IMG, Octagon tied to Stanford Financial scandal
Did IMG and Octagon have a quid pro quo relationship with Stanford Financial Group, the latest house of financiers-cum-crooks (sadly, the line has become a bit blurred of late) that is under investigation by the FBI and that was charged this week by the Securities and Exchange Commission (SEC) in connection with an alleged $8bn fraud? Even if the answer is no, at the very least the coziness between the groups raises important questions for clients to consider when going forward. At the end of the day, whose interests are really being served by these mega-agencies? As one blogger aptly put it, ‘Why are [Tiger Woods] and [Arnold Palmer] paying IMG for their services, when IMG’s services are being bought and paid for by a third party. Who is IMG serving?’
First, the allegations. The NY Post broke the story this past week that “IMG quietly agreed to steer clients looking for investment advice to Stanford Financial Group, potentially exposing them to millions of dollars in losses resulting from the financial firm’s alleged fraud.” Additionally, the story states that Stanford also held talks about a consulting deal with Octagon, during which it inquired about a “financial management deal,” according to a source with knowledge of those discussions. “Basically, they wanted assurances that Octagon would park its clients’ money with them if they did a deal,” this source said. The story continues:
According to three sources with knowledge of the situation, IMG and Stanford have a quid-pro-quo agreement under which Stanford Financial paid IMG a low to mid-seven-figure consulting fee in exchange for IMG advising its clients – which include golfers Tiger Woods, Arnold Palmer, Anthony Kim, Camillo Villegas, Vijay Singh, Sergio Garcia and others – to have their money managed by Stanford. The backroom bargaining has exposed IMG to charges of double-dealing, and is raising questions about where the firm’s allegiances lay: with Stanford Financial or its athlete clients.
It is alleged that in return, IMG advised Stanford on where and how to spend its sponsorship money, especially in regards to golf tournaments.
This scandal is not the first time IMG has made the news for arguably dubious practices. Several years ago, Ernie Els lambasted the firm (he since left) for circulating his name and a corresponding price tag, without his permission, to corporations–some of which were title sponsors to Tour events–that were looking to set up corporate outings with IMG clients during tournament week. The PGA Tour, as is still the case, regulates against players being paid appearance fees to play in specific tournaments (as opposed to Europe, where appearance fees are kosher), though client or corporate outings independent from the event itself are distinguished.
Tiger’s agent, Mark Steinberg, who has been interviewed on SportsAgentBlog.com and is the senior corporate vice president & global managing director of IMG Golf, vehemently denied the charges, stating flatly that “IMG does not give investment advice to our clients…period.”
Yet evidence suggests otherwise. A 2005 Telegraph story on former tennis great and IMG client Virginia Wade, for instance, suggests that in fact the firm is quite integral in the financial decisions made by its clients.
“Since 1974, Ms. Wade has benefited from financial advice from her management company, International Management Group ‘We are in touch regularly, maybe once a month,'” she said.
In the meantime, it’s business as usual for the Cleveland-based firm, widely considered one of the most dominant players in the management of professional golfers and tennis players, as well as its involvement in the two sports’ various tournaments and media related ventures. Prized client Vijay Singh just entered into a major endorsement deal with Stanford that included sponsorship of his bag, visor and left chest on shirts and sweaters. He says that he will continue to wear the logos, relics to a once distinguished name and company that has since found the wayside, mired in deceit and fraud. And both Camilo Villegas and Morgan Pressel have ongoing deals as well. Finally, Tour commissioner Tim Finchem stated that the Stanford St. Jude Championship on June 11-14 in Memphis, Tenn. will be played – with or without its title sponsor (the PGA Tour has a rainy day pot of about $200 million it can dip into for such emergency situations, i.e. if Stanford backs out or cannot continue its sponsorship). However, as one senior Golfweek writer wrote, Stanford also is affiliated with IMG’s prized client, , with a three-year founding sponsorship of AT&T National, a Tiger Woods Foundation event.
Chances are that Camp Tiger is looking none too kindly on this whole sordid affair, and that IMG will get an earful. From IMG’s standpoint, that will hopefully be the end of it. But if more murky details emerge, things could get worse for the mega firm before they get better. And if push comes to shove, more clients could choose to do what Ernie Els did a long time ago and cut their losses. Or at the very least, ask the company precisely whose interests it is serving.