Money Players

Money Players Top 10 Biggest Sports Losers in 2007

"How did you go bankrupt?"
"Two Ways. Gradually, and then suddenly."
—Ernest Hemingway, The Sun Also Rises

Here is my list for the 10 Biggest Sports Losers in 2007...

10. The fallout from Alex Rodriguez It's hard to characterize someone who signed a $300+ million deal as a financial blunder, but even Rodriguez admits, "The whole thing was a mistake. It was a huge debacle." The tally:

• The Yankees lost $21.3 million in subsidies from the Texas Rangers under the terms the trade which brought Rodriquez to the Yankees in 2004.
• Rodriquez took a beating in the media, especially when the announced "opt-out" upstaged the 2007 World Series.
• The move caused a major strain on Rodriguez's relationship with agent Scott Boras.
• A-Rod's new contract pays A-Rod over $30 million per year, which is huge money by every standard except A-Rod's previous contact...the new contract is just an 8% increase over his previous mega-deal. No one will cry for A-Rod, but certainly the economics of baseball have improved at a higher rate.

9. Conduct counts NFL Commissioner Roger Goodell took unprecedented action against NFL players Chris Henry, Adam “Pacman” Jones, and Tank Johnson. Jones lost $1.292 million in base salary. Henry lost half of his $435,000 base salary, or $217,500. After being cut by the Chicago Bears, Johnson signed with Cowboys for $255,000 to play 8 games, which is the prorated portion of a minimum contract. Based on Johnson's market value, his behavior cost him at least a few million. Jones also plead "no contest" for his role in a strip-club fight left a man paralyzed. [Related Money Players post: Character matters, revenue counts]

8. Taking on the champ Denver Broncos Travis Henry fathered 9 children by 9 different women, which ties him with Evander Holyfield as the once undisputed fathering champ. However, Evander's record deserves an asterisk: of the nine children Evander fathered by six different women, four were born in wedlock. Thankfully, Henry has a $25 million contract to fund a whole-lotta child support. Still when Henry fell behind with some of his payments a judge ordered him to pay $3000 a month and set up a $250,000 trust fund. Henry did win his appeal of a one-year suspension for a positive marijuana test.

7. Caffey files bankruptcy Former NBAer Jason Caffey, who played 10 years in the NBA and signed a $35 million free-agent contract with the Golden State Warriors, filed bankruptcy in October, claiming more than $1.9 million in debts against nearly $1.15 million in assets. Records show Caffey pays $7,000 month in alimony and child support. "Who wouldn't have trouble with that after retiring five years ago?" Caffey said. In reality, Caffey would have needed to bank approximately $1.6 million cover this expense. Caffey got divorced in 2006. More sperm banking: "Several other women have also sued Caffey for child support." 

6. Nene screwed by former business manager Denver Nuggets forward Nene claimed former business manager Joe Santos failed "to fulfill his duties as manager and personal assistant and to keep adequate financial records. He also has said Santos diverted funds for personal use." Nene learned in January 2006 that he was essentially broke, despite earning a $2 million salary. He then terminated his business relationship with Santos. Santos alleges that Nene agreed to "pay him 6 percent of his annual revenue over a seven-year span." With Nene's 6 year, $60 million contract, Santos would receive $600,000 a year, up from the $84,000 salary Santos was previously paid to be Nene's errand boy and interpreter. [Related Money Players post: Nene plays offense against weak defender of his money]

5. Marion Jones sprints out of control Not a good year for the former Olympic champion:

• Admitted to lying to federal agents about her use of steroids prior to the 2000 Summer Olympics.
• Plead guilty in U.S. District Court that she had made false statements regarding the BALCO case and a check-fraud case.
• Filed bankruptcy.
• Stripped of all five 5 Olympic medals she won at the 2000 Summer Olympics in Sydney.

On the bright side, all Olympic medals are not lost: In 2007 she married Obadele Thompson, who won an Olympic bronze medal at the 2000 Olympics. And Marion gave birth to a Olympic hopeful.

4. Michael Jordan's divorce  MJ's divorce from Juanita cost him a reported $168 million. Add another distinction to Michael's career: The most costly celebrity divorce settlement in United States history. Ever. Fortunately for MJ, he made a lot of money to make this distinction possible.

3. Kirk Wright wrongs a lot of pro athletes A quick refresher: Kirk Wright bilked investors, including many current and former NFL players out of at least at least $20 million. (He fraudulently provided investors with reports claiming his firm, International Management Associates, had over $180 million in assets. But when he was finally busted, there was less than $500,000 accounted for.) In February 2007, Wright was ordered to pay nearly $20 million as part of a default judgment by the U.S. District Court in Atlanta. In March 2007, six current and former players sued the NFL and its union, seeking to recoup $20 million they lost in this fraud scheme. (The NFLPA, in response to significant financial losses experienced by several NFL players, began the Financial Advisor Program, a first-of-its-kind program aimed at protecting players against incompetent and fraudulent advisors.)

2. Cirque de Isiah Thomas and James Dolan Mismanagement, horrible judgment, bad lawyering, bad PR, and stupid comments added up to a $11.6 million jury award. NBA commissioner David Stern was smart to strongly  recommend settling the case for $11.5 million, rather than risk further embarrassment by appealing.

And the # 1 Biggest Sports Loser in 2007

1. Say it ain't right, Mike? Michael Vick lost the most in 2007. He lost his NFL career and his freedom for the next two years. The Falcons also demanding Vick repay $20 million of his signing bonus. And in less than one year he went from NFL hero to villain of dog lovers everywhere.

Note: An argument could be made that those people and leagues who suffered from the steroid fallout be placed high on the list. But on second thought, I really believe steroids has had a negligible to positive financial impact on sports. While I would never condone anyone cheating, the case can be made that steroid users prospered while management looked the other way. From a PR standpoint the $20-30 million MLB spent to conduct the Mitchell Report and hopefully clean up the mess was money well spent.

Tell us what you think.

--Marc Isenberg

Marc's book, Money Players now available here. And on amazon.com.

Nene plays offense against weak defender of his money

By Marc Isenberg

Another unfortunate alleged financial scandal was reported today. According to a Rocky Mountain News article, "The Denver Nuggets forward [Nene] has accused Joe Santos of failing to fulfill his duties as manager and personal assistant and to keep adequate financial records. He also has said Santos diverted funds for personal use."

Nene learned in January 2006 that he was essentially broke, despite earning a $2 million salary. He then terminated his business relationship with Santos.

Santos alleges that Nene agreed to "pay him 6 percent of his annual revenue over a seven-year span." With Nene's 6 year, $60 million contract, Santos would receive $600,000 a year, up from the $84,000 salary Santos was previously paid to be Nene's errand boy and interpreter.

The NBPA caps agent fees at 4%. Santos deal with Nene appears to circumvent NBPA agent regulations by claiming he was Nene's business manager, not his agent. But Santos's lawyer stated in an email to Rocky Mountain reporter James Paton that Nene's claims have "cut short" Santos' dream to one day become an NBA agent.

I am guessing Santos' dreams will be shattered if he ever tries to become an NBPA certified agent since he appears to have already violated NBPA agent regs.

It's another sad tale. Won't be the last, but always worth repeating.

Pension benefits for retired pro athletes

By Marc Isenberg

There has been a lot of attention paid recently to the retirement benefits of older professional athletes, particularly those who played pre-1980. Greg Johnson of the Los Angeles Times does an excellent job documenting the issue facing MLB and the NFL and NBA.

Larry Dierker, a former MLB pitcher, earned $125,000 in his best year. Two years from now, when Dierker turns 60, he will begin collecting $180,000 in annual retirement benefits. Dierker credits longtime MLBPA executive director Marvin Miller for educating players about the importance of retirement planning. Thanks to Miller and the players who stood strong during some long, drawn-out battles with management, the MLB pension is the "gold standard for union-represented athletes."

Older retired athletes in the NFL and NBA are not so fortunate. For example, Conrad Dobler, age 56, is eligible to receive $24,000 annually now, or he can receive $48,000 if he waits until age 62.

As Johnson's article in the LA Times points out, "Federal law requires union leaders to represent the interests of current and future players rather than aging athletes, so improvements to previously negotiated benefits must be approved by current union members — and often by the franchise owners who foot the bills."

Two of the most outspoken ex-NFLers have been Mike Ditka and Jerry Kramer. They have teamed with several NFL legends to launch the Gridiron Greats Assistance Fund to "assist retired players in dire need due to the lack of adequate disability and pension benefits." Read and watch their presentation.

Since current players play an important role in directing retirement benefits of all players, there is an obvious dilemma. The question is, How much responsibility do current players have to past players? Further complicating the issue is the fact that the financial futures of current players are far from secure. The current system unfortunately pits current players against the legends of the game, which is unfair to both sides. As Babe Ruth once said, "Baseball is more than a fraternity. It is a family. And the fellow ballplayers are your brothers. In for a penny, in for a pound. All for and one for all." If there's a problem with retired players' benefits, it should be addressed by the Leagues and the unions.

The NBA recognizes the enormous contribution of the pioneers of professional basketball (See related post below). New NFL Commissioner Roger Goodell appears to be open minded on that front. During his first "state of the NFL" delivered at the Super Bowl, he said the League needs to "reevaluate to see what we can do more to address the issues and we'll do that."

Many former pro athletes did not partake in the financial windfall of playing professional sports. A few are hard pressed to cover life’s necessities. Pride often prevents them from holding their hand out. Fortunately, many former NFL stars, such as Ditka, Kramer, and Nick Buoniconti are speaking out on behalf of guys who really need financial assistance and support.

Current players should continue to fight for greater retirement and health benefits for former athletes, not just for recent retirees. All professional athletes should keep in mind that they will be active, voting members of the Players Association for just a few years. But they will be retired players for decades. Reaching back to improve pension benefits of retired players, particularly those who literally sacrificed their bodies to help build professional sports into a multi-billion dollar enterprise, is simply good business. These guys sacrificed their bodies -- and in some instances, sadly, their minds -- to make the league what it is today. They stood together though often very troubled labor negotiations, even striking on several occasions in order to improve wages and benefits not just for them, but for every player who followed. Fighting for former players sets an important precedent for future generations of professional athletes: Players take care of their own.

Resources
Mike Ditka speaks on retired NFL players in dire need of assistance
NFLPA's Retired Players FAQs
Gene Upshaw responds to retired players (Word document)
NBA Retired Players

Articles
NBA reaches out to its pioneers [Greg Johnson/LA Times]
The NFL's forgotten players [Ken Murray/Baltimore Sun]
Glory has its price: 25 years later, the heroes of the 49ers' first Super Bowl championship team weigh the costs of playing a brutal game [Ron Kroichick/'SF Chronicle]
NFL's cold-hearted stance regarding its vets is deplorable [Bryan Burwell/St. Louis Post-Dispatch]
Not much nobler than Lefty's good deed for Dobler [Art Spander/Oakland Tribune ]

Financial end-arounds (updated)

On Febuary 12, 2006 Kirk Wright was ordered to pay nearly $20 million as part of a default judgment by the U.S. District Court in Atlanta. This would be great news if Kirk Wright had this kind of money in his accounts. Wright fraudulently provided investors with reports claiming his International Management Associates funds had over $180 million in assets. But when he was finally busted, there was less than $500,000 accounted for.

Here's an I wrote last year in the Sports Business Journal on personal finance and professional athletes.

Pro athletes must use caution to avoid financial runaround

By Marc Isenberg
Published August 28, 2006: Page 13

When the infamous Willie Sutton was asked why he robbed banks, he said, “Because that’s where the money is.” If Sutton were alive today, perhaps he’d target professional athletes. Instead of his risk-taker’s bravado, he could steal millions from unsuspecting pro athletes with simple razzle-dazzle and lies.

While professional athletes are among the most financially fortunate members of society, they are also among the most vulnerable. Young, financially inexperienced and often surrounded by yes-men, professional athletes are magnets for scam artists.

Kirk Wright, founder of hedge fund International Management Associates, is the latest to be accused of defrauding current and former pro athletes. From 1998 to 2005, which The Wall Street Journal points out included the worst bear market since the Great Depression, Wright reported average annual returns of more than 27 percent. The returns apparently were fabricated. The Securities and Exchange Commission estimates that Wright, who was arrested by FBI agents in Miami on May 17 and faces 21 counts of federal mail fraud and three counts of securities fraud, bilked investors out of at least $115 million. <Read full article in PDF file> 

Randolph Morris and the benefits of being an NBA reject

Randolph Morris, a junior center at Kentucky finds himself in a fascinating situation. The story starts out with his unfortunate decision (at the time) to test his market value by declaring for the 2005 draft after his freshman season.

Once Morris's projected draft position began to fall it probably would have prudent to withdraw his name and return to school. Instead he kept name in the draft, but was not selected. Had he been a late 2nd round pick, his college career would have been over. He would have either signed an NBA rookie minimum contract or ended up in the NBDL or in Europe. Morris thought he could return to play for his school, as permitted by NCAA rules. But Morris was ruled ineligible for the entire season (later reduced to 14 games) because he, in the eyes of the NCAA, had an agent working on his behalf and because he did not pay all his own expenses associated with working out for NBA teams.

Nothing worse than declaring for the draft, then not getting picked. Actually for Randolph Morris going undrafted will likely turn into his good fortune. Literally.

Here's how it works: While the NCAA allows a player to return to school (as long as he announces his intention to return prior to the draft or is not drafted and maintains his amateur status), under the NBA collective bargaining agreement he is only eligible to be drafted one time.

Fast forward to the present: Randolph Morris is a now a junior and considered a top prospect. He is averaging 16.9 points and 8.0 rebounds. Last week Morris made 10 of 11 shots against North Carolina and its star Tyler Hansbrough.

Since Morris cannot be drafted again he will enter the NBA as a free agent. A coveted free agent. No artificially capped rookie contract. Instead he (and his agent) can negotiate with any NBA franchise and sign with the highest bidder.

Like an infomercial voice over, BUT WAIT, THERE'S MORE! Apparently many NBA GMs were not aware of the rules covering a player in Morris's situation. An NBA team doesn't even have to wait until the normal free agent signing period which starts July 1. They can sign him, get this, now.

Not since Jim Chones left Marquette in the middle of the 1971-72 season to sign with an ABA team, has a college basketball player been in this type of situation. The ABA held its draft in the middle of the college season in order to gain an advantage over NBA. What the ABA owners lacked in money, they made up for in ingenuity.

I am sure college coaches will be up in arms about the potential can of worms Morris might open if he leaves Kentucky. Dick Vitale will probably freak out and write another open letter to the misguided Randolph Morris. He will talk about loyalty, about commitment, about finishing what he started. All good points. He probably won't mention those money-grubbing college football coaches who left their teams last week...in the middle of the season...when their own market values were peaking.

Interestingly, when Jim Chones was in this situation his college coach, Al Maguire, one of my all-time favorites, encouraged him to sign the pro contract. Keep in mind, Marquette was 21-0 at the time and the number 2 ranked college team in the country.

According to Chones:

"Al says to me, 'Jimmy, you gotta leave, it’s a lot of money and it’s a great opportunity.' I told him that I didn’t think I was ready and you know what Al tells me? 'Jimmy, I don’t care and it doesn’t make a difference. You gotta go.' You see, Al had no fear. He wasn’t afraid to voice his opinion or stand up against anything or any institution. There will never be another Al McGuire or a revolutionary like he was...He saw the world not as people wanted to see it, but as it really was."

I hope that Randolph Morris stays until the end of the season, but I will not begrudge him if he leaves.

Lexington Leader's Jerry Tipton explains why it is unlikely that a pro team would sign Morris during the season. As college basketball commentator Clark Kellogg said the NBA does not want to "create the appearance that it is raiding players off teams."

Why the rich go broke

Tim O'Brien wrote a great article in The NY Times a few weeks ago, "Why the rich go broke."

The article focuses on former boxing champ George Foreman who nearly went bankrupt in the 80's. He turned his financial career around, earning millions from boxing and then hitting it big as a product pitchman (including the mega-selling George Foreman Grill).

The entire article is worth reading, but if nothing else listen to what George Foreman has to say:

"A lot of people just don't grow up. I mean, 65-year-old men. They just don't grow up. They don't understand that money does not grow on a tree and that you've got to respect every dollar. Like Rip Van Winkle - the guy who slept - they party, party, party, then they wake up. 'Oh my God!' And they do something desperate trying to recapture what they had. And it doesn't work like that. You must stay awake."

"I've never borrowed a significant amount of money in my life. Never. Never will. I've got no interest in it. The other reason is I never thought I would be way happier when I had 2X instead of X."

"You can become complacent. You can say, 'I'm successful,' which is the kiss of death. In America it's hard to wake up hungry. It's frightening. You can become complacent and wake up tomorrow totally homeless."