The 96-4 Purse Split

By Thomas Hauser
Carl Daniels is on the verge of filing a lawsuit against AOL-TimeWarner and Don King Productions in the United States District Court for New Jersey. The suit will allege that the defendants tortiously interfered with Daniels' business relationships and conspired to deprive him of just compensation in conjunction with a purse bid that was held for Daniels' February 2nd bout against middleweight champion Bernard Hopkins. Hopkins was victorious in the bout when Daniels was unable to answer the bell for the 11th round.

More significantly for the business of boxing, the lawsuit will seek a declaratory judgment from the court that HBO is a "promoter" within the meaning of the Muhammad Ali Boxing Reform Act. If the court so rules and the ruling is upheld on appeal, it would limit HBO's long-term contracts with fighters, force HBO to make certain financial disclosures, and otherwise change the way it does business.

Daniels was the mandatory IBF challenger for Hopkins' crown. According to Nick Garone (Daniels' manager), after Hopkins defeated Felix Trinidad to unify the middleweight championship last September, Don King offered Daniels $400,000 to face Hopkins. Garone asked for $900,000. A purse bid was then scheduled for November 7th.

The purpose of purse bids is to ensure that a champion and mandatory challenger receive fair compensation for their services. Any duly registered promoter who wants to promote the fight can submit a sealed bid; the highest bid is accepted; and the purse is then divided 75 percent to 25 percent in favor of the champion.

Under IBF rules, each promoter registered with the organization is notified by fax that a purse bid is about to take place. At the time of the Hopkins-Daniels purse bid, 11 promoters were so registered. The annual registration fee is $2,000.

"A week before the purse bid," Garone remembers, "Marian Muhammad called me up and said, 'Do you realize this is going to purse bid? I told her, 'Yeah; I'm in negotiations.'"

Finally, according to Garone, after long back-and-forth negotiations, he and King shook hands on a purse of $800,000 for Daniels.

"We shook hands," Garone says. "That's a funny statement. I thought we had a deal because I shook hands on a contract with Don King. Don told me he'd call Joe Dwyer to postpone the purse bid, and I really thought I was going to get a written contract. Then Don never called me back."

As the day of the purse bid approached, Garone began to get nervous and took steps in an effort to protect his fighter. By his account, "I had Les Bonano and Dino Duva call Kery Davis and say, 'We're thinking of bidding. What are the particulars?' I was physically in the room with Dino when he called Kery and asked what HBO would pay as a license fee. Kery told him, 'I won't disclose what's on the table. We'd rather deal with Don King on this one. We'd rather you not get involved.'"

John Agnetti, the attorney for Daniels, goes further. He quotes a third party as saying Davis told him, "If anyone else bids successfully on this fight, we're not going to televise it."

Davis acknowledges that HBO was negotiating a long-term contract with Don King for Bernard Hopkins' services at the time of the purse bid. He doesn't remember talking with Bonano about the fight. As for his conversation with Duva, Davis says, "I told Dino that we were supporting King in the purse bid. Don had a number from us pursuant to contract terms that had been negotiated, although I don't think the contract had been signed yet. If another promoter had bid on the fight and won, I don't know what would have happened. But when we have a multi-fight contract with a promoter or a fighter, it's our practice not to support other promoters in a purse bid. That would be bidding against ourselves."

"It was a screwy situation," Dino Duva remembers. "We were considering going in to bid on the fight, but Kery said he was in an awkward position and couldn't talk about numbers before a purse bid because of confidentiality clauses in his dealings with King."

Les Bonano says simply, "It is a fact that I had a conversation with Kery, and I'm sure the things Nick is telling you about it are accurate and true because Nick is an honest guy. But I don't want to get involved in this at the present time for reasons I'm sure you can understand."

The purse bid was scheduled for November 6th at noon at the IBF office in New Jersey.

"That morning," says Garone, "Dino called Marion Muhammad and said he wanted to submit a bid through Duva Boxing, but she told him he couldn't because Duva Boxing wasn't licensed with the IBF. Dino asked her to hold off on the bid until later in the day so Duva Boxing could apply for a license, and she refused."

Under IBF rules, a promoter must be registered with the organization for at least 30 days prior to making a purse bid. There is a way around the 30-day requirement. A promoter can file a non-refundable $20,000 fee with a request for an exception and hope for the best. King himself followed that procedure in 2001, when he wanted to bid on the second fight between Vernon Forrest and Raul Frank. The IBF granted his request; King won the purse bid; and the two men fought at Madison Square Garden.

Be that as it may, Bobby Goodman of Don King Productions came to the Hopkins-Daniels purse bid with two envelopes. No other promoter was present to force a higher bid from King, so Goodman submitted a bid of $500,000. Daniels received 25 percent of that amount; $125,000. Meanwhile, according to Garone, HBO paid King a license fee of $3,500,000. King, in turn, paid Hopkins a reported $2,800,000.

Joe Dwyer says he's sorry that Daniels came out of the purse bid so poorly but opines, "I think it was incompetence on the part of Garone. It's up to the fighter and his management team not to put themselves in this sort of situation. Nick was trying to play in the big leagues, and he didn't belong."

Garone acknowledges that he could have handled things better and says he feels awful about the small purse paid to his fighter. But he also says that his handling of the situation doesn't justify what he claims was misconduct by others. His bottom line is, a winning purse bid of $500,000 makes no sense when HBO is paying a license fee that's so much larger.

Certainly, if Daniels had a promoter of his own, the purse bid would have bid significantly higher. Promoter Dan Goosen says that a competitive situation could have resulted in a purse bid of $2,500,000.

Cedric Kushner is more cautious. "No one thought Daniels could win," Kushner notes. "So you're really talking about a one-fight situation, because Don King has Hopkins. At best, if you put the site fee, foreign television, and sponsorships together, you have about $1,000,000. Then, let's say, HBO bids $2,000,000, because that $3,500,000 was by no means guaranteed. That gives a promoter $3,000,000 to work with, but you have expenses in promoting the fight and you want to make a profit. So a promoter might bid between $2,000,000 and $2,250,000."

What would have happened then? If another promoter had bid $2,000,000, Hopkins might have refused to fight for his seventy-five-percent share ($1,500,000). In that event, the fight would have fallen apart, and Bernard would have been stripped of his title by the IBF. Certainly, as Kushner notes, the $3,500,000 HBO license fee would have dropped, since that number was contingent on Hopkins-Daniels being part of a long-term HBO-King-Hopkins contract. But suppose, to the dismay of the promoter, HBO didn't bid $2,000,000 either?

Pat English, the attorney for Main Events, answers that question with the thought, "There is no answer." According to English, "No one discouraged us from bidding on the fight; and frankly, we should have, but a lot of these purse bids slip by. There's a tendency not to bid on another promoter's fighter, because of the assumption that the other promoter will find a way to structure a deal with his fighter that allows him to win the purse bid. Also," English continues, "there were really only two networks to sell the fight to; HBO and Showtime. So it all depends on what TV was willing to pay."

Here, the thoughts of Showtime's Jay Larkin are instructive. "No one came to us with the fight," says Larkin. "If they had, we would have been interested, but only at the right price. As a stand-alone one-off fight, $500,000 is a lot closer to reality for Hopkins-Daniels than $3,500,000."

Thus, Dan Goosen speaks for his brethren when he says, "Sure, HBO wanted things to fall into place in a certain way. Everyone in the business knew it was entering into a multi-fight contract with King and Hopkins. But Nick Garone let it happen. Nick is a nice guy. Nick means well, but he got outsmarted."

Still, as Garone notes, when HBO is paying a license fee of $3,500,000, the winning purse bid should be more than $500,000. He says that the integrity of the purse bid system was compromised; that the system didn't work properly.

The week before the fight, Garone sent a claim letter to HBO along with a copy of a draft complaint which he said he would file if an equitable financial adjustment was not forthcoming. Now Carl Daniels is about to make good on Garone's threat.

"The key here is HBO's conduct," says Garone. "HBO was scaring off other promoters. Don knew the numbers, and HBO refused the give the numbers to other promoters. And on top of that, Kery Davis was telling other promoters not to bother bidding on the fight; that HBO wanted to work with King. That's because HBO wanted to close a multi-fight deal with King and Hopkins, which it did after the purse bid. But Carl was forced to subsidize their deal. It's another example of the system allowing certain people and certain corporations to squeeze honest fighters as hard as they can while funnelling fighters and money to each other."

John Agnetti, who will represent Daniels in the litigation, is obviously in accord. "I know we're in for a fight," says Agnetti. "Boxing is controlled by a small group of people; and if you buck the system, they'll come at you with a vengeance. Also, there's a conspiracy of silence in the industry, which means it will be very hard to get all of the people involved to testify. But Hopkins-Daniels is a microcosm of how business is conducted in boxing. This lawsuit isn't just about Carl Daniels. It's about the good of the game. Fighters should get a fair shake, and Carl didn't."

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