The late Mark McCormack must be spinning in his grave. His baby has had a very 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.

Check out this NY Post article (H/T Joe Weisenthal at Clusterstock):

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.

This earlier post noted the fascinating contract dispute that has arisen between Texas Tech University and the most successful coach in the school’s history, Mike Leach.

Now, with the university and Leach at loggerheads, and a university-imposed February 17th deadline looming to get a deal done on a proposed modification and extension of Leach’s contract, the real issue ought to be this — why has IMG, Leach’s agent in these negotiations, allowed the negotiations to reach impasse?

Well, it probably is not all IMG’s fault because Leach has a law degree and is likely highly-involved in the negotiations.

But one has to wonder about the judgment of the agent and the coach who would allow a five-year, $12.7 million contract go up in smoke over a few contractual details that simply should not be deal breakers.

To put this in perspective, the contract that Tech has offered Leach is one of most lucrative in big-time college football, almost certainly one of the top 10 or 15 contracts in terms of compensation.

What makes that all the more remarkable is that Tech — with a relatively modest athletic budget of a bit less than $50 million a year — is not close to being one of the most lucrative football programs in college football. By way of comparison, Texas’ annual athletic budget is over $100 million and Oklahoma’s is about $75 million.

In short, a distinct possibility exists that the eccentric Leach will never receive another offer as lucrative as Tech’s current one in his coaching career. How on earth is Leach — who is a good but not great coach — thumbing his nose at that kind of scratch?

In short, because IMG and Leach don’t like several contractual details of the university’s proposed contract.

For example, IMG and Leach want it to be relatively inexpensive for another program to swoop in and hire Leach away from Tech.

Not surprisingly, Tech wants it to be relatively expensive for another program — at least during the first three years of the new deal — to hire Leach away from Tech.

Similarly, Tech doesn’t want to have to pay an arm and a leg to buyout Leach’s contract if it wants to make a change, while IMG wants Tech to pay Leach a buyout equal to 40% of the remaining compensation due Leach under the contract at the time Tech elects to fire him.

The other two issues are so minor that they barely merit mentioning.

First, Tech wants Leach to pay a penalty of $1.5 million if he interviews with another school during the term of the contract without Tech’s consent. The other issue is that Tech wants to have any outside income that Leach arranges approved by Tech and run through the athletic department.

Having been involved in a few of these rodeos, here’s why I think IMG and Leach are foolish if they allow this potentially lucrative deal to evaporate on Tuesday.

First, it’s simply not unreasonable for Tech — which does not have a particularly wealthy football program — to hedge its risk of losing Leach to another program by requiring a substantial buyout of the contract.

The purpose of such a buyout is to allow Tech to mitigate its loss by using the buyout funds to hire a good coach to replace Leach. Moreover, the amount of Tech’s proposed buyout will not deter a bigger program that really wants Leach. IMG and Leach ought to recognize this reality, negotiate the least amount of buyout that they can, and move on.

The buyout of Leach is the toughest issue, but not all that difficult to resolve.

IMG’s 40% proposal, particularly during the early years of the contract, is unrealistic given the size of Tech’s resources, so they should come off those amounts.

On the other hand, Tech’s proposal for the buyout in the later years of the contract is relatively paltry, so Tech should come up considerably on those amounts. By both sides giving a bit in those areas, a deal can be reached.

The other two problem provisions are easily resolvable.

On the outside compensation issue, Tech has to regulate that income under NCAA regulations, so requiring Leach to obtain Tech’s approval is not an unusual or unreasonable demand.

Leach and Tech should simply agree that Tech will have the right to approve any such outside comp and that such approval will not be withheld unreasonably. For his part, Leach should agree that he will report and account to Tech for all such outside income so that Tech can comply with its obligations under NCAA regulations.

Finally, Tech would probably waive the proposed $1.5 million penalty if Leach would simply agree that he won’t interview for another job during the term of the contract without Tech’s approval, which Tech should agree would not be unreasonably withheld.

Then, if Leach were to do so anyway, Tech could elect to fire Leach for cause, which means that it wouldn’t have to pay him anything further under the contract. That would resolve that issue.

So, if the foregoing is all that it would take for Leach to become a multi-millionaire, then why are IMG and Leach thumbing their noses at Tech’s attractive offer?

The only answer I can come up with is that sometimes pride and emotion really can overwhelm good judgment during the heat of negotiations.

Having said that, I still think cooler heads prevail and a deal gets done. There is simply too much for Leach to lose by not doing so. Leach may be eccentric, but he is not stupid.

And IMG didn’t become the world’s most successful agents by recommending that their clients reject very lucrative contracts.

A fascinating dispute between Texas Tech football coach Mike Leach and Texas Tech University highlights the tension in the relationship between the business of big-time college football and academia.

According to this Examiner.com article (a more-detailed Don Williams/Avalanche Journal article is here and a Double-T Nation blog post is here), Leach and Tech have agreed on the financial terms of an extended contract, but are hung up over several issues relating to termination and buyout of the contract, including Tech’s demand that Leach agree to pay the school $1.5 million if he interviews for another head coaching job without Tech’s permission.

Thus, despite Leach being Tech’s most successful football coach, Tech isn’t all that secure about Leach. And despite Leach’s success at Tech, Leach isn’t all that thrilled about being at Tech, which is evidenced by his continually seeking other head coaching jobs.

Tech apparently thinks that Leach’s wanderlust makes Tech look bad, so Tech is seeking to restrain Leach’s efforts to obtain another job by making it expensive for him to do so. However, by making such a demand, Tech reinforces to Leach that he really would prefer to be somewhere else.

So, Tech is caught in a conundrum.

On one hand, Leach has generated profitable attention for Tech; thus, it makes sense to pay big money to keep him.

However, on the other hand, Leach turns around and disparages Tech in the coach marketplace by continually trying to leave. Why pay big money to someone who is diminishing the value of your product?

Nevertheless, Tech is probably over-thinking this issue.

Leach is a good coach, but not the best diplomat. Pay him a salary commensurate with Tech’s financial capability and Tech’s position in the Big 12, and then require a hefty buyout to compensate Tech if another program hires Leach.

Don’t worry much about Leach’s wanderlust — a large buyout will deter most programs from pursuing Leach.

Trying to restrict Leach’s wanderlust by imposing a penalty is counterproductive in that it forces Tech to endure a coach who really does not want to be there while reducing the chance that Tech will realize a windfall from another program hiring Leach and paying Tech the buyout.

Having said all that, is Leach really worth it for Tech? Could Tech’s program do about as well with another (and likely, far less expensive) coach who is truly content with his position at Tech?

It would be refreshing if Tech were to decide to find out.