Nov
27

Could Basic Accounting Assistance Have Hedged Risk Of Marlins Players Traded To The Blue Jays?

Sept. 28, 2012; Miami Marlins starting pitcher Mark Buehrle (56) throws against the Philadelphia Phillies at Marlins Park. Credit: Steve Mitchell-US PRESSWIRE

Common questions from individuals who wish to be sports agents include, (1) should I go to law school? and/or (2) should I get a masters degree in sports management?  A much less frequent question asks whether one on a “sports agent track” should seek an accounting degree.

It is typical for law school graduates to legitimize their legal education (even if they do not “practice law”) by promoting the way that the schooling allows graduates to think and attack problems differently than their peers.  Many sports agents do not practice law in the traditional sense, or at least treat such as a marginal part of their professional lives.  But the degree is undoubtedly valuable.  Similarly, an accounting background can be helpful to an agent.  It could even be argued that a background in accounting is more beneficial for a would-be agent because there are less competing agents with a full understanding of that field.

Take the recent trade between the Miami Marlins and the Toronto Blue Jays as an example of how an understanding of basic accounting principles can assist an agent and his clients well before such a trade ever takes place.  It has been well documented that the Miami Marlins insist that all player contracts are void of a no-trade clause.  No-trade clauses are typically negotiated into a contract by the player, who hopes to prevent being traded at certain times and/or to certain teams.  There are a variety of reasons why players choose to have no-trade clauses implanted in their contracts, including but not limited to stability, preference of location, proximity to family and taxes.

Florida has no state income tax.  When Mark Buehrle signed a 4 year, $58 million contract with the Miami Marlins prior to the start of the 2012 season, the pitcher was hoping to be in Miami for quite some time.  After being traded to the Blue Jays, Buehrle’s agent Jeff Berry stated,

“Throughout the recruiting process, the Marlins made repeated assurances about their long-term commitment to Mark and his family and their long-term commitment to building a winning tradition of Marlins baseball in the new stadium.

At the same time, given the Marlins history, we were all certainly aware of and voiced concern about the lack of no-trade protection. This is unquestionably a business, and signing with the Marlins was a calculated risk. Mark held up his end of the bargain; unfortunately, the same can’t be said of the Marlins.”

The calculated risk not only included the potential of having to move his family with him to Toronto after only one year in Miami, but also a boatload of new taxes for the left-hander.  It is estimated that the trade will cost Buehrle roughly $600,000 per year in taxes.  To make matters worse, Buehrle will no longer be able to deduct the fees he pays his agent in addition to his clubhouse fees and training expenses on his tax return.  Yes, quite a calculated risk for negotiating with a team that just says no to no-trade clauses.

Maybe someone with an accounting background would have recognized the possibility of a trade to the Blue Jays, the consequences of same and structured the contract to provide a windfall for the player should all the dominoes fall in that direction.  That’s what Carlos Delgado’s agent did years ago when the first baseman signed a deal with the Marlins (which back then also refused to permit no-trade clauses).  Delgado’s agent, David Sloane, negotiated the insertion of a clause that required any team that received Delgado in a trade to pay for his new income tax obligation in that state.  That clause saved Delgado over $2 million in tax responsibility when he was traded to the New York Mets.  That is creativity by an agent who was looking to hedge risk.  I don’t know if Sloane has an accounting background, but I can see how being disciplined in that area would help when negotiating deals with teams like the Marlins.