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Wed March 28, 2012
The 'Illegal Procedure' Of Paying College Athletes
Originally published on Wed March 28, 2012 12:09 pm
In a stunning piece published in Sports Illustrated in 2010, former sports agent Josh Luchs admitted to paying money and providing other benefits to college athletes, in clear violation of NCAA and NFL Players Association rules. Luchs, who represented more than 60 NFL athletes over the course of his career, named more than 30 former players who allegedly accepted money or other benefits while still enrolled at universities around the country.
Since then, Luchs has traveled the country, speaking about the dirty business side of college sports. It's a world where colleges make millions of dollars off of players, and where some agents routinely win contracts through illegal means. Luchs outlines many of these practices in his new book Illegal Procedure.
Luchs first paid a player from the University of Colorado in 1990. The player, linebacker Kanavis McGhee, had explained to Luchs that his mother had lost her job and was falling behind on her rent payment. To solve the problem, McGhee needed to come up with $2,500. He asked Luchs for help.
"At the end of the day, I decided that I'd go ahead and give him what he needed," Luchs tells Fresh Air's Dave Davies. "It would help me develop a relationship, and that's really what it was all about — and it bettered my chances of signing the guy."
After lending McGhee the money, Luchs ended up not signing him — but it didn't stop him from paying more college players — or from seeking advice from other agents in the business. One well-known agent, Harold "Doc" Daniels, explained to Luchs that there were certain rules when giving out loans to college players.
"He taught me that rather than paying a lump sum of money ... it would be more productive for us to give it to them incrementally — in smaller doses — so that they'd come back on a regular basis in a systematic fashion so we would have the opportunity to maintain a line of communication and better our chances of representing the player at the end of the road," he says. "That made all the sense of the world to me. We would determine a minimum amount ... and if we understood what their needs were or what their family life was about, then we could ... better prey upon those needs and fill those gaps — and we did. ... And it may only cost $200 a month for a player that could end up being a first-round draft choice and generate millions."
Luchs and the financial advisers he worked with also purchased automobiles and other luxuries for players. He bailed one athlete out of jail and brought more than one player to live with him, just to keep them close and keep competing sports agents at bay. But he says coaches remained in the dark.
"From my perspective, they didn't know," he says. "And I don't think they wanted to know, and I don't think anybody ever looked closely enough to want to find out. I think they still don't."
Luchs was eventually suspended for a rules infraction. He has since transitioned to a career in real estate and says he would have made different choices, if given the opportunity.
"Very few of us see the world the same way at 22 as they do at 42, which I am now," he says. "But as far as providing loans, I ... really question the morality and the ethics of the entire structure that leaves these players in a position where they have to [accept loans] if they want to not live in poverty. ... As far as ethically, at the end of the day, I was helping myself. I acknowledge that. It was a shortcut I took. And would I do it again? No, I wouldn't do that again. ... My ambition exists but no longer in a blind form."
On the relationships between players and agents
"The relationships are real. They may start out, very clearly, with a tit-for-tat or pay-for-play or whatever you want to call it. But these relationships evolve. I have relationships that have gone on 15, 18 years ... with players who I gave money to. They know my family. They know my kids. I know theirs. If you look at the Sports Illustrated cover story that ran in October of 2010, where I came out and talked about all these players I gave money to in violation of the rules, one of the things that jumped out to me was the number of players that stood up and actually manned up and admitted that they received those benefits from me."
On making money as an agent
"Unlike in entertainment or book agents, we don't get our money off the top automatically sent to us and then send the player their check. Once a player gets a check, now the onus is on us to go collect. As for the amount of money the agents are earning off of these players, the money is there at the very, very top of the draft. When you factor in the costs associated — that are real costs of training and housing and doing all the things you need to do when a college player ends his season and goes into the pros — and the investment that you make in him, if you don't end up representing a player in the first two rounds, you end up losing money."
On why he was suspended from being an agent
"I was suspended for providing a $5,300 commission check that a player had paid to us to an attorney during a civil proceeding. They were able to use that as a stick or a bat to knock me down. I understand a lot of people will say, 'Well, you did all of these things so this was your comeuppance.' And maybe so. But at the end of the day, what I was suspended for wasn't something that I did. I leveraged and I bartered and I traded the stories that I had, the experiences I had, so I could create an opportunity for myself long-term in another business so I'd be able to take care of my family."
On what reforms he would implement in college athletics
"I'm suggesting that if the NCAA doesn't want to share profits and continue to have this unpaid workforce, then let the market determine their value. Let us give them money if that's what they need — a nonrecourse loan at very favorable interest rates. Allow [agents] to fill that gap, because as of right now, it's being done but it's not being done in a way that can be controlled or monitored by anybody at the NCAA or the NFL Players Association or even at the state level. And the NCAA, they don't have subpoena power and they have absolutely no impact on the agent community whatsoever. And what I'm recommending is for participation in that program, an agent then could offer up and trade the equivalent of subpoena power — access to phone records or bank records — and give the NCAA the ability to enforce its rules."
TERRY GROSS, HOST:
This is FRESH AIR. I'm Terry Gross. Our guest, Josh Luchs, spent 15 years as a sports agent representing talented college football players who hoped to turn pro. He admits breaking plenty of rules in his efforts to get good players to sign with him. He gave thousands of dollars to players who were still in college in violation of NCAA rules, a practice he said was common among agents competing for the attention of top athletes.
He also rented luxury cars for players, bailed one out of jail and brought more than one player in to live with him, just to keep them close and keep competing sports agents at bay. Luchs left the business after being suspended for a rules infraction and told many of his secrets in a 2010 cover story in Sports Illustrated. He has a new memoir about his experiences, co-written with James Dale, called "Illegal Procedure: A Sports Agent Comes Clean on the Dirty Business of College Football." Josh Luchs spoke with FRESH AIR contributor Dave Davies.
DAVE DAVIES, HOST:
Josh Luchs, welcome to FRESH AIR. Tell us about the first player you ever paid money to.
JOSH LUCHS: You know, much like it said on the cover of SI in October of 2010, I'll never forget the first time I paid a player. I had flown to Colorado to recruit a star defensive end pass rusher. You know, to give you some context, I had a hard time renting a car when I flew to Colorado, I was only 19 years old.
And I waited for him outside of his apartment and basically bum rushed him at the door and, you know, introduced myself, let him know what I was there for and that I had come all the way from Los Angeles.
He was very gracious. He let me in, and we sat, and we spoke and talked a while. And he had let me know that eventually that he had some personal matters to attend to in the form of his mother who apparently had recently become unemployed and was in danger of losing her ability to support herself in her home, she might be kicked out of her apartment.
And basically to solve the problem, he needed to miraculously come up with $2,500 somewhere. I suppose that I became the somewhere.
DAVIES: And so what did you do?
LUCHS: I told him I needed to think about it. This was the very first time that I'd even thought about doing something like that. So I left, and I made my list of pros and cons as to, you know, right and wrong and the benefit and the exposure and the issues. And at the end of the day, I decided that I'd go ahead, and I'd give him what he needed.
It would help me to develop a relationship, and that's really what it was all about, and that bettered my chances of signing the guy. And I - 19 years old, I really didn't have a whole lot of cash like that laying around. So I had to dip into my Bar Mitzvah fund, some of the money I had gotten back in the day.
(SOUNDBITE OF LAUGHTER)
LUCHS: And luckily, you know, being a good boy, I saved it and knew that one day it was going to be used for something very important, and why not this, an investment in my future. Well, my first investment was a poor one, as it turns out, because after lending it to him, I never saw him again. So yeah, it was a rude awakening.
DAVIES: So you become an agent, as you say. There's a simple, you know, registration fee. And you eventually get connected with a gentleman named Harold Daniels, known as Doc, one of the few African-American prominent agents at the time. And you describe that he showed you how to pay players but do it within a certain set of rules that just made more sense. Do you want to go over that and just describe what was the right way to do - the right way to pay players from his perspective?
LUCHS: The right way, the rules according to Doc - who was a six-foot-seven, maybe-a-biscuit-away-from-400-pound guy who was just an unbelievable character and really an amazing person, and he gave so much to so many, and I don't just mean giving money out to college athletes in violation of the rules. He was a very, very charitable man and with a really big heart.
But, you know, Doc had taught me that, you know, rather than giving guys a lump sum of money, where they would take it, say thank you maybe, maybe they wouldn't, and then you wouldn't hear from them again. It would be more productive for us to give it to them incrementally, in smaller doses so that they'd come back on a regular basis, the first of each month, you know, in a systematic fashion that we would have the opportunity to maintain a line of communication and better our chances of representing the player at the end of the road.
And that made all the sense of the world to me. We would determine a minimum amount. I mean, if you just said to a guy, hey, how much credit card debt do you have, and you pay it off, you know, that was one thing. But, you know, if we understood what their needs were and what the shortfall amount was from their scholarship and what their family life was about, then we could better understand what the hot-button issue would be.
And unfortunately, and as unflattering as it might be, we'd be in a better position to prey upon those needs and fill those gaps, and we did. And it may only cost two to three to $500 a month for a player that could end up being a first-round draft choice and generate millions.
DAVIES: Right, now...
LUCHS: But the system, the way it is, is the culprit.
DAVIES: And one of the other rules was, you don't pay in cash, right?
LUCHS: No, no, you don't pay in cash, because - the good thing about cash is that it would be untraceable, but the problem with giving a player a stack of cash is he could deny that he ever took it from you. So what Doc had done - and I had no idea what this was, but - I didn't even know what a money order was.
And you could to, like, a 7-11 or a Western Union, anywhere, and you could end up picking up, you know, a money order that essentially was untraceable, but you had a receipt that you could keep in your hands that showed that you gave that money to that player and at least remove the question as to whether or not you gave the guy money.
But no outsider, nobody outside of the transaction could track that unless we wanted them to.
DAVIES: Yeah, it was interesting, because you were breaking the rules, and yet you do want some internal documentation of it. You also said: Make it clear to the player this is a loan. And you actually have him sign some kind of loan document, right?
LUCHS: Absolutely, and that brings me to today. I mean, I understand ethically and morally, people say that giving these athletes loans is questionable or wrong, you know, but upon reflection, if you really think about it, the question is why is it wrong.
I understand it's you don't want to induce guys to signing with you, but, you know, why is wrong - ethically?
DAVIES: But so if you're giving several hundred dollars a month over a period of a couple years, you're going to lay out a substantial amount of money, and in a lot of cases, of course, players end up going off and signing with a different agent. Would they pay you back?
LUCHS: Many did, and quite frankly, not that many people stiffed Doc. I wouldn't have stiffed Doc.
(SOUNDBITE OF LAUGHTER)
LUCHS: This was not the kind of guy you stiffed, OK, let's just be honest about it. And no, most of the time guys had paid it back, whether they went with us, or they didn't go with us. And that was not so much the issue until the very end. I think in the late '90s, there was a new rule that was implemented that said that if a player had taken money from an agent while they had eligibility remaining, that the player didn't have to pay that money back.
It's an ill-conceived, at best, solution to that problem, because then players who had their hands out would take money from as many agents as they possibly could and stiff all of them without any fear of repercussions and knowing that there would be no, you know, legal mechanism, by which, that an agent could go get repaid.
So it just opened up the floodgates, and it took a problem that clearly was an issue and became - it exacerbated it and made it much worse.
DAVIES: Let's talk just a little bit about what the rules were and who made them. I mean, clearly nobody expected agents to be paying college athletes, but who actually prohibited it? Who were the governing bodies, and what were the rules?
LUCHS: Well, at the time it wasn't against the law. It was simply against the NCAA rules. In fact the NFLPA eventually incorporated NCAA rules, and so did the individual states with the Uniform Athlete Agent Act.
DAVIES: Let's just make the (unintelligible), we say the NFLPA, that's the National Football League Players Association, which is, essentially it's the union for the players, right?
LUCHS: Right, and they say that agents work at the behest of the union, and they are supposed to be the governing body of the agent community. However, you have to ask yourself a question: Why do they care about the rules of the NCAA? They really don't, and that, I think, in and of itself, shows you why the problems exist the way they do today and will continue to exist because they don't have skin in that game. The individual states...
DAVIES: What do you mean by that? What do you mean by that, why they would care about what the NCAA says?
LUCHS: It's almost counter-intuitive, you see. The NFL Players Association, you know, their role has been to generate as much money for players as possible. That's what they've always done. And it seems to me that it's somewhat counterintuitive for them to prevent athletes from getting money from any source at any time.
They want them to get the most possible. And the NCAA rules, the way they're structured, are very prohibitive and quite frankly oppressive for these athletes. You know, when you're talking about loans in particular, it's the ability to receive loans, it's a basic right that all Americans have. And why should college athletes be denied that same right? The only reason why is because the NCAA says so.
DAVIES: Did parents ask you for money, too, parents of athletes?
LUCHS: Absolutely, oh absolutely, not just for loans but, you know, I had a parent - and recently, you know, an Auburn dad had told me that both of his sons were going to be pro players. And although I wasn't going to be giving him money during the season because at that time I had stopped the practice of violating the rules that way. He had said that whatever agent is going to represent my two boys is going to make a ton of money, and that agent is not only going to buy me an S-class Mercedes for that privilege, but I'm going to train my sons, and you're going to pay me what you would have been paying a training facility. Instead of paying them, you're going to pay me.
So, you know, he was laying out the terms of what it was going to take to represent his son, and, you know, you can wrap up an inducement any way you want to, it's still an inducement.
DAVIES: And how did you respond to that request?
LUCHS: At that time, I had moved on from that, and I wasn't going to play that game. And as it turns out, in hindsight I made the right decision, not only because I wasn't interested in playing by those rules anymore, but because one player I think was a seventh-rounder, and one ended up in the third round, and a year later, he hurt his knee and never, you know, made it in the long run anyhow.
So just from an investment point of view, whatever agent went ahead and paid that price probably ended up losing.
DAVIES: Now, there were times when athletes did make some pretty extravagant demands, and you played, right?
LUCHS: Yeah, absolutely, and, you know, one thing you've got to understand is that, you know, we tried to limit our exposure as much as possible. I remember one time that a player's father, who was a minister, had said that the other people who were competing to represent his son, you know, they were going to be providing, you know, a certain amount of money available to that player.
In addition, they wanted an automobile, an Escalade on dubs, with every single imaginable customized upgrade. And, you know, not just that, but they wanted it delivered to the church to inspire the flock. And I inspired the flock, let's put it that way.
(SOUNDBITE OF LAUGHTER)
DAVIES: You did it, you came up with the Escalade.
LUCHS: Yeah, we - hallelujah, it was very inspirational, but bear in mind, when I talk about, you know, trying to deflect and limit liability, we had a financial advisor who was interested in working for that player be on the hook for that car. Because if we were, you know, ending up representing, you know, seven, 10 players a year or whatever it was, and we ended up having to be on the hook for cars for all those players and the credit lines for all those players, it got pretty hairy.
So we tried to outsource as much of that as possible, limit our liability.
DAVIES: We're speaking with Josh Luchs, he is a former sports agent, whose book about his experiences is called "Illegal Procedure." We'll talk more after a short break. This is FRESH AIR.
(SOUNDBITE OF SONG, "WATCHING THE DETECTIVES")
DAVIES: If you're just joining us, our guest is former sports agent Josh Luchs. He's written a book about some of the experiences he had representing athletes and some of the improper things he did in the course of that. It's called "Illegal Procedure."
You got into the business in 1990, and you were an active agent for, what, 15 years or more and finally left when you got a one-year suspension from the National Football League Players Association, right. Now, this followed some very long and complicated litigation you had with a former partner, Gary Wichard. What were the circumstances of the suspension, and how did that affect your decision to leave?
LUCHS: Well, you know, I was suspended for providing a $5,300 commission check that a player had paid to us, to my attorney during a civil proceeding. And they were able to use that as a stick, or a bat, to knock me down. And I understand there will be a lot of people that will say, well, you know, you did all of these things so this was your comeuppance, this is what you deserved, you got what you deserved.
And maybe so. You know, I'm willing to accept that. But at the end of the day, what I was suspended for wasn't something that I did. So I leveraged, I bartered, and I traded the stories that I had, the experiences that I had so that I could create an opportunity for myself, long-term, in another business, so I'd be able to take care of my family.
You know, Google, it's amazing, you can Google somebody, and whatever's there, no matter what people say about you, it's there forever. You can't get rid of it. And so I felt like the only way to obliterate that, would be to agree to do this tell-all for Sports Illustrated, which I did.
DAVIES: So that was 2010, and you describe some of the stuff you've described in this book and here in the interview. And in the book, you advance some ideas for reform. What should change in the system?
LUCHS: Well, there's lots of things that need to change. Unfortunately, players, student athletes as they call them, are living below the poverty line. There was a study done by the NCPA, the National College Players Association. They had done a joint study, the National College Players Association and Ithaca College, that showed that there was an average shortfall amount between the cost of full attendance and what players received of around $3,000.
And unfortunately, a lot of these players have no way to fill that gap. There's no mechanism by way to get that money that they need, aside from Pell grants and other things that people will bring up in defense of why nothing needs to change.
So what I'm advancing is it just deals with the agent problem. College football has a lot more problems than just the agent issue. In fact, a lot of the scandals that took place over the past few years - in college football, in college basketball - had nothing at all to do with sports agents.
But with respect to the agent problem itself, I'm suggesting that if the NCAA doesn't want to share profits, and they want to continue to have this unpaid workforce, then let the market determine their value. Let us give them money if that's what they need, in a non-recourse loan at very favorable interest rates.
You know, allow us to fill that gap because as of right now it's being done, but it's not being done in a way that can be controlled or monitored by anybody at the NCAA or the NFLPA, the National Football League Players Association or even at the state level.
And the NCAA, they don't have subpoena power, and they have absolutely no impact on the agent community at all whatsoever. And what I'm recommending is for participation in that program, an agent then could offer up in trade the equivalent of subpoena power, access to phone records or bank records and finally give the NCAA the ability to actually enforce its rules, one little tweak.
I mean, at the end of the day, do they want to lose a toenail, or do they want to lose a foot? I'm saying sacrifice the toenail.
DAVIES: The toenail, meaning this restriction on financial transactions between agents and college players?
LUCHS: Right. The ability to receive loans is a basic right that all Americans have. Why should college athletes be denied that same right? The only reason that they're denied that right is because the NCAA says that they should.
DAVIES: You know, I have to say when I read about, you know, these players getting loans from agents, a lot of them paid them back. Particularly when you compare this to other kinds of corruptions, you know, members of Congress who betray the public trust for money or Wall Street derivatives manipulators who bring the financial system down, I mean, this doesn't seem so terribly destructive.
LUCHS: No, in fact if it's a crime, it's certainly a victimless crime. People need to understand the way that the structure of the NCAA works and what they're protecting. Lots of people will argue, well, hey, you know, if you're not going to give them loans, the right way to do it is to actually pay the players.
But what they fail to realize is that if they paid the players, then an argument could be made that they're employees, and if they're employees, now suddenly there are benefits, such as workers' compensation, that need to be considered and the impact that that has on college football. And quite frankly, they should be employees.
They should be students who are also employees. I don't see how that's even wrong.
DAVIES: You began when you were 19 years old, getting started in the business, and were confronted with an athlete who wanted $2,500, and you faced a moral choice and decided it was worth a try and started down this road. Now you're in another business, you're in real estate. Are you a different person? Do you consider these kinds of dilemmas differently?
I mean, there are shortcuts in all kinds of businesses.
LUCHS: Absolutely, and, you know, let me say that very few of us see the world the same way at 22 as they do at 42, which I am now. So, obviously I don't suppose I do everything the same way I did it back then. But as far as providing loans, you know, I know people - the knee-jerk reaction, and I think they're conditioned by what they've grown up with, you know, since the '50s, I guess, when the NCAA coined the phrase student athletes, and the amateurism, the way that we know it to be today - I really question the morality and the ethics of the entire structure that leaves these players in a position where they have to, if they want to not live in poverty, take money from some of these sources.
So as far as ethically, I mean, yeah at the end of the day, I was helping myself. I acknowledge that. It was a shortcut that I took. Would I do it again? No, I wouldn't do that again. I made the choice not to do that stuff again, when after my suspension I had to decide if I was going to continue the business or move on somewhere else. So my ambition exists but no longer in a blind form.
DAVIES: Well, Josh Luchs, thanks so much for speaking with us.
LUCHS: Thank you so much for having me.
DAVIES: Josh Luchs spoke with FRESH AIR contributor Dave Davies. Luchs' memoir is called "Illegal Procedure: A Sports Agent Comes Clean on the Dirty Business of College Football." I'm Terry Gross, and this is FRESH AIR. Transcript provided by NPR, Copyright National Public Radio.