BILL ANALYSIS Ó
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|Hearing Date:April 4, 2011 |Bill No:SB |
| |238 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: SB 238Author:De León
As Introduced: February 9, 2011 Fiscal:Yes
SUBJECT: Athlete agents.
SUMMARY: This bill increases penalties for a violation of the
Miller-Ayala Athlete Agents Act (Athlete Agents Act), which regulates
interactions between athlete agents and college and professional
athletes. The bill requires an agent to relinquish any profit made
from a violation of the Athlete Agents Act and directs courts to
suspend or revoke a violator's privilege to operate as an athlete
agent.
Existing Law:
1) Regulates specified activities of an athlete agent in representing
or to represent student and professional athletes. (Chapter 2,
Division 8, commencing with Section 18895 of the Business and
Professions Code (BPC))
2) Defines "agent contract" as any contract or agreement in which a
person authorizes or empowers an athlete agent to negotiate, or
solicit on behalf of the person, with one or more professional
sports teams or organizations, for the employment of the person by
one or more professional sports teams or organizations, or to
negotiate or solicit on behalf of the person for the employment of
the person as a professional athlete. (BPC §18895.2.)
3) Defines "athlete agent" as any person who, directly or indirectly,
recruits or solicits an athlete to enter into any specified type of
contract, or for compensation procures, offers, promises, attempts,
or negotiates to obtain employment for any person with a
professional sports team or organization or as a professional
athlete. (Id.)
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4) Defines "student athlete" as any individual admitted to or enrolled
as a student in an elementary or secondary school, college or
university or other educational institution if the student
participates as an athlete in a sports program. (Id.)
5) Defines particular types of contracts entered into by athlete
agents on their own behalf or with others, and when persons may be
considered as participating in negotiations to enter into a
contract. (Id.)
6) Requires an athlete agent to file specified information, including
whether a student athlete or educational institution has been
impacted by the actions of the athlete agent, with the Secretary of
State, and to advise an athlete of the availability of this
information.
(BPC §18896 to §18896.6.)
7) Prohibits an athlete agent from offering or providing money or any
other thing of benefit or value to a student athlete and imposes
additional requirements pertaining to an athlete agent's
transactions with a student athlete, specifying the circumstances
under which an athlete agent may contact a student athlete, or his
or her family. (BPC §18897.6 to 18897.63.)
8) Prohibits an athlete agent or athlete agent's representative from
offering or providing money or anything of benefit or value to a
school or representative of a school in return for a client
referral. (BPC §18897.67.)
9) Requires an athlete agent and student athlete who enter into an
agent contract to provide written notice within 48 hours of the
contract to the chief administrator of the school where the athlete
has been admitted or is enrolled and requires the athlete agent to
include a disclosure in a contract with a student athlete, warning
the student that he or she may lose eligibility to compete in
interscholastic or intercollegiate sports upon entering into the
contract and allowing the student athlete to rescind the contract
within 15 days. (BPC §18897.7 to 18897.77)
10)Makes a violation of the Athlete Agents Act by an athlete agent or
athlete agent's representative or employee a misdemeanor,
punishable by a fine of not more than fifty thousand dollars
($50,000), or imprisonment in a county jail not exceeding one year,
or by both that fine and imprisonment. (BPC §18897.93).
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11)Allows a court to suspend or revoke the privilege of an athlete
agent to conduct business as such if he or she is convicted of a
violation of the Athlete Agents Act. (Bus. and Prof. Code
§18897.93).
This bill:
1) Requires a court to suspend or revoke the privilege of an athlete
agent to conduct business as such if he or she is convicted of a
violation of the Athlete Agents Act.
2) Specifies the factors a court shall consider in deciding whether to
revoke the privileges of an athlete agent, including the nature and
seriousness of the misconduct, the number of violations, the
persistence of the misconduct, the length of time over which the
misconduct occurred and the willfulness of the defendant's
misconduct.
3) Specifies that a court shall order an athlete agent or athlete
agent's representative or employee to relinquish all revenues
received in connection with the violation.
FISCAL EFFECT: Unknown. This bill is keyed fiscal.
COMMENTS:
1. Purpose. This bill is sponsored by Mr. Carmen Trutanich, the City
Attorney of Los Angeles . According to the Author, current law
neither deters nor removes an unscrupulous athlete agent from the
athlete agent industry. The Author asserts that this bill is
needed to prevent victimization of student athletes because under
current law, convicted athlete agents do not lose their business
privileges, nor are they required to relinquish revenues earned in
connection with the violation. The Author also notes that "as a
result, athlete agents operate with minimal oversight which causes
great harm to not only student athletes but also California
colleges and universities and the entire athlete-agent industry.
Currently student athletes are unable to distinguish between
unscrupulous athlete agents and athlete agents who act properly,
and this bill will solve the vexing problem by finally removing
improper athlete agents from the athlete agent industry."
2. Illegal Activity Between Athlete Agents and Student Athletes. The
National Collegiate Athletic Association (NCAA), the national
governing body for college athletes, coaches, and athletic
departments, has rules in place requiring college athletes to
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maintain amateur status while they are in school. With amateur
status, NCAA rules prohibit student athletes from accepting what
the organization terms as "improper" benefits, including gifts,
cash, or other items of value. Under NCAA rules, student athletes
permanently lose their collegiate eligibility if they sign with an
agent.
Athlete agents often attempt to provide college players with
benefits in order to induce the athletes to hire them once they
become professional. This can be extremely lucrative, as an
athlete agent typically receives 3-10% of the gross value of a
professional sports contract. An athlete agent can earn many
millions of dollars representing a single player over his
professional career.
A recent Sports Illustrated article, based on extensive interviews
with a certified NFL agent in the business for over 20 years,
highlighted the pervasiveness of illegal interactions between the
agent and NCAA athletes. The agent confirms that he provided
thousands of dollars in cash to many student athletes while they
were still in college, and several players also confirm that they
accepted money from the agent.
Violation of NCAA rules can result in severe penalties for
athletes, coaches, and school athletic departments. Athletes can
be declared ineligible to play. School athletic departments may be
forced to pay significant fines to the NCAA. Wins and
championships may be retroactively forfeited if it is found that a
player on the team violated the rules. Teams may be banned from
participating in postseason events for a number of years and the
number of athletic scholarships teams offer can be restricted.
3. The Athlete Agents Act. In 1996, the Senate Business and
Professions Committee's Subcommittee on Sports heard testimony from
university officials and coaches, interscholastic sports governing
bodies, attorneys, and former college athletes. All of these
witnesses spoke of a growing pattern of various abusive practices
on the part of athlete agents. Witnesses emphasized that such
abusive practices have great harmful effects on the athletes and
their families and friends, athletic programs and schools
generally, including alumni and fans. All witnesses also decried
the lack of meaningful oversight of athlete agents, citing
insufficient penalties in current law and apparent inattention
and/or inability of any agency to take action against athlete
agents.
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That same year, the Athlete Agents Act was passed to enact a
comprehensive set of provisions governing the conduct and practice
of individuals who work as athlete agents, including the required
filing of information regarding the background and business
practices of the athlete agent with the Secretary of State's
Office. According to the Secretary of State Special Filing Unit,
465 athlete agents or athlete agent companies have filed
information. It is unknown whether any action has been taken
against athlete agents pursuant to the Athlete Agents Act.
4. Uniform Athletes Agent Act (UAAA). Problems associated with
illegal athlete agent conduct are national in scope. Far too
often, the actions of athlete agents in other states result in the
loss of student-athlete eligibility, the imposition of financial
penalties on the student-athlete's institution and the taint of a
"scandal" on both the institution and the larger intercollegiate
sports community. In an effort to address these problems, the
National Conference of Commissioners on Uniform State Laws (NCCUSL)
began work in 1997 on developing a model state athlete agent law.
At the time, there were 28 state athlete agent laws each with a
different set of fees, bonding and registration requirements, and a
list of prohibitive acts. Many of the laws were ineffective and,
as a result, were sporadically enforced. In addition, agents
expressed frustration over the differing state regulations and the
time and costs associated with registering in many of the
jurisdictions. Many agents simply ignored most the state agent
laws and the corresponding registration requirements. After three
years of work, that included input from sports agents,
representatives of the professional sports leagues players'
associations and the NCAA, NCCUSL completed its work in drafting
the UAAA. The model law provides for important protections for
student-athletes and educational institutions and it also seeks to
assist athlete agents by standardizing and streamlining the
regulations governing the profession.
As of January 1, 2011, 40 states and the District of Columbia have
enacted the UAAA. A version of the UAAA passed the Legislature in
2010 (SB 1098, Corbett), but the bill was vetoed by the Governor.
In addition to California, Michigan and Ohio have non-UAAA laws
regulating athlete agents. Seven states currently have no laws
regulating athlete agents.
5. The Sports Agent Responsibility and Trust Act (SPARTA). In 2003,
H.R. 362 and S.1170 were introduced during the 108th Congress to
address continued allegations of unethical and illegal activities
of athlete agents that result in significant damages. The Sports
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Agent Responsibility and Trust Act (SPARTA), signed into law in
2004, binds athlete agents to a certain code of conduct for
recruiting and signing athlete agents. Specifically, the law
prohibits athlete agents from:
Providing false or misleading information, or making
false or misleading promises or representations, providing
anything of value, such as gifts, cash or a loan to the
student-athlete or anyone associated with the athlete.
Failing to disclose in writing to the student-athlete
that he or she may lose NCAA eligibility after signing an
agency contract.
Predating or postdating contracts.
Stemming from concern that jurisdictional issues and lack of
uniformity have stymied meaningful enforcement of athlete agents,
SPARTA brings them under the jurisdiction of the Federal Trade
Commission (FTC), and considers athlete agents who lure student
athletes with lies and gifts to enter into agency contracts in
violation of the FTC's unfair and deceptive businesses act.
1. Related Legislation. SB 101 (Corbett), also being heard by this
Committee, seeks to update provisions in the Agents Act to address
potential conflicts of interest related to talent agencies
servicing professional athletic teams and leagues in situations
where they are not related to the employment of athletes an agency
may also represent.
SB 694 (Sher) of 2001, SB 1652 (Sher) of 2002 and SB 1098 (Corbett)
of 2010 all aimed to enact the UAAA but were vetoed by the
Governor.
AB 1987 (Miller, Chapter 857, Statutes of 1996) established the
Agents Act in California.
2. Arguments in Support. The City Attorney of Los Angeles believes
that the current penalties for athlete agents who violate the law
are too lenient, particularly when weighed against the significant
damage that results from illegal practices. As stated by the City
Attorney, "unscrupulous agents thrive on exploiting the financial
circumstances of student athletes, encouraging them to accept
financial incentives." The City Attorney also notes that since
athlete agents are motivated by financial profit, there must be a
"sufficient penalty" like relinquishing revenues.
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According to The University of Southern California (USC) , this bill
is necessary because the current law provides only minimal
oversight of athlete agents and this bill would help remedy this by
enhancing enforcement and requiring the courts to revoke the
privileges of an athlete agent. USC notes that under current law,
these agents must be sued civilly in order to force them to give up
revenue connected with illegal activity, but such claims are rarely
brought against agents. USC states that the bill provides for
greater incentives for such claims to be brought forth.
3. Policy Question : Should the bill specify who receives the
relinquished funds of the agent? In its current form, the bill
does not specify where money collected from an agent as a result of
a violation of this act will be deposited. Consideration should be
given to either providing all moneys collected with the
jurisdiction that prosecutes the violation or splitting funds so
that half the funds are deposited in the general fund.
NOTE : Double-referral to Public Safety Committee (second.)
SUPPORT AND OPPOSITION:
Support:
Carmen A. Trutanich, City Attorney of Los Angeles (Sponsor)
California Association of Independent Colleges and Universities
(AICCU)
University of California Office of the President (UCOP)
University of Southern California (USC)
Opposition:
None on file as of March 30, 2011
Consultant:Sarah Mason/Chris Belsky