“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.
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…