One thing that I have learned since starting this blog and reading quite a bit of material on the sports agent profession, is that nine times out of ten, a sports agent should not be in charge of handling his clients’ money. In fact, maybe a sports agent should never personally handle client income. I have to believe that the majority of lawsuits in this field concern the mismanagement of player salaries by athlete agents. There is no problem with giving clients advice on wealth managers and financial planners, but to try to do it on your own, while negotiating deals with teams/companies, can be messy. Especially if you do not have the requisite Finance background to do a job well done.
Malpractice is a term that is not limited to the medical profession. Lawyers can be sued for not performing their duties and so can people who hold themselves out to being knowledgeable wealth managers. Additionally, sports agents can get themselves into trouble without offering any financial advice.
Players’ associations are smart. They will not make payments directly to agents. Instead, players’ salaries are paid to the players, who then may compensate their agents according to the terms set forth in their agreements. Outside of the players’ association, agents may put other terms into their agreements with their clients. For instance, it is popular for an agent to place a clause in his Representation Agreement, that the client will direct all sponsors to pay the agent directly. Thereafter, the agent will deduct his percentage (usually anywhere from 10-25%), and then send the rest to the client. If no shady business occurs, this practice is fine. It’s when the books are not kept clean that problems occur.
Eddy Curry believes that his former agent, Lamont Carter, might have been withholding some of Curry’s earnings and wants to see the books. I do not know what Curry’s agreement with Carter looked like, but it would have been smart for him to place a clause in the agreement that had something to do with giving him permission to audit Carter’s books and records from time to time. But even if no such clause was present, Curry may still have a solid access argument since the agent owes a duty to disclose information and to not to put himself in a position where his own interests may conflict with the interest of the client. While Curry is no longer the principal, if Carter withheld information in violation of his fiduciary duty and withheld money rightfully owed to Curry, the books will probably be opened by Court decree.
It’s a cliche, but with power comes great responsibility. If you want the money to come into the agency first and take your commission before sending the bulk of money to your clients, go for it. But realize that it is your fiduciary duty to act in the best interest of your clients at all times. There is nothing wrong with openness when you are doing the right thing and not hiding money from clients.