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Potential Loopholes to the International Signing Period

Ben Badler from Baseball America has long been recognized as perhaps the top guy on international prospects.  He has really been delving into the brave, new world of Latin American spending (starting this July 2nd under the new CBA) in recent weeks.  Today’s piece from Badler talks about potential loopholes that savvy teams may try to exploit in order to get around the $2.9M spending cap.  The article is a good read by itself and I thought it would be a nice follow-up to our article about the viability of an international draft from last week.

Within the article, Badler lists 6 specific methods that crafty teams and international directors could employ to exploit the new system.  These ideas were garnered from interviews with scouts and international directors from MLB teams, but Badler discounts some of them out of hand for not being truly plausible.

There were two ideas, however, that I thought were interesting enough to consider as loopholes for teams willing to stray into the gray areas.

The first idea was to commit to signing additional players from the same trainer.  Say Trainer X has a hot shot player that he feels would command $3M on the market last year, but that is now above the $2.9M cap for ALL players signed.  A team could agree to sign 2 currently available 17-year olds in Trainer X’s camp right now for $400K each and then sign the hotshot on July 2nd, when he is eligible, for $2.2M.  The Trainer gets his commission on $3M of total contracts, the two 17-year olds get an inflated bonus well above their worth (minus fees, of course), and the hotshot still gets a ridiculous amount of money, too.  Plus the team stays under the $2.9M cap and has money left over.

Is this legal?  Sure.  Is it ethical?  No.  It is a clear circumvention of the spirit of the cap and MLB, if they choose to track thoroughly enough, could enact fines against the MLB team that does this.  Although it is not highly publicized at the time of international signings, try to keep track of the trainers that each player is represented by.  If one team is signing a lot of players from a specific trainers, there could be some smoke to this theory.

The second idea that I found interesting was to stash a player in the Mexican League.  The reason I found this one interesting to share was the example of Luis Heredia.  In 2010, the Pirates signed Heredia away from his Mexican League team for $2.6M.  Although this is the commonly reported bonus (even here at Pirates Prospects), it has always been known that his Mexican League team received 75% of that number as a rights fee — similar to what happens when a Japanese team auctions off one of their free agents.  Technically, Heredia and his family only received $650K of that reported amount.

The theory espoused by Badler through conversations is that a trainer could send his soon to be 16-year old players to Mexico, have them establish residency and sign with a Mexican League team.  That player could then sign with a MLB team for $1M and keep $250K as his bonus.  The MLB team would only have $250K count against their cap, even according to one MLB official interviewed in the article.  It will definitely be interesting to see if there are a rash of Dominican/Venezuelan players signed as Mexican League free agents this year.

If either of these two practices, or any of the other 4 mentioned in the article, actually come to fruition this year, it could push MLB to an international draft sooner rather than later.  At that point, each draft slot would have a set bonus amount and it would greatly hamper the ability for shenanigans by trainers and MLB teams.

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  • http://profile.yahoo.com/SP5KGRLHREA26KGZGW6EPUIIPY Paul

    I’m having a hard time understanding how the Mexican League route would benefit the player or trainer in any way. (I understand how it helps the Mexican League and the MLB team.)

    What is the motivation for the player to go this route and potentially receive far less money? Wouldn’t the trainer get shutout of the money, or does he receive a cut? If so, does the trainer’s cut come from the Mexican League or the player?

    • Kevin_Creagh

      The theory is that the trainer gets a cut on the back half from the Mex League team. In the BA piece, he mentions that a group of people bought a defunct Mex League franchise for the purpose of potentially attracting Latin American players.
      And in Latin American signings, no one cares about the player’s benefit. That’s the sad truth.

      • http://profile.yahoo.com/SP5KGRLHREA26KGZGW6EPUIIPY Paul

        I just read the following from Ben Badler on BA:

        “The rule applies to Mexican citizens only, the official said, so teams
        can’t send a Dominican or Venezuelan player to a Mexican League team to
        try to get around the new bonus rules.”

        So unless the player obtains Mexican citizenship it would seem this is not the loophole originally theorized.

        • Kevin_Creagh

          No, that is what people are saying could happen. It’s incredible to think about, but changing citizenship is seen as “viable”.

  • sweetleb

    how about a bag of cash off the books of corse, kind of what they do in college football.

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