Raising Cane
By Rob Perez
Sunday, January 27, 2002
Questions of favoritism
Timeline
cloud UH deals with agentJune Jones was the golden boy who could do no wrong. His team was well on its way to completing one of the most amazing turnarounds in college football history.
So in 1999 when the University of Hawaii football coach pushed the idea of UH hiring his longtime agent and friend, Leigh Steinberg, to help revive the school's ailing sports marketing efforts, administrators enthusiastically embraced it.
The prospect of getting a nationally prominent agent to team up with UH on the heels of Jones' wildly successful inaugural season was like a dream come true.
That dream became reality in April 2000 when UH, without seeking competitive bids, entered into a five-year, $100,000-per-annum consulting contract with Steinberg's firm, Steinberg Moorad & Dunn. A few months later, the school signed a separate but related six-figure marketing agreement with the firm, again without seeking other proposals, something the athletic department was not required to do.
Both deals clearly have benefited the university, UH officials say. The athletic department, for instance, is expected to net roughly $900,000 to $950,000 in marketing revenue -- the most ever -- in the fiscal year ending in June. That's money generated from corporate sponsorships of UH sports.
"The results have been pretty damn amazing," said Jim Donovan, associate athletic director.
But for those who care about open government and conducting the public's business free of potential conflicts of interest and favoritism, the Steinberg case raises troubling questions, mostly over how UH administrators didn't consider or too easily dismissed such concerns.
Questions still persist even as Steinberg helps Jones renegotiate his UH contract while his firm serves in major consulting and marketing roles for the athletic department.
Sports marketing experts on the mainland say having the same firm representing the athletic department and its head football coach simultaneously not only is unusual, but creates the potential for conflicts at multiple levels.
What's in the best interests of one client is not necessarily in the best interests of the other, they say.
"It's hard to serve two masters," said Scott Kelley, director of the University of Kentucky's Center for Sports Marketing.
"It all sounds very shady," added James Santomier, a business professor who teaches sports management and marketing at Sacred Heart University in Fairfield, Conn.
UH officials say everything about the Steinberg agreements was handled above board and that they didn't consider the firm's multiple roles at the university a problem.
"There is no conflict at all," Jones said. "This is a unique situation."
UH administrators also said the school was fortunate, thanks to the Jones connection, that someone of Steinberg's prominence was even interested in helping UH. Steinberg's contacts especially would be beneficial as the university strove to get its story out nationally and internationally, they said.
But UH administrators may have been too enamored with Steinberg's reputation and with trying to please a coach who was quickly becoming the most popular public figure in the islands. (Remember the "June Jones for Governor" T-shirts?)
A look at how the Steinberg deals developed raises a number of red flags, beginning with how little public discussion took place before the first contract was approved in April 2000 by the Board of Regents.
Despite the fact that the Steinberg deals were to be the first of their kind for UH's athletic department and UH was going to be the first collegiate client for Steinberg's firm, the school saw no need to solicit other proposals.
It didn't have to. The athletic department has been exempted from the state's procurement laws since the mid-1990s.
Yet public universities elsewhere generally seek competitive bids -- many are required to do so -- when they hire contractors for major deals. Bids are sought so the institutions can gauge whether they're getting the most bang for their bucks.
Former UH President Kenneth Mortimer, who was at the helm when Steinberg was hired, said the university didn't solicit other proposals because he didn't think anyone else of Steinberg's stature would consider bidding.
"There was no way a Leigh Steinberg would be interested in talking to us at all" without the Jones connection, Mortimer said.
Still, UH administrators and regents had enough concerns about the proposed Steinberg contract that several UH representatives went to see a West Coast attorney versed in such deals to get an independent assessment. They were told it was a good agreement, said Hugh Yoshida, UH athletic director.
By the time the contract went before the board for approval, all worries apparently had vanished.
Even though the agreement didn't get its first public airing until the regents met in April 2000, it was approved unanimously with no regent raising any concerns, according to minutes of the April meeting.
For $100,000 a year, the agreement called for Steinberg's firm to conduct a number of evaluations, such as what improvements could be made on UH's Aloha Stadium lease. It also required the firm to do an analysis on the best way to restructure the sports marketing department, which was disbanded in 1999 for budgetary reasons, and whether a private contractor should be hired to do the marketing work.
When Steinberg completed the restructuring analysis about a month later, it recommended the department be re-established. The firm also presented two options for doing the marketing: UH could do the work internally, or it could hire Steinberg.
The company struck the marketing deal several months later. It was paid about $235,000 in the first year of that annually renewable agreement, and currently is in the second year.
Santomier, the sports marketing professor, said he was amazed that Steinberg got the consulting contract without bidding and then was able to score the marketing one by doing an analysis that the company benefited from financially.
"What a sweet deal," he said.
But Mortimer said it's not unusual for a consultant to be hired to analyze a problem, recommend a solution and then offer to do the fix for an additional fee.
Regarding Steinberg's multiple roles at UH, Mortimer said he never even considered that might create conflicts of interest.
Steinberg himself, however, recognized such potential. That's why he keeps the marketing and consulting division of Steinberg Moorad separate from the agency representation side, according to Jonathan Atha, director of collegiate marketing for the firm.
Staff members from one division can't discuss their work with colleagues in the other, and if Atha is in a room when Steinberg starts talking about Jones' contract, Atha has to leave.
"Leigh's very cognizant of that (potential conflict)," Atha said. "He takes great care to keep all of that segregated."
Like UH officials, Atha said the partnership between Steinberg and UH has proved successful.
Yoshida, the athletic director, said UH already had a great relationship with Steinberg based on his involvement in negotiating Jones' original contract in 1998. UH, Yoshida said, got a great bargain, and Steinberg played a part in that.
In his first season with UH, Jones took what was an 0-12 team and led them to a 9-4 record, a share of the Western Athletic Conference championship and a victory in the Oahu Bowl.
After a disappointing 3-9 season the following year, the Jones-led Warriors came storming back, capping a 9-3 season with a blowout of rival BYU last month.
Given the euphoria that still remains from the season, Santomier doesn't believe all the questions about the Steinberg deals will register much concern.
"It's very shady, but in the long run no one's going to care, because they're winning," the professor said. "And if you raise those questions, you'll be accused of being a spoilsport."
Spoilsport it is.
Sports agent Leigh Steinberg is representing University of Hawaii football coach June Jones in contract negotiations with the school. Steinberg's firm also is doing consulting and marketing work for the UH athletic department, creating a series of intertwining relationships that raise questions about conflicts of interest. Here is how those relationships developed: Chronicling the
Steinberg-UH relationshipDecember 1998: June Jones is hired as UH football coach under a five-year agreement negotiated by firm of Leigh Steinberg, Jones' longtime agent.
July 1999: Athletic department disbands its marketing operation for budgetary reasons.
November 1999: With Jones' support, Steinberg meets with university officials in a private meeting to propose that his firm market UH sports. Then-UH President Kenneth Mortimer endorses the idea.
December 1999: In Jones' first year, the Warriors finish 9-4, including a 23-17 victory in the Oahu Bowl. It is a record turnaround from the previous season's 0-12 finish.
April 2000: Without seeking competitive bids, UH hires Steinberg on a five-year consulting contract for $100,000 annually. The agreement opens the door for Steinberg to do marketing for UH as well.
May 2000: Steinberg recommends that UH re-establish a sports marketing department. The company proposes two options: UH does the work itself or hires Steinberg to do it.
September 2000: Steinberg and UH sign a marketing agreement that in its first year nets the company roughly $235,000. UH earns $610,000.
December 2000: UH ends disappointing season 3-9.
December 2001: UH finishes season 9-3, including a stunning 72-45 win over then-No. 9-ranked Brigham Young University.
December 2001: Steinberg starts renegotiating Jones' contract with UH.
January 2002: Under Steinberg's watch, UH expects to net $900,000 to $950,000 in marketing revenue this fiscal year, the most ever for the athletic department.
University of Hawaii
Star-Bulletin columnist Rob Perez writes on issues
and events affecting Hawaii. Fax 529-4750, or write to
Honolulu Star-Bulletin, 500 Ala Moana Blvd., No. 7-210,
Honolulu 96813. He can also be reached
by e-mail at: rperez@starbulletin.com.
