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MIAMI (TheStreet) — Celebrities have more money than the average American, but there’s no evidence that they spent or invested it more wisely during the recent economic downturn.
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The average nonceleb doesn’t need much prompting to tell you how bad it’s been in the past few years. Call last year a recovery period if you must, but Americans still saw personal bankruptcies rise 9% to more than 1.5 million and reach their highest point since bankruptcy law reform was introduced in 2005, according to the American Bankruptcy Institute and the National Bankruptcy Research centre.
Meanwhile, real estate data firm RealtyTrac notes that foreclosures rose to a record 1.05 million, edging the previous record of 918,000 in 2009. That means 26% of all homes sold last year were foreclosures.
It seems only fair that celebrities contribute to both categories, with some losing 280 times the $50,000 the Census Bureau says an American household makes in a year. The following are just 10 examples of celebrities who’ve taken a huge financial hit during the past few years.
This post originally appeared at The Street.
Five years and three teams ago, Boston Celtics centre/rapper/actor/Comcast(CMCSA) pitchman Shaquille O'Neal won an NBA title with Dwyane Wade and the Miami Heat. At the time, he was also trying to sell a house on Star Island in Miami Beach that he bought for $18.8 million in 2004. Sitting on 2.5 acres along 300 feet of Biscayne Bay waterfront, the 19,400-square-foot home had eight bedrooms, a two-bedroom guest house, a tennis court, an indoor racquetball court, a six-car garage and a pool splashed with the Superman logo.
Shaq tried to flip the house for what he felt was a reasonable $32 million to $35 million and in 2007 almost had a New York Yankees third baseman on the hook for $25 million. But he watched the estate linger on the market for five years amid a housing crisis that flushed Miami housing prices by nearly 40%, according to the Florida Association of Realtors.
Eventually, Shaq unloaded the house on Russian real estate magnate and Naomi Campbell paramour Vladislav Doronin in 2009 for a reported $16 million -- $2.8 million less than he paid and less than half his asking price. Shaq has since recovered, heading toward the playoff as starting centre (once he comes back from injury) of the NBA's East-leading Celtics, but only in the world of celebrity investments and bankrupcy can a $2.8 million to $16 million loss be considered getting off light.
Sure, everyone knows now not to invest with Bernie Madoff, but someone should have told Mr. Six Degrees and his wife The Closer that before Madoff uncorked his $50 billion Ponzi scheme on them and the rest of the investing world.
The pair reportedly lost millions of their personal investments in the scheme and, while it may have been somewhat comforting to know that Hollywood figures such as Steven Spielberg and Jeffrey Katzenberg were duped in the same deal, it had to be humbling for the already prolific Bacon to tell Life & Style magazine in 2009 that 'I need to work, for obvious reasons.' Remember this when you're inundated with commercials for any of Bacon's four projects slated to hit the screen this year.
While it's great U2 raked in $130 million last year as the world's biggest-selling music act, according to Forbes, that sum wouldn't even cover the amount Bono lost on his worst investment. When Bono bought a stake in private equity firm Elevation Partners in 2004, it gave him a nearly 30% stake in Palm, including stock worth an estimated $325 million. In the pre-iPhone smartphone market, that wasn't too shabby.
When Palm fumbled the Pre, however, and the iPhone surged in market share, that investment started to look a lot more shaky. It got worse when H-P(HPQ) bought Palm for $1.2 billion last year, but only valued Palm shares at $5.70 when they were trading at $18 just a year before.
The whole deal set Bono back $140 million and, while it's tough to top U2's Pop album as a career low point, his disastrous Palm investment trumped it in Bono's typically grand fashion.
The good news for Philadelphia Eagles quarterback Michael Vick is that he turned a Comeback Player of the Year season in 2010 into a key to the city of Dallas and a franchise tag from the Eagles that could be worth $16 million to $20 million if the NFL doesn't lock out its players next season. The bad news: The aftermath of his dogfighting conviction and ensuing prison sentence will put almost all of that money into other people's hands.
It's no secret Vick's past cost him endorsement deals with Nike(NKE) and AirTran(AAI), more than $60 million of his $130 million contract extension that he signed with the Atlanta Falcons in 2004 and 16 months of his freedom. What's less known is that also left him bankrupt, with roughly $10 million to $50 million in debt.
According to the Atlanta Journal Constitution, he's been paying off that debt by keeping only $300,000 of the $6.8 million he made with the Eagles during the past two seasons but has more than $20 million still outstanding. Though he's recovered from his dogfighting conviction professionally, its fallout will likely keep his paycheck on a short leash for the imminent future.
Ordinarily a fairly savvy businesswoman -- especially considering she started her Maverick record label with Time Warner(TWX) almost 20 years ago before that was a thing to do -- Madonna's one major blunder came during her marriage to Guy Ritchie, which was filled with them.
Forget her and Ritchie's heavy ordnance of a film Swept Away, her 'British' children's book The English Roses, her directorial debut Filth and Wisdom, her American Life album and her affected English accent -- you marry a guy who directs heist movies like Lock, Stock and Two Smoking Barrels and Snatch for a living and you don't sign a prenuptial agreement?
Madonna was worth $500 million during her marriage to Ritchie and, while the director didn't clean her out when their marriage dissolved in 2008, the $75 million he reportedly got was a nice parting gift.
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