For this update, I’m going to start with a woman. Debi Thomas was once the most popular figure skater in America. She won the bronze medal at the 1988 Olympics. After retiring from skating, Thomas graduated from medical school and began practicing orthopedic surgery. According to one of her colleagues, Dr. Lawrence Dorr, “She wanted and expected to be treated like a star, but in orthopedics, she knew she wasn’t a star.”
Thomas began bouncing from job to job, got divorced and lost custody of her son. She started her own practice and that eventually failed and then she appeared on that “train-wreck” TV show “Fix My Life,” featuring Iyanla Vanzant. (Has anyone’s life actually improved after appearing on that show?) That’s when the world discovered that twice divorced former star lived in a bedbug infested trailer with her alcoholic fiance and his two sons, that her medical license has lapsed, she lost custody of her son, and she had no real income to speak of outside of selling gold bullion. Wow! Today, three decades later, out of the lime light, Thomas appears to have accepted her fate and enjoys life in Virginia near the Appalachian Mountains. Good for her. Other major athletes have a different story to tell.
Most of the scammers are men, but there are some women in the pack. The most famous is probably Peggy Ann Fulford. Where do I start with Ms. Fulford (if that’s her real name)? The 61-year-old has been married five times and had 8 aliases. Fulford is currently serving a ten-year prison sentence in Texas for defrauding, cheating, stealing, (whatever you want to call it), several professional athletes, including former NBA basketball player Dennis Rodman and Travis Best.
I want you to follow this story and factor in the details that I think are significant (in maroon text), because collectively this will help solve the puzzle of why athletes get scammed and defrauded of their money. Fulford has been known to furnish homes, buy engagement rings and deal with endless baby mama drama. Let’s drop names. Who are some of the people burned by Peggy Fulford? NBA Dennis Rodman and NFL Running Back Ricky Williams.
Take Williams. When Williams’s then girlfriend, Kristin Barnes, gave birth to the couple’s first child, in April 2002, it was Peggy who drove Kristin and baby Prince home from the hospital; when a second child arrived, Peggy hosted the baby shower. “She was just larger than life,” Kristin says. “She could make any person feel like a million bucks.”
Or Dennis Rodman. Peggy ingratiated herself with Rodman to the point that he gave her a “shout out” during his NBA Hall of Fame Induction speech. When Rodman’s electricity at his condo was cut off or he received late notices for not paying his bills, Peggy crafted the story that Dennis was too wild and needed to be saved from himself. Based on Rodman’s reputation that was plausible. That’s how she justified taking control of Rodman’s bank accounts and denying him access to a debit card.
As things started to unravel for Rodman, things were worst for Ricky Williams and his family. His then wife went to load the kids in the SUV to take them to school, only to discover that their Range Rover had been repossessed or as we say in the old neighborhood “snatched” from the garage. Folks started making some calls to the colleges and investment firms and discovered that Peggy did not attend Harvard University and she did not work at the Charles Schwab investment firm.
In 2014, Williams testified in U.S. District Court that every NFL paycheck he earned from the Dolphins and the Ravens from 2008 to 2012—some $5 million post tax—plus $250,000 in endorsements was deposited into bank accounts under Peggy Fulford’s control and how most of that money was missing.
In my view, Peggy “groomed” these athletes and their families, much like a molester grooms their victim. Typically, she would offer to manage a client’s finances without a fee. She would appear to be transparent by setting up two bank accounts—one for personal living expenses and the other for investments. Usually, money directed to the “investment” account, would be directed to Peggy’s account. When she did charge a fee, that fee was usually outrageous. For example, she charged Ricky Williams $60,000 for his wedding, which reportedly was twice the actual cost.
Fulford lived large sporting two Bentleys and a Maserati in her driveway, which reportedly were purchased with stolen funds. Oh, I forgot the four Mercedes Benzes, three Range Rovers, a Porsche, and a Rolls-Royce Ghost. What is it with black folks and cars? Yeah, Fulford is Black. The only color that really matters in this story is green, but it is rare that a black female can get this kind of access and control. According to reports, Fulford also stole jewelry and clothing, had homes in multiple states, private school tuition and one year charged over $2 million dollars on American Express.
In fairness, Rodman and Williams were not her only victims. Add NBA players Rashad McCants and Travis Best and NFL player Lex Hilliard to the list.
As I close out the Fulford case, let me share some additional data. According to a study by Ernst & Young, pro athletes claimed nearly $600 million in total fraud-related losses between 2004 and 2018. But that figure is based on only 35 cases available in public court documents.
There is a long list of athletes who are victims of fraud. In recent years Tim Duncan, Mark Sanchez, Roy Oswalt, Kevin Garnett, Torii Hunter, Clinton Portis, John Elway, Joe Haden, Adewale Ogunleye, Vernon Davis, Darren McCarty, Horace Grant, Darren McFadden and Michael Vick have all been victims of advisor and agent misdealing’s that have led to millions of dollars in losses.
Here Are My Take-Aways
- Most athletes were not taught how to manage money. Two-time NBA Champion and 11-time All-Star, Chris Bosh, was quoted in an article by Jackie MacMullan saying: “I have millions of dollars and I don’t know finance. I’ve had some bad things happen in my career…I was 22 years old when I started. I didn’t know anything. People put stuff in front of me and I signed it, and then it came back and crucified me 10 years later.”
- Most athletes trust their financial advisors.
- Despite hearing all the stories, most athletes think it won’t happen to them.
- Know the three components of “The Fraud Triangle” as described by David Byrne. According to Byrne, “The Fraud Triangle” states that a trusted person, such as a financial advisor or money manager, commits fraud based on three chronological factors:
- Pressure– Trusted person has a problem that money can solve.
- Opportunity– Trusted person has access to someone’s money and believes his fraud is unlikely to be discovered.
- Rationalization– Trusted person justifies what he is doing to absolve himself of the guilt of the crime.
How Can Athletes Protect Themselves from Being Victims?
One out of every six NFL players will file for bankruptcy during retirement. Athletes who have filed for bankruptcy include: Kenny Anderson, Wally Backman, Charlie Batch, Bruse Berenyi, Riddick Bowe, Randy Brown, Mark Brunell, Bill Bucker, Jason Caffey, Dale Carter, Jack Clark, Raymond Clayborn, Derrick Coleman, Dermontti Dawson, Jim Dooley, Lenny Dykstra, Luther Elliss, Eddie Edwards, Chris Eubank, Rollie Fingers, Archie Griffin, Ray Guy, Tony Gwynn, Dorothy Hamill, Scott Harrison, Steve Howe, Harmon Killebrew, Bernie Kosar, Terry Long, Rick Mahorn, Harvey Martin, Deuce McAllister, Darren McCarthy, Denny McLain, Craig Morton, Greg Nettles, Jonny Neumann, Gaylord Perry, John Arne Riise, Andre Rison, Rumeal Robinson, Manny Sanguillen, Warren Sapp, Billy Sims, Leon Spinks, Sheryl Swoopes, Roscoe Tanner, Lawrence Taylor, Duane Thomas, Bryan Trottier, Mike Tyson, Johnny Unitas, Michael Vick, Antoine Walker, Danny White, Ray Williams, and Rick Wise. Tired yet? I’ll stop listing names for now.
Former NFL cornerback Phillip Buchanon recently published a book addressing this very issue, titled, “New Money: Staying Rich.” In this very candid book, Buchanon says his mother told him that he had to give her $1 million for all that she had done for him growing up. Ouch!
This article is on athletes who went “broke.” I do feel compelled to share a few keystrokes about athletes who managed to be successful.
- Michael Jordan, owner of the Charlotte Hornets and who endorses dozens of products is reportedly worth $1.45 billion
- Former Heisman Trophy winner and NFL defensive player of the year Charles Woodson owns and develops real estate, has his own clothing line, and even owns his own wine brand.
- Earvin “Magic” Johnson reportedly has a personal worth estimated at $657 million. Johnson has invested in Starbucks and the Los Angeles Lakers, and other business ventures.
- Venus Williams also tops the list of successful athlete investors and financial managers. Venus Williams is the CEO of V Starr Interiors, part owner of the Miami Dolphins in the NFL, franchise owner of Jamba Juice, and manages an athletic clothing line.
- Serena Williams also owns a portion of the Dolphins, manages her own fashion label, and maintains endorsements with Chase Bank and PepsiCo.
According to the article written by Martin J. Greenberg and Henry Twomey, here are the Takeaways and Best Practices:
- Keep it simple, stupid. (KISS)
- Be involved, not a bystander.
- Financial literacy – educate yourself with the basis of economics, financing, and investment.
- Employ a cross-check financial team, including financial manager, accountant, attorney, and investment counselor.
- A dollar today is worth more than a dollar tomorrow.
- Immediately plan for the next phase of your life. The first day that you go onto the court, you might be surprised at your talents and resources available.
- Be conservative.
- Build a foundation first.
- Uncle Sam and the IRS always get their piece.
- Asset allocation is extraordinarily important.
- You have a short earning life.
- An estate plan in the event of death is absolutely necessary.
- Hairbrained and get rich quick schemes are outside the lines.
- Make certain your advisors have the insurance and financial capacity to bear the loss in the event of a malpractice claim.
- Carte blanche, broad powers of attorney, are an absolute no-no.
- Show me your credentials. Be certain that your financial advisor is credentialed.
- Take responsibility. Professional athletes need a financial enforcer.
- The money doesn’t last forever.
Athletes Gone Broke: Mo’ Money, Mo’ Problems!
Originally Posted October 10, 2018
Did you know that 78% percent of NFL players are under financial stress or bankrupt just two years into retirement. Within five years of retirement, 60% of NBA players are broke, according to Sports Illustrated.
In the ESPN documentary “Broke,” Director Billy Corben provides a “step-by-step guide on how to go broke” by talking to the current and former professional athletes who’ve gone broke themselves or have watched teammates and peers drain their bank accounts.
A disturbing large number of Black athletes have squandered millions of dollars due to bad business decisions, divorces, child support payments, uncontrolled lavish spending, overall poor financial planning and lack of personal discipline.
Two of the more recent athletes in the news who have gone broke are former NFL stars Vince Young and Jamal Lewis.
In August 2012, former NFL player Jamal Lewis, 32, was arrested and charged with child abandonment. Earlier this year Lewis declared bankruptcy. He is one of many professional athletes to file for bankruptcy. According to court records, Lewis has $14.5 million in assets, and $10.6 million in liabilities. Court documents also reflected that Lewis now earns $35,000 per month, and spends $34,050 of it. In addition, Lewis’ cars cost $5,700 per month, his mortgage is $6,000 per month and he owns a $200,000 boat, along with a $150,000 Ford F-650 XUV. Lewis also owns other vehicles, which explains why his car payments are so high. The court documents reflected that Lewis did not contribute anything to charity.
In July 2009, Lewis continued to play football. While still with the Ravens, Lewis invested in a cross country trucking business. His company had a fleet of around 200 trucks delivering perishable goods. Lewis personally guaranteed the loans with his bank. By June 2010, Baltimore County Circuit Court records reflected that M&T bank won a judgment last year against Lewis for more than $350,000 in unpaid lease installments and late fees and $35,000 in attorney fees.
On July 30, 2006, Vince Young, the No. 3 overall pick of the 2006 NFL Draft, signed a six-year contract with the Tennessee Titans that was worth $48 million dollars. The contract had a maximum value of $57.79 million, with $25.74 million guaranteed. Here we are six later and young is out of the league and according to his lawyer, has run out of money.
Young earned over another $4 million last season with the Philadelphia Eagles and signed a one-year, $2 million contract with the Buffalo Bills in May. Young was released in August before the start of the regular NFL season.
Let’s take a look at some of the athletes who have “gone broke.”
- Eddy Curry – A few years ago, NBA player Eddy Curry, despite making over $60 million in his career, Eddy Curry (NBA) is in serious debt while still shooting the ball. According to an Associated Press report, Curry defaulted on a $575,000 loan with an 85 percent interest rate (you read that rate correctly—85%). Curry was ordered by a judge to pay back $1.2 million to Allstar Capital Inc. Curry reportedly lost his $3.7 million home to foreclosure while trying to maintain monthly expenses exceeding $250,000 per month. Curry is currently in training camp with the San Antonio Spurs.
- Warren Sapp —The former Tampa Bay Buccaneer, Oakland Raider and NFL Network commentator owes more than $6.7 million to creditors and back child support and alimony, according to a Chapter 7 bankruptcy filing in South Florida. Sapp’s $6.45 million in assets includes 240 pairs of Jordan athletic shoes worth almost $6,500; a $2,250 watch; and a lion skin rug worth $1,200.
- Dennis Rodman — The eccentric Hall of Fame basketball star is allegedly broke and behind on over $800,000 of child support bills. Rodman’s also been challenged in court for failure to pay child and spousal support to his third wife, Michelle.
- Travis Henry — This former NFL Running Back has 11 children with 10 different women. Henry fell behind on child support payments and reportedly tried other avenues to generate money. Henry currently serving jail time for cocaine trafficking.
- Latrell Sprewell — Early in his career this former NBA player turned down a $21 million contract from the Minnesota Timberwolves citing that the contract did not offer enough money because he had a “family to feed.” According to MSNBC, Sprewell had his Italian yacht seized by a U.S. marshal after his mortgage went into default. Eventually his home, valued at $5.4 million, went into foreclosure in 2008 despite the fact that he made nearly $100 million during his career.
- Lawrence Taylor — The NFL Hall of Fame Linebacker’s life has been marred by cocaine addiction, statutory rape charges and bad investments. Taylor also plead guilty to tax evasion.
- Kenny Anderson — The NBA Point Guard was already broke by the time he retired from the NBA in 2005 after making approximately $60 million. Since then, he went back to school, got a degree and is now the boys’ basketball coach at David Posnack Jewish Day School in Davie, Fla. Anderson accumulated over $40,000 in monthly expenses to go along with child support for eight children. Anderson also owned eight cars, a home in Beverly Hills, a $10,000 monthly allowance, and regular $3,000 giveaways to relatives. In his divorce, he lost nearly $6 million in a prenuptial agreement.
- Scottie Pippen — Although he made an estimated $120 million during his playing days, former NBA great Scottie Pippen lost millions in mismanaged money (he sued his former law firm for the mismanaging). He also made the ill-advised purchase of a $4 million Gulfstream jet and later found out it needed $1 million worth of engine repair. At one point, Pippen owed U.S. Bank more than $5 million in principal, interest and attorneys’ fees, which he reportedly could not afford. On June 30 of this year, Mr. Pippen left the Cook County courthouse in tears after a jury awarded him $2 million out of the $8.2 million he was seeking in one of those lawsuits against two attorneys at the Chicago law firm Pedersen & Houpt.
- Terrell Owens — Back in January 2012, former NFL player known as “T.O.” admitted to GQ magazine that he was friendless, almost broke and “in hell.” He claimed that he lost his millions not because of an extravagant lifestyle, but because financial advisers steered him astray.
- Evander Holyfield — The former 4 time Heavyweight boxing champion who made over $250 million during his career said: “I’m not broke; I’m just not liquid.” Holyfield’s $10 million 54,000 square foot home with 109 rooms on 234 acres was foreclosed in 2008. He also owed a landscaping company over $500,000 in unpaid services and had problems paying child support for his 11 children. Holyfied also owed $200,000 in back taxes. The good news is that the house recently sold at auction for $7.5 million. The bad news is that at the time of the sale Holyfield owed more than $14 million.
- Deuce McAllister — Former NFL player McAllister lost millions when his Nissan dealership in Jackson, Miss. went belly up in 2009. Nissan is currently suing him, claiming the dealership defaulted on hundreds of thousands in payments and even more on exceeded credit limits.
- Michael Vick — The elusive NFL Quaterback filed for Chapter 11 in 2008 after serving prison time for participating in a dog fighting ring. He lost millions in all sorts of ways, including failing to pay for 130 rental cars and defaulting on a loan to set up a wine store. Vick’s appears to be headed in the right direction as he recently signed a $100 million contract with the Philadelphia Eagles.
- Muhsin Muhammad — The former NFL Wide Receiver owed tens of thousands in overdue credit card bills and ended up selling his home on eBay.
- Antoine Walker – Former NBA star Antoine Walker, earned more than $110 million and filed for bankruptcy in 2009, one year after retiring from the NBA. Walker’s financial moves reportedly included supporting 70 family and friends, building his mother a 10-bathroom mansion, owning at least two Bentleys and two Mercedes and collecting watches. In an interview with ESPN’s First Take TV show on October 2, 2012, Walker said, his financial woes were not largely due to gambling. He admitted to gambling but not as much as has been reported. Walker said his problems stemmed from bad investments in the real estate market, bad advice and supporting a lavish lifestyle with friends and family.
- Raghib “Rocket” Ismael – Ismael played two years in Canada and 10 in the NFL, earning an estimated $18 million to $20 million in salary alone. He then started to invest in a series of ventures that went bust, including a Rock n’ Roll Café, COZ Records, a movie, cosmetics, nationwide phone-card dispensers, and calligraphy proverbs kiosks.
- Mike Tyson – This former boxer may be the “King of Broke.” Tyson reportedly earned over $400 million during his career. Tyson’s fall from grace included a nasty divorce, a rape charge that led to a prison sentence, felony possession of drugs and a DUI charge. At one point, Tyson was worth less that $700 dollars. His situation has improved. He appears to be doing well in recovery for drug and alcohol problems, has remarried, had a movie made about his life and he is on Broadway starring in a play about his life.
- Allen Iverson – This former NBA dynamo reportedly earned over $200 million in salary and endorsements is reportedly broke. Iverson, aka “The Answer,” apparently has no answer to cure his financial woes. Iverson reportedly owes $859,000 to a Georgia jewelry store. Trouble seems to follow Iverson in the form of arrests for assault, carry a concealed weapon and gambling debts.
White athletes go broke too. Names like Bernie Kosar, Mark Brunell, Johnny Unitas, Bjorn Borg, Rollie Fingers, Curt Schilling, Sean Salisbury and Lenny Dykstra have gone broke. We chose to focus on athletes whose names and careers you are more familiar with.
Is the reporting of broke athletes different for white athletes than black athletes? Are there more racial stereotypes associated with the black athletes? Or is it just a matter of sports stereotypes? We’re just asking? We believe that many people, regardless of their race would go broke if they became a multimillionaire over night, especially, without any financial training. We need to teach our children financial literacy skills as soon as they learn how to count.
Former college (Fab 5) and NBA player Jalen Rose explains HOW athletes go broke. Ed Butowsky, featured in ESPN’s successful “30 for 30: Broke,” addresses how and why pro athletes find themselves in financial distress. Ed Butowsky has been in investment advising for the past 26 years and has seen first-hand how these athletes go broke.
When Vin Baker was a 20-year-old center on the unheralded University of Hartford basketball team, Sports Illustrated called him “America’s Best Kept Secret.” Recently, it was widely reported that the former pro basketball star, who earned $100 million during 13 NBA seasons, is broke and currently in training for a managerial position at a Starbucks franchise in Rhode Island.
At first glance, Baker’s financial hardship seems incomprehensible: He managed to deplete that massive fortune only 10 years into his retirement from basketball. In fact, Baker’s situation is disturbingly common. According to a 2009 Sports Illustrated article, 78% of former NFL players face bankruptcy or financial stress within two years of retirement. That same article reported that the rate of NBA retirees going broke within five years of leaving the court was as high as 60%. The NBA says that figure was overblown and pulled out of thin air; according to an NBA union survey, within 10 years of retiring 6% to 8% of players had lost huge amounts of money or were having trouble making ends meet.
In any event, everyone acknowledges that the finances of pro athletes and retirees is a source of serious concern. Students of behavioral economics may not be surprised to learn that basketball players who demonstrate a preference for long-range, low-percentage three-pointers seem especially likely to run into financial problems when they retire.
Poor financial literacy, ill-chosen accountants and other financial advisors, high-risk investing, gambling addictions, divorce, cultures of lavish spending, and much else have led countless professional athletes to bottom out financially over the years. MONEY has put together a list of ten of the most famous flops, from the professional boxing leagues to the WNBA, as living proof that even the biggest of fortunes can have a short shelf life.
Tyson was just 20 in 1986 when he nabbed the record for the youngest boxer to become a WBC, IBF, and WBA champion. During the long career in the ring that followed, he fought in over 100 professional matches, held the heavyweight championship more than once, and earned more than $400 million. Yet Tyson declared bankruptcy even before he retired in 2003.
Where did all the money go? A 2003 New York Times article on the filing claimed that Tyson “spent with the type of aggressiveness that once characterized his early round knockouts”—on everything from jewelry and limousines to Siberian tigers. Tyson claims crooked promoters didn’t help: In 1998, he filed a $100 million suit again his former promoter, Don King, claiming King had cheated him out of tens of millions over the course of the ’90s.
In spite of his relatively tiny stature for an NBA player (Iverson measures about 6 feet), this former shooting guard was once the league’s MVP, not to mention one of the highest-earning basketball players in the world. During his 2008-2009 season with the Detroit Pistons, Iverson’s salary was just under $21 million.
But when Iverson’s wife Tawanna filed for divorce in 2010 after eight years of marriage, a different financial picture came to light. Iverson was apparently broke, in debt, and incurring monthly expenses—rumored to include the cost of buying new clothes when he traveled to avoid carrying luggage—that greatly exceeded his earnings. At a 2012 divorce proceeding, Iverson reportedly pulled out his pant pockets and shouted at his wife, “I don’t even have money for a cheeseburger!”
Still, as recently as May 2015, Iverson has denied that he’s in financial straits. And the 11-time All-Star has a Reebok-funded “rainy day” trust fund worth $30 million, though he can’t access it until 2030.
One of two recipients of FIFA’s 2000 “Player of the 20th Century” Award, Argentinian footballer Diego Maradona is considered one of the best soccer players of all time. He’s been paid accordingly, setting the world record for soccer team transfer payments twice, and, for a recent coaching gig for Dubai-based team Al Wasl, earning a salary of nearly $3 million per year.
Unfortunately, the same success can not be claimed for Maradona’s management of personal finances. The Italian government claims that he owes $50 million in unpaid taxes from his time playing for Napoli from 1984 to 1991. So far, all Maradona has coughed up is some expensive jewelry, a sign that he may not be the ideal candidate to replace disgraced former FIFA president Sepp Blatter.
A three-time NBA All-Star and NCAA and NBA champion, Antoine Walker earned just north of $108 million over the course of his 13-year NBA career.
But Walker matched his big earnings with financial decisions that were questionable at best. The 6-foot-9 baller reportedly never wore the same designer suit twice, and said he was lending financial support to 70 different friends and family members at the height of his spending. In 2009, Walker was arrested for writing over $1 million in bad checks to Las Vegas casinos.
Walker filed for Chapter 7 bankruptcy in 2010, and has since teamed up with Morgan Stanley, where, as a consultant for Morgan Stanley Global Sports and Entertainment, he’ll provide insight to financial advisers and clients. “Gone In An Instant,” Walker’s documentary about his financial downfall, is scheduled to be released later this year.
More than a decade after his 1985-1996 Major League Baseball career had ended, this former Mets and Phillies star seemed to be on top of his financial game.
In 2008, Dykstra listed his net worth as $58 million; a year before that he dropped $18.5 million on a mansion in Thousand Oaks, Calif. He even had his own website for investing ideas (“Nails Investments”), a magazine geared towards athletes’ high-end lifestyles (Player’s Club), and a financial advice column on TheStreet.com.
But in 2009 Dykstra, claiming to be a victim of mortgage fraud, lost his house to foreclosure and filed for bankruptcy, listing less than $50,000 in assets and $10 to $50 million in liabilities. In 2012 he was sentenced to 6.5 months in prison for bankruptcy fraud, concealment of assets, and money laundering.
WNBA salaries are notoriously lower than those in the NBA—in 2014, the maximum league salary was $107,000—but Swoopes, a three-time Olympic gold medalist and WNBA MVP, earned over $50 million by becoming the first female basketball player to lend her name to a sneaker: the Nike Air Swoopes.
Unfortunately, a series of bad investments and unscrupulous lawyers and agents led her to file for Chapter 13 bankruptcy in 2004. In 2009, when Swoopes was 37 and was cut from the Seattle Storm, she was so poor she couldn’t afford to pay rent.
Generally speaking, NHL players don’t make quite as much as the stars in other professional sports. But you’d think that McCarty, a four-time Stanley Cup winner who earned more than $15 million during his 15-season career as a tough-nosed “enforcer” on the ice, would have been comfortable in retirement.
Instead, McCarty reportedly fell under the influence of drugs and gambling, and filed for bankruptcy in 2006, before his NHL career had even come to an end. Later, he was also accused by the IRS of failing to pay his taxes. In 2012, McCarty was featured in a couple of episodes of TruTV’s “Hardcore Pawn”—less than three years after retiring, he was working at the pawn shop featured in the show.
Even decades after winning a gold medal for figure skating in the 1976 Winter Olympics in Innsbruck, Austria, Dorothy Hamill was one of the nation’s most popular athletes. A 1993 survey by the Sports Marketing Group of Dallas placed her popularity above that of Michael Jordan. When she signed a $1 million-a-year contract to skate for the Ice Capades—a franchise she would later come to co-own—her financial future seemed set.
And yet America’s favorite figure skater was forced to file for Chapter 11 bankruptcy in 1996, blaming her estranged husband for steering her into bad business decisions. Hamill continued to tour, perform on TV, and in 2007 published a New York Times bestselling memoir A Skating Life: My Story.
Over 15 seasons as a standout NFL wide receiver (1996-2011), Terrell Owens was known for his athleticism and emotion on the field, as well as a wide array of end zone celebrations after scoring touchdowns. But unlike his football record, Owens’ finances left little to celebrate.
Despite an estimated $80 million in career earnings, Owens was forced to file for bankruptcy in 2012, citing bad investments, a collapsed housing market, and some $50,000 of monthly child support payments.
As a quarterback for the Atlanta Falcons, Philadelphia Eagles, and New York Jets, Michael Vick surpassed $100 million in career earnings—pretty amazing considering he spent nearly two years of his prime playing days in prison on charges related to a dog-fighting ring.
While in jail, in 2008, Vick filed for bankruptcy protection and convinced his creditors to restructure his debt. By living on a budget of $300,000 since his release from prison, Vick has reportedly managed to pay back almost all of the $18 million he owed at the time.
Let’s Talk Success
After a successful career at New York Life, the founder and president of Taylor Insurance and Financial Services in Los Angeles now manages a practice that serves 1,500 clients — which includes celebrities and Hall of Fame athletes — all while juggling a weekly radio show, recently penning a book, sitting on the boards of three non-profits and founding the non-profit Future Stars Basketball Camp.
This just may be the best story about an annuity. Steve Young was signed out of Brigham Young University (BYU) and into a 40-million-dollar contract with the USFL. That was the headline but the reality was that he was given an annuity that would pay out something like $40 million over the 50 years that followed. Had it been a deal with the San Francisco 49ers (where Young really earned his NFL hall-of-famer cred), I’d say it was a raw deal. However, given the fact that some players weren’t paid for playing in the final season (or other seasons) of the USFL, accepting the annuity appears to have been a genius move on the part of either Young or his agent.
Those annuity payouts have lasted longer than the league and it’s safe to say that he has made more money than probably anyone else involved with the league. To be fair, that couldn’t have happened to a nicer guy. Even with a large signing bonus, and salary, he continued to wear old jeans and drive a 19-year-old Oldsmobile Dynamic (a clunker at that). In addition to outlasting the league, that annuity even outlasted the Oldsmobile car company! Who would have thought that? With a staggering number of pro athletes going broke after they retire, it’s refreshing to read stories about players who made smart financial choices.
Shout out to Rashard Mendenhall
Without question HBO’s Ballers TV series has some of the best writing, acting, producing and directing in the business. One such talent is the former NFL player and Money Baller Rashard Mendenhall who defied the odds of post-retirement financial ruin by keeping his eyes open and running his life on his own terms. He now works as one of the show’s writers. “I wasn’t supposed to walk away from the NFL, but I did. I wasn’t supposed to be writing television, but I am. I’m supposed to be lost after football. I’m not. I’ve reinvented myself. This is my first transformation. I’m supposed to be broke right now, or maybe the statistics say five years from now. Either way, I’m not even close. I’m not supposed to be anything but a football player. But really, I’m just a guy who used to play football. There’s a reason I’m doing this.”
In all fairness, we cannot ignore that good work is being done by organizations like The Azara Group, the NFL and the NFLPA are working diligently to make improvements and helping players. Examples of efforts to move the needle for athletes are the NFL’s Financial Education Program and the NFLPA’s new division called “The Trust,” which focuses on retired players and their post-pro transition.
The Azara Group is also dedicated to advancing the athletic and post-athletic careers of these champions. Career planning, business strategy, and negotiation skills are essential. In the case of pro athletes, a clear action plan for the future can help preserve their wealth. We believe in always being proactive and playing offense when it comes to the future. We help our clients strategize for career longevity and lasting financial success. These players deserve to live their dreams on the field and beyond, and our goal is to help get them there.
1. Don’t wait. Assemble your team of advisers now
A windfall is, by definition, unexpected, so prepare before one comes your way. Professional sports draft deals, for example, are completed at lightning speed — within hours, even minutes, of making a player an offer. Make a mistake and it could cost you a lot of money. That’s why I counsel my clients to get their team in place as soon as possible. Your team should include an agent (for sports or entertainment), a Certified Public Accountant (CPA), and a financial adviser who communicate regularly about your financial situation and goals. That way, when a cash event occurs in your life, you’ll be ready.
2. Protect against scams
I advise that it’s not reasonable to expect a pitcher to be a great catcher, or a center fielder to be a great short stop. You want the best person for each position. Likewise, you should avoid one-stop-shop advisers. For example, don’t let one person advise you on both your tax needs and your financial investments. That’s how scams can happen. So, make sure there’s oversight between your agent, CPA, and financial adviser. This will help create a solid system of checks and balances.
3. Ready, set, negotiate
If you’re dealing with a signing bonus, it will likely be your first exposure to a significant amount of money. And it will come with a sizable side of taxes. Should you take a lump sum, or spread out payments over time? What are the tax implications of receiving your bonus in California verses Florida? Be careful here. Work with your CPA, because these decisions could affect you financially. Your agent can help you negotiate contract terms you may not have known were negotiable, like help paying for college when your sports or entertainment career is done.
4. Pump the breaks on spending
Whether a windfall is $500,000 or $5 million, it’s likely going to be much more money than a person has seen at one time. In response, a lot of those coming into windfalls spend it before the ink dries on the check.
Young athletes who have just been drafted, for example, may buy expensive cars, houses, bling — you name it. The money just vanishes as young players try to keep up with the veterans. For example, there was a player during my MLB days that got “tricked” into purchasing a $200,000 car just to show up a veteran teammate who claimed to have one on-order as a practical joke. The last thing you want is to get to the end of the year and think, “Where did it all go?”
Professional athletes are at particularly high risk of doing this. In fact, MLB players file bankruptcy four times more often than the national average. According to Sports Illustrated, 78% of NFL players are bankrupt or under financial stress within two years of exiting the league, and 60% of NBA players are bankrupt within five years.
5. Just say no
If you come into a windfall, people are going to find out. That’s when people come out of the woodwork with “great investment” ideas. Friends, family, and strangers with no business experience start seeking you out. My personal advice: Stay away from business deals your first year.
I’ve seen players lose hundreds of thousands on restaurants, car dealerships, hometown baseball academies, and other bad deals. Learn to say “no.” And if you can’t, ask them to send their proposals to your financial adviser to review. Let them be the bad guy.
Whether you’ve just been drafted into a professional sports league (the MLB draft is right around the corner in June) or are even selling a company or are receiving some other windfall — it can be like winning the lottery. That lottery ticket can come with huge distractions. At worst, it can make you spend money you don’t have. With the right team in place, you can avoid the all-too-common pitfalls that lead to financial downfall. Asking questions is both empowering and free of charge. Not knowing the answers can cost you financially.
Steve Finley is a Financial adviser with the Global Wealth Management Division of Morgan Stanley in Rancho Santa Fe. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC, Member SIPC, or its affiliates.
Gary A. Johnson is the Founder of Gary A. Johnson Company & Associates, LLC, a management training and consulting company. The company manages a variety of Internet and digital media enterprises including Black Men In America.com, one of the most popular web sites on the Internet. In addition, the company manages Black Boating and Yachting.com.