KEY WEST, FLORIDA (Fortune) -- In the end, none of it amounted to good business.
For all the trouble and expense that the government says Gus Dominguez went through to bring Cuban baseball players to the United States - from hiring a drug felon and insurance scamster to arrange the smuggle in a 28-foot Baja speedboat, to renting vans and apartments and paying for food - he never made a dime off the scheme. In fact, he's still in the hole for at least $250,000.
And for that, Dominguez could wind up in jail. Dominguez, a long-time baseball agent, is on trial here in a federal courthouse - a square building that sits on a main thoroughfare directly across from where Ernest Hemingway lived - for allegedly smuggling Cuban baseball to the U.S.
It's a crime the locals are familiar with: just this week, some 22 Cubans showed up at the Key West airport claiming to have arrived at a beach on a raft made of "buckets and bolts." Much has been made recently of baseball's international flavor - about 25 percent of Major League rosters are made up of non-natives, and MLB has done much to tout this as evidence of baseball's popularity and robust health.
But this trial has exposed another side of that story, a darker chapter in which crooks and shadowy operatives shuffle baseball players - "commodities" is the word the prosecutor has used - from country to country hoping to cash in.
On Thursday jurors got a lesson in economics 101 for baseball agents, in particular the niche business of representing Cuban defectors, a profession that Dominguez pioneered in the early 1990s. They likely left court for the day thankful they never entered that line of work. In the indictment, Dominguez is accused of paying a convicted drug dealer to bring five ballplayers to the Florida Keys in August of 2004. Dominguez, according to testimony and court documents, then paid to transport them to California, where the five lived in apartments paid for by Dominguez's agency, Total Sports International, ate and trained on his dime.
When the five were showcased for pro scouts, three signed minor league contracts for minimal amounts. According to testimony Thursday from Steve Schneider, Dominguez's business partner, the pair has yet to receive a dime. (Two of the players still play in the minor leagues, for the Atlanta Braves and Arizona Diamondbacks, and the others are out of baseball.)
"We have a standard fee arrangement that is the model for every player," Schneider said on the witness stand. "If we sign a player to a pro contract, we take a percentage of that signing bonus." None of the players signed big league deals, and none have paid back expenses to Total Sports, according to Schneider, who said the agency lost money in 2003 and 2004, the time period during which the alleged smuggling took place.
While the criminal charges center on one smuggling operation in 2004, the prosecution has introduced evidence regarding an earlier operation in 2003, one that brought current Seattle Mariners shortstop Yuniesky Betancourt to the United States. Betancourt went on to sign for millions, but ditched Dominguez as an agent and never paid him, according to testimony. Betancourt is expected to miss Friday's Mariners game versus the Cleveland Indians to testify here.
Ironically, the fact that Dominguez lost money could bolster his defense. The prosecution has tried to paint a picture of Dominguez as a profit-seeking crook dealing in human cargo - an argument that weakens with the absence of profits.
"Gustavo continues losing money," said Ysbel Medina-Santos, the drug dealer who claimed on the witness stand that he was paid by Dominguez to smuggle in Betancourt and the five other players. Medina-Santos, who wore a faded blue prison uniform because he is in custody waiting to be sentenced on the drug charges, said Dominguez paid him $100,000 to smuggle Betancourt out of Cuba. "This ballplayer business was a failure," added Medina-Santos, who said that Dominguez promised to pay him a percentage of any bonus a player who he smuggled out of Cuba received from a major league baseball team.
One scintillating issue hanging over the trial is how complicit major league teams have been in the smuggling of Cuban baseball players over the years. Some in the baseball community believe Major League Baseball - which like any American business is barred by the Cuban embargo from doing business in Cuba - has taken a wink-and-nod approach to the issue. Medina-Santos hinted at the prospect when he claimed Dominguez told him that teams would often pay monies "under the table" to compensate for the costs associated with smuggling players. Medina-Santos, who had been grilled by the defense over his failure to pay taxes on his drug proceeds, said: "How many agents take money from under the table and do not report that to the government?" 
