Rich professional athletes squandering their millions has become a sad cliché.
A Sports Illustrated article last year showed how shockingly common financial ruin is:
- 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.
If that’s not bad enough, the recession has made things even worse. Too much money in real estate; investments in Ponzi schemes; and poor financial advising have been exposed with the down economy.
A sign of the times? More former stars are selling their championship rings for money than ever. “It’s amazing that I heard the recession was over,” says Timothy Robins, owner of Championshiprings.net, who buys bling from current and former pros and saw a 36% increase in sales during 2008-2009. “I’m getting more calls from players than ever. They’re having a really hard time.”
While just about everyone has lost money over the past two years, athletes tend to make particularly bad financial decisions, and it’s not just reckless spending.
Pros seems especially susceptible to Ponzi schemes. Some recent examples:
- Federal prosecutors charged a woman who once advised Michael Vick and several other football players with stealing $3 million from eight victims in a Ponzi scheme, according to the AP. Vick is suing Wong to get $2 million back.
- MLB stars Greg Maddux, Bernie Williams, Johnny Damon (pictured here), J.D. Drew, Andruw Jones, Carlos Pena and other current and former players invested with Allen Stanford, according to the Washington Times.
- Seven former and current NFL players are among the 3,000 investors who were allegedly duped into investing $100 million in a Canadian-based Ponzi-type scheme -- a pyramid allegedly run by two men who had prior dustups with the law, according to the Calgary Herald.
- Hall-of-Fame QB John Elway invested $15 million with suicidal Ponzi schemer Sean Mueller.
Maybe it's because tangible business ventures are more fun than stocks and bonds. With little business background, however, athletes have made some terrible investments. Some examples from SI:
- In May 2007 former quarterbacks Drew Bledsoe (pictured here) 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.
- Rocket Ismail also squandered a fortune funding an inspirational movie; the music label COZ Records; a cosmetics procedure whereby oxygen was absorbed into the skin; a plan to create nationwide phone-card dispensers; a Rock N' Roll Café, a theme restaurant in New England; and recently, three shops dubbed It's in the Name, where tourists could buy framed calligraphy of names or proverbs of their choice.
- Michael Vick put $6 million in bank loans towards a car-rental franchise in Indiana, real estate in Canada and a wine shop in Georgia.
Costly divorce has long caused financial pain, but it's especially acute in pro sports.
Polls, studies, and anecdotal evidence suggest that the divorce rate for pro athletes are high, according to the NYT.
In football, the Times article mentions the reasons why NFL and other pro sports marriages fail: 'rampant infidelity, women who target athletes, trophy wives, lifestyles not conducive to marriage and players being surrounded by entourages, which can discourage intimacy.'
And it can be costly: Need we remind you of the Tiger Woods divorce episode?
Everyone wants to be Magic Johnson, who runs the successful Magic Johnson Enterprises, which invests in urban development. When most pro athletes try and run their own business, however, the results are poor.
As SI notes, recent examples include Saints alltime leading rusher Deuce McAllister, who filed for bankruptcy protection for the Jackson, Miss., car dealership he owns and Panthers receiver Muhsin Muhammad, who put his Charlotte mansion on eBay a month after news broke that his entertainment company was being sued by Wachovia Bank for overdue credit-card payments.
The most spectacular recent example is former MLB All-Star Lenny Dykstra (pictured here), who has been forced to sleep in his car after his magazine, The Player's Club, failed miserably. 'Nails' filed for bankruptcy protection in July, reportedly owing between $10 and $50 million.
Lots of money usually means a good party. But for some athletes, that's about all they do. Drugs, especially, can mean bad news. Some examples:
- Texas Rangers baseball star Josh Hamilton (pictured here) began his career by burning through a $4 million signing bonus doing coke, crack and downing a bottle of Crown Royal a day, according to Maxim.
- NBA player Chris 'Birdman' Andersen burned through his $289,000 2001 signing bonus partying; in 2006, was kicked out of the league for two years for unspecified drug use, according to ESPN, losing his $3.5 million a year salary.
- Pro football star Ricky Williams lost millions in salary when failed drug tests because of marijuana use, leaving the NFL in 2004 (paying $8.6 million for breach of contract) and then being suspended in for a year in 2006.
Like everyone, athletes should be allowed to have as many children as they like. But not all are exactly responsible with parenting, having multiple kids with multiple women. That, put crudely, costs a lot.
Take the example of former NFL player Travis Henry. The NYT reported recently that Henry, 30, a former N.F.L. running back who played for three teams from 2001 to 2007, has nine children -- each by a different mother, some born as closely as a few months apart. Henry says he's broke, and cannot afford the estimated $170,000 in child support he owes per year.
Or boxing champion Evander Holyfield. As the AJC notes, Holyfield has grossed more than $248 million in the ring, but also came close to losing his Atlanta home because of child support payments believed to total $500,000 annually -- on top of two divorces and several failed business ventures.
And then there's Jets cornerback Antonio Cromartie, who's still trying to remember the names of all his kids…
Players often know they need financial help. They just chose the wrong people to advise them.
Whether buddies from back home or predatory scammers, the NFL Players Association says 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, according to SI. Some of the magazine's examples:
- 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.
- William (Tank) Black, a disgraced agent 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
- Kirk Wright, a hedge fund manager, 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. Wright committed suicide in prison.
Going to prison for 18 months because of fighting and killing dogs wasn't the only thing that hurt Michael Vick. The star NFL quarterback also went broke.
Besides millions of dollars in lost salary, Vick sunk his fortune into legal fees, fines and supporting family and friends, according to the Smoking Gun. A judge recently approved a plan for the QB to repay creditors $20 million after he filed for bankruptcy.
This might be the most obvious way sports stars lose their money: sometimes, they just act stupidly.
And moronic decisions have serious financial consequences. Recent memorable examples include:
- Michael Vick (see dog fighting entry)
- New York Giant Plaxico Burress was sent to prison for two years for having an illegal gun and accidentally shooting himself at a New York City nightclub last November -- right after signing a five-year, $35 million contract.
- NFL first-round pick Adam 'Pacman' Jones (pictured here) has twice been suspended by the NFL for off-field incidents -- including for the entire 2007 season -- and was released in February by the Dallas Cowboys, notes the AP. Besides many other run-ins with the law, Jones was most famously involved in a melee and shooting at a strip club, but essentially got off. He's now looking for work; Jones had signed a four-year contract with the Cowboys worth $13.3 million.
- Olympic champion Michael Phelps was caught smoking a bong, losing his Kellogg's endorsement deal, as well as financial support from USA Swimming, according to the New York Daily News.
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