Sports Business: BASKETBALL
FALLASHA ERWIN IN YOUR FACE
Is the toughest-talking agent in pro basketball too tough?
Imagine this. You're 20 years old, not long out of the 'hood in Detroit, you've barely ever balanced a checkbook, and the NBA is recruiting you. Who you gonna call?
For many world-class athletes, deciding whom to trust when they are on the verge of the big time can be excruciating. Most sign up with powerful independent agents or big sports-management outfits--strangers who provide them with a battery of lawyers, accountants, financial planners, and endorsement gurus. But Chris Webber, power forward for the Washington Bullets, looked homeward.
The man he turned to was a Detroit lawyer and CPA named L. Fallasha Erwin, known to Webber because of Erwin's longtime romantic relationship with Webber's aunt. In the three years that he has represented Webber, Erwin has become controversial in the NBA. Many say he's a hot-tempered, outof-his-depth amateur who is hurting his client's interests. As Erwin tells it, he's a damn-the-rules agent unafraid to play rough to get what he wants. What's clear is that Erwin has rubbed the basketball Establishment the wrong way.
Erwin is an anomaly: Few big-league players have a single adviser who is at once lawyer, CPA, tax guru, agent, and business manager. And in a world where the workers are mostly black and the management white, Erwin stands out as an African American who came up the hard way. The son of a factory worker, Erwin put himself through law and business school at the University of Michigan. Later, he worked as a Coopers & Lybrand tax specialist.
Intent on examining the business of being a superstar athlete, BUSINESS WEEK late last year approached the NBA. League officials suggested Webber and provided an introduction to Erwin, who eventually discussed his plans for Webber during six hours of interviews. Erwin now contends some of the information included here was given off the record, which BUSINESS WEEK denies.
Darting through traffic at 70-plus mph on a congested Detroit interstate, Erwin whips by startled drivers as he divulges details of his grand plan for running Webber's financial empire. "I've set up this company to create jobs for Chris's family out of Chris's earnings," Erwin screams as he swerves back into the fast lane. "We're not just giving them money. It gets around IRS rules. That's the beauty of it."
FAIR PAY. The centerpiece of this empire is the fourth-largest contract in NBA history: $57 million over six years. Erwin and veteran basketball agent William Strickland of IMG, who was enlisted only to help do the deal, negotiated the contract for Webber in late 1995. Several sources familiar with the negotiations say Strickland was primarily responsible. Strickland declined comment. Still, Erwin's share of the one-time commission on Webber's salary totaled close to $1 million. Certainly a fair payday for helping close such a deal. Beyond that, BUSINESS WEEK estimates that Erwin earns in excess of $100,000 a year for handling Webber's business affairs. But one common criticism of Erwin is that his get-out-of-my-way driving style extends to his professional relations and is costing the affable Webber big money in endorsement contracts.
Erwin says Webber earned around $1 million last year in endorsement income from deals with Nike, Mid-Atlantic Coca-Cola Bottling Co., and LogoAthletic. But other young NBA stars deemed by sports marketers to be of Webber's stature rake in far more. The Pistons' Grant Hill and 76er rookie Jerry Stackhouse, for instance, also play for so-so teams, yet each earns an estimated $4 million to $5 million a year off court. "Clearly, Webber is undervalued," opines Jed Pearsall, president of Performance Research, a Newport (R.I.) sports consultant. "But when you're selling a one-man product, as with Webber's agent, you've got less leverage and have to take what's offered."
That's part of the problem, but numerous sports marketers blame Erwin's inexperience and abrasiveness for his failure to close more deals. "Fallasha is not an agreeable sort," says Thomas Carmody, who in his role as senior vice-president for strategic projects at Reebok International Ltd., has dealt with Erwin. "No one wants to work with Fallasha," maintains a Bullets official, "so how can Chris get more deals?"
Two sources close to the team confirm that in January, Erwin alienated management by chewing it out for not pushing hard enough to get Webber on the All-Star team--though he played in only 15 games before submitting to season-ending shoulder surgery. And early in the 1993-94 season, Nike CEO Phil Knight was so turned off by Erwin's style after a meeting at the company's Portland headquarters that he walked out and initially refused to work with him, say two sources familiar with the talks. The Bullets, Erwin, and Knight, through a spokesman, declined public comment.
Is Erwin doing a solid job of managing Webber's finances? BUSINESS WEEK enlisted a panel of experts to assess a financial plan for an unidentified young athlete. The plan--and the client's personal relationship with his manager--mirrored Webber's. The seven financial planners unanimously concluded that the structure was flawed, though its stated goals got a thumbs-up: Live off endorsement income, invest the fully guaranteed NBA salary, look after the player's family, and retire comfortably.
Several planners were concerned about Erwin's involvement with Webber's aunt and Erwin's power: "This is an awful lot of control to give to one person without independent checks and balances," says certified financial planner Ross Levin of Accredited Investors in Minneapolis.
Also troubling to the panel was the complex corporate structure of Webber's empire. Erwin has set up three C corporations--taxable entities separate from their shareholders--to handle Webber's endorsement income and other businesses and to shift income to Webber's family. One of these, C. Webb Corp., employs Webber's family for duties like handling fan mail. This would likely send a red flag to the Internal Revenue Service, says former IRS Commissioner Donald Alexander, now a partner at Akin Gump in Washington. Erwin's decision to set up three C corporations made little sense to panelists, since a C corporation may incur double taxation and each additional one has added costs.
Also of concern: two corporations set up for Webber's charities and administered for a fee by his aunt Charlene Johnson. Panelists wanted to know: Why two, when two cost more? Terry Siman of Executive Financial Services in Spring House, Pa., was unsure of their value "other than getting additional income to the aunt." Erwin declined comment.
GOOD MARKS. Still, Webber is making a bundle and appears to be saving a lot. Erwin got good marks for setting up an irrevocable insurance trust and for his conservative investment philosophy. Erwin declined to release specifics of how the NBA salary was invested but intimated that the portfolio contained tax-free muni bonds, mutual funds, and growth stocks.
For his part, Webber--who dreams of owning a bank or hotel--trusts Erwin and is comfortable working with him. Webber, who left Ann Arbor after his sophomore year to turn pro in 1993, is young and impressionable--but he's no fool. "It's a matter of who you trust," he says. "Fallasha needs me more than I need him." That may be true, but no one denies Erwin cares about Webber--perhaps too fiercely. "I wonder if somebody in the NBA is out to get me," says Erwin. Maybe. The NBA runs a tight ship, and Fallasha Erwin could be rocking it a little too much.By Willy Stern in Detroit