View Full Version : Money Athletes and their money

03-26-2009, 06:10 AM
Very long but interesting. Looks like there's careers for financial advisors in pro sports...

Warning - article is too long to post. 1st few pages are here. You'll need to go to link to get rest.


What the hell happened here? Seven floors above the iced-over Dallas North Tollway, Raghib (Rocket) Ismail is revisiting the question. It's December, and Ismail is sitting in the boardroom of Chapwood Investments, a wealth management firm, his white Notre Dame snow hat pulled down to his furrowed brow.

In 1991 Ismail, a junior wide receiver for the Fighting Irish, was the presumptive No. 1 pick in the NFL draft. Instead he signed with the CFL's Toronto Argonauts for a guaranteed 18.2 million over four years, then the richest contract in football history. But today, at a private session on financial planning attended by eight other current or onetime pro athletes, Ismail, 39, indulges in a luxury he didn't enjoy as a young VIP: hindsight.

"I once had a meeting with J.P. Morgan," he tells the group, "and it was literally like
listening to Charlie Brown's teacher." The men surrounding Ismail at the conference table include Angels outfielder Torii Hunter, Cowboys wideout Isaiah Stanback and six former pros: NFL cornerback Ray Mickens and fullback Jerald Sowell (both of whom retired in 2006), major league outfielder Ben Grieve and NBA guard Erick Strickland ('05), and linebackers Winfred Tubbs ('00) and Eugene Lockhart ('92). Ismail ('02) cackles ruefully. "I was so busy focusing on football that the first year was suddenly over," he says. "I'd started with this $4 million base salary, but then I looked at my bank statement, and I just went, What the...?"

Before Ismail can elaborate on his bewilderment—over the complexity of that statement and the amount of money he had already lost—eight heads are nodding, eight faces smiling in sympathy. Hunter chimes in, "Once you get into the financial stuff, and it sounds like Japanese, guys are just like, 'I ain't going back.' They're lost."

At the front of the room Ed Butowsky also does a bobblehead nod. Stout, besuited and silver-haired, Butowsky, 47, is a managing partner at Chapwood and a former senior vice president at Morgan Stanley. His bailiwick as a money manager has long been billionaires, hundred-millionaires and CEOs—a club that, the Steinbrenners' pen be damned, still doesn't include many athletes. But one afternoon six years ago Butowsky was chatting with Tubbs, his neighbor in the Dallas suburb of Plano, and the onetime Pro Bowl player casually described how money spills through athletes' fingers. Tubbs explained how and when they begin earning income (often in school, through illicit payments from agents); how their pro salaries are invested (blindly); and when the millions evaporate (before they know it).

"The details were mind-boggling," recalls Butowsky, who would later hire Tubbs to work in business development at Chapwood. "I couldn't believe what I was hearing."

What happens to many athletes and their money is indeed hard to believe. In this month
alone Saints alltime leading rusher Deuce McAllister filed for bankruptcy protection for
the Jackson, Miss., car dealership he owns; Panthers receiver Muhsin Muhammad put his mansion in Charlotte up for sale on eBay a month after news broke that his entertainment company was being sued by Wachovia Bank for overdue credit-card payments; and penniless former NFL running back Travis Henry was jailed for nonpayment of child support.

In a less public way, other athletes from the nation's three biggest and most profitable leagues—the NBA, NFL and Major League Baseball—are suffering from a financial pandemic.
Although salaries have risen steadily during the last three decades, reports from a host of sources (athletes, players' associations, agents and financial advisers) indicate that:
• By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.

• Within five years of retirement, an estimated 60% of former NBA players are broke.
Numerous retired MLB players have been similarly ruined, and the current economic crisis is taking a toll on some active players as well. Last month 10 current and former big leaguers—including outfielders Johnny Damon of the Yankees and Jacoby Ellsbury of the Red Sox and pitchers Mike Pelfrey of the Mets and Scott Eyre of the Phillies—discovered that at least some of their money is tied up in the $8 billion fraud allegedly perpetrated by Texas financier Robert Allen Stanford. Pelfrey told the New York Post that 99% of his fortune is frozen; Eyre admitted last month that he was broke, and the team quickly agreed to advance a portion of his $2 million salary.

The Wall Street meltdown is only the latest threat to athletes' financial health. "Athletes have a different set of challenges from, say, entertainers," says money manager Michael Seymour, the founder of Philadelphia-based UNI Private Wealth Strategies. "There's a far shorter peak earnings period [in sports] than in any other profession, and in many cases they lack the time and desire to understand and monitor their investments."

In 2005 Butowsky began inviting sports figures—some well off, some not—to what he calls his financial "boot camps," elementary sessions that go from defining a bond to explaining a diversified portfolio as the equivalent of a balanced meal. There is no charge for the sessions or pressure to sign up with Chapwood, according to Butowsky, who calls this service his "mitzvah to sports." The financial adviser, who helps counsel Thunder forward Kevin Durant pro bono, hopes merely that the sessions will reflect well upon Chapwood.
Such goodwill is easy to earn: The bar for radically improving the financial habits of pro athletes, Butowsky acknowledges, is low enough for a toddler to trip over.

"Oh, I've seen it all," says veteran agent Bill Duffy, whose clients include Suns guard Steve Nash and Nuggets forward Carmelo Anthony. "A pro athlete's money is supposed to outlive his career. Most players never get that."

Why? Where do they go wrong?


OVER THE YEARS Rocket Ismail's portfolio has contained a passel of dubious inventions and risky investments. After mentioning that he once poured money into a religious movie, the gregarious father of four goes uncharacteristically mum about the details. "I don't really want to go over that agony," he says, smiling thinly.

Ismail played two years in Canada and 10 in the NFL, estimating that he earned $18 million to $20 million in salary alone. He made an abortive NFL comeback attempt in 2006, never getting beyond workouts with the Redskins, and then navigated the reality-TV circuit (Pros vs. Joes, Ty Murray's Celebrity Bull Riding Challenge). Today he does a Cowboys postgame show on Fox Sports Net. As cautionary tales go, Ismail's could've been worse: He has his Notre Dame degree, and he never filed for bankruptcy, had legal trouble or got divorced.
Yet he lost several million dollars, he admits, through "total ignorance."

It began in the winter of 1991 when he sank $300,000 into the Rock N' Roll Café, a theme restaurant in New England designed to ride the wave of the Hard Rock Cafe and Planet Hollywood franchises. One of his advisers pitched the idea as "fail-proof, with no downsides," Ismail recalls. He never recouped his money and has no idea what became of the restaurant.

Lesson learned? If only. After that Ismail squandered a fortune funding not only that inspirational movie but also the music label COZ Records ("The guy was a real good talker," says Rocket); a cosmetics procedure whereby oxygen was absorbed into the skin ("We were not prepared for the sharks in the beauty industry"); a plan to create nationwide phone-card dispensers ("When I was in college, phone cards were a big deal"); and, recently, three shops dubbed It's in the Name, where tourists could buy framed calligraphy of names or proverbs of their choice ("The main store opened up in New Orleans, but doggone Hurricane Katrina came two months later"). The shops no longer exist.

You might say Ismail had a run of terrible luck, but the odds were never close to being in his favor. Industry experts estimate that only one in 30 of the highest-caliber private investment deals works out as advertised. "Chronic overallocation into real estate and bad private equity is the Number 1 problem [for athletes] in terms of a financial meltdown," Butowsky says. "And I've never seen more people come to me about raising money for those kinds of deals than athletes."

For the risk-averse investor, an adviser such as Butowsky would suggest allocating 5% to private equity, 7%--12% to real estate, 50%--65% to a mix of public securities (stocks,
mutual funds and the like) and the rest to alternatives such as gold and hedge funds. Yet with athletes, who are often uninterested in either conservative spending or the stock market, those percentages are frequently flipped. Securities are invisible, after all, and if you don't study them, they're unintelligible. Not to mention boring. Inventions, nightclubs, car dealerships and T-shirt companies have an advantage: the thrill of tangibility.

Many players, consequently, are financial prey. "Disreputable people see athletes' money as very easy to get to," says Steven Baker, an agent who represents 20 NFL players. In May 2007 former quarterbacks Drew Bledsoe and Rick Mirer and five other NFL retirees invested at least $100,000 apiece in a now-defunct start-up called Pay By Touch—which touted "biometric authentication" technology that would help replace credit cards with fingerprints—even as the company was wracked by lawsuits and internal dissent. (The players later sued the financial-services firm UBS, which had encouraged its clients to invest in Pay By Touch, for allegedly withholding information about the company founder's criminal history and drug use.)

About five years ago, Hunter says, he invested almost $70,000 in an invention: an inflatable raft that would sit under furniture. The pitch was that when high-rainfall areas were flooded, consumers could pump up the device, allowing a sofa to float and remain dry. "The guy I invested with came back and wanted me to put in more, about $500,000," Hunter says. "Then I met [Butowsky], who just said, Hell no! I wound up never seeing that guy—or any of my money—again."

Hunter, who in November 2007 signed a five-year, $90 million contract, has been able to absorb the loss. But innumerable other athletes have not been so lucky. Former (and perhaps future) NFL quarterback Michael Vick filed for Chapter 11 bankruptcy last July and recently put his mansion in suburban Atlanta on the market. That's partly because he is unable to repay about $6 million in bank loans that he put toward a car-rental franchise in Indiana, real estate in Canada and a wine shop in Georgia. "It's always so
predictable," Butowsky says. "Everyone wants to be the next Magic Johnson."

But Johnson is the rare, luminous exception of tangibility gone right. In 1994 he started a chain of inner-city movie theaters and diligently built a business empire. Today Magic Johnson Enterprises includes partnerships with Starbucks, 24 Hour Fitness, Aetna and Best Buy, and its capital management division has invested over a billion dollars in urban communities.

The rule, unfortunately, is a mogul manqué like McAllister. According to a civil suit filed on Feb. 20 by Nissan, the running back owes the car company more than $6.6 million plus almost $300,000 in interest on his car dealership. Or Muhammad, whose Cleveland music company, Baylo Entertainment, is being sued by Wachovia for allegedly failing to pay back $24,603.24 on a Visa Business Rewards credit card. Muhammad's 8,200-square-foot lakeside estate, which boasts a custom spa and the "largest residential aquarium in the Southeast,"
can now be had on eBay for $1.95 million, $800,000 less than he initially asked for.
"Without question, this recession is increasing the velocity of what's taking place with athletes," Butowsky says. "They're suffering tremendously." Retired NBA forward Vin Baker's seafood restaurant in Old Saybrook, Conn., was foreclosed on in February 2008 due to nearly $900,000 in unpaid loans. (It has since reopened with help from an anonymous investor.) And former major league infielder Junior Spivey's portfolio of real estate has lately assumed the form of a sinkhole. "I'm taking a huge hit," says Spivey, who has been buying homes to sell and rent since 2001. (He won't say how many properties he owns.)
"It's very tough, especially for someone like me who's not playing."
Then there are the unnamed athletes and team personnel who pawned 400 title rings to the online reseller championship-rings.net over the past three months, a spike of about 33% from the same period last year. (A 2008 Giants Super Bowl ring was among them.) "It's mostly younger players who've been selling," says Tim Robins, the site's owner. "It's the economy. Selling these items is always embarrassing, a last resort."

SALARY ASIDE, the closest analogue to a pro athlete is not a white-collar executive. It's a lottery winner—who's often in his early twenties. "With athletes, there's an extraordinary metamorphosis of financial challenge," says agent Leigh Steinberg, who has represented the NFL's No. 1 pick a record eight times. "Coming off college scholarships, they probably haven't even learned the basics of budgeting or keeping receipts." Which then triggers two fatal mistakes: hiring the wrong people as advisers, and trusting them far too much.

"That's the killer," Magic Johnson says. Johnson started out by admitting he knew nothing about business and seeking counsel from the power brokers who sat courtside at the old L.A. Forum, men such as Hollywood agent Michael Ovitz and Sony Pictures CEO Peter Guber.
Now, Johnson says, he gets calls from star players "every day"—Alex Rodriguez, Shaquille O'Neal, Dwyane Wade, Plaxico Burress—and cuts them short if they propose relying on friends and family. "It won't even be a conversation," says Johnson. "They hire these people not because of expertise but because they're friends. Well, they'll fail."

Says Hunter, "They'll say, 'I got this guy, a cousin who's an accountant.' But he's usually an accountant in the 'hood. You hire him, you're doing him a favor."

Strickland realized that all too late. In 2001, when a "friend of a close friend" of the nine-year NBA vet proposed a real-estate deal in Georgia, Strickland turned to his business manager: his dad, Matthew, a retired lieutenant colonel in the Air Force. The paperwork on the plot of land, which was on sale for $1.8 million but supposedly had been appraised at as much as $3 million, appeared legitimate, and Strickland bought it. "I trusted my father to help look it over for me because I was hooping and didn't have time,"
Erick says. "He checked it out. But he didn't go that extra length."

The land wasn't worth anything close to what Strickland was told. "I had to take that hit," he says. "I wish my dad hadn't been put in that position. He just didn't have the knowledge." As for his close friend? Strickland says the man secretly got a cut of the deal, and the conflict caused a permanent "falling out" between them.

Relatives are not the only ones foolishly trusted with athletes' money. One up-and-coming guard in the NBA allows his entire fortune to be managed by his former AAU coach, who has the player's power of attorney. In a meeting with Butowsky in December, the guard's dad admitted that he has no idea who the son's accountant is and said he wanted a financial "intervention."

The NBA player's ignorance of his own affairs is not unique. According to Bob Young, the managing director of Apex Wealth Management in Doylestown, Pa., "You'll say to a player, 'How are you doing?' A lot of the time they'll respond, 'I have no idea.' All the bills are paid by someone else, and none of the statements go to [the athlete]."

In fact, according to the NFL Players Association, at least 78 players lost a total of more than $42 million between 1999 and 2002 because they trusted money to financial advisers with questionable backgrounds. In this rogues' gallery Robert Allen Stanford looks almost presidential—and shows that even when athletes trust financiers of high
repute, things can go disastrously wrong. The dubious advisers included Luigi DiFonzo—a former felon who claimed he was an Italian count and defrauded players such as Hall of Fame running back Eric Dickerson before committing suicide in August 2000—and disgraced agent William (Tank) Black, who built a pyramid scheme that took a total of about $15 million from at least a dozen players, including Patriots running back Fred Taylor.

Just last May, Atlanta hedge fund manager Kirk Wright was convicted on 47 counts of fraud and money laundering in a scheme involving more than $150 million. His client list included at least eight NFL players; former safeties Blaine Bishop (who lost $4 million, according to court documents) and Steve Atwater (who lost $2.7 million) had recruited former Broncos stars Terrell Davis and Rod Smith to Wright's firm, unwittingly making them victims too. Soon after his conviction Wright committed suicide in prison.

In October, Atwater himself received an investment pitch from a fellow athlete. Former quarterback Jeff Blake sent 102 other retired players an e-mail on behalf of Triton Financial, an investment firm in Austin, whose "athlete services" department Blake directs along with three other ex-QBs: Chris Weinke and the brothers Detmer, Ty and Koy. In the e-mail, a copy of which was obtained by SI, Blake claimed without caveat that "Triton is averaging 32% annualized return on its investments within the past five years."

Triton is an official partner of the Heisman Trophy Trust and the sponsor of the Triton Financial Classic, a PGA senior tour event. Its CEO, Kurt Barton, told SI that the firm manages "about $300 million" in assets, and he claimed that Triton registered with the SEC (as is required by law of investment adviser firms with at least $25 million in assets
under management) "roughly six months ago, around October." But the Texas State Securities Board and Triton chief compliance officer David Tuckfield said that the company has not, in fact, done so. "Right now, we're only registered with Texas," Tuckfield said. "But we're passing the [assets] threshold, and we're confident that we'll need to file this year."

Says Paul Cohen, a real estate investor who owns properties in Austin, "In this economy, especially in real estate, anything you bought in the last two years is deeply underwater. I guess what [Triton is] saying could happen. But then again, I could target the moon with my rifle and shoot, but I ain't gonna hit it." (Barton did not dispute the e-mail's 32% figure, but he and Tuckfield admitted to SI that Blake should not have sent it out. Barton also conceded that Triton was "not supposed to publish specific numbers about past performance" without significant disclaimers, including a disclosure of what the company had invested in.)

(too much to post. Go to link for more)


03-26-2009, 06:22 AM
(too long to post)
Ok, that shit right there is funny. I don't care who you are.

Chief Chief
03-26-2009, 08:20 AM
Looks like there's careers for financial advisors in pro sports...