February 20, 2009
IMG's bad week
McCormack was the attorney who parleyed his friendship with PGA Tour star Arnold Palmer to create the world's leading management firm for professional athletes and celebrities, International Management Group, now known as IMG. In addition to Palmer, McCormack represented such icons as Jack Nicklaus, Tiger Woods, Margaret Thatcher, Mikhail Gorbachev and Pope John Paul II, to name just a few.
McCormack died in 2003 after suffering a major heart attack and his shares in IMG were sold in connection with the administration of his estate. With his death, the oversight of IMG passed on to a new generation of managers led by über-agent, Ted Forstmann.
Well, that new generation of managers just hit a serious bump in the road.
First, although a relatively small deal, IMG suffered a disproportionate amount of horrendous national publicity over its handling of the contract negotiations of eccentric but successful Texas Tech football coach, Mike Leach.
Not only did IMG alienate the decision-makers at Tech to the point that the university seriously considered firing Leach, IMG's handling of the matter forced Leach to resolve the contract impasse himself in a face-to-face meeting with Tech's chancellor yesterday afternoon. What is Leach paying IMG for, anyway?
At any rate, Leach's resolution of the impasse over his contract at least saved IMG from facing the prospect of a $10 million-plus malpractice damage claim from Leach for fouling up the negotiations.
But it appears that IMG may not be as fortunate with regard to its relationship with the major business fraud of this week, Stanford Financial Group.
The Post has learned that IMG quietly agreed to steer clients looking for investment advice to Stanford Financial Group, potentially exposing them to millions of dollars in losses resulting from the financial firm's alleged fraud.
According to three sources with knowledge of the situation, IMG and Stanford have a quid-pro-quo agreement under which Stanford Financial pays IMG a low- to mid-seven-figure consulting fee in exchange for IMG advising its clients - which include golfers Tiger Woods, Arnold Palmer, David Toms, Sergio Garcia and others - to have their money managed by Stanford.
The backroom bargaining has exposed IMG to charges of double-dealing, and is raising questions about where the firm's allegiances lay: with Stanford Financial or its athlete clients. [. . .]
IMG's deal with Stanford Financial involved the management firm advising the now-tarnished financial firm on where to spend sponsorship money, particularly related to golf tournaments.
Stanford's alleged fraud could cost IMG north of $10 million in fees, as well as any clients who got burned in the scandal.
For the time being, IMG is denying that it parked some of its clients' funds at Stanford in return for Stanford hiring IMG as a consultant. But IMG's denial raises as many questions as it answers, such as how did IMG's clients find Stanford if IMG didn't point them in that direction? You can rest assured that, if IMG was in fact consulting for Stanford while recommending that its clients invest money with the firm, IMG will probably just open up its pocketbook and reimburse those clients for any losses attributable to Stanford's demise.
Any other approach to the Stanford problem would be an even bigger public relations fiasco than what IMG has suffered over the Leach-Tech contract negotiations.
Frankly, regardless of whether IMG had a consulting deal with Stanford, that IMG may have recommended that at least some of its clients invest funds with Stanford raises serious questions about the firm's judgment. As noted earlier here, the Houston business community widely-knew for years that any investment in Stanford was an extremely risky bet.
IMG's immediate and vehement denial of any conflict of interest in regard to Stanford and its other clients reflects that it is taking this problem seriously. We all know what happens when a trust-based business loses the trust of the market.
Posted by Tom at February 20, 2009 12:01 AM |
I bet George Fleming is all over this one!
Posted by: Barton Bentley at February 20, 2009 9:26 AM
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