SBJ/October 24 - 30, 2005/Labor Agents

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  • Lawmakers blast Jockeys’ Guild management

    A congressional hearing on the insurance crisis in horse racing began with tears from the wife of a paralyzed jockey and ended with members of Congress berating Jockeys’ Guild CEO Wayne Gertmenian for canceling a $1 million policy that had covered riders for racing accidents.

    Paralyzed jockey Gary Birzer and his wife, Amy,
    take the oath to testify during the hearing.

    Members of the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations also slammed the management of the guild for failing to provide information requested by its members and by Congress, and for not getting new insurance to protect the nation’s 1,200 jockeys.

    “You’ve done nothing,” Rep. Joe Barton, R-Texas, shouted at Gertmenian. “You’ve done not a darn thing except obfuscate and delay and go as far as you can not to obey the subpoenas of this committee.

    “I don’t know if we have any guild members here,” Barton said to a hearing room filled with a couple dozen jockeys. “I don’t know what it takes to make a change in management under your bylaws, because we’ve had trouble getting your bylaws. But if I were a dues-paying member of the Jockeys’ Guild, I’d want new management.”

    Gertmenian sat quietly with his attorney through most of the seven-hour hearing, as witness after witness testified that guild management had lied to them or failed to provide information about the finances of the organization.

    Focus on insurance

    The guild has been under fire since the summer of 2004, when jockeys discovered for the first time that they were not covered for $1 million in medical costs — as they had been for many years — for injuries suffered in racing accidents. When West Virginia jockey Gary Birzer suffered a spinal cord injury after his horse threw him in a race at Mountaineer Park, jockeys found out that the policy had been allowed to lapse two years earlier. Birzer owes more than $500,000 in medical bills.

    Birzer, now confined to a wheelchair, testified that he joined the guild in the late 1990s because he was getting married and wanted to protect his family. He said he always paid his dues, which amounted to $64,000 over seven years, and was never told that the policy had lapsed. “I feel they have completely let me down,” Birzer testified.

    The most emotional testimony came from Birzer’s wife, Amy, who tearfully described how she found out her husband would never walk again, and how he was forced to leave a hospital specializing in spinal cord injuries because he was not insured.

    When Gary Birzer was first injured, Amy Birzer said that Guild vice president Albert Fiss first told her the guild “had no money” and could not help at all.

    Nevertheless, a highly regarded rehabilitation center at the University of Pittsburgh Medical Center agreed to take Gary Birzer as “a charity case” for four weeks, she said. When the four weeks was up, Fiss told Gary Birzer that the guild would pay for four more weeks at the center.

    “Unfortunately, this was just another lie from Mr. Fiss,” Amy Birzer testified. She said she called Fiss and asked him, “Why won’t you help my husband?” Fiss told her that the guild wanted to use her husband as “a guinea pig” to make a political statement, she testified.

    Later in the hearing, Rep. Michael Burgess, D-Texas, asked Fiss, “Did you say that?”

    “Yes, I did,” Fiss said. “I would like to apologize.”

    Burgess replied, “I wish you would.”

    Guild leadership

    The hearing went beyond the insurance issue to cover the manner in which Gertmenian became CEO of the guild in 2001 after the former top guild employee was ousted during a controversial conference call of the board of directors.

    Hall of Fame jockey Jerry Bailey, who was a board member in 2001, said that no vote was taken to replace the guild’s then-national manager John Giovanni with Gertmenian. He also testifed that five of the nine members of the board in 2001 were against firing Giovanni. Yet, Gertmenian was installed after five of the nine board members later faxed in documents authorizing the change, a move whose legitimacy was questioned by members of the committee.

    Bailey said that he asked Gertmenian about his credentials to run the guild, but that Gertmenian wouldn’t provide references, saying that they were “confidential.”

    Later in the hearing, Barton grilled Gertmenian about his resume, in which Gertmenian says he served in important positions in the Nixon and Ford administrations, including as chief détente negotiator in Moscow for the National Security Council. Barton said there were no records at the Nixon or Ford presidential libraries to back up Gertmenian’s resume.

    Rep. Ed Whitfield, R-Ky., said the committee had contacted a former assistant secretary of defense who worked during the time in question, and that he had never heard of Gertmenian.

    Barton said bluntly of Gertmenian’s resume, “We think it’s a complete fabrication.”

    Gertmenian responded, “I was special assistant to, um, I’m sure you can find the documents.”

    Barton replied, “No, I don’t need to find the documents. It comes off your resume. You provide the documents.”

    Two other members of the guild’s 2001 board of directors who led the charge to replace Giovanni with Gertmenian — Hall of Fame jockey Chris McCarron and retired jockey Robert Colton — testified that they now realize that putting Gertmenian in charge of the organization was a mistake.

    Colton, McCarron and Tomey Jean Swan, all of whom were members of the board in 2002 when the on-track accident coverage was allowed to lapse, also testified that they did not vote on that decision.

    Gertmenian had previously stated under oath that “the board of directors” made the decision to cancel the insurance. But during the hearing Gertmenian testified that he had answered the question incorrectly.

    “It was my belief when I answered the interrogatories that the board had, in fact, made that decision,” Gertmenian said. “I was wrong.”

    The question was asked as part of a lawsuit brought against the guild by its former treasurer, Eddie King, and by a paralyzed former jockey, Gary Donahue, who have both been trying to find out what happened to more than $1 million in a guild charity, the Disabled Jockeys Fund.

    At the end of the hearing, Barton indicated that the guild’s problems with Congress were not over.

    “This is the beginning of the process,” Barton said. “At a minimum, we want to see the catastrophic insurance in place as soon as possible for on-track injuries. And then we are going to start cleaning this up. In my opinion, this is an absolute disgrace.”

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  • Owner taking Kain’s spot at IMG

    IMG owner Ted Forstmann will take over as president of the sports marketing and management giant when Bob Kain, longtime leader of the company, steps down Nov. 1 to become vice chairman.

    Kain is expected to stay with the company for at least a year after that. IMG was expected to send out a companywide e-mail during the past weekend notifying employees of the change.

    “I am not leaving,” said Kain, who has led the U.S. operations of IMG since the mid-1990s, in an e-mail response to questions about the change. “I am resigning as president and I will step out of my day-to-day management responsibility. I will remain on the IMG board of directors and continue my close relationship with [IMG client] Wimbledon.”

    Forstmann, senior partner of Wall Street buyout firm Forstmann Little & Co., which bought IMG for $750 million in October 2004, was not available for comment by press time for this story. Kain is one of a group of senior executives who was hired by late IMG founder Mark McCormack, who died in May 2003.

    Senior IMG executives, including Bill Sinrich, CEO of IMG media arm TWI; Peter Johnson, president of IMG’s non-media business; CFO Mark Ryder; and IMG’s co-directors of its golf business, Mark Steinberg and Bob Ryder, all of whom reported to Kain, will now report directly to Forstmann, Kain said.

    The transition of leadership of the world’s biggest and most powerful sports agency will begin next month. “I will be very involved in our 2006 business plans and then really turn over all management responsibility to Ted and other members of the Office of the Chairman,” Kain wrote in his e-mail. Forstmann created the office of the chairman earlier this year. Its members include Sinrich, Kain, Forstmann and Ryder, who joined IMG as CFO this year after serving as CFO of American Greetings.

    Forstmann discusses changes at IMG

    IMG owner Ted Forstmann, who has become increasingly involved in running the sports television, marketing and management giant since he bought it a year ago, said his role will increase with Bob Kain’s move from IMG president to vice chairman.

    Kain’s move, which will happen Nov. 1, comes as the company has completed a financial turnaround, Forstmann said. “Now that we together have accomplished what we have accomplished, this company is extraordinarily financially sound,” he said.

    Forstmann would not provide any details, but said 2005 will be the most profitable year — “by a huge margin” — in IMG’s more than 40-year history.

    Forstmann said he has no plans to replace Kain. Rather, he said, IMG will be run like a lot of the companies his firm, Forstmann Little & Co. has acquired, including Gulfstream Aerospace. That means without a president, but with an Office of the Chairman, which includes senior executives of a company who report directly to Forstmann.

    That group will now include Chris A. Davis, a senior executive Forstmann has known for 15 years who has worked at other companies he has controlled, including Gulfstream, where she was chief financial officer. In 1990, Forstman bought Gulfstream for about $850 million. He sold it in 1999 for $5.5 billion.

    IMG was sold to Forstmann Little in October, 2004 for $750 million.

    Davis will handle day-to-day issues at IMG, while Forstmann will handle strategic planning and growth opportunities, he said.

    Longtime IMG employee Peter Johnson will also be added to the Office of the Chairman. The other members are Forstmann, Kain; Bill Sinrich, CEO of TWI, IMG’s media arm; and Bob Ryder, CFO.

    In his new role as vice chairman, Kain will no longer be responsible for running day-to-day operations, but will be involved in strategic planning, including creating new lines of business for the company.

    “The most important thing he is going to do is he is going to help me and help this company grow very significantly financially from where it is now,” Forstmann said. “He is not leaving anything. [He] is going to go from one task to a different task.”

    Sources told SportsBusiness Journal that Kain plans to stay with the company for at least a year, but Forstman said, “I can only assume, since Bob tells me he is very happy, that we will go on together for quite a while.”

    - Liz Mullen

    Kain said he has been planning this move for years. “In 2002, I had agreed with Mark McCormack that I would work closely with him through 2004 and then probably retire from IMG,” he said. After McCormack died, though, “it was incumbent on me to do whatever was needed to protect IMG, so my personal plans had to be deferred.

    “When Forstmann Little bought IMG a year ago, I told Ted Forstmann I would continue as president through a ‘transition period,’ which would be between one and two years,” Kain wrote. “It is clear to me that the transition period is complete.”

    Since Forstmann bought IMG, many in the sports industry, and particularly executives at IMG’s rival companies, have speculated that the change in ownership would cause a mass exodus at the agency, which has been known for its private, cliquish culture. Kain, Johnson and Vice Chairman Alastair Johnston are among many IMG executives who have worked at the company for decades.

    Asked if his stepping into a less significant position at the company meant that other top IMG managers would be leaving, Kain answered, “I am not leaving and Alastair and Peter are very happy at IMG. I do not see any senior executives at IMG leaving in the foreseeable future.”

    For the last two or three years, Kain has overseen an effort to cut costs at IMG to make the company more profitable. That process began before McCormack’s death and continued under Forstmann. McCormack was described many times as an empire-builder who was focused on consolidating power in the sports world, but not on the bottom line.

    IMG is a private company and does not release financial information, but Kain said last week, “The 2005 earnings will be the highest in our company’s history. Our 2006 preliminary plan assures us that next year will be significantly better. This is another reason why it is the perfect time for me to be transitioning out of the management of the company.”

    The company made another personnel move last week when Chris A. Davis joined Forstmann Little to work on three companies it controls: Citadel Broadcasting, 24 Hour Fitness Worldwide Inc. and IMG. Davis has worked in senior financial positions at some major corporations, most recently as chairman and CEO of McLeodUSA, a Midwest telecommunications company. It was not immediately clear what role she would have at IMG.

    Kain joined IMG in 1976, while in his mid-20s, and quickly became a major tennis agent, signing Bjorn Borg and Chris Evert, among other stars. He was named director of IMG Tennis in 1983 and launched IMG’s figure skating division in 1984, signing Olympic champion Scott Hamilton, with whom he created the acclaimed Stars on Ice professional tour.

    Other clients that Kain has represented as an agent over the years include Vitas Gerulaitis, John McEnroe, Pete Sampras, Andre Agassi, Billie Jean King and Dorothy Hamill.

    Kain led IMG’s acquisition of the Nick Bollettieri Tennis Academy in 1985, which became a major pipeline for the agency to sign tennis prodigies. It later became a major training center for many major professional sports, which has helped IMG recruit world-class athletes at young ages.

    By the mid 1990s, Kain was promoted to senior officer and was responsible for all of the agency’s operations in North and South America. In 2001, he was promoted to president and chief operating officer of IMG Americas.

    In January 2003, McCormack suffered a cardiac arrest and fell into a coma. In April 2003, Kain and Johnston, who long headed the golf division, were promoted to co-CEOs by the board of directors.

    They remained co-CEOs after McCormack’s death and led an unsuccessful effort for a management-led buyout of the company from McCormack’s heirs. Forstmann bought the company in October 2004.

    In February 2005, Forstmann announced in a company memo that he was making changes to the management structure that included eliminating the co-CEO structure. Kain was made president of IMG, while Johnston was named vice chairman.

    “I was able to build a great tennis business, skating business and IMG Academies business,” Kain said. “I think my greatest achievement was stepping in with a couple of other senior executives when Mark McCormack passed away and successfully keeping all of our top management, our top clients and our top properties together, and directing the company to an unbelievably strong position financially.”

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