroughly convinced that this legislation is done for the right reasons and will be helpful. But also, let me point out that all wisdom

doesn’t originate immediately, even sometimes with me, and that

the purpose of these hearings is to bring additional information,

and I think we are going to have a better bill because of the questions that Ms. DeGette has asked and that Mr. Beales has brought

forward. We want to take these things in and try to have a better

bill.

We are also somewhat handcuffed by—you are somewhat pushing from behind in trying to get a remedy for these kind of problems. And so it is not the cleanest way, but I think it is a way— it is the best way within the tools that we have. So, again, we are

listening to all that you have to say. And because of that, I think

we are going to have a better bill. And certainly, I think this is

going to benefit our country and a lot of individuals.

Ms. DEGETTE. Let me just say——

Mr. STEARNS. Yes.

Ms. DEGETTE. [continuing] add my 2 cents, Mr. Chairman. I also

support the legislation. I just want to make sure that we write it

as narrowly as possible to achieve the intended goal. One thing I

have learned in my years in legislative services is about the law

of unintended consequences. Talking about Gram-Leach-Bliley, for

41

example, you know, we are still dealing with the fallout from that

bill.

I really want to thank the sponsors for bringing it up, and I do

think it is a growing problem in college athletics and one we need

to deal with.

Mr. STEARNS. I thank the gentlelady. And thank you for your patience while we had to go vote.

The hearing is adjourned.

[Whereupon, at 12:14 p.m., the subcommittee was adjourned.]