Ex-basketball star Antoine Walker once played $15,000 hands of blackjack in the prestigious Las Vegas VIP rooms.
He reportedly financed an entourage of up to 70 people and built his mother a Chicago mansion with an indoor swimming pool. Then there were the suits, the jewelry, the cars and the $1,800 dinners.
The 6-foot-8 Walker loomed large and lived large during a 12-year NBA career that saw him earn $110 million.
Two years following his 2008 retirement, Walker filed for bankruptcy. More than anyone, his stunning tale of burning through tens of millions of dollars brought notoriety to athletes who go bust.
Well-paid athletes are similar to the high-net-worth clients who seek the professional help of advisors every day. Athletes, however, may lack the financial sophistication of typical high-net-worth clients. Their fall might be steeper and messier than the norm.
In this article, advisors share how they are creatively educating the wealthy athletes of the future, as well as the planning tactics they use to protect a wayward client as much as possible under the law.
Today, Walker is chasing redemption within financial services. He tells young athletes of his financial woes at educational forums sponsored by Morgan Stanley’s Sports and Entertainment Division.
Morgan Stanley Global Sports & Entertainment (GSE), headed by Drew Hawkins, is in its fourth year and has 91 directors across the U.S. The group advises “hundreds” of athletes and is rapidly growing, according to Hawkins. Ex-NFL linebacker Bart Scott, who made about $50 million in his career, joined Walker as a Morgan Stanley consultant.
“It’s huge,” Hawkins said of the former athletes fronting the program, “because they can say one thing and I can say the same thing, and me saying it does not carry the same level of credibility that it does coming from them.”
Seven thousand student-athletes sat through Morgan Stanley programs during the past two years, Hawkins said. The group has agreements in place with some professional teams as well as college football’s Senior Bowl in Mobile, Ala.
There is no sales component to the program.
“We wanted to have the ability to develop a robust education program that was fun, that was interactive and engaging, that was non-sales-oriented, with the idea that we could better educate individuals and start at earlier stages of their careers,” Hawkins explained.
‘I’m not going to be stupid’
NBA All-Star Kenny Anderson assured a New York Times reporter that “I know the value of my money” in a 1998 interview.
“I’m not going to be stupid enough to just spend it like crazy,” added Anderson, a New York City playground legend.
Anderson definitely wasn’t and isn’t stupid. After signing a $15 million rookie contract with the New Jersey Nets in 1991, he bonded with accountant Scott Bercu. Both had an affinity for finance and numbers.
The straight-talking Bercu, who works mainly with actors and entertainers, came up with a financial plan to which Anderson readily agreed.
His allowance was $10,000 a month.
“I told him he had a partner from day one,” Bercu recalled, “and he looked at me kind of funny … I told him that partner was Uncle Sam. You’re making $15 million, and that’s a lot of taxes to pay.”
As Anderson lost his financial discipline and dug a deeper and deeper hole, Bercu employed investing methods to safeguard as much money as he could.
For example, he put Anderson’s house into a trust well in advance of a three-year “look-back” period that accompanies bankruptcy. The law includes the look-back period to discourage people from hiding assets.
“We did that knowing this guy is going bankrupt,” Bercu said. “You didn’t have to be a rocket scientist to see that. He spent all the money. He started playing poorly near the end, so he wasn’t as attractive to the ball clubs.”
Marriage and children presented another thorny financial issue for which the accountant created trusts. Anderson was married five times and has eight children. Bercu parked a chunk of money in a trust, from which the interest generated enough cash to pay alimony and child support while preserving the principal for his client.
“We picked up some life insurance and annuities, and we still have them today,” Bercu added. “We got that early on when things were good. We had to get a lot of life insurance to backstop the trusts, to support the trusts that we set up for the mothers of the children.”
Setting family boundaries
The idea of setting boundaries is a key point in Professor Glenn Wong’s Sports Law and Business Program at the Sandra Day O’Connor College of Law at Arizona State University.
“One of the biggest ideological battles that athletes must fight in the financial management arena is the notion that they’re the savior for their family and community and therefore must take care of everyone,” said Wong, an expert in sports law.
In its first semester, the course is a hybrid of personal finance, business and law. Everyone benefits from more knowledge of personal finance, Wong said, but the program is especially geared to help ASU athletes who will become instant millionaires in pro sports.
The pitfalls begin on day one, he said.
“No athlete ever intends to squander or mismanage the money they receive from a professional playing contract,” he explained. “The attitude I have seen in many players is ‘$10 million? I’m never going to be able to spend all of that. I’m fine,’ or ‘Finances? My agent/advisor handles that. My job is to play my sport.’”
Advisors face unique challenges in financial planning for athletes, Wong said.
“Whereas some young people might be willing to invest in high-risk ventures in an attempt to grow their assets, athletes who have already earned significant income are best suited to be conservative first in their investment strategy before venturing into high-risk investments,” he noted.
In 35 years as an accountant and advisor, Don Christensen has seen “every kind of dumb investment” you can imagine. He heads up the Professional Athlete Division at Ronald Blue & Co., a Christian-based financial advising firm.
The firm advises more than 100 active and retired players and coaches with a more hands-on approach, Christensen said.
“We do a holistic thing for our ballplayers,” he said. “We run a family office, basically. Their paychecks are sent to us, and we pay their bills. … Most of our athletes are Christians. So I’m very active in helping them give their money away also.”
Ronald Blue employs “biblical principles” to financial planning, Christensen said. In particular, the “borrower is a slave to the lender” (Proverbs 22:7).
“When they come to me and say, ‘I want to lease a car,’ I say, ‘Well, let’s look at this. Why would they lease you that car?’” Christensen explained. “‘There’s a moneymaking thing in there. So if it’s a good deal to lease the car and you’re going to own the car for a while, then it’s a good deal to pay it off.’”
Like many advisors, Christensen starts a new client off with a comprehensive plan that includes life goals years down the road. For athletes who have a limited high-earnings life, he adds a provision to their budget: “We use a rule of thumb that for every $50,000 of lifestyle, you’ll need at least $1 million of liquid assets saved.”
Some athletes don’t want to adhere to the plan and tire of the financial discipline Ronald Blue requires.
“I say, ‘Listen, if you don’t want accountability, I’m probably not your guy,’” Christensen said. “Because when they run out of money, they’re going to want to blame everybody else. I don’t want to be there when they run out of money if I can help them. If they don’t want to listen, I say, ‘Hey, why do you want to pay me a fee if you’re never going to listen?’”
Fall of Shame
Standing barely 6-foot, Anderson, 46, is a little man who excelled in a big-man’s game. Growing up in Queens, Anderson attended the famed Archbishop Molloy High School.
College recruiters started showing up at the school when Anderson was in sixth grade, and he made the cover of a city tabloid when he was just 14. By the end of his high school career, he was a four-time Parade All-American, a feat not accomplished since Lew Alcindor (later known as Kareem Abdul-Jabbar), and the consensus top player in America.
After a two-year career at Georgia Tech University, Anderson was the second pick in the 1991 NBA draft, by the New Jersey Nets. Although somewhat disappointing as a pro (selected for one All-Star game), Anderson played 14 years and averaged 12.6 points and 6.1 assists per game.
He also made $63 million. Anderson filed for bankruptcy the year he played his final NBA game — 2005. Anderson was knowledgeable and interested in his finances, Bercu said, and he understood his earnings potential would be short-lived. But he lacked discipline.
“Kenny, unfortunately, is a sweetheart and was a sweetheart,” Bercu said. “He wouldn’t say no, and he couldn’t say no. I’d say no, but a lot of times, he’d overrule me. He was just a giving sort of guy, but he gave beyond what he could afford to.”
Anderson also liked cars — and jewelry. “I was his jeweler’s best friend,” Bercu said.
Anderson owned 10 cars at one point, according to media reports, from a Porsche to a customized Range Rover. He reportedly paid up to $75,000 annually on car insurance and maintenance. In his bankruptcy paperwork, Anderson listed $41,000 in monthly expenses and 69 creditors, the New York Daily News reported. While married to his second wife, Tamiyka, Anderson bought a 16,000-square-foot home in Atlanta for $2.1 million and rarely lived there, the paper reported.
Anderson actually showed remarkable financial restraint during the early years, Bercu said. He signed a five-year, $15 million deal with the Nets and initially pursued a sound financial plan with Bercu’s team.
After that, things fell apart with his second contract, which raised Anderson’s salary substantially.
“It got to the point where I would tell him that he didn’t have the money to buy a Bentley, and he’d say, ‘Yes I do. I have it in my stock accounts, so take it out of there,” Bercu recalled. “And he started to ignore the discipline that we tried to instill in him. Ultimately, he began to deplete those accounts.”
Hamill famously skated her way into America’s heart with her wholesome image and gold medal-winning performance in the 1976 Olympics.
Sporting the soon-to-be-popular bobbed hairstyle and a pixie smile, the 19-year-old Hamill won the ladies’ singles program at the Innsbruck games. In the process, Hamill is credited with creating a new skating move, the camel spin that turns into a sit spin, which became known as the “Hamill camel.”
Hamill also won the 1976 World Championships and then turned professional. Asked to join the Ice Capades by Donna Atwood, Hamill was a show headliner beginning in 1977. Then in her 50s, Atwood had been the show’s star for decades and had acquired a financial stake in the Ice Capades.
Hamill sought to follow in her footsteps. But times had changed, and the Ice Capades were no longer drawing the same crowds. After Ice Capades folded due to attendance declines, Hamill and her husband bought the financially strapped company’s assets in 1993.
She formed her own company, Dorothy Hamill International, of which she was president. Hamill revealed her motives in a Sports Illustrated interview: “It was breaking my heart to think there would be no more Ice Capades. It wasn’t just that I once skated for the company, it was also the thought of all those skaters out of work.”
While the Hamill-produced “Cinderella Frozen in Time” won praise and even aired on ABC, the decision proved unwise financially. Hamill declared bankruptcy in 1994. The Ice Capades was sold to Pat Robertson’s International Family Entertainment in 1995 and later shut down. Hamill, 60, would endure further hardships, battling depression and breast cancer. She would regroup and remarry, and she continues to skate and appear in television specials and has published two books about her life.
How did ex-NFL star quarterback Vince Young blow through a reported $60 million in just seven years? It turns out it was in some of the most foolish ways possible.
At least a gambler has a chance to win. And buying cars and other toys leaves the owner with an asset, albeit usually a heavily depreciated one.
Young did things like buying out 120 seats on a Southwest Airlines flight in 2007 because he wanted to fly alone. He spent $5,000 a week at The Cheesecake Factory in Nashville, and he reveled in ordering $600 shots of Louis VIII cognac for himself and teammates.
To say these are not good investments would be putting it mildly. But it was part of an overall pattern that drove Young from the NFL far too early.
In 2006, Young reached the pinnacle of his football life. He had led the Texas Longhorns to a national championship game victory, 41-38, in one of the most talked-about title games in college football history.
The Tennessee Titans made Young the third pick in the 2006 NFL draft and signed him to a five-year deal worth up to $58 million. Of that, $25.8 million was guaranteed. Young played five years in Tennessee before making one-year stops with the Philadelphia Eagles and the Buffalo Bills.
Young, 33, last played in 2012 and officially retired from the NFL two years later. According to spotrac.com, which tracks sports contracts, Young earned $35.4 million in NFL salary. He also signed endorsement deals worth $30 million with Reebok, Campbell’s Soup, Madden NFL, Vizio and the National Dairy Council, CBS News has reported.
The financial troubles came quickly. Young was one of many players who took out high-interest, high-dollar loans during the NFL owners’ lockout in 2011. While the league agreed on a new contract with players in August 2011 without any games missed, Young missed a payment on the $1.8 million loan.
Pro Player Funding invoked its right to call in the full loan, plus interest. A court ruled in favor of PPF.
Young took out the PPF loan so he could throw himself a $300,000 birthday party, said Ronald Peoples, president and CEO of Peoples Financial Service. Peoples recalled the loan in a deposition after Young claimed Peoples and Houston lawyer Major Adams II mismanaged $5.5 million in endorsement money.
Young filed for Chapter 11 bankruptcy in January 2014, a move he later petitioned the court to rescind after he reached settlements with PPF and Adams/Peoples.
In 2013, Young graduated from the University of Texas with a degree in youth and community studies from the College of Education. The university hired the former football star in 2014 as a development officer for program alumni relations and to raise money for programs that assist first-generation and low-income college students.
Hall of Fame
Hall of Famer Nolan Ryan, 70, reached the pinnacle of his post-baseball businessman life when he led a complex $590 million transaction to purchase the Texas Rangers in 2010.
At the time, the Rangers were in bankruptcy, and Ryan teamed with Chuck Greenberg, a Pittsburgh sports lawyer. Their winning bid included $385 million in cash and assumed liabilities, according to the New York Times. Ryan’s bid topped a rival group led by media tycoon Mark Cuban.
The equity stake in the team more than tripled after the team signed a new television deal with Fox Sports Southwest that pays the Rangers $80 million a season, more than four times the previous deal.
On the field, Ryan played 27 seasons in major league baseball and is the all-time leader in strikeouts, with 5,714. Ryan was elected to the Baseball Hall of Fame in 1999, his first year of eligibility, with 98.79 percent of the vote, the third-highest percentage in history.
Ryan’s business empire is modest by high-net-worth standards, but it is marked by steady, conservative investments one would expect from a laconic Texan. He built a portfolio of land, a bank, a restaurant and stakes in two minor league baseball teams.
His most notable business venture is Nolan Ryan’s All-Natural Beef in Huntsville, Texas. The beef production and distribution company sells millions of pounds of meat across the country. Ryan lives at his private Gonzales River Ranch in Gonzales, Texas, a 7,000-acre property that doubles as a family home and working cattle farm.
Like many athletes successful off the court, Michael Jordan had financial smarts and discipline early in his career. Fresh off leading the University of North Carolina to an NCAA national championship, the 21-year-old Jordan signed a five-year, $2.5 million deal with Nike.
It was the beginning of a lifelong partnership that would earn both parties immense wealth from the Air Jordan brand. As Jordan won NBA championships with the Chicago Bulls in the 1990s, his business acumen was just as successful off the court.
Nike’s Air Jordan business included shoes and other merchandise and was so profitable that the company decided to break it out as the Jordan Brand. That business brings in roughly $1 billion annually. In 2013 alone, Jordan’s affiliation with Nike netted him a reported $90 million.
While the Bulls won their first three NBA championships in the early 1990s, the team sold out all home and road games. Jordan the businessman recognized his value and demanded a $30 million annual salary, which he received.
Jordan began a twin campaign to capitalize on his popularity off the court. He became the marketer in chief, raking in many additional millions endorsing Coca-Cola, Chevrolet, Gatorade, McDonald’s, Ball Park Franks, Rayovac, Wheaties, Hanes and then-telecom giant MCI.
After retiring from the NBA in 2003, Jordan focused on building his various businesses, which included a Jordan Brand clothing line he co-operated with Nike, as well as Michael Jordan Motorsports, a professional motorcycle racing team.
In 2006, Jordan got back in the league when he purchased an ownership stake in the Charlotte Bobcats (renamed the Hornets in 2014) franchise. Four years later, Jordan bought out the majority shareholder to become the first former NBA player to become the majority owner of a franchise.
The investment proved to be a shrewd business move. Thanks to new television contracts, the average value of an NBA franchise had nearly tripled since 2010. The Hornets turned Jordan’s reported $275 million investment into a majority stake of $725 million.
In addition, endorsements never slowed for Jordan in his post-playing days. Court documents revealed he made $500 million in endorsement income from 2001 to 2012. His net worth is roughly $1.3 billion.
The younger half of the famous tennis champion Williams sisters, Serena’s approach to business has a decided millennial influence. In short, she leveraged her social media presence to build a personal brand empire worth an estimated $150 million.
As of early June, Serena had more than 19.3 million followers on Facebook, Twitter and Instagram. According to the MVPIndex, which ranks athletes based on social media reach, Serena was the 16th most valuable athlete in the United States in 2016. Her social media presence was worth more than $22 million in equivalent value for her brands.
On the court, Serena is considered by some to be the greatest women’s tennis player of all time. She has 23 major title wins, one more than the legendary Steffi Graf. Serena has won $81.7 million in prize money, more than double the earnings of her nearest competitor.
At 35, Serena is regarded as the top women’s player in the world in a sport that considers 30 the age of decline. Serena hasn’t played since January, as she is pregnant with her first child. Her inactivity allowed Angelique Kerber to surpass her as No. 1 in the WTA rankings.
Serena’s many endorsement deals include Nike, Wilson, Beats by Dre headphones, IBM and Delta Air Lines. But she is leaving her mark in the fashion world, where Serena designs and sells a personalized fashion line in an equity deal with the Home Shopping Network.
Serena joined sister Venus in a pair of high-profile sports business partnerships. The sisters own a small equity stake in the Miami Dolphins, becoming the first African-American women to own a piece of an NFL franchise. In 2016, they bought shares in the Ultimate Fighting Championship, a popular mixed martial arts empire run by Dana White.