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« | Home | »

California State Athletic Commission on a path towards insolvency, could get shut down

By Zach Arnold | June 10, 2012

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Last Monday’s meeting for the California State Athletic Commission in San Diego proved to be full of landmines that surprised the politicians populating the committee. On the agenda, two key items for debate involved modifying rules for hand wraps and allowing Therapeutic Use Exemptions for testosterone usage. The director of the DCA (Department of Consumer Affairs), which technically oversees the CSAC, wants no part of legalizing testosterone usage. Despite the fact that there are no official guidelines for testosterone usage by the CSAC, we know that at least one high profile fighter (Dan Henderson) had TRT for his fight against Mauricio Shogun in late 2011. If you are trying to figure out how this is happening while the commission has no guidelines set in stone for TUEs for testosterone, you’re not alone.

However, the big bombshell that came out of the San Diego meeting had nothing to do with hand wraps or with drug usage.

Early on during the course of Monday’s meeting, Executive Director George Dodd went through the agenda that the commission was going to go over for the many hours they would be in session. Within minutes, Dodd was confronted by the commission over finances. He was pressed by a commissioner as to a letter from the DCA to the CSAC in which it said that the commission was on the path to insolvency.

In other words, broke.

Dodd was asked about if the commission is already close to ‘overspending this year’ in terms of their budget and he admitted that this was the case.

The California State Athletic Commission’s fiscal year for budgeting is from July 1st to June 30th. Budgetary matters have to be taken care of before state legislators leave for Summer recess. According to the DCA, the CSAC is heading towards the Fiscal Year finish line on fumes and would not have money in the bank for the upcoming Fiscal Year.

How did this happen?

To put this into perspective, the commission’s April 9th meeting in Sacramento indicated that finances were tight but that business would be able to proceed as normal. Within a two month time span, the DCA fired off an insolvency letter to the commission stating that everything was going to hell on the finances. This is why the commissioners on the CSAC got caught flat-footed. Politicians don’t mind spending other people’s money but what they don’t like is when you put them in a position to be publicly embarrassed. That shouldn’t be how the world works, but it is.

George Dodd talked about how there are spending limits set by legislation and that he feels the commission is on target to still make it but the problem is what can be spent versus what they are taking in for revenue. He stated that the DCA observed back in March that the math was not adding up. Stunningly, Dodd said that the revenue projections were off by more than $500,000 because of decreasing revenues as compared to the last few years of business. He does feel that the commission can remain solvent, however. As a result of the DCA’s insolvency letter by Denise Brown, the same boss who does not want the CSAC to allow testosterone usage, the CSAC is now crafting a letter in response to the DCA.

Dodd noted that the commission has had to relieve some people of their duties and that more cuts were on the way. He said that they were looking to replace permanent positions with non-permanent workers, but that the purging would continue through August when the CSAC has their next meeting in Sacramento. When pressed about why there are budgetary problems, Dodd put the bulk of the blame on the amount of inspectors the commission uses. He claimed that over half of the commission’s budget is based on paying for inspectors, who are paid hourly. Dodd noted that inspectors are stuck in traffic, which means it’s eating up the commission’s funds.

If this sounds ugly to you in print, you ought to listen & watch the actual meeting.

Searching for answers

With the heat on, Dodd started quizzically searching for answers as to why revenues are so out of whack. He pondered if California’s tax codes were driving away fighters from doing one-off bouts in the state. Then it was a question about venues perhaps not giving promoters the right kind of deals.

“It could be based off their venues, they’ve never pinpointed why they aren’t coming here.”

He then mentioned Zuffa buying out Strikeforce and how it’s hurt the state from having a local presence. Dodd said that having a major promotion from California taken away has hurt. He stated that a big game plan is needed to bring back big-time promoters to California so they can prosper.

At this point, however, things got uglier. Dodd was pressed about a recent Golden Boy boxing event at the Home Depot Center in Carson, California. (June 2nd show w/ Antonio Tarver vs. Lateef Kayode, Winky Wright vs. Peter Quillin and Austin Trout vs. Delvin Rodriguez on Showtime). He claimed that the show drew 5,000 (later clarified as 5,200) with only 1,200 paid. This fact immediately drew a reaction from the commissioners who were upset. Dodd started coming up with reasons for the bad gates in California, including the bad economy, pricing of tickets, venue & fighter issues. Curiously, Dodd would later say at the hearing that the business the Golden Boy show drew in Carson lined up with his revenue projections.

A commissioner promptly asked Dodd why the commission was hiring staff if the revenues aren’t adding up. Dodd’s excuse was that the commission hired staffers in March based on December projections and he admitted that he should have seen what was coming in terms of declining revenues. He said that the commission was taking in $1.7M to $1.8M in yearly revenues for the last three fiscal years but that the numbers are way down now. He claimed that referees in Nevada & New York are paid by a static contracted fee as opposed to getting paid hourly.

At this point, it was the inspectors on the CSAC who were promptly getting thrown under the bus. CSAC Chairman John Frierson wondered why 7 inspectors are needed at events when 3 or 4 would suffice to fix the ‘overstaffing’ problem. The discussion led to the idea of having 3 inspectors per show unless there is a major title fight. Some of the suggestions to fix the budget issues by the Executive Director and the commissioners were downright crazy. The idea of limiting the number of inspectors to 3 per show was pushed with having one inspector at the table and two inspectors in the respective corners. To make up for having fewer inspectors, it was suggested that the referees help out with hand wrap inspections. Multiple commissioners, who were stunned by the financial news, vociferously stated that every CSAC agenda hearing should have items about inspectors and budgetary updates. Dodd defensively said “I agree” about 20 different times as he was getting peppered with questions.

When it came to the amount of inspectors (7) per show, former Executive Director Armando Garcia got thrown under the bus and blamed for increasing the amount of inspectors per show.

A commissioner chimed in by saying he was at a recent boxing show in a town called Plymouth, California where a riot broke out and the two inspectors were overwhelmed by the crowd due to lack of security. The commissioner stated that inspectors couldn’t keep fans away from the boxers in the ‘backstage’ area. Frierson immediately rebutted that it’s not the commission’s job to handle security and that it’s the promoters who are responsible. He told Dodd that he signs off on all the referees for fights and that he wants to have the authority to review & sign off on inspectors who work events.

Political infighting

One commissioner, Linda Forster (political ally of John Frierson), said that it’s a no brainer to not overspend if there aren’t funds to put on events. She wondered aloud how the commission went from ‘close to overspending’ in April to receiving an insolvency letter two months later from the DCA.

“I expect that not to be the case in the future.”

To which Frierson replied, “It was a shock to me. I’m the Chair.”

To which Dodd feebly responded, “I didn’t know it was coming as well.”

Dodd broke down an example of declining revenues, stating that an event had previously would have netted the commission $90,000 in revenue. The hope was downgraded to $80,000. The actual number for a big show ended up being $22,000.

One commissioner immediately shot back at Dodd and said that an examination should be required to look at how promoters are selling tickets because ‘this looks very fishy to me.’ With the temperature rising in the room, Dodd stated that the new hirings for the commission would likely get released.

Linda Forster summed up what the other commissioners were feeling.

“Do you know how embarrassing it would be to the state of California if we can’t put on boxing events?”

Never mind health & safety concerns. It’s all about the optics. Courage.

“You’ve got to come up with a plan to us for what we are going to do.”

To which Chairman Frierson replied, “It was really a complete surprise when we got that (insolvency) letter. I was shocked!”

Of course the Chairman was shocked. He’s too busy running for political office or getting involved in other CADEM political matters. However, the Executive Director had no choice but to play it safe in response.

“It was a shock to me as well.”

After some revealing conversation about the health of the state’s pension fund for boxers and how the commission would try to have the press/media contact fighters who might be eligible to collect benefits from the Raymond James-managed account, it was time for public comment about the situation regarding commission inspectors. Throughout the hearing, the commissioners were conversationally very chatty. That changed very quickly when CSAC inspector Frank Gonzales stepped up and blistered the commission in a six minute address that eviscerated the commission’s remarks & suggestions regarding the inspectors.

Gonzales stated that having 7 inspectors at an event to do the job asked of them is ‘barely adequate’ in terms of the amount of business they have to conduct in one day. He asked the commissioners to consider that they are essentially running one-day businesses by bringing a heavy suitcase containing medical documentation, licensing forms, and tools needed to set up shop to collect the money in order to pay the fighters & establish that everyone is credentialed and licensed. Inspector Gonzales brought up that the inspectors at shows also are in charge of handling drug testing. He noted that if a fighter does not immediately produce a urine sample for a drug test, the inspector by law is told to stay with the fighter until the sample is produced. This means that if you have only a couple of inspectors per show, you will have major workload problems. He invited the commissioners to attend a show and to watch the inspectors do their job.

(If all of this sounds familiar to you in regards to the CSAC, it should. These types of issues regarding commission documentation and handling of paperwork were covered in the commission’s 2011 sunset review report on things that needed to be fixed.)

Inspector Gonzales finished off by claiming that with fewer inspectors at shows, there could be potential problems regarding fighters getting paid and elements of gambling being involved. He noted that fewer inspectors at shows means more security issues because the inspectors are no longer permitted to wear badges.

The response from the commissioners to Inspector Gonzales’ comments? Dead silence. The commission proceeded to move onto other matters on the agenda.

Running out of time, money, and answers

The commission is in a money crunch. As Linda Forster said, how will they ever look if the commission gets shut down… right before they have to produce a sunset report to John Frierson’s buddy, California state senator Curren Price, to justify why the commission should stay open for business.

Later on during the San Diego hearing, another shining example of promoter troubles was highlighted. A promoter testified that he lost $23,000 on a show and didn’t have enough money from the gate to pay the fighters. The promoter claimed that he had to get a loan to pay off what was needed to be taken care of. The reason this became a story for the commission is because the promoter was pressed as to why he wasn’t listing people who were putting up money to back shows on the public paperwork as ‘investors.’ The back story here is that the promoter in question was told to get cashier’s checks ready for both the event officials & fighters. However, the promoter initially claimed he didn’t have time to go to the bank to get the funds for the fighters. On the promoter’s application, he allegedly listed having the liquid assets to be able to cover the costs of paying the fighters. At the San Diego hearing, the promoter in question was characterized by George Dodd as never having the funds available to pay the fighters via check(s) in the first place.

Towards the end of the San Diego hearing, the Zuffa family showed up to quickly comment on AB2100. Given that AB2100 died on May 25th in Appropriations, there wasn’t much for the Zuffa family to worry about. The commissioners made it very clear that they do not want to deal with such regulation, no matter how watered down it is. Executive Director George Dodd warned, however, that he heard that AB2100 might be revived and attached to another piece of legislation in Sacramento soon. Larry Epstein, Lorenzo Fertitta, Marc Ratner, Chuck Liddell, Ronda Rousey, and Dominick Cruz were at the hearing to voice their opposition to AB2100. Only Mr. Epstein spoke and he didn’t need to say too much to know that the commission is on board with him. For a state that is already over $500,000 off of their revenue projections for this year alone, they are not going to have anything to do with AB2100 as long as they are open to the public.

Which is not something that may be happening for much longer. A lack of revenue/insolvency means the California State Athletic Commission would have to be shut down. If the commission gets shut down, that means all boxing & MMA events would no longer be allowed to take place in California.

Towards the end of the exhaustive three hour session, one commissioner stated to George Dodd a rather revealing comment.

“You’re the boss, you took the hit today.”

Yes. A mild verbal lashing is really going to fix incompetence and inspire others to have confidence in the behavior of the California State Athletic Commission.

As the Executive Director was scheduling the next commission hearing in August (Sacramento), a debate broke out over airplane fares and debates about why Mondays are chosen for CSAC hearings. John Frierson, the same man who was embroiled in a ticket/gift scandal, wanted to know why it took so long to get reimbursed after he paid for flights using his credit card. Dodd replied that he didn’t have to worry about this and that he should let his staff book the plane tickets for the commission members.

The commissioners and Executive Director politely debated what days of the week work best to schedule future hearings. A date for the August hearing was agreed upon.

“It really takes away (from) my poker night, which is on Tuesday,” remarked Chairman Frierson.

“Hey, Tuesday screws up my poker tournament.”

And everyone laughed.

Topics: Boxing, CSAC, MMA, Media, UFC, Zach Arnold | 46 Comments » | Permalink | Trackback |

46 Responses to “California State Athletic Commission on a path towards insolvency, could get shut down”

  1. Tomer says:

    “Later on during the San Diego hearing, another shining example of promoter troubles was highlighted. A promoter testified that he lost $23,000 on a show and didn’t have enough money from the gate to pay the fighters. The promoter claimed that he had to get a loan to pay off what was needed to be taken care of. The reason this became a story for the commission is because the promoter was pressed as to why he wasn’t listing people who were putting up money to back shows on the public paperwork as ‘investors.’”

    So promoters don’t have to put the base purses into some sort of escrow account prior to the card? I thought in (some) states you’re required to cough up the money prior to the card to prevent bounced check scenarios.

    • Fluyid says:

      I can’t speak to California specifically, but in the states I know of, you have to have a performance bond up with the state so that they can convert it and pay fighters, etc., if the promotion doesn’t pay up.

      • Tomer says:

        Yeah, that was the security of thinking of (performance bonds) – I remember a few fights that fell through because the promoter couldn’t front the cash.

    • Ed Stock says:

      Nevada requires (NAC 467.142) that the promoter either give the Commission checks to cover all fighter payments, letters of credit, or other means of payment approved in advance by the Commission before the event takes place. The bond they require in Nevada is to cover refunds to ticket purchasers. I can’t find anything in their regs that require promoters to have bonds to cover payments to fighters, since the payments are dealt with by the reg I first mentioned. With passing NSF checks being a crime in just about every state, a promoter would be nuts to try to hand in rubber checks to cover fighter pay, I’d say.

      • Tomer says:

        The issue, though, is that the fighter would still be screwed even if you press charges against the promoter since they would not have the cash in hand, which is why some states require performance bonds or similar instruments to prevent fighters (and other parties) being completely stiffed.

  2. 45 Huddle says:

    AC’s should be self sustaining entities within each state where the fees from the promoters pay for the employees. There is no reason for the tax payers to foot any of the bill here.

    So if California can’t find a way for that to work, it is their own fault.

  3. EJ says:

    I sure as hell won’t be shedding any tears that the most corrupt and irresponsible AC in sports is getting shut down. These people have no business running anything let alone one of the major AC’s in mma. Anything that can get rid of what’s been a huge black mark on the sport for years now is fine with me at this point.

  4. Rob Maysey says:

    So, Dodd notes that the loss of Strikeforce (a California based promotion) has hurt the Commission’s revenues. . . following acquisition by the UFC.

    Yet, AB 2100 is a non-starter because Zuffa opposes it?

    Foolishness. Should Zuffa vacate the State of California, a new “Strikeforce” would be hatched almost immediately.

    Not to mention — isn’t the guiding principle of this commission to protect the athlete?

    • 45 Huddle says:

      You really think that a new Strikeforce would happen in California? With what talent? With what TV contract?

      Ain’t going to happen, even if the UFC doesn’t go back to California for 5 years.

      • Rob Maysey says:

        I am certain Strikeforce would be replaced. . .

        What network?

        You really think Showtime is going to sit idly by, and not attempt to enter the market?

        I don’t.

        Talent? Talent has virtually no option at the moment. Strikeforce was able to obtain talent pre-Zuffa, so would another promoter.

        • 45 Huddle says:

          Strikeforce was able to get most of their talent from acquiring EliteXC. That option is not there today. There was also a slew of free agents floating around. And they had a working relationship with DREAM which allowed them to both use the same fighters.

          None of those options are there today. Zuffa has about 66 of 70 (on a low estimate) of the Top 10 fighters from Bantam to Heavy.

          The only options today are to build from absolutely nothing…. And we have seen that with Bellator, which has built up zero momentum over the past 4 or so years.

        • Steve4192 says:

          “You really think Showtime is going to sit idly by, and not attempt to enter the market? “

          You are putting the cart before the horse. Strikeforce is not dead yet. Showtime is still in the market. Until Zuffa closes shop, Showtime is not an option for other promoters.

          Also, what makes you think the ‘next Strikeforce’ will be based in California? I am sure Zuffa is not the only promoter who is vehemently against AB2100, they just happen to be the ones with the financial clout to do something about it. If AB2100 passes, I doubt other promoters would be rushing to put on shows in California.

      • VinRokk says:

        “With what talent?”

        Dude, Cali has a pretty deep talent pool. It’s not too far fetched. It could give another Cali-based promo a chance to grow and expand.

    • Jason Harris says:

      Food for thought, why doesn’t Bellator run in CA almost ever?

      Also, the idea of a “new Strikeforce” is just hilarious. It’s not like the overwhelming amount of competition from Strikeforce is pushing other guys out of the market.

    • Rob Maysey says:

      What makes me think promotions will rush to California?

      It is the richest and most talent deep MMA market in perhaps the entire world–that is why.

      Showtime is not in MMA to carry a promotion publicly treated as second fiddle, with no prospect of PPV outlet–bank on that.

      • Rob Maysey says:

        True Jason–it is the spector of Zuffa putting a show the week before or week after that keeps any major league shows from appearing in California. . .

        If Zuffa vacates–watch.

        • Jason Harris says:

          Including Strikeforce, Zuffa has run exactly 1 show in San Jose this year. Nothing else in CA. There are exactly 2 events throughout Zuffa scheduled in CA, one in Los Angeles and one in San Jose.

          Where are you getting “a week before or a week after”?

          Also, who are these major league shows? Where are they currently appearing since CA having 1 Strikeforce show in 6 months is apparently too crowded of a market?

  5. Steve4192 says:

    Does anyone have any idea how many inspectors other states use on fight night? Is seven a pretty common number, or is it higher/lower than other states?

    • Fluyid says:

      Depends on the size of the event, of course. I’ve worked shows as an inspector where it was just me and another guy.

  6. Jason Harris says:

    Everything is a freaking travesty with CSAC for some reason. Why do these guys have such a problem running a damned commission?

    Interesting food for thought, CA has a really strong community of MMA fighters and fans, as well as a few really successful local organizations…but the vast majority of local fights are put on in Indian casinos. Since CA didn’t allow MMA until a couple of years ago, I think King of the Cage, Tachi Palace fights and the like just got used to working with the Indian casinos and now have no reason to move out.

  7. Rob Maysey says:

    Nah, 45 Huddle–your timing of events is faulty. In fact, Strikeforce was acquired VERY soon after they announced their working relationship with Dream and M-1.

    Very few cross-promotion bouts took place at all.

    As to most of their promotional talent coming from EXC–really? Again, SF was acquired VERY soon after the EXC acquisition, and they had a roster of fighters already including some of their biggest stars.

    That is before noting–EXC found talent. . . as did Strikeforce. . . .

    • Weezy02 says:

      “Nah, 45 Huddle–your timing of events is faulty. In fact, Strikeforce was acquired VERY soon after they announced their working relationship with Dream and M-1.”

      You’re mistaken, unless you’re arguing that a year and a half later is “VERY soon” (which I can’t imagine you’d possibly argue). From Wikipedia entry on Strikeforce (Yahoo Sports link included):
      “During August 2009, Strikeforce CEO Scott Coker announced that they had signed formal alliances with Japanese MMA-promotion Dream and Russian promotion M-1 Global. Coker said the partnership would allow for co-promotion and fighter exchanges for events both in the US and Japan”

  8. Rob Maysey says:

    And how many such co-promotion and fighter exchanges took place?

    Please enlighten. . . since my post was in response to the suggestion that this supplied SF will all this talent.

    • Weezy02 says:

      Please show me where I asserted the exchanges did take place. I was simply pointing out that your statement was incorrect. Your quote was:

      “Strikeforce was acquired VERY soon after they announced their working relationship with Dream and M-1.”

      That’s all I was commenting on. It was incorrect.

      • Rob Maysey says:

        You didn’t assert that exchanges took place–but my comment that you “corrected” (not really) was in response to 45 Huddle, who did IN FACT suggest SF was obtaining talent from such exchanges. Here is the 45 Huddle quote that I was responding too:

        “Strikeforce was able to get most of their talent from acquiring EliteXC. That option is not there today. There was also a slew of free agents floating around. And they had a working relationship with DREAM which allowed them to both use the same fighters.”

        What is 45 Huddle suggesting, if not that SF was utilizing fighters with the working relationship?

        • RWeezy02 says:

          I don’t disagree with your response to him. Again, all I was pointing out was that there was quite a bit of time that elapsed between when the relationship with DREAM and M-1 was announced and when Strikeforce was acquired. It sounds like we agree on that fact, though.

  9. [...] CSAC Running Into Financial Problems (FightOpinion.com) [...]

  10. The Truth LB 101 says:

    They gave the kitty to the CAMO!

    Low ball estimated annual Revenue they lost to CAMO on amateur MMA.

    Estimated 125 Events at $2500 per event = $312,500
    Estimated 1300 fighters x $115 = $149,500
    Estimated 100 promoters x $500 = $50,000
    Estimated 300 officials x $50 = $15,000
    Plus 5% of gate and broadcast rights.
    Plus all the professional fighters and promoters who would have been CSAC licensees.

    Expenses:
    2 Rash Guards per fighter @ $5 each estimated
    CAMO Gloves per fighter @ $25 estimated plus a monopoly for the one and only manufacturer.
    PO Box or small office on Wilshire.
    Web site

    Amount of money this “non profit” gives to charity ???????

  11. [...] said that the commission was on the path to insolvency i.e. broke. In a great investigative piece Fight Opinion broke down the nuances of the news. Below are some highlights from their [...]

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