Money Players

I'm as Mad(off) as Hell: Ex athletes in financial peril

Today is a sad, dark day in New York City, even if the sun is finally shining. Hearing from the victims of Bernard Madoff was a stark illustration of the havoc this man wreaked on his financial victims. Glad he is going to jail for the rest of his life, but it's still small consolation to the hundreds of victims, including more than a few charities, whose banks and lives Madoff shattered.

Too many people wanted to believe Madoff was a financial genius. Madoff might have been the biggest, most brazen scammer of all time, but he's not the only one.

These are issues are issues I try to grapple with, in my book and in my consulting. How do we help everyone make better decisions about their financial futures? Yes, much of my work involves future, current and ex professional athletes, whose situations are somewhat unique. But too many people are falling prey to financial con artists. We can send Madoff and others to jail. We can tell people how to avoid financial scams. We can remember all horror stories about the victims. But, then what?

Bankruptcy Tonic

A-Game Publishing is pleased to announce that Money Players: A Guide to Succeed in Sports, Business & Life for Current and Future Pro Athletes is now in its second printing. Boring advice like spend less, save more, invest conservatively not your style? Try Bankruptcy Tonic!!

Money Players Links

Money Players is all about being the best resource for the business of being a professional athlete. Here are some links from around the web that we think are must reads for any current or aspiring professional athlete and their families.

• Sports agent C. Lamont Smith talks to Sports Agent Blog’s Darren Heitner about his new venture, jocklife.com. According to Smith, “Jocklife.com is for athletes of all levels: high school, college, and professional. The whole gist of the Jocklife platform is to bring some balance and fairness to the coverage of athletes…give athletes the opportunity to define themselves. Today, athletes are really defined by the coverage they get and the stories written about them. Very few times do they have the opportunity to define themselves in an extended fashion.”
  
  
• Slam Magazine’s Lang Whitaker interviews NBA agents Lon Babby and Jim Tanner. Tanner and Babby are known in NBA circles for their fee structure (hourly rather than percentage based) that saves their clients a lot of money.  They also are known as the agents that negotiated Josh Childress’ ground breaking deal with Greek professional team Olimpiacos.
  
  
• A nice piece by SI’s Kevin Armstrong on top high school basketball player Jordan Hamilton and his tight knit family. Hamilton’s mother mentions his intentions to sign a National Letter of Intent in the near future. Hopefully, she understands both the positives and the negatives of such a move.
  
  
• According to reports, Stephon Marbury has just spent $45 million to purchase a new private jet. Stephon has made a lot of money throughout his career (approximately $150 million), but this could turn out to be a purchase Steph will regret. Stephon probably has plans to lease the plane out when he is not utilizing it, but Scottie Pippen tried to do the same thing, and that didn’t end well for him. Stephon might want to put down the Bankruptcy Tonic and pick up a copy of Money Players.
  
  
• The Wall Street Journal with a report on how budget cuts in college athletic departments could hurt the U.S. in future Olympics.
  
  
• Another article on Baylor hiring the former AAU coach of top recruit John Wall. We first told you about this story in a previous set of Money Players Links.

-Nate Jones

For more in-depth information on the business of being a professional athlete, purchase Money Players: A Guide to Success in Sports, Business & Life for Current and Future Pro Athletes, written by our own Marc Isenberg.

Money Players Links

Money Players is all about being the best resource for the business of being a professional athlete. Here are some links from around the web that we think are must reads for any current or aspiring professional athlete and their families.

• Lester Munson with a great tribute to the late Gene Upshaw. Munson gives a very thorough breakdown of how Upshaw fought for and gained free agency rights for NFL players. You have to wonder what benefits NFL players would have today without the work of Gene Upshaw.
   
• On Ball Don’t Lie, Rod Benson wonders if his blogging might be part of the reason he hasn’t been signed by an NBA team. With more and more professional athletes starting their own blogs, one has to wonder if blogs help or hurt them. Some might say that Gilbert Arenas has both hurt and helped himself a ton with his NBA.com blog.
  
  
• More on Jameer Nelson’s “Building Magic” team building event. We have no idea if this will translate to wins, but this definitely shows that Jameer Nelson is a leader, through and through.
  
  
• According to bankruptcy papers, Michael Vick is losing $12K per month. Michael is going through tough times now, but he’ll have a chance to rebuild his life in the near future. Hopefully he’ll come out and be willing teach young up and coming athletes about the mistakes he has made, so that they won’t make the same mistakes in the future.
  
  
• According to NCAA President, Myles Brand, "NCAA amateurism regulations preclude individuals from receiving cash or the equivalent thereof (e.g. trust fund), as an award for participation in competition at any time, even if such an award is permitted under the rules governing an amateur non-collegiate event in which the individual participates."  The NCAA has dug its heels in on the amateur issue and shows no signs of relenting. Interestingly, the International Olympic Committee, which for many decades insisted that the amateurism was a core belief, dramatically relaxed its amateur rules. In 1974, the word "amateurism" was removed from the Olympic Charter, which eventually paved the way for the participation of athletes who received compensation, either through playing or endorsements. Regulating amateur athletes in a marketplace that places a high value on elite student-athletes is becoming increasingly difficult. The NCAA is in a tough situation. What do you think the NCAA and its membership should do? 
  
  
• Speaking of Brand, the Indianapolis Star gives us a report on Dr. Brand’s NCAA salary.  With an annual salary of $971,000, the NCAA President makes more than every public university president in the country. But he also makes less than ever major sports commissioner in the country. His job has similar requirements to both of those groups, so his salary being in between the two might be right on point.
  
  
• Brand was also in the Huffington Post this past week talking about the topic of pay for play in college sports.  In response, Brian Grummell of AOL’s Fanhouse gives us his take on the topic.  The comments section on Brand’s Huffington piece are also worth taking a close look at.
  
  
• The New York Times investigates if endorsement opportunities disappear for Olympic athletes that are injured before they have a chance to perform.
  
  
• Speaking of the Olympics, CNBC’s Darren Rovell has been doing an excellent job of covering the business side of the Olympics. We highly recommend rummaging through his blog archives over the last couple of weeks to soak up all of the information you can. You can start with this post on the most marketable non-team sport athletes following the Olympics.
  
  
• Check back Thursday for another set of must read Money Players Links.

-Nate Jones

For more in-depth information on the business of being a professional athlete, purchase Money Players: A Guide to Success in Sports, Business & Life for Current and Future Pro Athletes, written by our own Marc Isenberg.

 

 

Michael Vick and that nasty Bankruptcy Tonic

I keep telling athletes: AVOID THE BANKRUPTCY TONIC...ESPECIALLY WHEN IN JAIL. Michael Vick's life is now in shambles, not just because he's in jail in Leavenworth, Kansas, instead of Falcons training camp, but because he made some horrible financial decisions unrelated to dogfighting. ESPN legal expert Lester Munson examines Vick's very troubling financial and legal dealings.

When Vick's back was against the wall, he desperately needed some sound advice...so he turned to Falcon teammate Demorrio Williams, a former Nebraska Cornhusker. (If you could only ask one person in the Falcon organization for financial advice, would it be Demorrio Williams or team owner and billionaire Arthur Blank? Tough call.) After all those wrongs Vick made on his own, Williams tells Vick to go talk to Mary Wong, a business (mis)manager from Omaha. (If I'm getting business advice from someone from Omaha, it better be someone with the last name Buffett.)

Money Players Top 10 Biggest Sports Losers in 2007

"How did you go bankrupt?"
"Two Ways. Gradually, and then suddenly."
—Ernest Hemingway, The Sun Also Rises

Here is my list for the 10 Biggest Sports Losers in 2007...

10. The fallout from Alex Rodriguez It's hard to characterize someone who signed a $300+ million deal as a financial blunder, but even Rodriguez admits, "The whole thing was a mistake. It was a huge debacle." The tally:

• The Yankees lost $21.3 million in subsidies from the Texas Rangers under the terms the trade which brought Rodriquez to the Yankees in 2004.
• Rodriquez took a beating in the media, especially when the announced "opt-out" upstaged the 2007 World Series.
• The move caused a major strain on Rodriguez's relationship with agent Scott Boras.
• A-Rod's new contract pays A-Rod over $30 million per year, which is huge money by every standard except A-Rod's previous contact...the new contract is just an 8% increase over his previous mega-deal. No one will cry for A-Rod, but certainly the economics of baseball have improved at a higher rate.

9. Conduct counts NFL Commissioner Roger Goodell took unprecedented action against NFL players Chris Henry, Adam “Pacman” Jones, and Tank Johnson. Jones lost $1.292 million in base salary. Henry lost half of his $435,000 base salary, or $217,500. After being cut by the Chicago Bears, Johnson signed with Cowboys for $255,000 to play 8 games, which is the prorated portion of a minimum contract. Based on Johnson's market value, his behavior cost him at least a few million. Jones also plead "no contest" for his role in a strip-club fight left a man paralyzed. [Related Money Players post: Character matters, revenue counts]

8. Taking on the champ Denver Broncos Travis Henry fathered 9 children by 9 different women, which ties him with Evander Holyfield as the once undisputed fathering champ. However, Evander's record deserves an asterisk: of the nine children Evander fathered by six different women, four were born in wedlock. Thankfully, Henry has a $25 million contract to fund a whole-lotta child support. Still when Henry fell behind with some of his payments a judge ordered him to pay $3000 a month and set up a $250,000 trust fund. Henry did win his appeal of a one-year suspension for a positive marijuana test.

7. Caffey files bankruptcy Former NBAer Jason Caffey, who played 10 years in the NBA and signed a $35 million free-agent contract with the Golden State Warriors, filed bankruptcy in October, claiming more than $1.9 million in debts against nearly $1.15 million in assets. Records show Caffey pays $7,000 month in alimony and child support. "Who wouldn't have trouble with that after retiring five years ago?" Caffey said. In reality, Caffey would have needed to bank approximately $1.6 million cover this expense. Caffey got divorced in 2006. More sperm banking: "Several other women have also sued Caffey for child support." 

6. Nene screwed by former business manager Denver Nuggets forward Nene claimed former business manager Joe Santos failed "to fulfill his duties as manager and personal assistant and to keep adequate financial records. He also has said Santos diverted funds for personal use." Nene learned in January 2006 that he was essentially broke, despite earning a $2 million salary. He then terminated his business relationship with Santos. Santos alleges that Nene agreed to "pay him 6 percent of his annual revenue over a seven-year span." With Nene's 6 year, $60 million contract, Santos would receive $600,000 a year, up from the $84,000 salary Santos was previously paid to be Nene's errand boy and interpreter. [Related Money Players post: Nene plays offense against weak defender of his money]

5. Marion Jones sprints out of control Not a good year for the former Olympic champion:

• Admitted to lying to federal agents about her use of steroids prior to the 2000 Summer Olympics.
• Plead guilty in U.S. District Court that she had made false statements regarding the BALCO case and a check-fraud case.
• Filed bankruptcy.
• Stripped of all five 5 Olympic medals she won at the 2000 Summer Olympics in Sydney.

On the bright side, all Olympic medals are not lost: In 2007 she married Obadele Thompson, who won an Olympic bronze medal at the 2000 Olympics. And Marion gave birth to a Olympic hopeful.

4. Michael Jordan's divorce  MJ's divorce from Juanita cost him a reported $168 million. Add another distinction to Michael's career: The most costly celebrity divorce settlement in United States history. Ever. Fortunately for MJ, he made a lot of money to make this distinction possible.

3. Kirk Wright wrongs a lot of pro athletes A quick refresher: Kirk Wright bilked investors, including many current and former NFL players out of at least at least $20 million. (He fraudulently provided investors with reports claiming his firm, International Management Associates, had over $180 million in assets. But when he was finally busted, there was less than $500,000 accounted for.) In February 2007, Wright was ordered to pay nearly $20 million as part of a default judgment by the U.S. District Court in Atlanta. In March 2007, six current and former players sued the NFL and its union, seeking to recoup $20 million they lost in this fraud scheme. (The NFLPA, in response to significant financial losses experienced by several NFL players, began the Financial Advisor Program, a first-of-its-kind program aimed at protecting players against incompetent and fraudulent advisors.)

2. Cirque de Isiah Thomas and James Dolan Mismanagement, horrible judgment, bad lawyering, bad PR, and stupid comments added up to a $11.6 million jury award. NBA commissioner David Stern was smart to strongly  recommend settling the case for $11.5 million, rather than risk further embarrassment by appealing.

And the # 1 Biggest Sports Loser in 2007

1. Say it ain't right, Mike? Michael Vick lost the most in 2007. He lost his NFL career and his freedom for the next two years. The Falcons also demanding Vick repay $20 million of his signing bonus. And in less than one year he went from NFL hero to villain of dog lovers everywhere.

Note: An argument could be made that those people and leagues who suffered from the steroid fallout be placed high on the list. But on second thought, I really believe steroids has had a negligible to positive financial impact on sports. While I would never condone anyone cheating, the case can be made that steroid users prospered while management looked the other way. From a PR standpoint the $20-30 million MLB spent to conduct the Mitchell Report and hopefully clean up the mess was money well spent.

Tell us what you think.

--Marc Isenberg

Marc's book, Money Players now available here. And on amazon.com.

Nene plays offense against weak defender of his money

By Marc Isenberg

Another unfortunate alleged financial scandal was reported today. According to a Rocky Mountain News article, "The Denver Nuggets forward [Nene] has accused Joe Santos of failing to fulfill his duties as manager and personal assistant and to keep adequate financial records. He also has said Santos diverted funds for personal use."

Nene learned in January 2006 that he was essentially broke, despite earning a $2 million salary. He then terminated his business relationship with Santos.

Santos alleges that Nene agreed to "pay him 6 percent of his annual revenue over a seven-year span." With Nene's 6 year, $60 million contract, Santos would receive $600,000 a year, up from the $84,000 salary Santos was previously paid to be Nene's errand boy and interpreter.

The NBPA caps agent fees at 4%. Santos deal with Nene appears to circumvent NBPA agent regulations by claiming he was Nene's business manager, not his agent. But Santos's lawyer stated in an email to Rocky Mountain reporter James Paton that Nene's claims have "cut short" Santos' dream to one day become an NBA agent.

I am guessing Santos' dreams will be shattered if he ever tries to become an NBPA certified agent since he appears to have already violated NBPA agent regs.

It's another sad tale. Won't be the last, but always worth repeating.

Pension benefits for retired pro athletes

By Marc Isenberg

There has been a lot of attention paid recently to the retirement benefits of older professional athletes, particularly those who played pre-1980. Greg Johnson of the Los Angeles Times does an excellent job documenting the issue facing MLB and the NFL and NBA.

Larry Dierker, a former MLB pitcher, earned $125,000 in his best year. Two years from now, when Dierker turns 60, he will begin collecting $180,000 in annual retirement benefits. Dierker credits longtime MLBPA executive director Marvin Miller for educating players about the importance of retirement planning. Thanks to Miller and the players who stood strong during some long, drawn-out battles with management, the MLB pension is the "gold standard for union-represented athletes."

Older retired athletes in the NFL and NBA are not so fortunate. For example, Conrad Dobler, age 56, is eligible to receive $24,000 annually now, or he can receive $48,000 if he waits until age 62.

As Johnson's article in the LA Times points out, "Federal law requires union leaders to represent the interests of current and future players rather than aging athletes, so improvements to previously negotiated benefits must be approved by current union members — and often by the franchise owners who foot the bills."

Two of the most outspoken ex-NFLers have been Mike Ditka and Jerry Kramer. They have teamed with several NFL legends to launch the Gridiron Greats Assistance Fund to "assist retired players in dire need due to the lack of adequate disability and pension benefits." Read and watch their presentation.

Since current players play an important role in directing retirement benefits of all players, there is an obvious dilemma. The question is, How much responsibility do current players have to past players? Further complicating the issue is the fact that the financial futures of current players are far from secure. The current system unfortunately pits current players against the legends of the game, which is unfair to both sides. As Babe Ruth once said, "Baseball is more than a fraternity. It is a family. And the fellow ballplayers are your brothers. In for a penny, in for a pound. All for and one for all." If there's a problem with retired players' benefits, it should be addressed by the Leagues and the unions.

The NBA recognizes the enormous contribution of the pioneers of professional basketball (See related post below). New NFL Commissioner Roger Goodell appears to be open minded on that front. During his first "state of the NFL" delivered at the Super Bowl, he said the League needs to "reevaluate to see what we can do more to address the issues and we'll do that."

Many former pro athletes did not partake in the financial windfall of playing professional sports. A few are hard pressed to cover life’s necessities. Pride often prevents them from holding their hand out. Fortunately, many former NFL stars, such as Ditka, Kramer, and Nick Buoniconti are speaking out on behalf of guys who really need financial assistance and support.

Current players should continue to fight for greater retirement and health benefits for former athletes, not just for recent retirees. All professional athletes should keep in mind that they will be active, voting members of the Players Association for just a few years. But they will be retired players for decades. Reaching back to improve pension benefits of retired players, particularly those who literally sacrificed their bodies to help build professional sports into a multi-billion dollar enterprise, is simply good business. These guys sacrificed their bodies -- and in some instances, sadly, their minds -- to make the league what it is today. They stood together though often very troubled labor negotiations, even striking on several occasions in order to improve wages and benefits not just for them, but for every player who followed. Fighting for former players sets an important precedent for future generations of professional athletes: Players take care of their own.

Resources
Mike Ditka speaks on retired NFL players in dire need of assistance
NFLPA's Retired Players FAQs
Gene Upshaw responds to retired players (Word document)
NBA Retired Players

Articles
NBA reaches out to its pioneers [Greg Johnson/LA Times]
The NFL's forgotten players [Ken Murray/Baltimore Sun]
Glory has its price: 25 years later, the heroes of the 49ers' first Super Bowl championship team weigh the costs of playing a brutal game [Ron Kroichick/'SF Chronicle]
NFL's cold-hearted stance regarding its vets is deplorable [Bryan Burwell/St. Louis Post-Dispatch]
Not much nobler than Lefty's good deed for Dobler [Art Spander/Oakland Tribune ]

Financial end-arounds (updated)

On Febuary 12, 2006 Kirk Wright was ordered to pay nearly $20 million as part of a default judgment by the U.S. District Court in Atlanta. This would be great news if Kirk Wright had this kind of money in his accounts. Wright fraudulently provided investors with reports claiming his International Management Associates funds had over $180 million in assets. But when he was finally busted, there was less than $500,000 accounted for.

Here's an I wrote last year in the Sports Business Journal on personal finance and professional athletes.

Pro athletes must use caution to avoid financial runaround

By Marc Isenberg
Published August 28, 2006: Page 13

When the infamous Willie Sutton was asked why he robbed banks, he said, “Because that’s where the money is.” If Sutton were alive today, perhaps he’d target professional athletes. Instead of his risk-taker’s bravado, he could steal millions from unsuspecting pro athletes with simple razzle-dazzle and lies.

While professional athletes are among the most financially fortunate members of society, they are also among the most vulnerable. Young, financially inexperienced and often surrounded by yes-men, professional athletes are magnets for scam artists.

Kirk Wright, founder of hedge fund International Management Associates, is the latest to be accused of defrauding current and former pro athletes. From 1998 to 2005, which The Wall Street Journal points out included the worst bear market since the Great Depression, Wright reported average annual returns of more than 27 percent. The returns apparently were fabricated. The Securities and Exchange Commission estimates that Wright, who was arrested by FBI agents in Miami on May 17 and faces 21 counts of federal mail fraud and three counts of securities fraud, bilked investors out of at least $115 million. <Read full article in PDF file> 

Randolph Morris and the benefits of being an NBA reject

Randolph Morris, a junior center at Kentucky finds himself in a fascinating situation. The story starts out with his unfortunate decision (at the time) to test his market value by declaring for the 2005 draft after his freshman season.

Once Morris's projected draft position began to fall it probably would have prudent to withdraw his name and return to school. Instead he kept name in the draft, but was not selected. Had he been a late 2nd round pick, his college career would have been over. He would have either signed an NBA rookie minimum contract or ended up in the NBDL or in Europe. Morris thought he could return to play for his school, as permitted by NCAA rules. But Morris was ruled ineligible for the entire season (later reduced to 14 games) because he, in the eyes of the NCAA, had an agent working on his behalf and because he did not pay all his own expenses associated with working out for NBA teams.

Nothing worse than declaring for the draft, then not getting picked. Actually for Randolph Morris going undrafted will likely turn into his good fortune. Literally.

Here's how it works: While the NCAA allows a player to return to school (as long as he announces his intention to return prior to the draft or is not drafted and maintains his amateur status), under the NBA collective bargaining agreement he is only eligible to be drafted one time.

Fast forward to the present: Randolph Morris is a now a junior and considered a top prospect. He is averaging 16.9 points and 8.0 rebounds. Last week Morris made 10 of 11 shots against North Carolina and its star Tyler Hansbrough.

Since Morris cannot be drafted again he will enter the NBA as a free agent. A coveted free agent. No artificially capped rookie contract. Instead he (and his agent) can negotiate with any NBA franchise and sign with the highest bidder.

Like an infomercial voice over, BUT WAIT, THERE'S MORE! Apparently many NBA GMs were not aware of the rules covering a player in Morris's situation. An NBA team doesn't even have to wait until the normal free agent signing period which starts July 1. They can sign him, get this, now.

Not since Jim Chones left Marquette in the middle of the 1971-72 season to sign with an ABA team, has a college basketball player been in this type of situation. The ABA held its draft in the middle of the college season in order to gain an advantage over NBA. What the ABA owners lacked in money, they made up for in ingenuity.

I am sure college coaches will be up in arms about the potential can of worms Morris might open if he leaves Kentucky. Dick Vitale will probably freak out and write another open letter to the misguided Randolph Morris. He will talk about loyalty, about commitment, about finishing what he started. All good points. He probably won't mention those money-grubbing college football coaches who left their teams last week...in the middle of the season...when their own market values were peaking.

Interestingly, when Jim Chones was in this situation his college coach, Al Maguire, one of my all-time favorites, encouraged him to sign the pro contract. Keep in mind, Marquette was 21-0 at the time and the number 2 ranked college team in the country.

According to Chones:

"Al says to me, 'Jimmy, you gotta leave, it’s a lot of money and it’s a great opportunity.' I told him that I didn’t think I was ready and you know what Al tells me? 'Jimmy, I don’t care and it doesn’t make a difference. You gotta go.' You see, Al had no fear. He wasn’t afraid to voice his opinion or stand up against anything or any institution. There will never be another Al McGuire or a revolutionary like he was...He saw the world not as people wanted to see it, but as it really was."

I hope that Randolph Morris stays until the end of the season, but I will not begrudge him if he leaves.

Lexington Leader's Jerry Tipton explains why it is unlikely that a pro team would sign Morris during the season. As college basketball commentator Clark Kellogg said the NBA does not want to "create the appearance that it is raiding players off teams."