Wow. I rarely say that in response to anything on TV these days (unless it was the replacement officials’ absurd call in the Packers-Seahawks game).
But after watching ESPN’s outstanding 30 for 30 Broke” there is not much else to say. I guess you could say it is sad, scary, disturbing or any of another dozen negative thoughts. I did not expect to be overwhelmed by it since this is a field with which I have a lot of direct experience.
I have met numerous athletes who have been defrauded by their agents, financial advisors, attorneys and friends. Many of them have been victims of ponzi schemes and other types of scams that were perpetrated on them due to their high profile, great wealth and relative lack of sophistication in dealing with these issues.
I know attorneys who have filed lawsuits to recover the funds from these ponzi schemes, but unfortunately, the scammers have typically spent and used most of the funds for their own personal benefit, acquiring expensive homes, cars and jewelry and also taking exotic vacations and trips. While it might make the victims feel a little bit better when they find out that the people who defrauded them have been disbarred, indicted, convicted and sentenced, the reality is that they rarely recover their funds.
When I discuss the cases with the attorneys who have filed the lawsuits on behalf of these athlete victims, they almost universally say that the athletes were defrauded by their own advisors, and that the athletes were too ashamed to come forward sooner to get authorities involved or get attorneys involved early in the process. The athletes (and their advisors) typically did too little (if any) due diligence on the transactions and on the people who are promoting the transaction.
So while we wonder why this occurs, the reality comes down to one point. TRUST. Athletes really do not know who to trust. They rely on the information that is put in front of them by their advisors and their friends. But who are the ones most often responsible for getting athletes into these ponzi schemes or other scams? These same advisors.
The trick here is for the athlete to develop and implement a large team of independent advisors that can work together to help the athlete conduct due diligence. This is where the stories from Broke” were the most disturbing.
One thing that Broke” made clear is that a lot of the problems arise from the athlete’s feeling of invincibility. We have read that hundreds and thousands of times relating to physical issues whether it is physical altercations, domestic violence, bar fights, drunk driving or others.
Yet, we expect these same young athletes to exercise better business” judgment, even though none of them have actual business experience (and few of their families have that experience either). When you think of who most people rely on when they need help, it is the people closest to them. Their family and their trusted advisors. The difference with professional athletes is that they do not grow” into these roles over time. They do not advance in their careers before their earn big dollars. They do not develop relationships with advisors while the stakes are small and have that relationship mature over time. Instead, they are left extremely vulnerable to their agents, their attorneys, their family, their friends and their financial advisors.
One disturbing element in Broke” was how often these players described just handing out money to other people. The sums of money are so large that they lose ALL perspective to the value of money. Yet, if you asked them how much money they could earn in a year in any job other than professional sports, that perspective might help them understand their spending habits.
But would they listen? If you go back and watch broke and listen to the stories from Andre Rison, you will see a tremendous attitude of I do what I want.” And that comes at an extreme price. It means that the athletes do not even want to listen to the people who really do want to help them. Everything in their life is about competition. About bigger and better. About having the best. So it is easy to see why that also applies to their investments.
You want me to take conservative investments.” Why should I?” My teammates just invested into a deal that is getting him [10/20/30%].”
And that is how it happens. The perpetrators of the scams and the ponzi schemes only need one access point. They find one athlete that they cater to and cultivate a relationship with, and then they use that person to gain athlete to pro teammates, college teammates, high school teammates, etc. You can see why the ponzi scheme format is so powerful in this environment. It connects all the victims and they all feel insecure about the investment loses and they do not know who to turn to. Many of the athletes write off their loses without even pursuing legal remedies. And by doing so, they do not bring enough attention to the problem. Lawsuits against these dishonest advisors would facilitate getting federal and state authorities involved. Given the limited resources of the FBI, the postal inspectors and the US attorneys offices, they are unable to investigate and pursue all of the claims that are out there. But with some help and with high profile victims, the lawsuits could help institute the proper administrative and disciplinary proceedings against those operating the ponzi schemes and other scams. By having cooperative witnesses, supporting documentation and good attorneys leading the way, the opportunity to recover funds before they are all squandered would increase dramatically. Because ultimately, the players really want a few things: 1) to get their money back; 2) to get their vengeance by having the scammers disbarred, indicted, convicted and sentenced; and 3) to not have this situation take over their life.
Hopefully for most athletes, these losses to fraudulent schemes do not constitute the bulk of their wealth. But many lose money in other ways. You saw the descriptions in Broke” talking about how many of them lost money in bad” deals as opposed to fraudulent deals. At the end of the day, the financial impact is the same even if the emotional toll is not the same.
But perhaps the most difficult losses” to overcome are not those from ponzi schemes, fraudulent investments or bad investments. It is the result of bad decisions by the athletes. The amount of money spent on cars, homes, jewelry, gambling, strip clubs, alcohol and other luxuries is way beyond proportion to their financial status. Athletes do not have the same length of earning career as the average business professional. In football, the average career is approximately 3 years. That means that most of the athletes never even make it that far.
In our next feature, we will look further at how the athletes can overcome these negative habits and what advice they should be given early in their career by the agents and families in order to protect them from slipping into the Broke” mentality.
We honestly hope that Broke” becomes required viewing for the all athletes who have professional sports aspirations. Because we know that many athletes will NOT listen. But we also know that the more often they hear the message, and the more often it is from neutral” sources, the more likely they are to give it some credence and give much stronger consideration to the steps that are necessary to prevent the losses to ponzi schemes and other fraudulent scams.