The Alvarez saga
I’ve been trying to wait to post something on this until I could better understand what exactly was going on. Right now, it seems to be a situation of the more you find out, the less you know or the more confusing it gets. But here’s the deal as I understand it as of right now:
You can read the story about what’s going on officially at this point here. It’s also worth reading Pirates president Frank Coonelly’s full statement on the matter. For those of you who don’t know what I’m talking about, No. 2 pick Pedro Alvarez has been put on the restricted list at the request of the Pirates. Coonelly’s statement says, “The Pirates were forced to request that Pedro be placed on the
Restricted List because we were informed by his agent, Scott Boras,
that Pedro will not sign the contract to which he agreed on August 15.
Boras further informed us that Pedro will not report to the Club unless
we renegotiate his contract and agree to pay him more than the $6
million signing bonus to which he agreed.”
Scott Boras, for his part, has referred us to the Players’ Association, saying it is their grievance and not his. The contention is that the agreement was made after the midnight deadline, something Mr. Coonelly flatly denied. It seems fairly clear, both in the statement and in other information I have gathered that the original deal (whether it was pre- or post-deadline) was actually hammered out between the Pirates and Pedro Alvarez (and his family) directly, without the benefit of Mr. Boras’ counsel. There has been a parallel made to the drafting of Alex Rodriguez in 1993. According to Baseball America, “Rodriguez signed with the Mariners shortly before
going to class at the University of Miami in late August, and on Oct.
14, Boras submitted a grievance, backed by the union, that the Mariners
didn’t make clear the terms of the contract he signed. The grievance
asked that Rodriguez should be allowed to renegotiate his contract or
void it and become a free agent.”
There have been some rumors and reports of deals being consummated after the deadline, most notably the one between the No. 3 pick Eric Hosmer (also a Boras client) and the Kansas City Royals. The biggest difference, of course, is that Hosmer signed his contract and has already begun his pro career, while Alvarez has yet to sign on the dotted line.
Here’s how the process seems to work in these down-to-the-wire cases. The two sides come to a verbal agreement on a net value for the deal. Using the Alvarez case as the example, that value was $6 million. By 11:59 p.m., both sides notify the Commissioner’s Office a deal has been struck for that amount. After midnight, it’s fairly common for some of the smaller details to be ironed out — things like when/where the physical will take place, smaller benefits like college tuition (if it’s applicable), etc.
It’s become apparent that there have been instances when negotiations have indeed extended past midnight. The Rangers evidently negotiated with outfielder Julio Borbon, also a Boras client, past midnight at last year’s deadline. That wasn’t brought to light, it seems, because Mr. Boras liked the terms of that agreement, which included a big-league contract. With this situation (see below), it appears he is not pleased with the outcome.
There are a few big questions that still need to be answered:
1. Is that pre-deadline verbal agreement legally binding? The Collective Bargaining Agreement did not expressly state that a
written agreement was needed when it was ratified in 2006. Since that
time, the Commissioner’s Office released a bulletin that said an email
or fax had to be sent to the Commissioner’s Office by the deadline.
This correspondence would come only from the club after the club had
reached a verbal agreement with the player and/or his agent. If Alvarez claimed he never agreed to a deal, then this case could head straight to court. But he’s not arguing that, but rather that the negotations extended past the deadline. It’s possible it could be argued that the verbal agreement, since it’s the usual course of conduct and has always served as binding in past practice, is then legal. But you have to wonder that if a written contract is not signed by a certain time — even if it’s because the player has stalled the process — then maybe all bets are off.
2. Can such a deal actually be re-negotiated? There seems to be a paradox within all of this. If the contention is that the deal was agreed to after the deadline, that would make it void, right? If it’s void, what is there to be re-negotiated? My guess is that even though Mr. Boras has removed himself from the proceedings currently by pointing all inquiries to the Players’ Association, a certain search for new loopholes is taking place. If this grievance ends up carrying weight, a new avenue for re-negotiating contracts would now exist.
3. Why has Pedro Alvarez decided to go this route? According to the statement from Mr. Coonelly, “Mr. Boras refused to engage in any negotiations at all until shortly
before the August 15 deadline and even then an agreement was reached
only after Pedro took control of the negotiations.” If Pedro stepped in and got this done, seemingly showing that he’s his own man and wanted to get going on his pro career, what has caused this seeming change of direction? The source cited in the story says that it might be over $200,000, an amount that would put Alvarez on par with Buster Posey and his deal — the biggest in the draft — with the Giants at No. 5. I’ve had several people — and none directly involved in this situation — strongly imply that this sounds a lot like the Boras Corp. being ticked off about being bested by Posey’s agency, CAA. If that’s the case, how did Alvarez, after making a strong stand by taking over negotiations, allow himself to get caught up in such pettiness?
4. What happens now? The Players’ Association has filed a grievance, which starts out by saying, “The Major League Baseball Players Association
today filed a Grievance challenging the unilateral decision of the
Commissioner’s Office to extend the August 15, 2008 signing deadline for drafted
players. The Association and the Commissioner’s Office have agreed to expedited
processing of this Grievance, with the intention of bringing the matter to
hearing as early as September 10, 2008.” The main bone of contention is not so much that an extension was given — and I’ve received no confirmation that it was — but rather that the Players Association wasn’t informed of an extension as required by the CBA.
6:30 p.m. ET Here’s an official statement from Major League Baseball, courtesy of Pat Courney, VP of Communications. The statement comes from Rob Manfred, Executive Vice President, Labor Relations and Human Resources:
“We believe the grievance is entirely without merit. The deadline was extended to accept minor league contracts voluntarily entered into by the clubs and the players with the help of their agents. It is settled law that the arbitration panel has no authority to disturb such minor league contracts.”
Whether this could lead to a re-negotiation, Alvarez becoming a free agent or going back into the draft class a la Aaron Crow, remains to be seen. I think we’re just getting started here and I’ll be sure to be back with any information as I get it.
MLB.com Geeking on the Draft 
Sadly I am now done with MLB. I hate the players, I hate the owners, I hate the agents, I hate the Red Sox and Yankees and I hate the disparity of this “league”. It is a joke and they have lost me. I hope Pedro Alvarez injures himself between now and the time he starts playing and is left without a contract. He deserves nothing more than that. Baseball players by and large (and I know having worked for MLB clubs in the past) are arrogant, self-centered, egotistical maniacs. There really is no difference between MLB and the NBA anymore. I am surprised that it took me this long to reach this conclusion.
I’m with eddieb about Alvarez having something happen to him. He’s risking $6M to get bragging rights? He’s going to lose 2009 as a development year, learning to be a pro, over $200K, money he would make up almost immediately if he rose to the majors by 2010, but if he ends up going back to school, his leverage is gone, and he’s not getting $6M.
This seems to me to be similar to how Boras made Matt White a free agent when the Giants did not do some perfunctory administrative function and thus Boras got White ruled a free agent. He got millions but his career never went anywhere, so I guess he’s glad Boras got him that lottery ticket.
Seems to be a pattern too, he refuses to negotiate, forcing the team to deal with a family that has no experience in negotiating, in the hopes that the team would make some sort of administrative mistake and trigger a loophole that allows him to make his client a free agent.
I’m really just sick of Boras and his bag of tricks. Really screws around with teams, makes weak teams with good picks bypass good prospects, just in order not to have to deal with Boras. It’s not a perfect system, but Boras is making it worse.
Fabulous background work Jonathan.
I don’t want to add to the conspiracy theories but I can’t help wondering if Alvarez has become unable to pass a physical and the grievance is just a stalling tool?
I also wonder if the $200k is, perhaps, a college tuition payment since we haven’t been able to find Alvarez’s name on the graduation rolls at Vandy? Just a wild guess.
Great work as always.
I’m pretty sure it’s not for college. The bonus he got was $6 million plus tution repayment.
I’m just really, really sad about this. I live in Nashville, have watched Pedro Alvarez quite often, am/was excited about him starting his pro career. It makes no sense to me that Alvarez would do something like this. He seems like such a nice young man, but this is a move that shows him to be totally without honor. You agree to a deal (and a fair one at that), then you live with it. I own a business and have done deals that in hindsight, I shouldn’t have done. But I have never once tried to renegotiate or get out of one of those. I try to be a man of my word, even if that means that I lose a few bucks along the way. I guess Pedro is showing that he is the type of person that will go back on his word, and sad is just the only word that I can come up with. Ultimately, this is his decision. Scott Boras works for him. I just hope that Pedro wakes up and realizes that he is taking a bad karmic path here.
I’m not going to write at length now about Pedro Alvarez’s accountability in all of this right now. I think there definitely is some and one of my bigger questions, as stated above, is how a kid who stood up and got the deal done could end up in this situation that obviously is not entirely (or mostly) his doing. What I will say is that you should withhold complete judgment — even if you want to cast aspersions about the company he’s keeping or feel that he made a wrong turn by simply allowing this to happen — until more things unfold. And trust me, they will…
I’m about to join eddieb and ditch MLB as well. This is ridiculous. Alvarez hasn’t even picked up a wooden baseball bat in Single A and $6 million is not enough money? I think the only way financial sanity will have a chance is if the public just stops going to the MLB ballparks. Fans should keep their hard-earned money they spend for high ticket prices, over-priced concessions and parking. Just go find alternate entertainment sources. Guys like Scott Boras have ruined sports. These ballplayers are overpaid and they appear to have a disconnect with the people who are paying to watch them. Even Alvarez coming from a modest background has already gotten as greedy as the best (worst) of them. This reminds me of the stupid hold out of pitcher Matt Harrington. He got drafted alongside Josh Beckett and then turned down $5 million and was last seen pitching in some independent league a few years back. Greed has destroyed baseball!
EddieB and anyone who agrees with him should shut-up and think.
Would you go to work for some place that you don’t want to?
Would you live in a place in the middle of nowhere, away from any friends and family, without your approval?
How about getting paid? Would YOU guys work for a dime less than you think you deserve? If you’re good enough at ANY profession, you don’t work at a place that doesn’t value enough to give you what you want.
This is the position Alvarez is in, he’s worth the 6 Million investment. An investment over at least 6! years of MLB service, and a few years in the minors. If he’s as good as hype, he should be worth millions more. He’ll be getting underpaid again!
Myabe you haven’t heard, but this is called capitalism. Alvarez is selling his ability to hit a ball, he thinks he’s worth more than 6 million over many years. The Pirates should know by now that he will be, and are being cheap and blaming him for doing the same thing you want. Getting paid what you’re worth.
Excellent summary, Jonathan. One thing that really confuses me is this: Boras, who is obviously a very sharp dude, should realize that any means by which he could prove Alvarez technically signed after the deadline could also be used to prove that Hosmer did too, and that MLB wouldn’t let Hosmer’s case just slide by simply because he’s happy with the result if Boras insists on making such a big deal about Alvarez.
I just don’t get it.
Even from a capitalist’s standpoint, this move might not make sense. The $6m that Alvarez stands to make is not the only money he’s going to make over the next six years. As a highly talented college player, let’s assume that he’ll make the majors in two years. That means that he’s making the minimum the first year, more in years two and three and then he’s eligible for arbitration in year four. Let’s say $390K, $600K, $750K and then $4M in his arbitration year (a reasonable figure for someone that’s a terrific young player, but not at the level of a Pujols). That’s $5,740,000 plus the $6M, which brings his take to $11.74M over that time. So let’s get that straight.
I’ve read that the Boras and Alvarez were willing to settle this for an extra $200K that would give Alvarez the same amount of money that Buster Posey signed for. This seems unlikely to me. The main mistake that was made by Boras/Alvarez was not insisting on a major league contract, which I’m guessing the Pirates would have consented to, had they been able to conduct negotiations. My guess is that Boras waited so long to bargain that things had to be done in a rush, Alvarez panicked and agreed to a market-value deal, just to get something done (I keep reading that Alvarez and his family “took control of the situation” as the deadline approached). In the light of day, Boras probably explained to Alvarez what the end result of not signing a major league deal, and they formulated a plan to get him out of that deal.
Here’s the problem. If the union’s claim that the Pirates breached the deadline is upheld (the union claims that MLB had no right to grant an extension to the Pirates and Royals), then Alvarez goes back into the draft pool, but then so must Eric Hosmer. Apparently, this extension was granted to both. And if I were the Pirates, I would insist on the Hosmer deal being invalidated right along with theirs. Hosmer, his team and Boras are all happy with that deal, so this would not be a good thing. How Boras and the union can claim that one would be invalid without invalidating the other is beyond me. I don’t see any defensible position that would allow negotiations to continue without gutting the August 15 deadline. Either Alvarez agreed to a deal in time, or he did not.
If it is invalidated, then Alvarez is not a free agent. He goes back in to the draft pool and as a college senior, he risks losing leverage or God forbid, the Matt Harrington meltdown scenario, although that is unlikely. Let’s assume that he gets drafted in the top few picks in the 2009 draft and signs a major league contract. The total value of David Price’s six-year major league? $11.25M, a little less than Alvarez would make over the same six years. The difference is that he’s guaranteed that money, where if Alvarez were to bomb, he would make less. But no one thinks that he’s going to bomb.
The bigger concern for Boras and Alvarez is that the clock starts ticking on Alvarez’ free agency when he is added to the 40-man roster (he makes the majors) under the current deal, whereas the clock would have started ticking immediately had he signed a major-league deal like Price had. He now becomes a free agent (potentially) two years later.
But how much is he really losing if he moves forward with the deal? If he’s the player that I think he is (Teixeira, Braun), then he’ll likely be in the bigs to stay in one year. That means that he is missing out on one year in the difference of the salary that he would make as a free agent and the salary he would make in his last year of arbitration. Once again, assuming that everyone is correct in the assessment of his talent, that could mean $3-4m for one year maybe? But keep in mind, by waiting a year to sign, he is losing a year of salary. And assuming that the progression of his salary until he becomes a free agent will likely follow the same pattern as Teixeira and all young players, the year that he loses in salary will be a year of salary in the middle or at the end of his career. That might be $10-15M a year, not the smaller amount he will earn in the first few years of any big leaguer’s career. It seems to make good sense to me that he get on with his career now, work hard, make the Pirates 2010 lineup and be eligible for free agency by 2016. The only way that Alvarez is losing out by signing this deal is if it takes him 2-3 years to make the majors.
I’m also quite sure that I’m missing something, because Scott Boras knows more about contracts and overall earnings for ballplayers than I do. But for the life of me, I don’t see it.
J.D. Drew was drafted second overall in 1998, held out and eventually signed a major league contract the next year with the Cardinals. From the time he was drafted until the end of the sixth year had he signed in 2008, he made about $15M, which is about $19M in today’s adjusted inflation dollars. If Alvarez gets to majors in 2010, it does not seem hard to fathom that he would earn more than that with two year salary while being eligible for arbitration along with that $6M.
More importantly though, keep your word. I hate it when people talk about capitalism and say things like “It’s just business” to excuse bad ethics. Capitalism depends on good ethics. For instance, there has to be trust in markets and accounting statements for the wheels of capitalism to work. If there is no trust, people don’t invest. Alvarez agreed to an offer that is fair market value and, assuming that he is forced to choose to the contract offer that he agreed to or going back into the draft pool, probably the best thing for him financially. Yes, it would have been better for him to get a major league contract, but he did not. He and Boras are to blame for that because they did not negotiate with the Pirates until the last minute. But he is where is now, and signing the deal is the right thing ethically and to his own bottom line.
To comment on 2 responses: (1) The capitalism arguement and/or the “Would go to someplace you did not want to?” or “Would you live somewhere you don’t want to live….?” arguments are baseless. This argument in a vacuum makes sense, but sadly we do not live in a vacuum. Mr. Alvarez chose (key word) to pursue a career as a major league athlete. The career he chose maintains an amateur draft with the intent of dispersing talent. Now I am not naive enough to believe the draft works to perfection, but the fact is the draft is a collectively bargained agreement between MLB & the Union. Therefore, Mr. Alvarez implicitly waves his right to choose where he plays by applying for the draft. The only recourses are getting a real job or hiring the Scott Borases of the world to “scare off” teams prior to the draft with visions of the highest financial guarauntee possible. And secondly, the fact MLB has been granted anti-trust exemptions by the government (not the current one so don’t make this a anti-bush rant), most laws of normal capitalism do not apply to the league or its inner workings. Mr. Alvarez’s situation is somewhat comparable to a person taking a job as a salesman for a large company. There are trips you don’t want to take or places you want to go, but by accepting the job you wave the right to choose.
(2) I agree with dmac37206 wholeheartedly and this is merely splitting hairs, but signing a major league contract and being on the 40 man roster does not begin a players clock towards arbitration. Arbitration time is judged solely on the time a player spends in the actual majors as a member of the 24 man active roster. A major league contract, though, does guarantee all money negotiated within the contract and also ensures the player is a direct invite to the major league spring training camp. This seems trivial, but it includes all the perks….lavish club houses and meals, infinitely higher per diems, housing stipends, shorter bus trips, etc. Basically, a huge bonus for a player who has not earned the rights. In addition, the fact the players yearly money is much higher and guaranteed shortens the amount of time a team, especially small markets, can keep the player in the minors. Thus, the player gets called up their first September and possibly prior to him being ready. This is where the major league contract gets him into the League and closer to his arbitration and free agent years.
I only browsed the lengthy comments so may have missed something but it’s possible Alvarez and Hosmer could both be ruled ineligible for college ball due to having Boras negotiate contracts on their behalf. The fact that these players can have “advisors” and keep their eligibility is BS anyhow but having their “advisors” actually enter contract negotiations on their clients behalf would have to rule them ineligible I’d think. If not, well MLB really needs to do something about this.
Second, the Union never seems to care a whole lot about the draft. It is one of the few things MLB can actually take control of when they need to because the Union doesn’t represent the players in the draft pool. MLB needs to grow a pair and get the system fixed so it actually increases parity due to this.
Third, a ML deal doesn’t affect arb but a team HAS to place that player on the fast track. Take David Price who was giving a ML deal last year. You are immediately placed on the 40-man roster meaning you immediately use an option (an option is used if you are placed on the 40-man roster whether you actually get a call or not). So you burn one of your 3 options right off the bat. Then the next season (your first full season) is option number 2 meaning you only have 1 more left meaning you theoretically have to make the active roster by your 3rd season regardless of what your progress has been like. Now in this situation, Alvarez would possibly be eligible for a 4th option if he hasn’t been on the active roster for a full season yet (very likely) but it still really hurts a team’s flexibility. Also if you sign a MLB deal, you can spread the bonus over multiple seasons (however many the deal is for) and often get smaller bonuses since your getting a higher salary (Price got a deal for 8.5 mill but a bonus smaller than the one Alvarez received I believe).
Fourth, someone said something about perhaps the 200k had something to do with school. I believe any player drafted by MLB teams who have full scholarships have whatever the remaining balance of their scholarship is placed in an account and set aside in case their pro career does not work out. Now I don’t know the specifics on this part of the contract but I’m pretty sure MLB has set up a system like this. If you are drafted out of HS with a full ride somewhere (say ASU like Hosmer had), you have whatever that amount is placed in an account and set aside. If you are drafted as a JR (say from a school like Vandy like Alvarez went to), you have whatever the value of your senior year is. Then if the player fails to make something of their MLB career and quits (there is probably some set amount of time they have to reach the majors by or have x amount of ABs or IP by), you get that money back. If your career is remotely successful, the team gets their money back.
Now as far as the situation at hand, Boras is horrible for baseball. I know a lot of people feel he is just doing his job but he is constantly pushing boundaries, looking for loopholes to take advantage of and tip toeing the legal lines. MLB should seriously look into getting his licensed revoked for WHATEVER they can put on him. I have no idea what an agent has to do to get and keep a license but I’m positive that Boras has tampered with negotiations, I’m confident he has contacted other teams against MLB rules while his players were still under contract and am positive his “advising” violates NCAA eligibility rules. There are probably all kinds of other things that I’m unaware of but the bottom line is Boras is horrible for baseball; he is rarely beneficial for his clients in my opinion.
Hosmer would have to be ineligible since he has started his pro career.
First off, love to see all the debating going on. People definitely have strong opinions about what’s going on and, to me, that’s good for baseball.
Now, to try and address some of what people said, which isn’t easy since there’s been so much written. For those of you who say they’re giving up on MLB, please don’t. Don’t let the Borases of the world ruin everything. The game is still the game and that counts for plenty? It ain’t perfect, but there’s a lot going on that’s positive. I mean, the Tampa Bay Rays in first place? Boras might be powerful, but he doesn’t have every single player in baseball. So don’t turn your back just yet, even though I agree this is indeed very frustrating.
I understand the “capitalist” argument to a point. I think players are entitled to get as much money as the market dictates — we can debate the problems with the system and how some take advantage of it ad nauseum — but until that gets addressed, players are entitled to maximize their opportunities… to a degree (this situation is not maximizing the situation, but abusing it). That being said, to say that $6 million isn’t enough because Pedro Alvarez — or anyone, for that matter — is worth more than that is absurd. He’s yet to play one inning of pro ball. He should get what the market dictates for the No. 2 pick in this given year, and that was $6 million, a deal he agreed to. I’m no economist, but I think a fair capitalist system is based somewhat on integrity, no? A deal should be a deal. To reneg on it now, whether it’s over an issue of the deadline or something else (psst, it’s really something else), is dishonest and makes an already shaky system even more broken. If this grievance ends up carrying any weight, we’re all in trouble.
Finally — for now — the $200,000. Boras never asked for that amount specifically. And that number has nothing to do with college tuition. It has everything to do with the No. 5 pick in the draft, Buster Posey. He got $6.2 million and there are a lot of people out there who think this is largely about egos and the fact that Boras Corp. doesn’t like being “bested” by anyone. If Posey signed for $5.8 million, you think this issue of the deadline ever gets brought up? Of course not. There’s a reason there was no complaining about the Hosmer deal. It was more in line with what his agent felt was right for a “special” high school player. But having a college hitter get more than his college hitter? That can’t be! I’ll write more on this later, but I have a sense of how things went down in terms of the timing. Suffice it to say that this seems like little more than a pissing contest between one agent and another (though, as one person told me, the other agent — Posey’s — had already zipped up and walked away).
There’s more to this than that, in all liklihood — it’s an opporutnity to try to find another loophole to take advantage of and show you’re bigger than the system. (more on that later, too).
As for Alvarez, I’d really like to get his thoughts before passing too much judgment, but you have to wonder how this kid who stood up and took the offer — clearly against his agent’s counsel — right at (or heck, even if it was after) the deadline — has allowed himself to be used in this whole affair.
Keep up the chatter folks…
When I was trying to explain the tuition thing, I was trying to use that as reasoning why it couldn’t possibly have anything to do with school.
As far as Alvarez, can the Players’ Union file the grievance w/o Pedro’s consent? We would still have the issue as to why he didn’t report for his physical or to camp still but is it possible Boras went around Pedro to get this filed?
There are those who feel the Players’ Association has no jurisdiction in this matter because Pedro was a drafted, and then according to the agreement, a minor league player. They do have a right to file something regarding the extension of the deadline without their consent, as stated in the CBA. At least that’s my understanding, but not on the behalf of a specific player.
I’m sure this wasn’t Pedro’s idea — and I know that’s not what you are suggesting — but I don’t see how it’s possible that he went around Alvarez to get this filed. The player, after all, didn’t report to Pittsburgh, so he has to be, in some way, complicit with all of this, don’t you think?
I suppose but I think the whole situation seems fishy. Before I really put a lot of thought into it I thought perhaps Boras had this plan from the start when he saw the Pirates had selected Alvarez. Now he always plays hardball so that really isn’t a sign but he has done similar things in the past so knows how the cards need to fall to have his player declared a FA. He knew the loophole he wanted the Pirates to walk through and he knew Selig would allow it to happen. I thought it was perfectly plausible for them to have decided at some point early on after the draft that unless the Pirates gave them X amount of money then they would verbally agree and then negate out.
Then I started thinking about Alvarez and how everyone seems to think he was a great kid. As I said, Boras is always a hardass during negotiations and perhaps Alvarez and his family just figured they would allow Boras to handle things since he was the professional but had a change of heart at the end because he wanted to play ball. The kid is a gamer but then why the change back?
I’ve read a lot of posts on various sites and boards about this topic and a lot of people seem to think there is nothing fishy going on behind the scenes started by Boras but I don’t see how that is possible. Either the Pirates are lying about everything, Boras/Alvarez had this plan from the start or Boras is acting on his own behalf. Even if he convinced Alvarez to let him work his magic, I feel like his pitch for why they should take this course of action was hardly straight forward and honest. I can’t see a good kid (like everyone seems to think he is) agreeing to treat the negotiations like this knowingly. After everything I’ve read I just think it sounds like either Boras is acting on his own or at least manipulating the situation, Alvarez isn’t the guy everyone thought he was or the Pirates are blowing smoke up everyone’s butt.