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.

Sean Jones update: more serious charges, more lame excuses

Add an SEC change to the growing list of offenses against former NFL player Sean Jones.

Kathleen Pender writes in today's SF Chronicle (she quotes me at the end):

Jones and four others were charged with mortgage fraud in federal court in Texas. According to the indictment, the defendants - including a property developer, an appraiser and two bank officers - conspired to obtain home loans based on inflated values on behalf of unqualified buyers, then diverted some of the loan proceeds to themselves.

Between 1999 and 2001, the defendants allegedly acquired more than $42 million in loans. The indictment charges each defendant with 12 counts of bank fraud. Each count carries a possible prison sentence of up to 30 years imprisonment and a possible fine of up to $1 million. Jury selection is set for May 12.

According to Pender's article, the SEC charges that Jones "refused to produce or allow the inspection of his advisory business records."

The SEC claims Jones "ultimately claimed that all his records had either been destroyed in a fire or inadvertently sold by a storage company." Given Jones' run of "bad luck" with the law, let's hope it's the latter; the former might bring an arson charge.

It's hard to keep up with this Jones, but I will continue to do my best. Previous posts on subject:
1) Sean Jones: pro and con
2) Sean Jones Speaks Yiddish and Gobbledygook 

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.

Sean Jones Speaks Yiddish and Gobbledygook

By Marc Isenberg

Last week, I posted on Sean Jones' arrest on bank fraud charges and a few of his past misdeeds. It's a sad, but not unfamiliar story.

A quick google search of "Sean Jones" and his investment firm "Amoroq" and you begin to see a disturbing pattern. Not only is Jones a bad speller with a penchant for silly metaphors, but he's also a slimy fraudster.

Back in his post-NFL heyday, Sean Jones was an agent, "representing" top NFL players such as Courtney Brown and Julius Peppers. He was also a financial adviser who founded Amaroq, which advised not only many professional athlete clients, but was also paid $60,000 per year by the NFLPA to provide advice about its pension plan.

Amaroq listed a “who’s who” of famous sports clients, including John Elway, Dan Marino, Jeff Hostettler, Corey Dillon, Ed McCaffrey, Harris Barton, Aaron Taylor, and Courtney Brown. In reality, these were clients of sports agent Marvin Demoff, who had some type of business relationship with Sean Jones.

Amaroq's website provides some interesting lessons about investing (along with nonsensical words, poor spelling, and bad grammar).

To wit: 

At AMAROQ we utilize computer algrorithms[SIC] to do the combinationatorial [SIC IF THAT'S IN FACT AN ACTUAL WORD] mathematics and to identify a limited number of candidate portfolios.

 And:

Scoring the game should be more than just counting the runs. We seek to go beyond the numbers of a manager or a portfolio of managers, and explain the "whys" of manager and portfolio performance. While a rising tide may lift all boats, it takes constant oversight in order to differentiate investment skill from market performance. [OR IF YOU INVESTED WITH JONES, YOUR BOAT SINKS]

Jones did provide some decent advice which clearly neither he nor Amaroq's clients ever followed:

Amaroq Asset Management is in regular contact with all managers charged with investing client assets, and when the situation warrants we require managers to report all account activity on a daily basis in order to ensure appropriate oversight and risk control. [OH REALLY?]

 And discussing its retirement consulting services:

We also assist our clients in determining the adequacy of communication materials, and developing customized presentations and materials for their plan participants. By allowing us to assist them, our clients have been able to successfully establish their programs while safely navigating the fiduciary waters that are so fought [THE WORD SHOULD BE FRAUGHT] with peril.

In a 2000 profile by Northeastern magazine (his alma mater), Jones said he managed a hedge fund. Apparently it wasn’t doing well. So bad, in fact, that he resorted to Yiddish to describe the fund’s poor performance. Said Jones, “It's putzing along. It's had its trials and tribulations”

Not only was Jones a former NFL player, but his firm once did business with the NFLPA. According to an undated ESPN.com article by Len Pasquarelli, “The problem for the NFLPA is that Jones' asset management company, Amaroq, is paid $60,000 annually by the union to help choose money managers with whom to invest funds. Documents that were filed by the NFLPA with the U.S. Department of Labor, and which were obtained by ESPN.com, confirm that amount.”

Len adds, "Jones has essentially been a poster boy for conflicts of interest since his retirement. He is noted as a 'prominent agent' in [a] magazine article, but rarely represents a player, instead turning over negotiations to Los Angeles-based agent Marvin Demoff, one of the pioneers of the business. And his cozy status with the NFLPA has raised eyebrows over the years."

Bottom line: I hope Jones' days working with NFL players, whether for a team or as an agent or financial advisor, are over.

Former Gamecocks sucker investors

Get ready for the next big SEC scandal. It involves South Carolina, but in this case it's the real SEC -- Securities & Exchange Commission -- that might have a keen interest in the questionable activities of current and former USC athletes and coaches.

Not again!!

Let's review:

In 1999 the real SEC (as in the Securities & Exchange Commission) shut down Cash 4 Titles, an auto title loan company. The SEC called Cash 4 Titles "one of the largest pyramid schemes in the nation’s history." More than 2,000 people invested $200 million with the company, including former former USC receiver Robert Brooks and former USC football coaches Brad Scott and Jim Carlen.

One of the ringleaders of the Cash 4 Titles scam was notorious sports agent and former USC assistant football coach Tank Black. In 2002 Black was convicted of stealing at least $12 million from several professional athlete clients.

Which brings us to the present. Apparently South Carolina is still fertile ground for money scams. According to a story in The State, ex-USC running back Rob DeBoer, founder of online music retailer BurnLounge, "now stands accused by the Federal Trade Commission of operating a pyramid scheme. DeBoer's partner is ex-USC quarterback and Gamecock football announcer Todd Ellis — helping turn Columbia into ground zero for BurnLounge."

According to The State, "Gamecocks receivers coach Steve Spurrier Jr. invested in BurnLounge a year ago after Oklahoma coach Stoops introduced him to the concept."

As a loyal USC assistant football coach Spurrier, Jr. isn't going to point fingers, right? After all, he's the ultimate coach's son. Actually Spurrier, Jr. in full-on-cover-his-ass mode, said:

"When Bob Stoops got me, he said, ‘I’ve spoken to a lawyer about this. I’ve spoken to my agent. I’ve spoken to some people to find out if this is a legitimate thing. And everything they told me, this is a legitimate (business). Put your name on it and go do it.’”

This appears to be a classic multi-level marketing scheme: a chance to easy make money, perceived credibility (even if none actually existed), and strong word of mouth.

UPDATE: According to Darren Rovell over at CNBC some pretty big sports figures are connected to BurnLounge, including "Shaquille O’Neal, who signed to represent the Web site in September. Danica Patrick, Dale Earnhardt Jr. and John Salley have been listed on the company’s materials."

Sean Jones: pro and con

By Marc Isenberg

Former NFL pro and current con artist Sean Jones irritates me. I wrote about Jones in my upcoming book, Money Players, talking about his shady work as a sports agent. Apparently his bad work wasn't yet finished.

Yesterday, Jones was indicted on bank fraud charges. It is alleged that he and four others "ran a scheme to pocket portions of more than $42 million in mortgage loan." Prosecutors contend that the men "defrauded three Houston banks by acquiring mortgage loans far in excess of the properties' value and then diverting the money for personal use."

Let's rewind: When Jones retired he became a sports agent. Chris Dishman, a former Jones’ teammate on the Oilers, became one of his clients. Dishman allowed Jones to manage his investments in addition to negotiating his playing contract. Dishman alleged that Jones engaged in unauthorized trading and in “churning” his account. The National Association of Securities Dealers awarded Dishman awarded $550,000 in damages. Dishman didn’t collect any money from the judgment. Said Dishman, "It got too expensive to keep trying to track [Jones] down. I didn’t have the money to keep fighting it. I didn’t win anything.” Of course, the Joneses, as namesakes go, have always been hard to keep up with.

In 2003 Jones was de-certified as an agent by the NFL Players Association related to his financial dealings with Dallas Cowboy Ebenezer Ekuban, a Jones client. Jones persuaded Ekuban to guarantee a $1-million real estate loan that ultimately defaulted; and to lend Jones $300,000, some of which was never repaid.

With his career options dwindling, Jones called the one (perhaps only) person willing to overlook all his flaws. So Al Davis hired Jones to work for the Raiders in 2004. On the team's website, Jones described himself this way: "I work in the Personnel department of the Raiders. Given my financial background, my experience as an agent, and having been in the broadcast booth, I bring a unique perspective to the team. I assess players to determine their weaknesses and also look at how they might be able to help us in the future." In what may be his best post-NFL career outcome, Jones was fired in 2007 without any criminal charges or allegations.

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>