Nats Insurance Lawsuit Details Kickback Scheme

The Nationals have filed a lawsuit against the Westchester Fire Insurance Co. in a bid to recoup the bonus that Dominican prospect Esmailyn Gonzalez – now known as Carlos David Alvarez Lugo - received for signing with the club, a detailed article by Baseball America's Ben Badler reports. According to Badler, the lawsuit describes a scheme in which Alvarez allegedly kicked back $300K of his $1.4MM bonus to Jose Rijo, who ran the club's Latin American scouting operation at the time. Rijo, a special assistant to former GM Jim Bowden, was fired in February 2009, and Bowden resigned three days later.

Alvarez claimed to be 16 at the time of signing, but as Sports Illustrated reported in 2009, he's actually four years older than that and was using a fake name. According to the lawsuit, the player “executed an affadavit detailing his fraud," including information on the kickback arrangement, leading the Nationals to file an insurance claim to reclaim their loss. However, two years after the filing of the claim, Westchester denied it.

In the suit, the Nationals argue their contract with Westchester covered $1MM of commercial crime insurance coverage and that the signing resulted from fraud by their employees. The club notes that Chartis, its excess loss insurer, has paid the club "substantially all of the Nationals’ loss in excess of Westchester’s liability limit for this policy." The suit adds that the Yankees and Rangers were also interested in Alvarez, apparently to suggest that competition justified the $1.4MM bonus. Westchester has yet to file a response to the complaint.

As Badler notes, Rijo was charged with money laundering in the Dominican Republic in 2012 in connection with the activities of suspected drug trafficker Matias Avelino Castro, who's now a fugitive. Alvarez, 27, has a .291/.412/.409 line in 1,207 minor league plate appearances, and has appeared in just two games for a Nats' rookie affiliate this year.