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Jorge Posada, Jose Contreras sue financial managers after losing millions in alleged scam

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(AP Photo/Seth Wenig)
(AP Photo/Seth Wenig)

According to Jorge Arangure, Jorge Posada and his wife Laura are suing Juan Carlos Collar and Anthony Fernandez of Quantum Ventures, LLC over “what they believe was a blatant and negligent mismanagement of funds.” The suit was recently filed in Miami. The Posadas were allegedly scammed out of approximately $11.2M. Ex-Yankee Jose Contreras is also suing Collar and Fernandez after losing more than $2M.

Posada entrusted his money to Collar and Fernandez way back in 1999, says Arangure. Collar and Fernandez “received all of the player’s mail, filed their tax returns, wrote checks for them, and were given the authority to make whatever investments they wanted” with Posada’s money. It wasn’t until Posada hired an independent investigator to audit his finances in 2010 that the wrongdoing was discovered. Here are the details of the scheme, from Arangure:

Shortly after founding Quantum in 2005, Collar and Fernandez formed a separate company to handle speculative real estate deals—Sunset Trails, LLC—into which they put $3 million of the Posadas’ money. But the $3 million didn’t ensure the Posadas any ownership of the properties Sunset Trails purchased. Instead, the money only entitled them to membership in the LLC. So the Posadas had no say in what happened with any purchase.

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On July 28, 2005, Sunset Trails purchased a plot of land for $13.5 million for the purpose of “developing an elite equestrian-themed community for the wealthy,” according to Contreras’s complaint. Most peculiar was that Sunset Trails purchased the land from Southern Acres of Florida, LLC, who on that same day had purchased the land for $8,402,900. In less than a day, Southern Acres had made a $5,049,000 profit.

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For example, both complaints outline that Quantum received a 1 percent management fee ($135,000) for Sunset Trails’ $13.5 million land purchase. Quantum also set up various conditions within the deal that gave them an even greater profit. For example, Quantum received the first 20 percent of all net profits. In total, Quantum was in a position to receive nearly 60 percent of all Sunset Trails earnings on the deal, a condition to which no independent company would have agreed upon. But Sunset Trails was not an independent company. Collar and Fernandez managed Sunset Trails.

Additionally, Fernandez served as the real estate agent on the deal, meaning he personally pocketed approximately $350,000 on the sale, according to Posada’s complaint.

“I’ve never heard of anything like that. It’s jaw dropping,” said Posada’s attorney to Arangure. “They would go to Jorge and they would have a stack of documents to sign, and they would just say ‘sign here,’ and Jorge would sign it. He completely trusted these guys with all of their finances. All of their money. Whatever the Posadas made, went directly into their accounts with these guys. That’s the kind of trust they had. The Posadas never in any way used other money managers, other investments. Everything was through these guys.”

The Sunset Trails land is currently being leased to a farmer and Posada’s money is still tied up in it. Collar and Fernandez will make nearly $750,000 in rent over the next five years. Because he was duped into being a member rather than an owner, Posada has no say in what happens to the property. Same with Contreras. Posada also invested over $8M into Quantum Hedge Fund, which invested in “risky, high leverage hedge funds.”

According to Baseball Reference, Posada banked more than $117M in player contracts during his time with the Yankees. That is before taxes and doesn’t include any endorsements or his MLBPA pension. Contreras made more than $67M during his time in MLB. Both lawsuits are set to go to trial next year.

The Day The Evil Empire Was Born

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It’s easy to forget just how big Jose Contreras was in Cuba. He was the country’s undisputed ace in international play for nearly a decade, helping Cuba to the silver medal in the 2000 Olympics and gold is numerous other events. Contreras first popped up on the big league radar in March of 1999, when he struck out ten Orioles in eight shutout innings during an exhibition game in Havana. Later in the year he struck out 13 in eight innings on one day’s rest against Team USA in the Pan Am Games, the first time Team USA was allowed to use professional players.

Contreras defected from Cuba in October of 2002 while in Mexico for a tournament, leaving his wife and young daughters behind. Contreras made his way to San Diego and eventually gained asylum in the United States, where he and agent Jaime Torres started fielding offers from Major League teams even though he wasn’t yet a free agent.

“Most of the organizations I thought were going to contact us have contacted us, and that includes the Yankees,” said Torres a little more than two weeks after the defection.

The Yankees needed to clear money to pursue their top two targets that offseason, Contreras and Hideki Matsui. They also wanted to re-sign Roger Clemens. Mike Stanton and Ramiro Mendoza were allowed to walk as free agents, and rumors circulated that they may trade Andy Pettitte and his $11.5M salary to free up more payroll room. Doubts about Contreras’ age persisted (he was listed at 31 at the time), but nonetheless the Red Sox and Mariners got heavily involved in the bidding. Contreras had been working out with Torres in Nicaragua that winter, and Boston went so far as to buy out every room of the hotel where he was staying.

“The Boss, that was something that was a one up on us when they did that, it was a shrewd move,” said Brian Cashman recently, “and [George Steinbrenner] was not going to be denied.”

“We were smoking cigars with Contreras and drinking rum until about 4 o’clock in the morning,” said then-Red Sox GM Theo Epstein recently. “He told us he always wanted to be a Red Sox, and then the next morning the Yankees offered him about $10 million more.”

The Yankees signed Contreras on Christmas Eve, giving him four years and $32M. Coincidentally, the contract became official on this date in 2003. Orlando Hernandez, who had spoken to Contreras by phone a few times after his defection, was traded to the Expos in January to further free up some money. Matsui had agreed to a deal a few weeks earlier, and Clemens would re-sign a few days later. The Yankees got all their men.

”The Evil Empire extends its tentacles even into Latin America,” said Red Sox president Larry Lucchino after news of the signing broke.

The Yankees and their fans have since embraced the Evil Empire moniker. The Imperial March — Darth Vader’s theme music in Star Wars — is a pregame staple at Yankee Stadium, and you can buy unlicensed Evil Empire merchandise right outside the Stadium on River Ave. Everyone knows the Yankees spend more money than every other team, and Lucchino gave us all something to rally around. No one tries to hide from the bloated payroll, which is something Lucchino’s Red Sox can certainly be accused of in recent years. We’ve embraced it.

Contreras’ contract drew the comment from Lucchino, but the Yankees have been operating this way for decades. They’ve always been in the hunt for big money free agents, always been at or near the top in payroll. It’s become the Yankee way, and they’ve been really successful going it. The Evil Empire crack did a fine job of relaying Lucchino’s frustration, but it’s also an acknowledgement of the team’s success and continues to be to this day.

Past Trade Review: Jose Contreras

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By most appearances, the Yankees were sitting pretty at the 2004 trade deadline. They were 64-38, 7.5 games ahead of the second-place Red Sox and 6.5 games ahead of the next closest AL competitor. On the night before the deadline they defeated the Orioles 2-1 on the strength of a Kevin Brown performance, his first start after spending more than a month on the DL. The team looked poised to win its seventh straight AL East title.

Still, the team had a major weakness in its pitching staff. They had allowed 500 runs through July 30, the second worst mark among teams above .500. It was also 10 runs worse than the Red Sox, while the Sox had outscored the Yankees by 10 runs to that point. That must have made the Yankees feel a little less secure in their position. In fact, it led them to seriously discuss a Randy Johnson trade with the Diamondbacks.

By July 28, however, it was apparent that Johnson would remain in Arizona. But that wouldn’t stop Brian Cashman from attempting to improve the team’s pitching staff. As he commented around the time the Johnson talks fell apart, “Right now, I’m exchanging ideas with other G.M.’s [sic] and trying to improve our club.” When that quote appeared in The New York Times, few of us could have guessed the mystery pitcher. A day after publication, a minute before the 4 p.m. trade deadline, we found out, though the more surprising aspect was the player the Yankees traded away.


Photo credit: Paul Sancya/AP

The Yankees signed Jose Contreras to a four-year, $32 million deal in the winter of 2002, which led to the now infamous Evil Empire declaration from Larry Lucchino. Because the rotation was so crowded, Contreras started the 2003 season in the bullpen, though he didn’t get much work early in the season. In just eight relief appearances he allowed 11 runs, six in three appearances against the Jays and five in one appearance against the Red Sox. He transitioned to the rotation at the end of May, and in his first two starts he allowed two runs over 14 innings, striking out 12. But he strained his subscapularis, causing him to miss over two months. Upon his return he pitched well in all but one start. Of course, that one came against Boston.

In 2004, however, Contreras could not put it together, which hurt particularly because the Yankees were relying on him. They had lost Roger Clemens, Andy Pettitte, and David Wells over the off-season and needed Contreras to hold down a spot atop the rotation. After a two-out start against Baltimore on June 2, Contreras held a 7.11 ERA, having pitched just 31.2 innings over eight starts. He recovered a bit after that, bringing his ERA down to 4.84 after a July 20 start against the Devil Rays, but then surrendered 15 runs over 12 innings in his next two starts against Boston and Baltimore. With their rotation reeling — even Tanyon Sturtze had gotten a start by that point — the Yankees needed an upgrade.

Brian Cashman and White Sox GM Ken Williams got a bit creative in their deadline deal. Instead of swapping prospects for veterans, as we often see, they decided to swap underperforming vet for underperforming vet. The White Sox received Contreras, plus $4 million, while the Yankees received 2003 Cy Young runner-up Esteban Loaiza. Even though his 2004 season more resembled his spotty past than it did his stellar 2003, he was still out-pitching Contreras. Plus, he would hit free agency after the season, which left the Yankees some flexibility.

The deal could not have backfired worse. Loaiza jumped right into the rotation, much to the joy of opposing hitters. He allowed 22 runs, 20 earned, over 24.2 innings in his first five starts, striking out 16 to 13 walks and 6 home runs. In other words, he had the FIP, 6.71, to go with the ERA, 7.30. After surrendering four runs in 4.1 innings to the Jays on August 27 the Yanks removed him from the rotation, though his bullpen stint went just as poorly. He made just one more start that year, but he probably wouldn’t have gotten even that had Kevin Brown not broken his hand punching a wall.

Loaiza’s only saving grace that year was the playoffs, in which he allowed just one run over 8.1 IP. Then again, that was a pretty important, the game-winner against Boston in Game 5 of the ALCS. The Yankees let him walk after that season, meaning all they got out of the deal was two months of horrible pitching, followed by a decent playoff run marred by one enormous run.

Contreras had his troubles in Chicago, keeping his ERA pretty consistent up until his last start, an eight-inning, zero run performance against Kansas City. The next year, however, is when the Yankees regretted the deal. As they ran through a series of scrubs because of various injuries to their pitching staff, Contreras pitched very well for the White Sox, racking up 204.2 innings with a 3.61 ERA (3.89 FIP). His ERA did rise to 4.27 in 2006, the final year of the contract he signed with the Yankees, though his FIP was right around his 2005 mark, 4.00. Though the Yanks’ staff was a bit better that year, they certainly could have used a performance like that in the middle of the rotation.

While the need to improve the pitching staff in 2004 was evident, the Yankees did not win in this trade. The pitcher they acquired was actually worse than the one they traded away. The move did save the Yankees about $15 million in future salaries, but considering the state of their pitching staffs in 2005 and 2006, I’m sure they gladly would have paid that money to Contreras. We can decidedly stick this one in the loss column.

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