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SBJ/February 18 - 24, 2002/Opinion
Easy-money promises, hard lessons
Published February 18, 2002
The rule in the news business is that if you have a good story, you write it every once in a while. The magazine U.S. News & World Report proved that again with another account of how various con artists had swindled various National Football League players out of many millions of dollars.
While journalistically excellent by all appearances, the piece was only the latest in the ongoing saga of "Jockscam," a hardy news perennial if ever there was one. Probably for reasons of neatness, it was limited to current and recent NFLers, but I'm sure it could have been expanded to include others. The list of sports stars who have been parted from their money is long, and no doubt growing even as you read this.
One needn't be an athlete to be victimized by financial chicanery, but the frequency with which it occurs to them indicates that it helps. At a time when seven-figure annual salaries are commonplace in sports, young performers often come into big money suddenly and with scant preparation for handling it. Their ignorance and hubris make them easy targets for financial sharks. The fact that some of those predators are the athlete's friends or relatives makes their propositions especially difficult to resist.
The sports leagues and player unions recognize this, and, alone or jointly, try to provide their enlistees with at least some money-management education. The NFL, Major League Baseball and the National Basketball Association all include financial-planning guidance in their annual rookie-indoctrination courses, and the NBA extends that service to veterans. Trouble is, some jocks either sleep through the courses or come out of them believing that the laws of risk and reward don't apply to them, the way the laws of gravity don't seem to.
"When you're making $3 million or $4 million a year in your early 20s, it's easy to get a warped impression of what to expect in the way of investment returns," says the former New York Knick Sonny Hertzberg, a managing director of the brokerage firm Bear Stearns & Co., who has helped lead investment seminars for NBA players.
Indeed, just about everyone who has worked with jocks has a financial horror story to impart. Bill Cayton, the boxing manager, tells of setting up a lifetime annuity for one of his charges with a piece of a large purse, only to receive a panicky call a few months later from an official of the issuing bank saying that the fighter and his father were threatening him with mayhem if he didn't turn over the entire sum to them that day. (He did.)
Alan Nero, the baseball agent, says that the morning after a client had signed for a $10 million bonus, the young man phoned to tell him he wanted to immediately write $1 million checks to each of four family members. Nero explained that he couldn't do that because taxes would take a big chunk of the bonus and he'd require most of the rest for present and future needs, and, anyway, it was possible to say "thanks" less extravagantly. He notes that the player held off for a time, but to his eventually sorrow later turned over the $4 million and more to dear ones in gifts and dubious loans.
The above examples show that advice to athletes often goes unheeded, but, based on personal experience and conversations with reputable player agents and investment types, I'm willing to take a crack at it. I'll keep it simple, suitable for posting on locker-room walls:
Regard any money given to friends or relatives as irretrievably gone, regardless of what they say when they get it.
Pay your own bills and write your own checks — all of them.
Remember that "can't miss" money-making schemes usually can. Miss, that is.
Frederick C. Klein is a columnist for SportsBusiness Journal.