Big contracts can lead to big money problems for athletes

2006-12-27T19:35:00.001-08:00

By Sarah Talalay

South Florida Sun-Sentinel

Posted on Wed, Dec. 27, 2006

FORT LAUDERDALE, Fla. - When David Bowens was selected by the Denver Broncos in the fifth round of the 1999 NFL Draft, he went from being a college student to earning a $185,000 salary and $90,000 signing bonus.

He picked out a big house in Denver, as well as a Jaguar, Range Rover and Ford Excursion.

"It's still a lot of money," Bowens, a defensive end who joined the Dolphins as a free agent in 2001, said of his first contract. "But the way I was spending it, you'd have thought I was a millionaire."

Bowens found out the hard way that what his agent, Harold Lewis, calls his "champagne taste and beer credit," didn't match his salary. By his first offseason and despite a degree in accounting, Bowens was borrowing money from Lewis. In 2003, he was injured off the field and the Dolphins chose not to pay him.

"My lights were cut off. My car was repossessed. I had bills piling up on me," said Bowens, 29. "I was poorer than I'd ever been, because even when I was a kid I always had lights, my mom always had the bills paid, we always had a car."

That's why Bowens, like many athletes these days, is getting the advice of a financial adviser this season.

"I have two weaknesses when I go shopping: Bed, Bath and Beyond and Best Buy," said Bowens, whose base salary this season is $750,000. "I buy a whole bedroom set; before you know it, I'm coming out with a $1,700 bill. Best Buy, I think I have every DVD ever made, every video game, every movie, any camera that comes out new, that's my weakness."

It's not just rapid spenders who need help. It can be any athlete with a large paycheck trying to plan for a future beyond a playing career.

With salaries across sports escalating dramatically during the past 15 years, financial advisers have become a crucial part of an athlete's management team, alongside agents, accountants and attorneys. It's no longer just agents who can be found jockeying to sign coveted draft picks. Financial experts are making pitches, too, often directly to the players on college campuses.

But as enticing as the world of financial advising of athletes sounds for the potential earnings and chance to associate with famous players, the field has drawbacks.

"A lot of people want to get into this business because they want to be around athletes," says Edmond Walters, founder and CEO of eMoney Advisor, a Pennsylvania-based online wealth management and financial advising system. "They want to be able to say, `I have the No. 1 draft pick or have two NBA All-Stars,' but it is not the same as doing planning for a business owner or a doctor."

Unlike high net worth individuals who typically build their wealth across many years, athletes have short careers in which to earn potentially millions of dollars.

"A business owner, they start work at 22 and can retire at 65. These

(athletes) are starting at 22 and their careers are over at 30, and they need to make it last 50 or 60 years," said Walters, whose eMoney program is helping dozens of athletes get organized financially. "It's one thing to sit down with someone who is 60 years old who has been investing for 40 years in a 401K and another thing to be sitting down with someone who is 22 years old making $1 million ... They go from graduating college or leaving college early to $10 (million) to $12 million in assets, homes, the best cars in the world, jets."

ADVICE TO LEND

Even with rookie financial seminars, athletes often are unprepared for an increasingly complex financial world that includes paying taxes across the various jurisdictions in which they play games; endorsement deals; family and friends looking for handouts; and dealmakers and investors trying to capitalize on their fame.

Getting athletes to understand their new wealth and what that entails isn't always easy.

"Rarely do you find someone is prepared to focus on finances," said Reggie Wilkes, senior vice president of the sports banking division of Mercantile Bank and Trust in Radnor, Pa. "The majority have been focused on developing their bodies and minds to become successful athletes. That's at the expense of other things."

Wilkes spent 10 years in the NFL as a linebacker with the Philadelphia Eagles and Atlanta Falcons. Although salaries have skyrocketed since Wilkes retired in 1987, he knows how dangerous the mixture of a large paycheck and locker room peer pressure can be to an athlete's bottom line.

"These guys are small corporations walking around," Wilkes said. "Their gross assets are sometimes bigger than small countries. You have to empower them so they can make a decision."

Wilkes tries to teach athletes that fancy cars depreciate the moment they are driven off the lot, that a Mazeroti isn't as important as a retirement plan.

"As fast as you can, you want to get them in the saving mode, before they get in the spend mode," said Wilkes, who has 25 athletes and coaches as clients. For the past six years, he has used the eMoney platform to organize his clients' finances. He says he likes that it allows the athlete and any of his advisers to access his accounts and investments.

Just as he learned that he should have had a diverse portfolio of investments during his playing days, Wilkes said having more than one person able to access an athlete's investments helps keep the process honest.

"My experience is when you have one person doing everything, that's a prescription for a potential horror story," Wilkes said.

SOME HAVE LOST BIG

All four major pro sports and their players associations provide rookies with financial seminars and workshops. The NFL, for example, includes a full day of sessions on credit management and budgeting. The NBA Players Association offers free financial auditing services to players, and this summer a dozen players attended a week-long program at Stanford University aimed at teaching them how to manage their finances and evaluate business and investment opportunities.

But only the NFL Players Association has a Financial Advisers Program, which certifies advisers and was designed to bring some order to a business that is largely unregulated, union officials said.

The individuals in the registry pay a $1,000 application fee and a $500 annual membership fee. They must have been in business at least three years, have a degree from an accredited university, have insurance and undergo civil, criminal and regulatory background checks.

Dana Hammonds, director of Financial Advisers Program, said the union's advisory board decided in 2000 to launch the program because "a number of players have been defrauded by financial advisers and just the sheer lack of financial literacy."

She said that while the union does not recommend advisers, "I think it gives the players a starting point."

According to the NFLPA, more than 78 players have been defrauded of more than $42 million by advisers since 1999. The most high profile case is that of former agent William "Tank" Black, who was convicted and sentenced to six years in prison for stealing about $14 million from his clients.

Numerous smaller examples never make the news.

Former Dolphins fullback Rob Konrad was the team's player representative when the Financial Advisers Program was created. He is now managing partner and principal at AllenKonrad Asset Management in Boca Raton, where about a third of the clients are football, baseball and hockey players and golfers.

"There's a tremendous need," Konrad said. "These guys make a lot of money in a few years. They're inexperienced. A lot of times, they become targets of unscrupulous people ... people wanting them to invest in emu farms and whatever else. Everyone wants them to purchase into things. Everyone knows who they are."

Earlier this year, six former and current NFL players sued the NFL and the NFLPA over the loss of $20 million they invested with Atlanta hedge fund manager Kirk Wright. The players claim the league and players association included Wright on the NFLPA's list of certified financial planners. Wright, who was arrested on charges of mail fraud by the FBI as he sat poolside at the Ritz-Carlton in Miami, has been accused of taking off with more than $100 million in investors' money.

Richard Berthelsen, general counsel for the players association, declined to discuss the case. "We don't believe there's any validity to the plaintiffs' claims," he said. "We expect the evidence will bear that out once it's before the court."

But Jim Evangelista, an Atlanta attorney representing the players, says the league and the players association didn't do a thorough enough background check that would have shown Wright and his company, IMA, were not to be trusted.

"Our clients, these are very impressive guys," Evangelista said of the players. "These are smart and savvy business men. If they can get taken advantage of, anybody can. The real failing for these guys is they relied on that program."

AVOIDING THE PITFALLS

When Dolphins cornerback Travis Daniels was at Louisiana State, financial advisers would approach him as he walked off the football field after games. The numerous business cards he was handed? Daniels threw them in the garbage.

"I hear a lot of stories with people getting their money taken from them by agents and financial advisers, and some of these guys, they do a lot of fast talking," said Daniels, 24, a fourth-round pick by the Dolphins in 2005. "When I was in college, they're talking about what they're going to manage. I've got nothing for you to manage yet, so I don't need this card."

Daniels said after his senior season at LSU, his offensive coordinator Jumbo Fisher, recommended a financial adviser out of Baton Rouge, La., and he signed up.

Daniels, who grew up in South Florida, kept his expenditures simple: a BMW 645 for himself and a Chrysler 300 for his mom. He later bought a house.

"Having a lot of money like that, at first it's like very exciting,"

said Daniels' whose base salary is $350,000. "Of course, you're going to have people come up to you and ask you for money, and at first you try to help out people as much as you can, but you've got to always remember in the back of your mind that after this goes, there's nothing else left. You've got to make sure you're protecting yourself for the rest of your future because you're only going to play football X amount of years, and after that you've got a whole life to live outside of that."

Retired Players Sound Off

Big contracts can lead to big money problems for athletes