SBJ/August 27-September 2, 2012/Labor and Agents

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  • Lawsuits stack up against financial adviser Crafton

    Seven current or former NFL players and gold-medal-winning soccer player Heather Mitts have filed lawsuits against athlete financial adviser Billy Crafton over the last few months.

    Former Pro Bowl cornerback Patrick Surtain, current Seattle Seahawks linebacker Matt McCoy and free agent linebacker Freddy Keiaho filed separate lawsuits against Crafton in state court in San Diego County in June, claiming breach of fiduciary duty, constructive fraud, fraud and deceit, among other things. Each is seeking unspecified damages. Blake Harper, attorney for all three players, said collectively they lost in excess of $5 million while Crafton was their financial adviser.

    Former Tennessee Titans and New York Jets linebacker Brad Kassell also sued Crafton in June, filing in state court in Travis County, Texas. Kassell alleges breach of contract, common law fraud and violations of the Texas Securities Act, among other things. The lawsuit contends that, on Crafton’s advice, Kassell invested approximately $700,000 in funds but that “virtually nothing remains” of those investments.

    Earlier this month, Philadelphia Eagles tight end Brent Celek; free agent wide receiver Kevin Curtis; St. Louis Rams quarterback A.J. Feeley; and Mitts, who is Feeley’s wife, joined as plaintiffs in a lawsuit filed in federal court in Philadelphia against Crafton. Their allegations include violations of U.S. securities laws, legal claims of fraudulent misrepresentation and bad-faith breaches of fiduciary duties. Andrew Smith, attorney for the plaintiffs, said his clients’ losses collectively were in excess of $7.6 million.

    Crafton, in a telephone interview last week, said of the lawsuits, “Per advice of counsel, I cannot comment on pending litigation.” He declined to comment further.

    All of the lawsuits ask for unspecified compensatory and punitive damages to be proven at trial.

    While the facts in each case differ, each involves losses the players contend they suffered from investments in Westmoore Management and entities related to Westmoore. The U.S. Securities and Exchange Commission shut down the Westmoore businesses in June 2011, citing that the entities engaged in a Ponzi-like investment fraud scheme.

    In April of this year, the NFL Players Association issued its first “alert” to all NFL player agents about an investigation it was conducting into a financial adviser. That adviser was Crafton. “The NFL Players Association Security Department in cooperation with law enforcement is investigating multiple alleged investment fraud claims” involving NFL players, the April 19 memo to NFL player agents stated.

    The NFLPA declined to comment for this story.

    Crafton told SportsBusiness Journal in April that he was never named by the SEC in its complaint against Westmoore Management, which is now in a receivership, and that he lost his own money in Westmoore investments. He also said at that time that he represented about 10 NFL players and 15 MLB players for financial work.

    The lawsuit filed against Crafton in federal court in Philadelphia states that Crafton represents at least 20 other professional athletes in addition to the named plaintiffs, including MLB and NHL players as well as other NFL players.

    Smith, the attorney, said he has been contacted by representatives of MLB, NHL and NFL players concerning similar claims and alleged involvement with Crafton, but he declined to identify the players or their representatives.

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  • Djokovic leaves CAA Sports, eyes new agency, more deals

    Novak Djokovic, the world’s No. 2-ranked tennis player, has ended his relationship with CAA Sports and is shopping for new representation.

    Many tennis insiders believe Djokovic will land at IMG, which is the agency he sought to go to 18 months ago but at the time was held to the terms of his CAA contract, numerous sources said.

    Novak Djokovic begins his defense of the U.S. Open crown this week.
    Photo by: GETTY IMAGES
    IMG spokesman Jim Gallagher declined to comment.

    What is clear is that Djokovic’s days with CAA are over. He said last week that his contract with the Hollywood talent agency had ended.

    “I ended that contract; I am without an agency at the moment,” Djokovic said before an appearance at sponsor Uniqlo’s New York flagship store, where he unveiled a new line of performance wear. “But there are many offers and negotiations at this moment.

    “A transition period is kind of going on right now,” added the former No. 1-ranked player in the world. “I have had a contract with I think [CAA] for four years. … I tried to work it out, and it was successful, but I think I needed to move on.”

    A CAA spokeswoman did not reply to repeated requests through email, text and voice messages for comment.

    Djokovic, who begins his defense of the U.S. Open crown this week, admitted he is keen to sign more endorsement deals. His peers with whom he has traded the No. 1 world ranking, Rafael Nadal and Roger Federer, boast lucrative endorsement portfolios, almost all of which, if not entirely, were negotiated by IMG.

    Djokovic, however, has not found the same market for non-endemic endorsements as Nadal and Federer, and it’s uncertain if new representation could change that. Two of his largest endemic deals, racket and apparel, were handled by CAA Sports, and the agency will continue to receive those commissions going forward. His apparel deal with Japanese apparel company Uniqlo, which was announced in May, is for the next five years; his Head racket deal goes for three more years, according to a source with knowledge of the agreements.

    He also backs Mercedes-Benz in his home country of Serbia; and watchmaker Audemars Piguet. He continues to wear Adidas sneakers, but sources said he is not currently paid by the brand, which he endorsed prior to 2010.

    “I am looking forward to … some new endorsements,” Djokovic said. “I am ending most of my contracts that I had from previous years and now I am actually negotiating with many companies for the future.”

    CAA entered the tennis business in 2008 by hiring two Israeli agents, Amit Naor and Allon Khakshouri, who at that time represented Djokovic. It marked the latest phase of the talent agency’s successful push into athlete representation.
    But Djokovic’s relationship with Naor and Khakshouri appeared to sour, and in recent months, he has been linked to billionaire Ron Burkle, founder of Yucaipa Cos., who recently helped form Relativity Sports.

    Last month, film studio Relativity Media — in which Burkle is an investor — formed the multisport talent representation business through the acquisition of several agent practices. That new firm, Relativity Sports, represents about 140 players in the NBA, NFL and MLB.

    Burkle, also a co-owner of the Pittsburgh Penguins, could not be reached for comment.

    It’s unclear what exactly Burkle’s relationship with Djokovic was and if there is any relationship between Burkle and CAA, sources said.

    With Djokovic looking for new representation, it marks another change among top tennis players. Federer and his agent, Tony Godsick, parted ways with IMG in May to form their own agency. In addition, Andy Murray’s future is uncertain, as the No. 4-ranked player worldwide will see his contract with CAA Sports to handle all his on-court business expire at the end of the year.

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  • CAA takes on a boarder, signs X Games champion Huston

    Liz Mullen
    Creative Artists Agency has signed 17-year-old X Games gold-medal-winning street skateboarder Nyjah Huston for representation in all areas.

    CAA will work to create opportunities for Huston in the areas of television, film, licensing and endorsements. A team of representatives led by entertainment talent agent Nick Styne, CAA Sports endorsements head Lowell Taub and sports agent Jack Tiernan will represent him.

    Nyjah Huston has been without representation since the end of 2011. He was with Wasserman Media Group.
    Photo by: GETTY IMAGES
    Huston, who became the youngest X Games competitor when he competed at age 11, has been without representation since the end of 2011. He was most recently represented by Wasserman Media Group.

    Huston’s current sponsors include Element Skateboards, DC Shoes and Silver Trucks. He has been featured in the Element-sponsored video “Rise & Shine” and in the “Tony Hawk’s Pro Skater” video game series.

    SCHARF JOINS WILLIS & WOY: NFL player agent Jack Scharf has joined NFL player representation firm Willis & Woy Sports Group as vice president of football operations and partner, according to agency partner Jordan Woy.

    It is not clear how many clients Scharf might be bringing with him to the firm.

    Scharf was an independent contractor for Lock, Metz & Malinovic but is being sued by LMM for breach of contract, among other things. The lawsuit — which was filed in Maricopa County, Ariz., in May and was posted earlier this month on NFL industry website Inside The League — alleges that Scharf breached a contract with LMM and owes the firm $392,492.48 for fees and expenses related to players he recruited for LMM. The players are not named, but the lawsuit contains an allegation that “Scharf, contrary to his earlier promise to the company, stated that not only had he paid players in the past, but that, he had never signed a player who he had not paid.”

    No details were given about these alleged payments. LMM principal and NFL player agent Eric Metz would not comment when asked about the matter last week.

    John Henderson, Scharf’s attorney, said the allegations contained in the lawsuit, including the allegation that Scharf paid players, “are absolutely false and the statements were made solely in an attempt to disparage Jack’s name in an attempt to destroy his career.”

    Henderson said there was no written agreement between Scharf and LMM under which he is alleged to owe LMM the fees. “It is our contention that the lawsuit was filed in retaliation for Jack Scharf’s failing to give up his interest in a specific player,” he said. Henderson would not name that player.

    Scharf’s name was listed earlier this year with other agents from LMM as representatives for linebacker Nick Perry, who was selected by Green Bay in the first round of the 2012 NFL draft.

    EXCEL SIGNS FOWLER: Excel Sports Management partner and MLB player agent Casey Close has signed Colorado Rockies center fielder Dexter Fowler, sources said. Fowler previously was represented by Scott Boras. Excel and Scott Boras Corp. officials did not respond to requests for comment.

    WME SIGNS STAN VAN GUNDY: Hollywood talent firm WME has signed former Orlando Magic coach Stan Van Gundy for broadcast work. A team of agents led by Jim Ornstein will represent him.

    RELATIVITY SPORTS SIGNS WELLS, BRYANT: Relativity Sports football head and NFL player agent Eugene Parker has signed Arizona Cardinals running back Beanie Wells and Dallas Cowboys wide receiver Dez Bryant. Wells was formerly represented by Octagon; Bryant was formerly represented by Rosenhaus Sports.

    Liz Mullen can be reached at lmullen@sportsbusinessjournal.com Follow her on Twitter @SBJLizMullen.

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  • NFLPA enters conflict involving LMM

    The NFL Players Association is reviewing the relationship between the player representation firm run by Ethan Lock, Eric Metz and Vance Malinovic and a financial advisory group called Your Source Financial and, in turn, that firm’s alleged association with a financial adviser who is being sued by seven current or former NFL players, according to a union source.

    NFLPA officials would not comment.

    Metz, an NFL agent and a principal of the Scottsdale, Ariz.-based agency LMM Sports Management, said the firm did not violate any NFLPA agent regulations. He added that the agency, which represents about 50 NFL player clients, welcomed the union inquiry and that he, in fact, has been proactive in cooperating with the NFLPA.

    Billy Crafton, the financial adviser, declined to comment, citing the ongoing litigation (see related story).

    Principals of Your Source Financial (YSF) did not return phone calls seeking comment, nor did attorneys for the firm.
    YSF is owned by Your Source Pacific Fund (YSP). Both groups are based in the Phoenix area.

    As previously reported (SportsBusiness Journal, Aug. 20-26 issue), YSP in 2009 acquired a 40 percent interest in the Lock, Metz and Malinovic firm. As part of that agreement, the three agency partners each bought a 5 percent stake in YSF, for a total 15 percent investment.

    The player representation firm is now in ongoing litigation with YSF and YSP. In October 2011, the agency filed suit against YSF and YSP, seeking damages in excess of $900,000 and a judge’s order allowing the company to be dissolved. YSF and YSP in June countersued the agency and a second company the partners formed, referred to in court documents as LMM 2, and asked that a judge put the two entities into a receivership.

    LMM 2 represents the active group LMM Sports Management that the three agency partners are operating while the litigation is ongoing.

    The NFLPA inquiry involves whether regulations involving contract advisers or financial advisers were violated by the player agency.

    On April 19, the union issued its first “alert” involving a financial adviser to all NFL agents, asking them for any information on Crafton.

    Crafton does not appear as an employee of YSF on its website, but multiple sources said he has been affiliated with that firm. In addition, a lawsuit filed by former NFL player Brad Kassell against Crafton states that he moved his brokerage account to YSF in April or May of 2011 on the advice of Crafton, who was his financial adviser at that time.

    According to Metz, Crafton worked as an unpaid intern at LMM 16 years ago but has had no relationship with the firm since then.

    Six days before the NFLPA issued its alert, LMM sent a letter to its NFL player clients telling them that they had recently become aware that Crafton was affiliated with YSF. The letter, dated April 13, a copy of which was obtained by SportsBusiness Journal, advised the player clients that the three name agents in the firm had acquired the 5 percent interests in YSF in 2009 but that they had since divested those interests in the firm.

    “We became aware early last week that one or more of you may have an account arranged by your financial advisor, Billy Crafton, which account may be managed by YSF,” states the letter, signed by Lock and Metz. “We had previously advised Billy that we didn’t want any accounts of our clients in any way connected with YSF.”

    Under NFLPA agent regulations, NFL agents are prohibited from referring clients to financial advisers or firms that are not regulated by the NFLPA’s financial adviser program. YSF is not regulated by the NFLPA.

    YSP and YSF, in their countersuit against LMM, states that one of the reasons YSP wanted to invest in LMM originally was so “LMM would refer its clients to YSF for wealth management services.”

    Metz said LMM did not refer any of its clients to YSF for any services. He said that when LMM learned that Crafton was involved with YSF, LMM sent the April 13 letter to clients and also called the NFLPA security department.

    “We never received a penny from any work that Your Source did or Billy Crafton did with any player, and the minute we learned of his relationship with Your Source, we immediately contacted NFLPA security,” Metz said.

    NFLPA Director of Security Tim Christine, whom agents were asked to contact with any information in the April alert, declined to comment.

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