I am in the midst of a multi-part exploration of the Major League Baseball (MLB) investigation into allegations that the Houston Astros engaged in a multi-year scheme to steal signs and signals from opposing teams. MLB issued a Statement of the Commissioner (MLB Report) detailing the investigation protocol, findings, disciplinary actions taken and conclusions. The entire sordid affair provides every compliance practitioner with multiple lessons to be learned that they can use in every corporate compliance program. Yesterday, I focused on the penalties assessed against Jeff Luhnow and A.J. Hinch. Today, I want to take a look at some of the lessons learned for the compliance professional.

Galileo’s principle (or the Law of Intended Consequences or No Good Deed Goes Unpunished). Tim Harford, the Undercover Economist, coined this term as “the steps we take to make ourselves safe sometimes lead us into danger”. This entire cheating scandal began around a technological innovation by MLB. In 2014 MLB began video review of umpires calls. To facilitate this innovation, MLB put a camera in centerfield. In 2017, MLB allowed teams to put monitors in the video replay review room to review these feeds so they could better determine if a challenge was warranted.

Early in that season, according to the MLB Report, “employees in the Astros’ video replay review room began using the live game feed from the center field camera to attempt to decode and transmit opposing teams’ sign sequences (i.e., which sign flashed by the catcher is the actual sign) for use when an Astros runner was on second base. Once the sign sequence was decoded, a player in the video replay review room would act as a “runner” to relay the information to the dugout, and a person in the dugout would notify the players in the dugout or signal the sign sequence to the runner on second base, who in turn would decipher the catcher’s sign and signal to the batter from second base.”

What is the risk that a team might abuse this new tech innovation? Is it up to MLB to actively assess the risk, manage the risk and then monitor the risk (i.e., the risk management process)? Afterall cheating in general and sign-stealing in particular have long been time-honored traditions in baseball. Up until the September 2017 Memo, electronic sign-stealing had not been addressed but it was considered ‘wrong’ while sign stealing from second base was considered good baseball.

Compliance Lesson – Every time you make a business change, your risk profile changes. Centralize a function and it can lead to inertia and misunderstanding with the business in the field. Decentralize your compliance program and it could well lead cooption of your compliance by the business unit in the field. Equally important, do you simply expect your employees to follow the rules or do you train them? Do you communicate ethical expectations? If not, why not?

Don’t Speak Softly and Carry a Big Stick. Speak Loudly. Manager Hinch was fully aware of the sign stealing scheme. Twice he took a very big stick in the form of a baseball bat to the monitor to damage it so badly that it had to be replaced. Yet he apparently never said anything to the players or Bench Manager Cora to stop the activity. The MLB Report stated, “Hinch admits he did not stop it and he did not notify players or Cora that he disapproved of it, even after the Red Sox were disciplined in September 2017. Similarly, he knew of and did not stop the communication of sign information from the replay review room, although he disagreed with this practice as well and specifically voiced his concerns on at least one occasion about the use of the replay phone for this purpose.” Moreover, if he had said anything, to either his direct report, Cora, or the players, it would have ended. Once again from the report, “Players stated that if Manager A.J. Hinch told them to stop engaging in the conduct, they would have immediately stopped.”

Compliance Lesson – Actions matter but words matter. If you are in management, when you see something SAY something. You cannot simply throw a bad practice, habit, ethical violation or Code of Conduct violation away. Sometimes saying “stop it” will work.

Make discipline matter. Both General Manager (GM) Luhnow and Manager AJ Hinch were suspended by MLB for one year. Hinch was not only suspended for one year but “must not be present in any Major League, Minor League, or Spring Training facilities, including stadiums, and he may not travel with or on behalf of the Club. If Hinch is found to engage in any future material violations of the Major League Rules, he will be placed on the permanently ineligible list.” In other words, he cannot even go to a stadium. Luhnow received a similar proscription. Further, they were both fired by Astros owner Jim Crane.

The two principals involved with the scheme, then Astros Bench Coach Alex Cora and Carlos Beltrán, had moved on to managerial roles with other teams, the Boston Red Sox and New York Mets respectively. They were both fired this week by their clubs. Cora was fired before MLB laid down a multi-year suspension on him for his actions in bringing the sign stealing scheme to the Boston club in 2018 when he became manager.

Beltrán’s situation was a bit different as he had been a player during his transgressions and players were given immunity. Yet, as Tom Verducci, in SI.com, said “His tenure as manager of the team would begin with a news conference in which he not only would have to account for being a mastermind in the team’s systematic cheating, but also have to answer detailed questions about his misuse of technology, such as why he didn’t stop when warned, what he did in the 2017 World Series and when his unethical espionage began.”

But the bottom line for all four is that they may well never manage in baseball again. Indeed, they may never work in their chosen profession at all. Those questions which Verducci said Beltrán would be required to answer will be asked of the other three as well wherever they might go. Or the question could be as simple as ‘are you cheating now like you did before and denying it again’?

 Compliance Lesson – If you really want to change behavior make the penalty harsh. If you want people to engage in ethical behavior make sure that if they break the rules, they are punished. This is even truer for management. They are expected to lead, expected to speak up and expected to stop unethical behavior.

In the next blog post, some reflections on the MLB Report.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2020