The Washington Nationals are suing an insurance company in an attempt to recoup the bonus money they paid to the Dominican prospect formerly known as Esmailyn Gonzalez, but of more interest in the baseball world are the details of a kickback scheme the Nationals allege in their lawsuit.
The Nationals signed Gonzalez for $1.4 million on July 2, 2006, when he presented himself as a 16-year-old. Three years later, it came out that Gonzalez was really Carlos Alvarez (full name: Carlos David Alvarez Lugo) and that he’s four years older than originally believed. Alvarez remains in the organization but has just 41 at-bats above short-season ball, and he has made just two plate appearances in the Rookie-level Gulf Coast League this season.
The Nationals assert that the Gonzalez/Alvarez signing came about as a result of fraud by their employees and filed an insurance claim to recoup the loss. Westchester Fire Insurance Co. denied the claim, so the Nationals are suing the insurance company. The team filed the lawsuit in May in Washington, D.C., Superior Court, but it was transferred to federal court in D.C. last week at the insurance company’s request.
In the lawsuit, the Nationals say that Alvarez “executed an affadavit detailing his fraud, including that he kicked back $300,000 of his bonus to Jose Rijo.” At the time Rijo ran the team's Latin American scouting as a special assistant to then-general manager Jim Bowden. The Nationals also claim that Jose Baez, the team's director of Dominican Republic operations at the time, was also involved in the kickback scheme.
Sports Illustrated first reported Alvarez’s real name and age in February 2009, and shortly after that federal officials said they were investigating allegations of bonus skimming in the signing of Latin American prospects. Nationals officials said at the time that they were unaware of the fraud until it became public, and both Rijo and Baez were fired on Feb. 26, while Bowden—who is not mentioned by name in the lawsuit—resigned three days later. The team also moved out of Rijo's academy in the Dominican Republic. The lawsuit claims that Alvarez's bonus "represented a complete loss resulting from the employee dishonesty, theft and fraud of Rijo, Baez and (Alvarez)."
The Nationals say in their suit that the Yankees and Rangers had also expressed interest in Alvarez "given his skill level and apparently young age," suggesting that they believed the $1.4 million bonus for Alvarez was justified at the time because of competition. Gonzalez was represented by Rob Plummer and trained in a program with Basilio Vizcaino, the prominent Dominican trainer known as "Cachaza."
The Nationals say they had a contract with Westchester for $1 million of commercial crime insurance coverage to protect the club from employee dishonesty, theft and fraud. The Nationals say their claim was denied—after months of delays—without reasonable basis, and say they reported the incident to Westchester with "extensive and detailed proof" as soon as they learned of the fraud. When Westchester responded more than three months later, according to the Nationals, they requested further proof "including an extensive, redundant and burdensome list of additional documents and a request for interviews with Nationals employees."
Two years after the Nationals submitted the claim, Westchester denied it. The team notes in its lawsuit that Chartis, the team's excess loss insurer, paid the club "substantially all of the Nationals' loss in excess of Westchester's liability limit for this policy," but that it has not been able to resolve its dispute with Westchester.
Westchester has not yet filed its answer in the lawsuit.
While the Nationals attempt to recoup their money from the Alvarez signing, Rijo has bigger issues on his hands. He was in the news last year when Dominican authorities charged him with money laundering in connection with the activities of Matias Avelino Castro, a suspected Dominican drug trafficker. A prosecutor at the time said that 80 percent of Castro's assets were in Rijo's name, including a sports complex and two hotels, and prosecutors have asserted that other drug traffickers have used Rijo’s name to legitimize their real estate transactions.
According to the English-language Website Dominican Today, the Dominican government asked a San Pedro de Macoris court in July to proceed with a trial for the eight men accused in connection with the August 2011 kidnapping and killing of journalist Jose Silvestre. The government's anti-money laundering office charged five people with murder in the case and three others—including Castro, who is a fugitive, and Rijo—with money laundering.