Financial manipulation, improper accounting, and fraud are morbid realities of business. In fact, the Association of Certified Fraud Examiners reveals that an average organization “loses five-percent of its annual revenue to fraud.”1 Containing and eliminating fraud is particularly relevant to the sports representation industry, which I plan to pursue.
From Kirk Wright to Tank Black, the list of “advisors” who have manipulated their relationship with professional athletes is reprehensible. Whether a player’s loss is from fraud or negligence on the agent’s part is irrelevant. It does not change the bottom line. The numbers speak for themselves; from 1999 to 2002, criminal fraud lost 78 NFL players $42 million, and this only includes those cases that have been reported. 2
An agent’s fiduciary duty to his client stretches beyond their responsibilities at the negotiating table. Agents don’t merely determine a player’s value, convince a team to pay it, and then shape the compensation package. They also protect an athlete’s union rights, market a player’s image, locate outside sources of financial advice, and plan for his career after sports. However, one of an agent’s most undervalued and overlooked duties is to protect them from shady business individuals and endeavors.3
One enormous aspect of this, especially given the history between athlete’s and financial manipulation, is loss prevention from both inside and outside the company. An agent is typically the quarterback of a team of experts—lawyers, financial advisors, business managers, and accountants—all charged with maintaining and improving the athlete’s finances and life. Despite the fiduciary duty an agent owes to his client, the instances of deceit are well documented, and it is thus the agent’s job to prevent them.
Donald R. Cressey’s fraud triangle theory states that fraud occurs when three factors are present: motive, rationalization, and opportunity. A business only holds tangible control over the last factor, reducing opportunity is a necessity if a business plans to prevent fraud. Of course, establishing an ethical moral fabric within the company resolves this problem at its core. However, a company should be ready for anything, and there are two keys to reducing opportunity,...