Dan Lozano and Albert Pujols’ 2004 Contract

Did agent Dan Lozano compromise his client, Albert Pujols, with the first baseman’s 2004 contract? The facts bring Deadspin’s allegation into serious question.

As most baseball fans know by now, the website Deadspin has enjoyed an avalanche of attention after publishing incriminating information about Albert Pujols’ agent Dan Lozano. According to Deadspin, the same content had been provided anonymously to traditional sports news sites ESPN.com, Sports Illustrated and Fox Sports, yet only Deadspin ran with it.

The article, “Dan Lozano: Albert Pujols’s Superagent, "King Of Sleaze Mountain," was filled with juicy stories and embarrassing photos of the agent. Not a word of it was attributed to any named individuals.

Putting aside the non-revelation that agents can be sleazy, perhaps the most serious accusation lodged against Lozano was that his troubled personal finances led him to negotiate a hurried and unfavorable contract for the St. Louis Cardinals first baseman in 2004.

This article will look into that allegation using generally-available information – something anyone could have done had they been motivated to question the claims presented.

Setting the baseline

From the Deadspin article:

“Albert Pujols was the best thing that ever happened to Dan Lozano, who by 2004 was nearly broke, colleagues say. A source familiar with the negotiations says the Cardinals knew of Lozano's money issues (as did many GMs around baseball), and they knew he was desperate to get a contract extension signed as soon as possible.

"’How can you handle your client's finances when you can't handle your own?’ asks a rival agent.

“The result: eight years at $14.5 million a year. One executive called it ‘the best owner's contract in baseball,’ according to a baseball source.

“If it wasn't full market value, but it was money right when Lozano needed it...” [sic]

In summary, the related allegations appear to be as follows:

1)     Lozano was desperate to get Pujols’ contract signed ASAP.

2)     The deal was below market value.

3)     Lozano received needed immediate financial relief.

The record-setting contract

With the benefit of 20-20 hindsight, the Pujols contract became a great one for the Cardinals. There is no doubt about that. I don’t recall anyone saying it, however, when the deal was officially announced by Pujols and then-general manager Walt Jocketty in Jupiter, Florida on February 20, 2004.

In fact, at that time, it was celebrated for what it was – an unprecedented contract in Major League Baseball.

It was only the ninth $100 million-value contract in baseball history. Further, Pujols was the quickest ever to receive such a huge deal, ESPN reported when the contract news was first disclosed (on this very site, by the way).

What really distinguished Albert from the other eight was that he had played only three full seasons for the Cardinals to date and was first-time arbitration eligible. Pujols was still three years away from his first potential shot at free agency. The previous season, his $900,000 salary was then the record for a third-year MLB player.

Pujols’ situation in 2004

Specifically, it was February 18, 2004 as players across MLB were about to report to spring training camps. Pujols’ arbitration hearing was scheduled later that same week. Almost immediately, he would be required come to terms on some kind of contract for the 2004 season.

Had Pujols/Lozano and the Cardinals gone the arbitration route instead of agreeing to a multi-year deal, Pujols would have been compensated at one of two rates. He would either have been paid his submitted amount of $10.5 million or the team’s proposal of $7 million for the upcoming season, with no chance of anything in between. That binary decision would have been made by the arbitrators assigned to hear his case.

Instead, the two sides came to terms on the record-breaking, seven-year contract with an eighth-year option. The kicker is that during the first year of that deal, Pujols earned the same $7 million as if he had lost in arbitration.

Note that the terms were not as Deadspin stated, “eight years at $14.5 million a year.” Pujols’ annual salary actually began low and escalated over the term of the contract. That is important to distinguish in the context of Lozano’s alleged desire to get his hands on quick money in 2004.

Specifically, Pujols’ contract called for him to receive $7 million in 2004, $11 million in 2005, $14 million in 2006, $15 million in 2007 and $16 million in each of the final three years of the deal (2008-2010). The Cardinals also held a $16 million club option for 2011 with a $5 million buyout. They later exercised that option for the eighth and final season. Deferred money from years four through eight, award bonuses and other perks were also part of the contract. There was no signing bonus. Ultimately, Pujols’ base salary became $111 million over eight years.

If Lozano wanted more money over time, it seems he would have shot for a bigger deal, instead of allegedly settling for less. However, the focus of the Deadspin contention was that the agent’s financial need was immediate in 2004 and it drove his behavior.

Pujols’ contract did not deliver up-front money

Consider this. Had Lozano’s actions been fueled by a desire to maximize his short-term commission, why did he not try to get a flat $14.5 million over eight years as Deadspin presented?

In reality, acceptance of that would not have been under the agent’s control, as the Cardinals could have balked at such terms. However, the decision to take Pujols to arbitration absolutely could have been made by Lozano.

Had they gone to hearing and won, the agent would have gained his cut of $10.5 million rather than $7 million. There would have been no 2004 risk to him in making that attempt. Even if he and Pujols had lost the hearing, the player’s salary that season would have been identical to the $7 million amount for which they settled.

If Pujols himself wanted the multi-year deal right then, which certainly could have been the case, why didn’t Lozano demand a big signing bonus up front or at least more money in the first year(s) of the deal to maximize his current cash flow? Perhaps he did and the Cardinals gave him the thumbs down. We will never know.

The basic concept seems pretty simple. More money for the player earlier means more commission in the agent’s pocket sooner, as well. The reality is that Pujols’ deal is aligned completely opposite from that approach.

Even if the two sides had gone to arbitration in 2004, it would not have limited Lozano’s and Pujols’ options going forward.

Lozano could still have turned around the next day or the next year and attempted to negotiate a multi-year deal for Pujols. If cash in 2004 was the primary objective, as part of a later multi-year deal, Lozano might have tried to convince the Cardinals to adjust Pujols’ 2004 salary upward from what would have been established in the arbitration hearing.

There is no indication that any of that actually happened.

A reality check

To better understand the mechanics of player-agent compensation, I contacted lawyer and agent Darren A. Heitner with a series of inquiries. When doing so, I did not mention the subject of this article, but instead posed general questions.

First of all, I asked Heitner when MLB player agents receive payment.

“Players do not pay their agents up-front on their salaries,” Heitner explained. “Agents will earn their commissions as their clients receive their salary; however, players and agents are permitted to agree to a structure whereby agents are compensated at some later time. It is good practice for agents to send invoices to players at the middle of the season and again towards the completion of the season… It is not uncommon for agents to invoice their players on their signing bonuses upon receipt of same.”

Though he is now on his own, Lozano was employed by the Beverly Hills Sports Council in 2004. I wondered if the firm might have given him extra compensation for the Pujols contract. Again, Heitner responded to my generic question, without any reference to this particular situation.

“Agents are certainly 'taken care of' by their employers when they are able to successfully recruit a talented player and then negotiate a mega deal on his behalf,” Heitner noted. “Many agencies pay their employee agents a commission on deals procured for their clients in addition to a base salary. These payments are often accounted for in the agent's employment agreement with the agency. It is not rare for agents who hit the jackpot on a deal to get a little something special in their Christmas stocking.”

In other words - and this is my summation, not Heitner’s - there is nothing to indicate that Lozano received an immediate financial windfall as a result of Pujols’ contract signing. Of course, only he knows that answer for sure.

For subscribers: To read the full, exclusive interview with Heitner, TheCardinalNation.com subscribers can click here. Not yet a member? A seven-day free trial is available.

A conclusion

Pujols’ 2004 contract was not pushed through early. In fact, he was one of the last arbitration-eligible players in MLB to come to terms for the season.

In the context of cash flow, the timing of the deal appears insignificant, if not completely irrelevant. There seems no reason to believe Lozano would have received his commission from Pujols’ big contract sooner than customary – after the player was paid during the upcoming season by the Cardinals.

Further, the deal does not appear to have been executed in a way to maximize 2004 earnings. Pujols made the same that season under the mega deal as if he had suffered the worst-case scenario, an arbitration loss. Finally, there was no signing bonus to generate quick commissions.

Perhaps Lozano had personal financial problems in 2004 or maybe he didn’t. But the contract Pujols signed doesn’t appear to be related, despite the allegations made.

In my view, the Pujols contract-specific contentions in the Deadspin story simply do not hang together.

Team-friendly deal now, but it wasn’t then

Fast-forwarding six years into his eight-year contract, Pujols’ place in baseball history had been cemented, with three National League Most Valuable Player Awards and a World Championship to his credit. Then still two seasons away from his current free agency, Pujols acknowledged that his 2004 contract had benefited his club while making it clear the deal was good for him, as well.

At the Cardinals Winter Warm-Up fan festival in January 2010, the first baseman said the following, as reported by the St. Louis Globe-Democrat.

"I know people talk about my contract, but when I signed my contract in 2003, 2004, whenever it was, people are talking about that now being a bad contract," Pujols said. "But you know what? When I signed my contract back then, the Cardinals didn't have to do that but they did it. And it was one of the best contracts at the time.

"You can compare my contract now to Manny Ramirez, (Mark) Teixeira, A-Rod, whoever you want, and it looks bad, but you know what, they were free agents and I wasn’t. I only had three years in the league and the Cardinals pretty much did me a favor, signing me for $100 million."

One thing is absolutely clear. The person who would have the most to lose, Pujols himself, remained appreciative of the deal Lozano negotiated on his behalf.

Pujols-Lozano relationship continues

If Pujols had second thoughts about his handling by Lozano, he easily could have changed his representation any time during the course of the last eight years. Apparently, on multiple occasions, other agents have tried to convince him to do just that.

In September, Pujols told USA Today this:

"I've heard all of the dirt about Danny from agents for the last 10 years, all trying to sign me. They're wasting their time. Danny has been an open book. To me, he's the best agent in the business, and I trust him with my life."

This week, the St. Louis Post-Dispatch chased Pujols down on vacation in Hawaii, from where he reaffirmed his position.

"I am absolutely staying with Danny as my agent," Pujols said. "And he will continue to negotiate my free agent contract. I am embarrassed for the people who are behind this. I want to make sure that people hear that."

The bottom line is that Pujols remains satisfied with his choice of representation. That is entirely his business, not ours.

Brian Walton can be reached via email at . Also catch his Cardinals commentary daily at The Cardinal Nation blog. Look for his weekly minor league column during the season at FOXSportsMidwest.com. Follow Brian on Twitter.

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