“DC” is broke. Despite earnings tens of millions of dollars during his playing career the former NBA No 1 draft pick is just another name in a long list of current and former high profile athletes who can not seem to create the same magic with their finances that they did during their playing careers.  Coleman’s “end-game’ list of assets in his bankruptcy petition consisted of  a Seadoo watercraft, his NBA pension, 1957 Buick convertible, worth $20,000; a 1970 Chevrolet Nova, worth $5,000; and a 1997 Bentley convertible, valued at $50,000 and some fur coats.

Just one more high profile athlete having to scale back his lifestyle to the level to which you have I have been accustomed.  Why is it that athletes who seem to have everything are often completely unable to control anything related to finances? While Derrick’s financial demise has been attributed in part to public interest investments gone sour, is that all there is to it?  It seems like an all to familiar story-line.

We all played our violins to death when we heard of Latrell Sprewell’s financial troubles. On Halloween 2004, Sprewell, who was in the final season of a $62-million five-year contract with the New York Knicks, said he was insulted by the Minnesota Timberwolve’s offer of a contract extension that was reportedly worth between $27 million and $30 million for three seasons. Sprewell stated, “I’ve got my family to feed.” That quote become a national moniker for the public perception of athletes as greedy, out of touch individuals.  While there is certainly the stereotype of the financially irresponsible NBA athlete, no professional sport is immune.

Let’s take a look at some high profile athlete financial sob stories over the years:

1. No one my age can forget Jack”The Ripper” Clark , star player for the Boston Red Sox who filed for bankruptcy in 1992 in the middle of his second year of a three-year, $8.7 million contract with Boston; he listed $6.7 million in debts. Jack was a master of financial planning and prudent asset acquisition. His bankruptcy petition listed assets such as 18 automobiles, including a 1990 Ferrari that cost $717,000 and three 1992 Mercedes Benz cars costing between $103,000 and $143,000. He owed money on 17 of the automobiles and was liable for about $400,000 in Federal and state taxes. He had also lost about $1 million in a drag-racing venture. Sounds like Jack would have been more at home in the NBA. You can read about it here

2. Johnny Unitas, Hall of Fame quarterback for the Baltimore Colts, filed for bankruptcy in 1991 citing numerous failed business ventures in his petition These failed bits included bowling alleys, land deals and restaurants. He filed for Chapter 11 bankruptcy in 1991.

3. Mike Tyson The name speaks for itself. Mike’s bankruptcy was highly publicized. Despite earning hundreds of millions during his boxing career, Mike kept it simple. His bankruptcy petition simply stated: ” I am unable to pay my bills”. According to federal court records, his liabilities totaled about $27 million. You can read that story here.

4. Dorothy Hamill, the women’s figure-skating gold medalist in the 1976 Winter Games, filed for bankruptcy after a series of financial setbacks. Hamill said she has experienced financial setbacks as a result of poor financial investment advice and management.

5.  Antoine Walker Despite earning a reported $110 million over the course of his 13-year NBA career, former player Antoine Walker is apparently broke. According to the Boston Globe the 33-year-old 6th overall draft pick of 1996 was in trouble, accused of  writing bad checks to different casinos, totaling $1 million. The Globe is also reported that Walker owed more than $4 million to his creditors.

These are just a few of many athletes’ tales of woe. It is not a phenomenon limited to professional sports — just ask M.C Hammer. Prior to his declaring bankruptcy, it was made public that his day to day living expenses far exceeded his income of $33 million. If I am going to veer off to celebrities, I certainly have to mention Kim Basinger and Michael Jackson.

When the Toronto Star ran an article alleging that a shocking figure that 60 percent of NBA athletes “go broke” five years after retiring, did we not all pull out that very tiny violin we have reserved for such occasions?  The NBA players union and the NBA have both disputed that figure. The article goes on to talk about all the people taking advantage of and “scamming” these athletes. While I have no doubt there is truth to this, I can also understand how such a generalization would make the NBA uncomfortable. It leaves you with the impression that 60 percent of NBA players are not only financially inept but also idiots in general. This is simply not true. While good business sense is often lacking, I view many of their mistakes as being more mistakes of trust, credibility and lack of life experience than anything else. Smart, busy people who can afford it, hire people with targeted expertise to help them. This allows them to focus on their expertise. Sometime mistakes are made and bad judgment is used in who we hire and hang out with. That is not unique to the NBA or professional sports. This happens to everyone. That is life. It happens all the time. It just does not make front page when we screw up. If there is any question at all as to how badly we as the general public screw up, just look at the personal bankruptcy filing statistics.

In order to get a perspective from the inside, I contacted Jordan Woy, a highly respected sports agent and a principal in the sports marketing/management firm of Schlegel Sports. Jordan has represented numerous high profile athletes

Here is what Jordon had to say:

I think there are several reasons why so many athletes “go broke”. First, whether it is a lottery winner, an athlete or a star entertainer, if they are not equipped with the knowledge on how to make and save money they are in trouble. When they didn’t earn it through disciplined business practices and they don’t have those skills they usually go through it quickly. Most lottery winners or athletes make a great deal of money in a short period of time. They start spending it on things that only go down in value (cars, jewelry, partying, entourage, etc) and start to evaporate the money they do have. They can carry this off until they stop earning big money. This is when the trouble starts. It is hard to believe that MC Hammer, Mike Tyson, Evander Holyfield and now Ed McMahon are broke. These are people who earned hundreds of millions over time and it disappeared. Lavish spending and entourages were probably the downfall for the first three for sure.

Most athletes play for four to ten years if they are lucky. After they pay taxes (can be 40 to 50%) and agent fees and buy their first homes, cars, outfits, jewelry (plus, cars, clothes and jewelry for friends and family), they are left with very little. When they first “strike it rich” all of their longtime friends and family expect help. Most athletes feel obligated to help everyone out at first then they wise up. They also want to keep up with their teammates. If someone buys a Bentley, they have to buy one; if someone buys a $75,000 watch, they have to buy one to keep up the appearance. Then, of course, when the career ends and they are still living in a multi million dollar house, driving 3 expensive cars (and insurance), traveling in private planes and taking Limo’s when they go out on the town, reality sets in. The money dries up very quickly.

However, if athletes educate themselves, learn money management skills and make smart, safe investments along the way, they are usually in very good shape. After representing athletes for over 20 years, we call this our “life plan”. We take out clients on working vacations in the off season to places like Las Vegas, Cancun and on a cruise to the Bahamas to learn business networking. We have people from industries such as real estate, oil and gas, financial planning, credit repair, asset protection/estate planning, etc come to educate the players and their wives so they can learn about these business and also determine if they are interested in any of these industries for life after sports. One of the financial planners who comes always says most people die coming down from Mt. Everest not going up. The goal is for these athletes to get to their Mt. Everest AND to get down safely.

So, what do you think? Are the financial mistakes that athletes make any different than your mistakes or mine? They are certainly mistakes made with a higher downside. When we hear these stories are we just unable to comprehend that someone could have that much money and spend it all? Can we learn lessons on how to live our lives from their highly publicized financial gaffes? Do we even care at all?

With all due respect to Latrell Sprewell, we have our own families to feed…

(New York) Word is out that  publicly traded Blue- Star Airlines(BST)  is falling victim to the Wall Street crisis and an unexpected unfavorable verdict with regards to a crash several years ago.  At 12 a.m this morning Blue-Star Airlines ceased operations and  filed for bankruptcy protection in New York federal  court leaving thousands of employees on the bread line.

Investors are also up in arms that new Blue-Star CEO Bud Fox allegedly ran up hundreds of thousands of dollars in credit card debt to invest in Blue-Star based on inside information given to him by his father Carl Fox.  Carl who was the head union litigation representative allegedly tipped off his son that there would be a favorable settlement of a lawsuit arising out of the crash that took the lives of all on board.  It turned out that the information was false. The case went to trial.  A 300 million dollar verdict was entered against Blue-Star.

Reports are that Fox who was leveraged to the hilt with a devalued Manhattan Condo and other toys allegedly ran up hundreds of thousands in cash advance bankruptcy debt to purchase Blue-Star stock in advance of the expected favorable settlement news that never came. He hoped to make a killing  when the stock shot up on the favorable lawsuit news.

Word on the street is that Fox who was making about 500k a year was financially and personally reeling. His long time high profile socialite interior designer girlfriend Darien Taylor who counted billionaire New York real estate speculator Gordon Gekko among her clients had recently moved out.

A close friend speaking on condition of anonymity confided that Fox crafted a plan that he thought would get Darien back and put himself  in the black.  Fox had approximately 20 credit cards with available credit somewhere between 200-300k.  He took the maximum cash advances on those cards and invested all of the money in Blue-Star.  He was apparently hoping for a 5-10 point pop that could net him up to 3 million dollars.  He would then pay back the credit card debt and be newly flush.  It is also being reported that he gave the same tip to Gordon Gekko who went long for millions.  The SEC has reportedly opened an investigation in the matter.

Unfortunately Bud’s dad had it all wrong.  The settlement fell through at the last second.  The case went to trial and there was a multi-million dollar verdict against Blue-Star.  Bud now has several problems.  Both American Express and Gordon Gekko now have contracts out on him.  He has also run up 300 grand in cash advance credit card debt that he can not repay.  Bankruptcy would appear to be the only viable option if Bud can pass the Chapter 7 Means Test.   Bud consulted a bankruptcy attorney. He was given some sobering news.  His income of 500k was way above the state mean so he would not be able to discharge his credit card debt. He would have to work out a repayment plan.  Visions of getting Darian back disintegrated.   But wait!   Are credit card cash advances to buy stock really consumer debt?  Bud took the position that since the majority of his debt was non-consumer cash advance debt invested in the stock market he was exempt from the means test and should be able to liquidate.

Is Bud correct in his assertion?    Everything being equal, because his cash advance debt is  primarily non-consumer debt he may not have to pass the means test and can file Chapter 7 bankruptcy.  It appears that as long as Bud can trace back the cash advances to his Blue-Star buys he can walk away from his entire mess in a chapter 7.  That’s the upside.  All is creditors are gone.  He can start over.  Of course Gordon Gekko lost big on the advice and does not forgive so easily.   I can feel the ice melting under Bud’s feet as we speak.

Moral of story?  If your considering bankruptcy first run up thousands of dollars in non-consumer cash advance debt on your credit cards. Enough to be exempt from the means test. Then take a flyer in the market with the money.  If if does not work out you can be Bud Fox too.

I have received emails from people who had the perception that I was “sticking up” for Latrell Sprewell and athletes like him. I was not. My comments were intended to be more of a sarcastic commentary on the large percentage of high dollar athletes who live paycheck to paycheck. The point I was trying to make was that financial immaturity leading to life changing mistakes is a human problem that occurs at all income levels. It is not just an athlete problem. Mistakes in spending more than you have, bad investments, bad decisions in who to trust traverse all professions and income levels. To say that a 19 year old in the NBA should be that much smarter and makes better decisions than a 19 year old who wins a five thousand dollar scratch off, inherits money or whatever is just silly. Your income level is not an excuse to make bad financial decision. I am not a wealthy person. I have a law degree. I have also made some terrible financial decisions in my life. More than I would like to admit to myself. Why? Because I didn’t use common sense and I didn’t do my homework. Guess what? The ability to use common sense and do due diligence are resources available to ALL income levels. More money does not make you “more smart”. It just means you have more bankruptcy creditors when you screw up.

The “Real Deal” is broke.

Former Heavyweight champion Evander Holyfield is playing the real life game of Deal Or No Deal. It has been reported that his $10 million estate in suburban Atlanta is under foreclosure, the mother of one of his children is suing for unpaid child support, and a Utah consulting company has gone to court claiming the boxer failed to pay back more than a half million dollars for landscaping. Just one more high profile athlete having to scale back his lifestyle to the level to which you have I have been accustomed. Why is it that athletes who seem to have everything are often completely unable to control anything related to finances?

We all played our violins to death when we heard of Latrell Sprewell’s financial troubles. On Halloween 2004, Sprewell, who was in the final season of a $62-million five-year contract with the New York Knicks, said he was insulted by the Minnesota Timberwolve’s offer of a contract extension that was reportedly worth between $27 million and $30 million for three seasons. Sprewell stated, “I’ve got my family to feed.” That quote become a national moniker for the public perception of athletes as greedy, out of touch individuals. Apparently, Sprewell still can’t feed his family. His yacht was recently repossessed and his multi-million dollar mansion is about to be foreclosed on.

While there is certainly the stereotype of the financially irresponsible NBA athlete, no professional sport is immune.

Let’s take a look at some high profile athlete financial sob stories over the years:

1. No one my age can forget Jack”The Ripper” Clark , star player for the Boston Red Sox who filed for bankruptcy in 1992 in the middle of his second year of a three-year, $8.7 million contract with Boston; he listed $6.7 million in debts. Jack was a master of financial planning and prudent asset acquisition. His bankruptcy petition listed assets such as 18 automobiles, including a 1990 Ferrari that cost $717,000 and three 1992 Mercedes Benz cars costing between $103,000 and $143,000. He owed money on 17 of the automobiles and was liable for about $400,000 in Federal and state taxes. He had also lost about $1 million in a drag-racing venture. Sounds like Jack would have been more at home in the NBA. You can read about it here

2. Johnny Unitas, Hall of Fame quarterback for the Baltimore Colts, filed for bankruptcy in 1991 citing numerous failed business ventures in his petition These failed bits included bowling alleys, land deals and restaurants. He filed forChapter 11 bankruptcy in 1991.

3. Mike Tyson The name speaks for itself. Mike’s bankruptcy was highly publicized. Despite earning hundreds of millions during his boxing career, Mike kept it simple. His bankruptcy petition simply stated: ” I am unable to pay my bills”.According to federal court records, his liabilities totaled about $27 million. You can read that story here.

4. Dorothy Hamill, the women’s figure-skating gold medalist in the 1976 Winter Games, filed for bankruptcy after a series of financial setbacks. Hamill said she has experienced financial setbacks as a result of poor financial investment advice and management.

These are just a few of many athletes’ tales of woe. It is not a phenomenon limited to professional sports — just ask M.C Hammer. Prior to his declaring bankruptcy, it was made public that his day to day living expenses far exceeded his income of $33 million. If I am going to veer off to celebrities, I certainly have to mention Kim Basinger and Michael Jackson.

When the Toronto Star ran an article alleging that a shocking 60 percent of NBA athletes “go broke” five years after retiring, did we not all pull out that very tiny violin we have reserved for such occasions? The NBA players union and the NBA have both disputed that assertion. The article goes on to talk about all the people taking advantage of and “scamming” these athletes. While I have no doubt there is truth to this, I can also understand how such a generalization would make the NBA uncomfortable. It leaves you with the impression that 60 percent of NBA players are not only financially inept but also idiots in general. This is simply not true. While good business sense is often lacking, I view many of their mistakes as being more mistakes of trust, credibility and lack of life experience than anything else. Smart, busy people who can afford it, hire people with targeted expertise to help them. This allows them to focus on their expertise. Sometime mistakes are made and bad judgment is used in who we hire and hang out with. That is not unique to the NBA or professional sports. This happens to everyone. That is life. It happens all the time. It just does not make front page when we screw up. If there is any question at all as to how badly we as the general public screw up, just look at the personal bankruptcy filing statistics.

In order to get a perspective from the inside, I contacted Jordan Woy, a highly respected sports agent and a principal in the sports marketing/management firm of Schlegel Sports. Jordan has represented numerous high profile athletes

Here is what Jordon had to say:

I think there are several reasons why so many athletes “go broke”. First, whether it is a lottery winner, an athlete or a star entertainer, if they are not equipped with the knowledge on how to make and save money they are in trouble. When they didn’t earn it through disciplined business practices and they don’t have those skills they usually go through it quickly. Most lottery winners or athletes make a great deal of money in a short period of time. They start spending it on things that only go down in value (cars, jewelry, partying, entourage, etc) and start to evaporate the money they do have. They can carry this off until they stop earning big money. This is when the trouble starts. It is hard to believe that MC Hammer, Mike Tyson, Evander Holyfield and now Ed McMahon are broke. These are people who earned hundreds of millions over time and it disappeared. Lavish spending and entourages were probably the downfall for the first three for sure.

Most athletes play for four to ten years if they are lucky. After they pay taxes (can be 40 to 50%) and agent fees and buy their first homes, cars, outfits, jewelry (plus, cars, clothes and jewelry for friends and family), they are left with very little. When they first “strike it rich” all of their longtime friends and family expect help. Most athletes feel obligated to help everyone out at first then they wise up. They also want to keep up with their teammates. If someone buys a Bentley, they have to buy one; if someone buys a $75,000 watch, they have to buy one to keep up the appearance. Then, of course, when the career ends and they are still living in a multi million dollar house, driving 3 expensive cars (and insurance), traveling in private planes and taking Limo’s when they go out on the town, reality sets in. The money dries up very quickly.

However, if athletes educate themselves, learn money management skills and make smart, safe investments along the way, they are usually in very good shape. After representing athletes for over 20 years, we call this our “life plan”. We take out clients on working vacations in the off season to places like Las Vegas, Cancun and on a cruise to the Bahamas to learn business networking. We have people from industries such as real estate, oil and gas, financial planning, credit repair, asset protection/estate planning, etc come to educate the players and their wives so they can learn about these business and also determine if they are interested in any of these industries for life after sports. One of the financial planners who comes always says most people die coming down from Mt. Everest not going up. The goal is for these athletes to get to their Mt. Everest AND to get down safely.

So, what do you think? Are the financial mistakes that athletes make any different than your mistakes or mine? They are certainly mistakes made with a higher downside. When we hear these stories are we just unable to comprehend that someone could have that much money and spend it all? Can we learn lessons on how to live our lives from their highly publicized financial gaffes? Do we even care at all?

With all due respect to Latrell Sprewell, we have our own families to feed….

©2008 Brian Cuban

About Brian Cuban