How the MLB–FCB Deal Could Face Legal Hurdles, Political Resistance

A landmark agreement between the MLB, the MLBPA and the Cuban Baseball Federation (FCB) could pave the way for a faster and safer movement of Cuban stars to the big leagues. Legal analyst Michael McCann breaks down the possible legal hurdles and political resistance from the White House that could result from the agreement.

A landmark agreement between Major League Baseball, the Major League Baseball Players’ Association and the Cuban Baseball Federation (FCB) could pave the way for a faster and safer movement of Cuban stars to the big leagues. Yet as explained below, the agreement could face legal hurdles as well as political resistance from the White House.

The agreement to end defections and to permit work visas

On Wednesday, MLB announced a three-year working agreement with the FCB, designed to “end the dangerous trafficking of Cuban players.” The chief element of that design: enable MLB teams to directly sign players from Cuba and ensure that those players and their families can travel safely and lawfully between the U.S. and Cuba.

Not all signings will be direct. MLB teams will need to pay the FCB for the contractual release of players who are 24 years old or younger and who have five or fewer years of service. The fee will reflect 25% of the signing bonus. It will be up to the FCB to decide whether to release such a player. In contrast, MLB teams will be able to sign Cuban players who are 25 or older and who have at least six years of experience in FCB without the consent of the FCB (MLB teams will, however, need to pay the FCB 15% to 20% of the total value of those players’ contracts).

If it goes into effect, the agreement would create a much more orderly and predictable process for MLB teams to sign Cuban players. It would also infuse the FCB, which has lost hundreds of players to defection, with needed funding. The agreement also instructs that Cuban players will be able to receive work visas that will allow them to be employed in the U.S. and travel with their family. Accordingly, these players and their families will be able to return to Cuba without legal complications. They would no longer need to defect to enjoy MLB careers and relinquish their Cuban citizenship.

The agreement does not foreclose the possibility of Cuban players defecting to another country and then seeking admission into the U.S. It’s possible some players would prefer that option, perhaps for personal or political reasons. They might also believe they would net a more lucrative contract as a free agent wherein their agents could host a showcase of the player to exhibit his skills and talents. Provided such a showcase went well, it might convince multiple MLB organizations to enter a bidding war for the player. This is especially true of players who are at least 25 years old, as they are not subject to the collectively-bargained cap on MLB teams’ international signings. However, under the MLB–FCB agreement, players who defect from Cuba would have to wait a couple of years before joining an MLB organization. Further, the MLB teams that sign them would still need to pay the FCB. On balance, then, the option to defect might longer prove advantageous for those pursuing an MLB career.

The embargo’s historical impact on Cuban players who seek to play in the U.S.

The ability of the MLB–FCB agreement to reduce—if not outright end—the dangerous smuggling of players out of Cuba is the agreement’s most appealing feature. Such smuggling has long been of concern to MLB and MLBPA executives, as well as to lawmakers and human rights advocates. Players have been forbidden from leaving Cuba, where salaries are determined not by market demand but by the central government. As a consequence, salaries for ballplayers in Cuba are dramatically lower than those found in MLB. Estimates vary, but many Cuban players earn roughly between $125 to $175 a month. This is far less than what low-paid (many argue grossly underpaid) U.S. minor leaguers earn and nowhere near the minimum MLB annual salary of $550,000.

The pay of Cuban players reflects the country’s socio-economic system. Cuba is a communist state run by President Miguel Díaz-Canel and his predecessor, Raul Castro, who after stepping down as president in April remains head of the Communist Party of Cuba. Since Castro’s brother, Fidel Castro, led a successful rebellion against the U.S.–backed government of Fulgencio Batista in 1959, relations between Cuba and the U.S. have been problematic. Early on, Cuba’s alliance with the U.S.S.R. sparked security concerns for the U.S., particularly given that Florida and Cuba are separated by merely 93 miles of ocean. Soon those concerns led to bilateral distrust, which was only amplified by the Bay of Pigs Invasion and the Cuban Missile Crisis. The distrust grew as evidence of disturbing human rights abuses and political repression surfaced under the Castro regime.

In the early 1960s, the U.S. instituted an economic embargo on Cuba and cut off diplomatic relations. The U.S. hoped that these moves would financially harm the Cuban economy and thereby destabilize Cuba’s leadership. While the Cuban economy would suffer in the following decades, Fidel Castro held a firm grip over the country until 2008. Castro, 82 at the time, voluntarily transferred power to his brother Raul, who continues to lead the Communist Party of Cuba.

In 2014, President Barack Obama and Raul Castro agreed to restore diplomatic relations, which led each country to reclaim an embassy in the other’s capital city. Over the next two years, the U.S. and Cuba agreed to ease travel restrictions and permit limited types of economic collaborations. Those collaborations chiefly concern medical practices, scientific research, humanitarian efforts and banking opportunities. Last year, President Donald Trump announced the U.S. government would revise some of the changes to the U.S.–Cuba relationship made under President Obama. The actual impact of those changes appears more limited than forceful rhetoric had signaled. Arguably a more consequential change under President Trump has been the U.S. government’s recent decision to reduce its embassy staff in Havana in the wake of sonic attacks.

As to the embargo, it is not one law but rather a catchall moniker for various statutes, executive orders, regulations and other proclamations that are designed to prevent or impede economic relations between the two nations. It began largely through executive orders issued by President John F. Kennedy and years later would become codified into statutes, including the Cuban Democracy Act of 1992 and the Cuban Liberty and Democratic Solidarity Act of 1996. Numerous regulations promulgated by the U.S. Treasury Department and the U.S. Commerce Department have also clarified and altered the scope of the embargo. The larger point is that despite the warming of diplomatic and economic relations between the U.S. and Cuba, the embargo remains in effect.

Among other things, the embargo bars American companies from conducting most types of business in Cuba and generally forbids them from negotiating with entities affiliated with the Cuban government. It also denies American businesses the opportunity to hire Cuban citizens. Violators of the embargo are subject to possible incarceration and massive fines.

As the embargo has been understood over the last six decades, MLB teams cannot sign players in Cuba, or sign Cuban citizens who are outside of Cuba, to employment contracts. This point was captured in a 1977 letter by then–MLB Commissioner Bowie Kuhn to teams in which Kuhn made clear that MLB teams cannot recruit or sign a player who is a Cuban citizen.

Circumventing the embargo and baseball draft

Until the new arrangement between MLB and FCB goes into effect, a player in Cuba can only join an MLB organization by separating himself from his country and renouncing his citizenship. This is a difficult and unappealing task for a variety of reasons. For one, leaving Cuba has been regarded by Cuban officials as an act of disloyalty or even treason. In fact, as detailed by Matthew Frankel in Major League Problems: Baseball's Broken System of Cuban Defection, the Cuban government treats defected players as if “they no longer exist, never mentioning them again in the state-controlled press . . . in official record books, baseball defectors have asterisks by their name; the explanation reads, abandono el pais, or ‘left the country.’” Unless relations between the U.S. and Cuba improve, a Cuban player defecting means saying goodbye to his family, friends and culture for a long time; the wait to return for a visit is at least eight years.

It took decades for a Cuban player to successfully defect to the U.S. to play baseball. In 1991, pitcher René Arocha defected while traveling with the Cuban national team in Miami International Airport. Arocha managed to evade his team during a flight layover. He would later sign with the St. Louis Cardinals. Several other Cuban players soon followed. These players benefited from the Cuban Adjustment Act of 1966 and the related “Wet Feet, Dry Feet” policy developed under the administration of President Bill Clinton. These legal actions allowed Cubans who arrived in the U.S. to seek permanent residency after one year (President Obama ended this policy in 2016).

Initially, MLB and the MLBPA weren’t sure how to classify the employment rights of defecting players. Should they be considered free agents who could sign with any team, or should they be subject to the MLB Draft or some other process that restricts their options? MLB deemed that defected players would be subject to the June amateur draft or a special lottery. In either approach, the player can’t negotiate with multiple MLB teams and leverage teams’ offers against one another. He must instead sign with the team that exclusively obtained his MLB rights.

Several Cuban players attempted to circumvent this restriction by entering the U.S. by way of a third country that is neither subject to the MLB draft nor any other MLB restriction on player movement. Under collectively bargained rules, draft-eligible players are those from the U.S., U.S. territories and Canada. Meanwhile, MLB has signed agreements with the Chinese Professional Baseball League, the Nippon Professional Baseball and the KBO League to ensure that players from those leagues in China, Japan and South Korea cannot directly negotiate with MLB clubs. No such system is in place for players from many other countries, including the Dominican Republic and Haiti.

Livan Hernandez was one Cuban player who avoided the MLB draft. The former Florida Marlins and Montreal Expos pitcher defected while the Cuban National Team played in Mexico. Hernandez then traveled to Venezuela and later to the Dominican Republic where he obtained political asylum. By obtaining asylum in the Dominican Republic, Hernandez became eligible to seek a visa in the U.S. He and his agent, Joe Cubas, then negotiated with multiple MLB teams. In 1996, Hernandez signed a deal with the Marlins that paid him a $2.5 million signing bonus—at the time the most lucrative bonus ever for a foreign baseball player.

The dangers of defection and role of the Justice Department’s on-going investigation

The strategy of defecting from Cuba to a country other than the U.S. and then establishing residence there has at times been fraught with danger. A particularly telling example was the terrifying experience of Cincinnati Reds outfielder Yasiel Puig, who, until a blockbuster trade on Friday, had played his entire career in the Los Angeles Dodgers organization.

A Brief, Incomplete History of Yasiel Puig's Unforgettable Tenure With the Dodgers

As detailed by Jesse Katz in his LA Magazine article Escape from Cuba, Puig risked his life to flee Cuba, where he says he was paid $17 a month. In 2012, Puig and three others were smuggled out of Cuba on a speedboat that had been commissioned by the Mexican drug cartel Los Zetas. It was Puig’s 13th attempt at trying to defect. He was taken to a Mexican island and held there for a ransom payment. Los Zetas expected payment from a criminal in Miami who had facilitated Puig’s smuggling with the expectation that he would receive 20% of Puig’s earnings in MLB. Summarizing a complicated story with many disturbing twists, Puig was then essentially kidnapped and taken to Mexico. He later signed a seven-year, $42 million contract with the Dodgers. While in the U.S., Puig would continue to be harassed for money through various threats to him and to his family.

Puig’s story is especially dramatic, but other defecting players have endured similarly treacherous experiences. They are aware that MLB teams will pay them amounts of money that in one year—if not one month—will far exceed what they could earn in their entire careers in Cuba. Yet they endured hardship to get to the U.S. Many, like Puig, also insist they continue to be harassed by corrupt individuals who are tied to Cuban defections.

The Justice Department is aware of this dynamic and how criminals are incentivized to play instrumental roles in it. As reported by SI’s Jon Wertheim in October, the U.S. Department of Justice is conducting a “sweeping probe” into how the recruitment of players who defect from Cuba may reveal violations of the Foreign Corrupt Practices Act (“FCPA”).

At its core, the FCPA prohibits the bribing of foreign officials. One potentially relevant type of bribe is that a player’s “buscone” or handler may be inclined to bribe local government officials in order to facilitate the process of the player gaining residency in a country other than Cuba. A player must establish residency in order to apply for a visa to work in the U.S.; until that time, he is considered “blocked” by U.S. law and off limits from conducting business with any American company. One such company is an MLB team—any MLB team that attempts to negotiate with a blocked player can face severe sanctions from the U.S. government and criminal charges that carry up to a decade in prison. Players who defect and establish residence elsewhere usually seek a P-1 visa, which is designed for internationally recognized athletes and requires an interview at the American embassy or consulate. Federal prosecutors may be able to show that agents “greased the skids” for the showing of residency, which in turn allowed the player to participate in showcases before MLB scouts.

Buscones are problematic on different levels. For one, they are often considered unethical and too closely connected to organized crime. For another, their primary goal is to maximize their cut from assisting a Cuban player to relocate, often in dangerous circumstances, from Cuba to another country. The non-monetary interests of players, including their safety and that of their loved ones, are often ignored. In many cases, a buscone will arrange for an illegal and dangerous defection out of Cuba and then when a player lands in the Dominican Republic, Haiti or another country, the buscone will try to arrange for residency, perhaps in unlawful ways. The Justice Department is likely interested in the role of American agents in negotiating with buscones.

In addition to potential FCPA violations, the Justice Department may be considering the role of wire fraud, money laundering and conspiracy in the process by which defected players land in the U.S. Any charge along those lines would probably center on the relationship between buscones and agents. With that in mind, the use of banking institutions to improperly funnel money from agents to buscones could surface as a source of concern.

Despite these unsavory dynamics and the Justice Department’s interest in them, several MLB teams actively recruit and sign defected players. As Jon Wertheim and I explored in October, the Los Angeles Dodgers have been particularly active in signing Cuban players. In many cases, however, the returns on these players haven’t matched the investments.

The compatibility of the agreement with President Trump’s administration

An agreement between Major League Baseball—the dominant professional league for “America’s pastime”—and a pro league sponsored by Cuba’s communist government is bound to trigger political controversy. Such an agreement would have been unimaginable decades ago, especially during the Cold War.

MLB officials were aware of that point long before the league began negotiations with their FCB counterparts. They agreed to bargain with the FCB only with the explicit approval of the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). Within the federal government, the OFAC possesses primary jurisdiction for the administration and enforcement of economic and trade sanctions. In March 2016, Ben Strauss of The New York Timesreported that the MLB had formally requested permission from the OFAC to negotiate with the FCB. For obvious reasons, MLB sought assurance that negotiations would not in any way be construed as violations of the embargo. The league subsequently received a license from the Treasury Department to proceed.

The approval of the license was made under the U.S. Secretary of Treasury at that time, Jack Lew. President Obama appointed Lew, who had previously served Obama as White House Chief of Staff. According to reporting by Dave Sheinin and Karen DeYoung of The Washington Post, MLB officials obtained confirmation from the Treasury Department under its current secretary, Steven Mnuchin, that the license remains valid. Those officials are mindful that Mnuchin was appointed by President Trump, who has expressed significant skepticism towards efforts to improve U.S.–Cuba relations.

As Sheinin and DeYoung report, some in the White House seem opposed to the MLB–FCB deal. Their basic contention is that it would betray the core and longstanding purpose of the embargo: to prevent money from reaching Cuba, thus destabilizing the Cuban economy and the Cuban government that plans it.  One “senior administration official” told The Post that the MLB’s deal “would institutionalize a system by which a Cuban body garnishes the wages of hard-working athletes who simply seek to live and compete in a free society.” The official went on to say, “We do not condone the actions of any person or entity that contribute to the violation of human rights of Cuban citizens and the Cuban regime's schemes to profit from the labor of its people abroad while keeping them in thrall to an oppressive political system."

To the extent the White House seeks to block the deal, it could argue that the agreement reached is materially different than the terms authorized by the Treasury Department’s license. Alternatively, it might claim that the license did not adequately contemplate connections between the FCB and Raul Castro’s regime. Under this logic, even if the FCB is not part of the Cuban government, it might be regarded as too closely tied to the Cuban government and thus its gains are enjoyed by the government in violation of the embargo. With that in mind, the White House is surely aware that Fidel Castro’s son, Antonio Castro-Soto, has served as vice president of the FCB.

If an adverse conclusion were reached by the Treasury Department, the Department could rescind the license. At that point, the MLB–FCB deal would no longer enjoy an exemption from the embargo and thus no longer be lawful. Such a move would surely lead the MLB to challenge the denial in court. The league would argue that its agreement sufficiently matches the terms of the license and that any administrative decision to terminate the license for political reasons would be arbitrary and capricious.

SI will keep you updated on legal developments with the MLB–FCB deal.

Michael McCann is SI’s legal analyst. He is also Associate Dean of the University of New Hampshire School of Law and editor and co-author of The Oxford Handbook of American Sports Law and Court Justice: The Inside Story of My Battle Against the NCAA.