Is There Life After Football? (24 page)

Profligate spending may be the reason some NFL players lose their money, but bad financial advice combined with injudicious investing comes in a close second.
Sports Illustrated
's Pablo Torre argues that “hiring the wrong people as advisors and trusting them far too much” are often to blame. The “wrong people” range from scam artists, to inept or unscrupulous advisors, to well intentioned friends and family members without a hint of financial expertise. Magic Johnson, one of the most successful businessmen among former professional athletes, couldn't put it much plainer. He gets literally dozens of calls from star players asking for financial counsel, but ends discussions immediately if they mention friends and family managing their money: “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.”
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A bit less wealthy, but every bit as wise, Hakeem Chapman underscores Johnson's point: “These guys are hurting, and you know why? Bad decision making. Working with their brothers, aunts, and uncles, and everybody who is going to show them how to invest their money.”
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Nearly half of NFL alumni report some form of business or investment losses at one time or another, and about 42 percent say they have received bad financial advice.
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One source of trouble is too much money invested in real estate and private equity investments,
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according to Ed Butowsky, managing partner of Chapwood Capital Investment Management. They typically involve personal connections and high risk, a recipe for far too many investment fiascos. Says Butowsky, “Coming out of college, you don't want to hear about the different and safe ways you can invest your money. You're more concerned about . . . the women, clubs and who knows who. You are concerned about the wrong things. . . . Young guys don't want to take the time to learn about how they should be investing their money.”
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Bart Scott elaborates: “Guys open up restaurants, and that is one of the most volatile industries that you can get into. . . . Restaurants in the hood. You know, [friends] ask you to do it, and then you ask for their business plan, and they say what is that? Exactly.” Car washes are also popular investments, according to Andre Rison: “For some reason, professional athletes got this fad with buying car washes.” One of these car wash deals went bad for Leon Searcy: “It wasn't no car wash. It was a fake deal. A friend of mine that I trusted. I gave him a lot of money to take care of it, and I haven't seen him or the money since.” Rison also liked to dabble in the music industry: “I spent a lot of money in music. . . . If you bumped into me back in the '90s, and you were an aspiring guitar player or keyboard player, I gave you money to go buy equipment.”
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How do players get into so much financial trouble with the throng of prospective advisors trailing them around? Perhaps that's the problem. Many players fall under the sway of seemingly well-intentioned adults
when they're mere teens. Remember, De'Anthony Thomas has been Snoop Dog's protégé since he was 12. Agents court players from the earliest opportunity, often skirting college rules and NFL standards. Unofficial advisors—often known as “street agents”—crawl out from under just about every rock. Even if players enlist legitimate professional help, there's no guarantee that an agent or legal representative will provide solid investment advice, or that financial advisors will handle players' money with players' long-range prospects in mind.

The NFLPA requires player agents and financial advisors to be registered and certified. An agent must pass a background check, have undergraduate and postgraduate degrees, attend two NFLPA-sponsored seminars, and pass a written examination covering the CBA, the salary cap, player benefits, NFLPA regulations governing contract advisors, substance abuse and performance-enhancing-drug policies, and other relevant topics. Ongoing compliance with the NFLPA regulations is required to maintain good standing. This includes paying an annual fee, having professional liability insurance, attending an annual NFLPA seminar for certified contract advisors, updating application information annually, and negotiating at least one player contract within a three-year period.
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Registered NFLPA financial advisors must hold a bachelor's degree, have eight years of licensed experience (FINRA, CPA, insurance license, or license to practice law), have professional liability insurance, no civil, criminal, or regulatory history related to fraud, and have no pending client complaints.
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Regulated or not, shady advisors have made quite a mark on the NFL financial scene. According to the NFLPA, before closer scrutiny was instituted, at least 78 players lost more than $42 million between 1999 and 2002 because they trusted money to agents and financial advisors with questionable backgrounds. Included in these cases are Luigi DiFonzo, a former felon who claimed he was an Italian count and defrauded players such as Hall of Fame running back Eric Dickerson, and William “Tank” Black, who built a pyramid scheme that took about $12 million from at least a dozen players. In 2008, 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 and former players, several of whom lost millions. In 2008, Jeff Blake, who played for seven NFL teams from 1992 to 2005, sent a shady e-mail message to 102 other retired players on behalf of Triton Financial, an investment firm in Austin, Texas, whose “athlete services” department Blake directs along with several other former players, including Chris Weinke and brothers Ty and Koy Detmer. The e-mail unabashedly claimed that “Triton is averaging 32% annualized return on its investments within the past five years.” A close examination of Triton revealed no such success. The firm wasn't even registered with the U.S. Securities and Exchange Commission. There are dozens of other documented accounts of scams and schemes, shady investments, and tax fraud that have cost players nearly everything they ever earned in the NFL.
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Not only are some agents frauds, but they overcharge their clients as well. “It's basically large-scale shoplifting,” says Ed Butowsky. “Athletes don't know industry standards, so virtually every one of them is being robbed.” Stock brokers, for example, may tout bonds with longer maturities because the commissions on them are bigger. Other advisors may overcharge for portfolio management, getting two or three percent instead of the customary one percent. Butowsky recalls meeting a former NFL player whose financial advisor—a former player himself—said that he couldn't reveal how much he was charging to manage the player's tax-exempt municipal bonds “because of the Patriot Act.” Butowsky said the advisor was taking $146,000 every year.
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ESPN business analyst Darren Rovell calls the NFLPA's efforts to regulate agents and advisors “a joke,” claiming it's something of a scam itself, a revenue stream for the union. Says Rovell, “I don't think that they can look you in the eye and tell you that they are doing a better job at controlling who should be an official advisor and who shouldn't.”
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Grave danger also lies in players' willingness to let agents take over other aspects of their lives. Butowsky says agents are more than ready:
“‘I am going to take care of your insurance. I am going to take care of helping you find a house. I am going to take care of getting you endorsements,' which very rarely happens by the way. ‘And I am going to take care of your finances.'”
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Players don't see their bills, or keep track of payments. They're in the dark about taxes. They lose touch with their own money, learn only what their advisors want them to know, and often end up with far less than they thought they had. “You think of sharks in the hood, you think of gang bangers and drug dealers. You haven't seen nothing 'til you step into some of these white collar criminals. . . . Look at all the players who got caught up in the pyramid schemes,” laments Bart Scott. Butowsky concurs: “I know many people who have had money wired out of their accounts to private equity accounts or into other accounts without their knowledge. A lot of signature forgery, and that is criminal.”
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Unfortunately, the humiliation of being duped keeps players quiet about their losses, allowing the scamming to thrive. It's a sad story, told too late, according to Leon Searcy:

NFL guys are very egotistic. They don't like anybody to get the best of them on the field or off of the field. So, when they do get [scammed] by an investor or schemer, most of the time they are not telling you, because they don't want you to know they done got got.
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Most NFL players insist that they're good family men, a noble sentiment that sometimes can be costly. George Koonce learned the hard way:

You sign that first contract and you're overwhelmed with excitement and expectation. You made it. You've been drafted. Then you try to concentrate on football, making the team. And you turn to your trusted friends or relatives to help you stay focused on the job at hand, to earn a spot on that opening day roster. But are your friends and family relatives really equipped to manage your
finances? In most cases no. But they are going to try anyway, and you want to let them
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Like so many others, Koonce found his family descending upon him from all angles. Former coach Brian Billick warns that relatives suddenly emerge that players have never before met. “However big you
think
your family is, it will grow in the weeks leading up to your appearance at the NFL draft. At the 2003 draft, Charles Rogers had 98 people in his entourage.”
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Pulling no punches, Bart Scott warns that “getting money sometimes is like turning the lights on in a dark house in the ghetto. It exposes a lot of roaches and rats.”
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These “new” families often start treating players as breadwinners—or lottery winners—even though their connections are tenuous. Koonce remembers feeling anxious and confused. Adult family members were suddenly asking him for financial advice and help.
“They felt that because I was making a lot of money I had all of the answers.”
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At least they were asking. Bernie Kosar signed a $6 million contract in the 1980s and saw his family immediately take over:

I wanted to get an agent to separate the money, football, and the family, so that we all could kind of coexist. But my family wanted to represent me; they wanted to manage my money. My father, he didn't really have a job after the mills had closed, and there weren't a lot of opportunities. I knew with my signing bonus he was paying off his mortgage and paying off the house and cars, and things of that nature. But, as I came to find out later, the Cleveland Browns also cut a contract with my father who also got a million dollars.
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Not only did Kosar's family hijack his income, he reports willingly loaning millions more to family members, teammates, and friends—money never repaid. He says financial advisors he “loved and trusted” mismanaged his money, losing as much as $15 million in a rash of bad investments.
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While Kosar's situation isn't typical, it's hardly unique. Some family members become de facto money and investment managers, while others approach players with “surefire” investment opportunities, showing up needing a little cash to get a hot new business off the ground. Says a former player's wife about how friends and family tap into NFL salaries: “My husband will go places and meet friends, and everybody has this wonderful idea that just needs some investors. Basically, they want to play with your money. If the investment makes it, then everybody is happy, but if it doesn't, they haven't lost anything; only you have. I think that people play on that. ‘Hey, we've been friends for years.'”
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More commonly, friends and family are just looking for a little help from someone they've known all their lives who's now stumbled onto some good financial fortune. Koonce remembers an onslaught of requests from his family shortly after his first payday. His parents had never discussed family finances with him, but suddenly they were lamenting their tight situation. Aunts, uncles, and distant cousins he barely knew were telling him about their financial woes: “If you don't come through for me, I am basically going to lose everything I got.” “I've been out of work, you know the situation with my car, the bills.” Koonce remembers asking himself,
“When did I become the bank?”
He typically responded with compassion and measured generosity, with only one big regret:
“I started a trucking company with my sister. I think I lost over half a million.”
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Family members' sense of entitlement is sometimes overwhelming. They fail to recognize the burden their requests actually amount to; tickets to games, airfare to game sites, hotel rooms, and restaurants become expensive. Players sometimes support family members and acquaintances who previously helped them pursue the NFL dream, and married players find their in-laws are suddenly much more “congenial.” Most of the demands aren't outrageous, but they presuppose the player's ability and willingness to take care of everyday expenses without batting an eye.
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Family and friends are generally ignorant of the player's actual financial situation. They're unaware that his salary is non-guaranteed and he's at risk of being released at any time with no compensation. One player
and his wife were incredulous when his parents asked him to pay off their home mortgage, even before he made an NFL roster. An undrafted free agent, he had signed a $230,000 contract and received a $15,000 signing bonus. When he was demoted to the practice squad, his salary dipped to $73,950.
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