Sports Chained to Big Business, Gambling & Corruption

But in order to create billion-dollar professional and amateur sports leagues, it requires many players and partners off the field of play, working in synchronization towards one common goal: the bottom line.

By Diane M. Grassi

The title of this report may come as no revelation to avid sports fans, business movers and shakers, and the politically connected, but every once in a while, it is worth taking stock of those most prominent in a field ripe for deception, deniability, and its penchant for unaccountability.

While the names Tiger Woods, Roger Federer, Rafael Nadal, and Derek Jeter need no introduction, even to non-sports fans, few people would ably recognize the name Ted Forstmann. Forstmann reigns over arguably the most powerful agency in all of sports and Hollywood and represents the individual interests of the likes of Messrs. Woods, Federer, Nadal, and Jeter.International Management Group, otherwise known as IMG Worldwide, is “a global sports, fashion, and media business, with nearly 3,000 employees operating in 30 countries around the globe,” according to its website,

And as its chairman and Chief Executive Officer, Ted Forstmann has been one of the most powerful men on Wall Street, going back to the 1980s and into the 1990s as owner of a private equity firm making key acquisitions and turning him into one of the world’s richest and financially powerful men. He paved the way for what we now recognize as leveraged buyouts of major corporations. His acquisitions have included Gulfstream Aerospace, Dr. Pepper, Citadel Broadcasting, Ziff Davis, Inc., General Dynamics, and 24 Hour Fitness, to name a few.

The story hardly ends there. Nor is this peek into big business sports solely about Mr. Forstmann, although he is now a major player. As noted by the <em>SportsBusiness Journal</em> in 2010, he is one of “50 Most Influential People in Sports.”

But in order to create billion-dollar professional and amateur sports leagues, it requires many players and partners off the field of play, working in synchronization towards one common goal: the bottom line.

Briefly, Ted Forstmann’s segue into entertainment and the sports industry did not have a natural path, with his buyout of IMG in 2004 for a cool $750 million. It was hardly the presence in the sports industry then that IMG now enjoys.

But that which was in common with his background was Forstmann’s ability to acquire multi-billion dollar ventures and the merging of industries. And he has done so with both amateur and professional sports in the areas of marketing, licensing, merchandising, media, and broadcasting properties.

Fortsmann’s first two major acquisitions following his purchase of IMG and after becoming its CEO in 2006, was the ownership of the Collegiate Licensing Company (CLC) in 2007. And all one needs to know about CLC is that it represents the merchandise licensing, media, and marketing rights of some 200 National Collegiate Athletic Association (NCAA) affiliated universities and colleges and their respective sports teams.

Following IMG’s purchase of CLC, it also acquired Host Communications in 2007 from Triple Crown Media, and now known as IMG College. It gave IMG not only more of a marketing reach into college teams but a further hold on multi-media contracts of the University of Kentucky, the University of Arizona, the University of Michigan, the University of Kansas, and the University of Texas, among others.

In 2008, CBS contracted with IMG for the marketing rights of its corporate sponsors for its NCAA championship broadcasts.

And with IMG’s 2010 acquisition of ISP Sports, it sealed the deal on marketing and media rights for 35 of 65 NCAA schools in the six BCS conferences, plus Notre Dame. In addition, ISP has marketing agreements with Arkansas, Arizona State, Auburn, Baylor, California, Duke, Florida State, Georgia, Georgia Tech, Miami, Notre Dame, Pittsburgh, South Carolina, Syracuse, UCLA, Vanderbilt, Virginia Tech, Wake Forest, Washington, and Washington State, among others.

So of what relevance is all of this, you ask? Well, unlike perhaps other commercial enterprises and the ways in which moguls operate, the NCAA is not like most businesses. It is a conglomerate of amateur athletes and educational institutions and its affiliates. And it must incorporate the ethics of sport with big business athletic conferences, which generally serve at their own pleasure.

There are, however, commonalities between the NCAA and the business of secondary education, in that they are largely in the fundraising business, with a lot of winks and nods and “Johnny come lately” oversight. But mix in private enterprise and we have the beginnings of a perfect storm, ripe for unaccountability.

With respect to the representation of broadcast entities, merchandisers, and leagues of professional athletes, including individual players, the image and propriety of these assets must be upheld, as well. But again, IMG is a money-making organization, most anxious to fill its own coffers, leaving such oversight to the schools and the leagues themselves.

And historically, Ted Forstmann and his Forstmann, Little & Co., before his foray into the sports world, has experience in expectations of other entities to keep their eyes on the ball, so to speak. In 2002 and ending in a settlement in 2004, Forstmann was sued by the state of Connecticut’s $200 billion pension fund in the amount of $120 million.

Forstmann was charged with negligently investing in two companies on behalf of Connecticut’s pension fund. Connecticut described it as a bait and switch of sorts, in that the state believed it was deceived into investing part of the state pension’s assets worth approximately $120 million, in XO Communications and McLeod USA, which both went bankrupt as a result of the fallout from the telecom bubble.

While Forstmann was relieved of some of the charges, which included fraud and failure to furnish details of his investments on behalf of the pension fund, the crux of the suit involved whether or not Forstmann violated an agreement prohibiting his investing any more than 40% of the state fund’s assets into one single venture.

Forstmann was found by a jury to have breached the contract and found “grossly negligent” in violating his company’s fiduciary duty. He was eventually required to pay damages in the amount of $15 million in 2004, in order to avoid an appeal by the state for even more damages by the court, and not originally awarded by the jury.

And following Forstmann’s ties to Wall Street, a lot of his personal behavior and conflicts of interest came to light in 2010, after an Association of Tennis Professionals (ATP) investigation’s findings were revealed and by way of a pending lawsuit. Both revealed disturbing information, at best.

The ATP created its Tennis Integrity Unit in 2008, after it had suspected that sports betting had wormed its way into the women’s and men’s world tours, in matches going back to 2006. No less than a dozen players have been suspended since 2008, for allegations of betting and/or throwing matches.

It was then learned that Ted Forstmann had bet $40,000 on the 2007 French Open, for Federer to beat Nadal, both IMG clients at the time. And the supposed conduit to the Costa Rican offshore bet was one James Agate.

Forstmann also bet on Vijay Singh to beat Tiger Woods, both IMG clients, in the 2007 Masters.

The public first learned of this information in late 2010, forcing the ATP to release the statement in November 2010, specific to Ted Forstmann that read, “We consider his behavior is inappropriate and that he will be in violation of the rules if he engages in such activity in the future.”

And the question remains. Why punish players and not the agents of players? The ATP claimed that in 2007 that its gambling prohibition only extended “to a player and/or his regular traveling support team (player support personnel).” And that does not include agents.

As of 2009, there is now “a uniform anti-corruption code in place,” according to the ATP.

James Agate, a decades-long colleague, associate and friend of Ted Fortsmann’s has revisited an old claim of his via a Los Angeles court by bringing a lawsuit against Forstmann in October 2010. The suit contends that Forstmann owes Agate millions of dollars in unfulfilled promises for his Agate Printing Co.

Following his acquisition of IMG, Forstmann allegedly was to direct printing related business to Agate. And now, Agate has IRS liens against his business, as well, which he says are the result of unpaid tax liabilities owed the IRS by Forstmann, as the result of his gambling, that Forstmann somehow attached to Agate Printing Co.

At the heart of Agate’s lawsuit is fraud and breach of contract which Forstsmann totally dismisses. And after years and years of association with Agate and being in business with him, Forstmann is trying to brush him off as none other than an extortionist and a flat out nut.

Although Forstmann copped to betting on Federer, when he stated in 2010, “It was bad judgment,” that hardly exonerates him. He also contends that he has not betted in any capacity since 2007.

But Forstmann also, allegedly, bet more than $600,000 on both NCAA football and basketball programs’ games and championships between 2004 and 2007, according to the lawsuit. In addition, according to Agate, he also placed bets on behalf of Forstmann on the New York Mets, the Boston Red Sox, and the New England Patriots. Within a few years’ time span, Agate claims Forstmann dropped millions of dollars, wagering on all manner of sports.

And Forstmann has made controversial statements as recently as this past fall, when he told the website “The Daily Beast” that although he was aware that he may have violated NCAA rules by betting, that the NCAA officials, “are like priests, and now they’re asking me if I bet on March Madness? Can you imagine that? I bet a few bucks on sports.”

Well, to one of Forbes Magazine’s 400 of the world’s most wealthy individuals, what is a couple of hundred thousand dollars here and there, even if it ends up in the millions? For Forstmann supposedly bet $170,000 alone on the March Madness tournament of 2007. In addition, NCAA men’s coaches are represented by IMG. But the NCAA is running defense for Forstmann, maintaining that he was not representing any NCAA coaches at that time. Others see it differently.

The NCAA, as of November, 2010 claims that it “opposes all form of legal and illegal sports wagering on college sports.” And that NCAA rules cover those “who are members of the association.” That means agents are exempt. However, Mr. Forstmann is not merely an “agent” given IMG’s hands in multiple NCAA cookie jars. And such exemplifies the height of not only incompetence but arrogance on the NCAA’s part.

At a time when the NCAA and professional sports are both trying to at least give the impression that they will not tolerate gambling, Las Vegas sportsbooks, offshore and Internet sports betting entities, and illicit gaming syndicates perhaps see it a bit differently. So, those who lord over the sports world have their hands full with both realized and potential improprieties.

Since Forstmann needed to quell the noises he has been hearing about his alleged malfeasance, he was prompted to release a memo to all of IMG’s 3,000 worldwide employees in December 2010. They may not now “engage in any form of gambling or wagering on the outcome or any other aspect of any collegiate sporting event, or to solicit, induce, or facilitate any other person’s gambling or wagering on the outcome or any other aspect of any collegiate sporting event.”

With regard to professional sports, IMG now requires employees to be aware of the applicable laws, rules and regulations respective of gambling. Impressed?

And the NCAA’s final conclusion on this matter? That Ted Forstmann and IMG remain immune. And where are the National Football League (NFL), Major League Baseball (MLB), and the Professional Golf Association (PGA) that were allegedly known victims of Fortsmann’s wagering? Missing in action.

Make no mistake. Corruption is embedded at all levels of this amalgam of sports and big business, in both professional and amateur realms. Ted Forstmann merely took advantage of the opportunity. He is a big fish and a known entity.

But many in the NCAA, its conferences, respective schools, affiliated donors, as well as its coaches and even those who make the rules, have the luxury of hiding behind the bleachers. And much like big institutions on Wall Street, they can go about their own improprieties seemingly untouched.

And unfortunately, Ted Fortsmann’s story, though an interesting tale and while still evolving, is hardly the only one.

So such is the bone of contention; that amateur and professional sports are both moving away from the presumption of integrity and towards more and more unaccountability.

Yet, there is still hope that the sports industry and its peripheral businesses can clean things up, in order to prevent further contamination of its playing fields. And it begs the question: Does there remain the collective will and the moral obligation to so resolve?

 Copyright ©2011 Diane M. Grassi 



By Diane M. Grassi

Diane M. Grassi attempts to shine new light on issues centered on professional and amateur sports through her writing, by going beyond the headlines and sound-bites and to present sports fans with the back-story. In that effort, she seeks out those issues that rarely become headlines and elicits discussion as to why that is case.

Grassi’s goal is to not only provide content, but to offer an outlet for sports fans of all types, of various backgrounds and life experiences, to engage in topical issues with candor, good humor and provocative thought. Yet, to Grassi, it is the issues that are paramount, as opposed to the messenger, while maintaining intellectually honest and original fact-based reporting and research without an agenda.

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