By Thomas Hauser
During the build-up to the January 21, 2006, rematch between Erik Morales and Manny Pacquiao, a great deal was said about the relationship between Pacquiao and his former promoter, Murad Muhammad. Pacquiao's current management team maintained that the Filipino hero had been badly exploited by Muhammad, and that there would be no more exploitation in the future. In examining what has happened since then, it makes sense to let the numbers speak for themselves.
According to a January 19th letter prepared by Nick Khan (one of Pacquiao's current co-managers) and submitted to the Nevada State Athletic Commission, Pacquiao was guaranteed a minimum purse of $2,000,000 for the Morales rematch. Subsequent to the fight, after deductions, Pacquiao received $313,446. That's not as bad as it sounds, but the question remains: "Where did the rest of the $2,000,000 go?"
One piece of the pie went to management. Pacquiao has three co-managers; Shelly Finkel, Nick Khan, and Keith Davidson. Khan and Davidson are attorneys. Finkel is not. The co-managers helped Pacquiao extricate himself from his promotional contract with Murad Muhammad. As part of that effort (and in addition to other services), they advanced a portion of the legal fees that were paid to Judd Burstein (who represented Pacquiao in his litigation against Muhammad). Pacquiao later reimbursed Finkel, Davidson, and Khan for the legal fees that they advanced.
Pacquiao's contract with his co-managers is the standard form contract provided by the California State Athletic Commission. It was signed before Dean Lohuis (then the acting executive director of the commission), who explained the agreement to Pacquiao through a translator (Pacquiao speaks Tagalog). Pacquiao was not represented by an attorney at the signing.
Pursuant to the managerial contract, Shelly Finkel is entitled to receive twelve percent of Pacquiao's gross purse from the Morales rematch. That means, in addition to his percentage of future income from the fight, he was entitled to $240,000 out of the $2,000,000 minimum purse. Finkel deferred $40,000 of this amount in the form of a loan to Pacquiao and received the remaining $200,000.
Nick Khan is entitled to receive 4.64 percent of Pacquiao's gross purse from the Morales rematch. That means, in addition to his percentage of future income from the fight, he was entitled to $92,800 out of the $2,000,000 minimum purse. Khan deferred $11,600 of this amount in the form of a loan to Pacquiao and received the remaining $81,200.
Keith Davidson is entitled to receive 3.36 percent of Pacquiao's gross purse from the Morales rematch. That means, in addition to his percentage of future income from the fight, he was entitled to $67,200 out of the $2,000,000 minimum purse. Davidson deferred $8,400 of this amount in the form of a loan to Pacquiao and received the remaining $58,800.
Freddie Roach (Pacquiao's trainer), is entitled to ten percent of Pacquiao's gross purse from the Pacquiao-Morales rematch. That means, in addition to his percentage of future income from the fight, he was entitled to $200,000 out of the $2,000,000 advance. Roach deferred $40,000 of this amount in the form of a loan to Pacquiao and received the remaining $160,000.
Other deductions included $376,666 in payments to the Internal Revenue Service on behalf of Pacquiao for present and back taxes; a $200,000 advance from Top Rank (believed to have gone to Pacquiao); $80,350 to Top Rank for Pacquiao-Morales fight tickets requested by Pacquiao; $75,000 to assistant trainer Restituto Fernandez; $50,000 to translator and camp aide Joe Ramos; $4,708 to Shelly Finkel for airplane tickets for Pacquiao's wife and one of Pacquiao's friends; $2,000 to the WBC as a sanctioning fee (the fee was relatively low because the fight was for a regional title); and $25,000 that was withheld by the Nevada State Athletic Commission pending the result of Pacquiao's post-fight drug test.
There were also $372,839 in deductions paid to Gary Shaw Productions (Pacquiao's promoter). Top Rank (Bob Arum's promotional company) was the lead promoter for the fight and did the bulk of the promotional work. Shaw was brought in by Pacquiao's management team to look after Pacquiao's interests.
In addition to performing his promotional duties, Shaw developed a great fondness for Pacquiao. It troubled Gary that, when Pacquiao fought Erik Morales the first time, Murad Muhammad had enjoyed a luxurious suite while the fighter was consigned to lesser quarters. Thus, for Morales-Pacquiao II, Shaw arranged for Manny to be lodged in a luxurious two-bedroom suite with a wet bar, plasma TVs, and other amenities. Shaw says that escorting Pacquiao to his suite was a great moment. "It made me feel good," said Gary, "just to see Manny's reaction." He had a smile like a kid at his first Christmas."
Deductions paid to Shaw included $3,200 for tickets to the rematch between Diego Corrales and Jose Luis Castillo requested by Pacquiao; $52,000 in additional advances (believed to have been paid to the fighter); and $67,639 for a Porsche purchased on behalf of Pacquiao.
In addition, Gary Shaw Productions received a flat fee of $250,000 for its services as Pacquiao's promoter with regard to the Morales rematch. This fee was negotiated by Shaw with Shelly Finkel and Nick Khan. The terms of Shaw's promotional agreement were explained to Pacquiao in Tagalog, and Pacquiao signed the agreement. It appears from the aforementioned January 19th letter prepared by Khan that the $250,000 promotional fee was charged in its entirety to Pacquiao. This conclusion is based on the fact that the portions of the $2,000,000 minimum purse listed as being due to Finkel, Khan, Davidson, and Roach are calculated as percentages of the entire minimum purse; not the minimum purse less Shaw's $250,000 promotional fee. Also, in a January 27th letter, Bruce Zabarauskas (counsel for Finkel) states that Finkel, Khan, Davidson, and Roach are entitled to their percentages based on Pacquiao's "gross purse." If Finkel, Khan, Davidson, and Roach had shared in the cost of Shaw's promotional fee, Pacquiao would, without other adjustments, have received an additional $75,000.
Clearly, Shaw negotiated very skillfully for himself. $250,000 is a lot of money. Secondsout contacted three promoters with extensive experience at the world-championship and pay-per-view levels. Each of the promoters said that he would have accepted $100,000 to serve as Pacquiao's promoter for the Morales rematch. Among the factors they cited were (1) the bulk of the promotional work was performed by Bob Arum; (2) Shaw benefited from the visibility and prestige that came with being Pacquiao's promoter of record; and (3) many of the chores that Shaw performed on Pacquiao's behalf (such as attending rules meetings and providing input on the selection of ring officials) could have been performed by Pacquiao's co-managers (and in particular, by Finkel who has been in boxing for more than two decades).
In examining the finances relating to the Morales-Pacquiao rematch, the proper standard is not what Pacquiao made for Morales-Pacquiao I with Murad Muhammad as his promoter. That would set the bar too low. Most knowledgeable observers agree that Pacquiao made less than he should have with Murad at the helm.
Rather, a look at the practices of Jim Thomas and Craig Hamilton is instructive. Thomas and Hamilton were, respectively, the attorney and management advisor for Michael Grant. When Grant fought Lennox Lewis in 2000, the promoters were Main Events and Panix Promotions (each of which had a promotional agreement with Lewis). The Grant camp received a gross purse of $3,500,000. It did not hire a promoter to separately represent Grant's interests. Instead, Thomas and Hamilton did the job as part of the duties for which they were reimbursed. Thomas and Grant, between them, received a total of ten percent of Grant's gross purse. It's also worth noting that Hamilton had been with Grant since 1995 and was a key architect in building the fighter as a commercial attraction.
Manny Pacquiao's co-managers have a contract that entitles them collectively to twenty percent of Pacquiao's gross purse from the Morales rematch. Clearly, professionals are paid at varying rates. For example, some lawyers charge $600 an hour while others charge only a small fraction of that amount. But it should be noted that, prior to the arrival of Pacquiao's present managerial team, Pacquiao had been fighting professionally for almost ten years, beaten Marco Antonio Barrera, and fought to a draw against Juan Manuel Marquez. He was already an established star.
Once all of the pay-per-view income and additional revenue from Morales-Pacquiao II is calculated, the Pacquiao team expects to receive approximately $1,250,000 beyond the $2,000,000 that has already been paid. Pacquiao's co-managers will be entitled to twenty percent of that amount, which would bring their collective share of the purse to over $600,000. Last Friday (January 27th), in response to a series of questions that were put to Shelly Finkel's attorneys, Bruce Zabarauskas wrote that, to date, Finkel, Khan, and Davidson have taken less than the amounts to which they are entitled under their contract with Pacquiao and have not yet decided whether to ask for the remainder of the money to which they are entitled.
Thomas Hauser can be reached by email at email@example.com.