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Why The FBI Got Involved With A Major League Baseball Scandal [e200]

Nasir and Matt celebrate the 200th episode by discussing America’s pastime and why the FBI has decided to get involved with a scandal in Major League Baseball.

Transcript:

NASIR: All right. Welcome to our podcast where we cover business in the news and add our legal twist. My name is Nasir Pasha – first baseman.
MATT: Oh, no, I’m Matt Staub and, actually, I played first base because I’m left-handed.
NASIR: Oh, that’s just my last name – first baseman. I don’t even know what you’re talking about.
MATT: I only really ever played first base and pitched for a little bit but I was mostly first base just because, if you’re left-handed, that’s pretty much the role you get thrown into just because it’s advantageous. You have the glove on your right hand and you can catch all the balls that are thrown from the rest of the infielders.
NASIR: I didn’t play much baseball but I think I was in the best position. Isn’t the best position in tee-ball right outfield? That’s what I was.
MATT: There’s probably four outfielders. Well, in regular baseball, there’s only three outfielders but there may be, like, a left, a right, a right center, and a left center.
NASIR: I’m pretty sure there was just three. I just remember – gosh, I hated that tee-ball. I did one season and it was horrible. I was a soccer guy.
MATT: Yeah. I mean, I liked baseball but focused on other sports after a while – not soccer.
NASIR: You were tennis and golf? You look like a tennis and golf guy.
MATT: Yeah, I play tennis. I liked playing golf but I was never really good at it. But, yeah, tennis was what I went with. No regrets for me – easier sport to play than baseball.
All right. Well, this is a pretty interesting story. It kind of just came out of nowhere. By the time this goes up, it won’t be fresh in the news but, as of the day we’re recording this, this is still a pretty new story and I guess there could be a lot of things that happen between now and then, but the FBI’s gotten involved with one of the baseball teams in the Major League Baseball. The St. Louis Cardinals are investigating this hacking issue. Let me give a little background facts here. The current Astros general manager used to work for St. Louis Cardinals. I’m not sure in what capacity but he had developed this system that was used that they called Redbird – this computer network that he was a part of. Eventually, he left the Cardinals and went to the Astros and developed a similar style computer system that he called Ground Control and there’s a lot that goes into this. I guess one of the big things – for those of you who don’t know a lot about baseball – there’s all these different levels before you come up to the major leagues. This whole minor league system and there’s a strategy of when you bring players up because you don’t want to bring a player up too quick because he might just not be ready and then it ruins his… it’s a mental game after that and then it just ruins him for the rest of his career. So, part of it was they have this whole system in place of when to bring players up but they also have more confidential information as well such as trade proposals – stuff that would be a great thing to have if you’re trying to get inside information on a team. So, Houston set this up. As of right now when I’m going over this story, they don’t know who the people in the Cardinals organization was that did this, but they basically were like, “Oh, yeah, that guy that used to work for us, he had that master password list, let’s take a look at it.” They took a look at it and I guess one or multiple passwords lined up and they were able to hack into the Houston Astros system at that point because I guess he used the same password. I guess that’s a whole other issue of where that’s crossing the line in terms of hacking but, you know, they were able to gain access to basically a lot of confidential and proprietary information in one of their opposing team’s systems and, yeah, that was kind of the beginning to the FBI getting involved which is kind of crazy to me the FBI got involved but it will be really interesting to see where this goes.
NASIR: Yeah. Obviously, we should preface this was alleged. I think we already said that but just in case anyone’s listening, we don’t know exactly what happened but this is pretty cut and dry. You know, there’s this one article – I don’t know if you caught this in the Washington Post – because, you know, on ESPN, they did this whole legal analysis by this one commentator and one of the questions asked was, “Is it actually a crime to hack into the data and files of the Major League Baseball team?” and the answer was incredibly wrong because the answer was, like, basically, it says, “It’s certainly ethically questionable but whether it is a crime is far less certain.” And then, he goes into this weird analysis of whether or not it was authorized access and whether the stolen information was otherwise available or public knowledge but this particular Washington Post article references… I think it’s in the wiring tapping statutes or somewhere around there but basically says very plainly that anyone who intentionally accesses a computer without authorization – which, in this case, the alleged facts were pretty clear – shall be punished as provided in Section so and so or whatever. I mean, obviously, in the sense that it doesn’t matter if you actually took any information, that is a crime to hack into somebody else’s computer. What’s the more important question from a civil perspective is what kind of damages can the Houston Astros get from St. Louis Cardinals if they’re able to prove this hacking and the confidential information was stolen?
MATT: Yeah, and I’m not even sure what the Astros want out of this. I mean, I don’t know if they really care about any sort of financial payment but they’d probably be happiest with the Cardinals losing draft picks or getting penalized in some fashion with Major League Baseball.
NASIR: Has the MLB ever… I’m sure, by next week, they have but they’ll have something to say about all this.
MATT: Oh, yeah, definitely, and that’s why it’s so weird that the FBI… I mean, I get why the FBI got involved but this seems like something that should have been handled internally within Major League Baseball. To me, there’s much bigger problems the FBI should be focusing on. But, you know, one thing that was pretty interesting – and this is all, like you said, alleged, especially at this point early in the game, no pun intended – investigators believe that St. Louis Cardinals officials were concerned that that guy who was the GM in the Astros and the former employee of the Cardinals had taken their idea and proprietary baseball information to the Astros at that point. I guess there’s a question of whether, you know, what he created when he was working for the Cardinals I assume would stay. I mean, the Cardinals would own that, I would assume.
NASIR: You’re absolutely correct and I assume they’ll raise that issue when these parties start litigating because the general rule is this: if you have an employee that develops some kind of proprietary software, as an example, or proprietary procedure, the default rule is usually that the employer owns that intellectual property. Now, when that employee goes from one to the other – you know, I’m sure this happens in baseball – confidentiality agreements, trade secrets, intellectual property agreements are signed even separately despite what the default laws are. And so, when he goes over to the Astros and develops a similar system, names it something different, there is some questionableness whether that’s clean, right? Whether that intellectual property was purely transferred and not necessarily worked from the ground up. But then, you have to balance that with how does an employee or a person remove that information from its mind, and the good example is that Bratz versus Barbie doll case that went back and forth for years. I hope I’m not misspeaking here but I believe, at the end of the day, Barbie doll won that case. The discussion there was, if you recall – I don’t know if anyone plays with dolls – I know, Matt, you do quite a bit – there’s Bratz dolls that was basically a Barbie doll reboot. The dolls look totally different of the facial features and so forth but the maker of Bratz actually worked on that model of doll while he was working at Barbie. He then left and then started Bratz and Barbie maintained that there were some intellectual property rights that were stolen because he developed this as a doll maker or doll designer while he was working with Barbie and it’s in the same space and so forth so there was some correlation there.
MATT: Yeah, this is pretty interesting, especially I would say the last decade – actually, probably even further back than that and, if you’ve seen Moneyball, you’ll understand what I’m talking about – baseball has become a very analytical game and all these different teams are trying to one-up each other and come up with these advanced statistics that give them a little bit of an edge – to coin Jonah Keri – the “extra two percent” that you can get over another team. When you have one of these employees create this system for you that might give you a leg up, especially the Cardinals which are year in and year out have one of the best teams and one of the best minor league systems in baseball, you know, that guy that creates it and goes and not only switches to another team but becomes the general manager, I mean, you know, obviously, he can’t take his whole system over there and he’s created something for the Cardinals but I would imagine he probably created something pretty similar when he went over to Houston at that point. If this is the Cardinals argument of “Oh, we wanted to make sure he didn’t steal anything,” I get that. It’s not grounds for hacking into their system. It doesn’t change the fact that they did that. It’s not going to be a defense, I don’t think. But it’s an interesting point. It’s unfortunate for us recording right now because it’ll probably have many more facts by the time this episode comes out and we might even sound really misinformed about the whole situation but this is competition – one team to the other – and they created something with the first one. It’s a hard thing to figure out when they go to the next one and they want to create something similar.
NASIR: There’s also the issue about poaching employees a little. I’ve seen some people talk about that within these articles because when an employee transfers from one baseball team to another – you know, this happens in all sports – how do you separate when it comes to that knowledge of even certain plays you have. Like, in baseball they have hidden symbols and gestures, right? How does that work? Do they just end up changing it every season?
MATT: It’s like one of those old Egyptian things. It’s hidden symbols in the wall and you have to figure it out. Well, yeah, the catcher will signal what pitches the pitcher’s going to throw. Some people are saying, “Well, this is stealing signs in 2015.” I mean, I don’t think this database had the signs that the catcher is going to give to the pitcher but this is just another form of what used to be some guy in the bleachers with binoculars looking at what the catcher’s doing and then trying to signal to the batter somehow. What used to be that in the old days is now stealing information systems and databases of how you run your whole organization. I mean, yeah, cheating has been around, especially in baseball, since probably day one. But this is just, you know, stealing signs, that’s not a crime. No one’s going to press charges for that but there might be some punishment for Major League Baseball but, you know, hacking into a system, it’s a little bit different. The FBI is not going to come knocking at the St. Louis Cardinals door if they were just stealing signs from the Houston Astros catcher.
NASIR: I mean, does that still happen with the binoculars things? Is that allowed?
MATT: It’s never been allowed. I think there was an accusation a couple of years ago of the White Sox.
NASIR: Those White Sox.
MATT: They were looking. I mean, now you can have cameras so you can feasibly see what the catcher’s signaling. This is what they were accused of. They had the camera, saw the sign, flashed something in the outfields so the batter could see it, and then whatever. I don’t know if this ever actually happens or not but that was the accusation. But this is way different than that. this is hacking into someone’s database and committing and crime.
NASIR: By the way, I should have some correction. I don’t know if it’s a correction or not but the whole Bratz and Barbie doll case, I mean, that’s gone back and forth. It was appealed to the Ninth Circuit court of appeals and, at the end, I think they gave the actual ownership of the Bratz dolls to the founder which was actually a company, MGA Entertainment. But, at the end, MGA still had to pay the attorney’s fees and so forth. But the point being is that the general rule is the employer owns the intellectual property developed and the issue with that case was that it was after work and things like that. There were other factors involved and there was an employment agreement. And so, it just shows you the importance of having a really good solid contract with your employees. At the same time, you know, your employees are going to leave you eventually. Just like in baseball, I mean, they’re going to go to a different team. How you protect your property for that is sometimes very difficult. Even the major league players have troubles with that, so to speak.
MATT: I thought you were going to say the correction was “I have no idea how dolls work” but referring to me because you made that statement earlier which is untrue.
NASIR: No, no, no, that’s the only thing that I don’t have to correct. I love sports but baseball is just the most boring sport ever – unless I’m at the game and that’s just because there’s other people there I’m looking around and watching.
MATT: Lucky for you this is happening in your backyard of the Houston Astros so you can go.
NASIR: I know. You told me, like, this is big news. I’m like, “I haven’t even heard it.” In fact, my wife was like, “Oh, Houston has a baseball team?” I’m like, “Yeah, they do!”
MATT: They actually had the number one prospect in all of baseball. He was in their minor league system. He got called up last week – or maybe even two weeks ago – but had his first home game last week and hit a homerun in his first game. It was a pretty big deal. But I didn’t even ask you because I assumed you don’t pay attention at all.
NASIR: No, you lost me at “called up from the minor league.” I fell asleep.
MATT: It’s fun.
NASIR: All right. Well, thanks for joining us on our first and last baseball episode. Actually, no, it’s not our first because we did have that one fan that got hit by a hotdog or something?
MATT: Got hit in the eye by Dinger, the Kansas City Royals mascot.
NASIR: So, our second and last episode on baseball. Thanks for joining us.
MATT: We’ve probably talked about it in another one. Oh, well. Keep it sound and keep it smart.

Nasir Pasha & Matt Staub

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The Podcast Where Nasir Pasha and Matthew Staub cover business in the news with their legal twist and answer business legal questions that you the listener can send it to ask@legallysoundsmartbusiness.com.

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