An unpunished fraud
Major League Baseball is big business. Not only do its 30 teams collectively generate more than $10 billion in revenue each year, but individual franchises, on average, are valued at more than $1.5 billion. Elite teams, such as the New York Yankees, command a multiple of that amount.
Championship-caliber play by a club, as teams are called, boosts not only its revenue but also its franchise value. Winning a pennant is said to be worth about $35 million to a team.
Each MLB franchise is allowed a team roster with a maximum of 26 active members per game, plus some reserves, so the total universe of players in any given season is relatively small for our national pastime.
MLB is not a public company, which means its financial information is not publicly reported or scrutinized. MLB is basically a private cartel that depends on public trust, interest and support to succeed.
It’s also a monopoly, exempt from most antitrust laws. The U.S. Supreme Court ruled in 1922 that Major League Baseball was not engaged in interstate commerce (despite teams routinely and repeatedly traveling across state lines to play games).
At the time, the term “commerce” was much more narrowly interpreted by federal courts than it is today, and the lack of team activities related to the actual production and distribution of physical goods allowed the league to avoid antitrust constraints and legally engage in monopolistic practices.
This monopoly exemption has been upheld several times by the Supreme Court, and the court declined to hear another challenge as recently as 2018.
MLB even has its own Constitution, in which Articles and Sections set forth the league’s and clubs’ respective relationship, rights and responsibilities. Article III, Section 1 gives the Commissioner of Baseball unilateral dictatorial authority, “solely and finally, to determine and decide all jurisdictional questions.”
This authority extends to preventive, remedial or punitive action regarding any “act, transaction or practice” deemed “to be not in the best interests of the national game of Baseball” by a club or individual.
His powers of punishment can include suspension or removal of any owner, officer or employee of a club and temporary or permanent ineligibility of a player. He can also impose fines on clubs and individuals.
Fines, however, are limited to a maximum of $2 million for a club, and $500,000 for an individual. Player fines must be “in an amount consistent with the then-current Basic Agreement” with the baseball union, the MLB Players Association. In Article VI, the teams essentially acknowledge that the Commissioner’s rulings carry the weight of divine commandments, and agree to be “finally and unappealably bound” by his actions. They also agree not to engage in litigation “between or among themselves,” and waive their “right of recourse to the courts.”
Understanding this tight-knit, closed-fist, tidy little insulated cocoon that is Major League Baseball helps fans make sense of the seeming illogic being applied to its latest scandal, after the Houston Astros were caught using electronic devices to cheat in their successful 2017 and 2018 seasons.
Using a camera in centerfield to steal the catcher’s signs (signals to the pitcher for what the next pitch will be), that live-feed information was instantly shared with the dugout, where a coded banging noise informed the batter what the next pitch would be.
During his investigation, Commissioner Rob Manfred admitted the cheating was “player-driven” and “player-executed,” but he only fined the Astros club and suspended two coaches—no players. A number of players had been granted immunity in exchange for their cooperation, and Manfred said it would be impractical to identify others with certainty, plus many had moved on to play with other teams.
Since the current bargaining agreement with the Players Association expires in 2021, the more likely reason is he didn’t want to unnecessarily upset the negotiations apple cart.
The Commissioner’s word is law, and teams have sworn not to sue each other, but that doesn’t change the fact that cheating along the way to winning a league championship series is a multimillion-dollar fraud—worsened by the Astros’ condescending dismissal of Yankees’ and other teams’ suspicions (now proven true) at the time.
Houston manager A.J. Hinch, who was suspended for one year and then fired one hour later by the Astros, was particularly vocal in deriding opponents who accused the Astros.
“It’s a joke,” he said last fall, referring to Yankee accusations during the American League Championship Series. “It made me laugh because it’s ridiculous.”
Manfred said evidence showed Hinch knew all along about everything.
Since the commissioner said he won’t discipline players, they’re off the hook—at least with MLB.
But in other businesses where individuals conspire to defraud an organization of millions of dollars, criminal charges are often brought. State or federal cases can be pursued even when a fraud was not successful. The burden of proof is based on intent, which was clearly rampant in Manfred’s report.
Letting millionaire players off scotfree is a gross injustice in this case (and likely injurious to the sport; fans want fair play). Lots of people are sitting in prison for far smaller fraud schemes.