Case Study

Third Party Agents

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Summary

This case study discusses how third party agents can negatively impact our business contracts

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Third party agents are often used to represent our interests in the negotiation process. We use them as we believe that their expertise as negotiators well better serve our goals and achieve better results. Many agents are paid on a commission basis. As a consequence, they can be very concerned about a negotiated outcome because of what they might derive from the negotiation. Their influence and effectiveness in the outcome also directly relates to the reputation they stand to gain or lose as a negotiator.

In the late 1980’s in the Unites States, sport’s agents Norby Walters and Lloyd Bloom succeeded in signing approximately 43 athletes to sign contracts. The contracts were signed in a manner to make it appear that the athletes had signed after completing their last year of eligibility, and before they turned pro. This was a rule mandated by the governing body, the NCAA, which had expressly forbidden that players be allowed to sign contracts before their last year of eligibility had finished.

To get the players to sign illegally, the agents induced the players by enticing them with tickets for concerts, airline flights, automobiles, cash payments to the athletes and their families, hotel accommodations, limousines, clothing, and more. This had all transpired when the players were in their last year of college which is the same as the last year of eligibility. The agents had in reality signed these players by using post-dated contracts where the agents received exclusive rights to represent the players when they turned pro. The contracts were made to appear as if the players had signed after the completion of their last eligibility year.

Some of the illegally signed players who had signed with these agents tried to void their contracts. The two sports agents proceeded to pressure at least four of the players who wanted to renege the contract by threatening that they would never play their sport again. As things came to a head, it began to seep out publicly that these players had not only been courted by the agents during the last year of their eligibility, but that they had signed their contracts before completing their final year of eligibility.

Eventually, these two agents were charged when word reached legal authorities. The charges included an eight count indictment for racketeering, conspiracy to commit extortion, and mail fraud, just to name a few.

Additionally, Lloyd Bloom was accused of defrauding one of the players out of $150,000 dollars by convincing him to invest 1/3 of his signing bonus into a credit business. In truth, it appears that Bloom applied the money to lease a Rolls Royce, pay off some bills, his ex-wife’s rent and karate classes.

Third party agents are essential to the business transactions we engage in every day. Most people simply don’t have the expertise to properly and thoroughly engage in some of our transactions and partnerships. However, agents often have privy to more information than one or more of the parties involved in a business negotiation or transaction. Their interests can sometimes run contrary to our own, so we must be cautious and on the ball when we subscribe to their specialised knowledge. We need to keep track of what they are doing, or else we run the risk of finding ourselves left behind the eight ball.

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