How (and Why) Athletes Go Broke

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March 23, 2009

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How (and Why) Athletes Go Broke

Recession or no recession, many NFL, NBA and Major League Baseball players have a penchant for losing most or all of their money. It doesn't matter how much they make. And the ways they blow it are strikingly similar

What the hellhappened here? Seven floors above the iced-over Dallas North Tollway, Raghib(Rocket) Ismail is revisiting the question. It's December, and Ismail issitting in the boardroom of Chapwood Investments, a wealth management firm, hiswhite Notre Dame snow hat pulled down to his furrowed brow.

This is an article from the March 23, 2009 issue Original Layout

In 1991 Ismail, ajunior wide receiver for the Fighting Irish, was the presumptive No. 1pick in the NFL draft. Instead he signed with the CFL's Toronto Argonauts for aguaranteed $18.2 million over four years, then the richest contract in footballhistory. But today, at a private session on financial planning attended byeight other current or onetime pro athletes, Ismail, 39, indulges in a luxuryhe didn't enjoy as a young VIP: hindsight.

"I once had ameeting with J.P. Morgan," he tells the group, "and it was literallylike listening to Charlie Brown's teacher." The men surrounding Ismail atthe conference table include Angels outfielder Torii Hunter, Cowboys wideoutIsaiah Stanback and six former pros: NFL cornerback Ray Mickens and fullbackJerald Sowell (both of whom retired in 2006), major league outfielder BenGrieve and NBA guard Erick Strickland ('05), and linebackers Winfred Tubbs('00) and Eugene Lockhart ('92). Ismail ('02) cackles ruefully. "I was sobusy focusing on football that the first year was suddenly over," he says."I'd started with this $4 million base salary, but then I looked at mybank statement, and I just went, What the. . . ?"

Before Ismail canelaborate on his bewilderment--over the complexity of that statement and theamount of money he had already lost--eight heads are nodding, eight facessmiling in sympathy. Hunter chimes in, "Once you get into the financialstuff, and it sounds like Japanese, guys are just like, 'I ain't going back.'They're lost."

At the front ofthe room Ed Butowsky also does a bobblehead nod. Stout, besuited andsilver-haired, Butowsky, 47, is a managing partner at Chapwood and a formersenior vice president at Morgan Stanley. His bailiwick as a money manager haslong been billionaires, hundred-millionaires and CEOs--a club that, theSteinbrenners' pen be damned, still doesn't include many athletes. But oneafternoon six years ago Butowsky was chatting with Tubbs, his neighbor in theDallas suburb of Plano, and the onetime Pro Bowl player casually described howmoney spills through athletes' fingers. Tubbs explained how and when they beginearning income (often in school, through illicit payments from agents); howtheir pro salaries are invested (blindly); and when the millions evaporate(before they know it).

"The detailswere mind-boggling," recalls Butowsky, who would later hire Tubbs to workin business development at Chapwood. "I couldn't believe what I washearing."

What happens tomany athletes and their money is indeed hard to believe. In this month aloneSaints alltime leading rusher Deuce McAllister filed for bankruptcy protectionfor the Jackson, Miss., car dealership he owns; Panthers receiver MuhsinMuhammad put his mansion in Charlotte up for sale on eBay a month after newsbroke that his entertainment company was being sued by Wachovia Bank foroverdue credit-card payments; and penniless former NFL running back TravisHenry was jailed for nonpayment of child support.

In a less publicway, other athletes from the nation's three biggest and most profitableleagues--the NBA, NFL and Major League Baseball--are suffering from a financialpandemic. Although salaries have risen steadily during the last three decades,reports from a host of sources (athletes, players' associations, agents andfinancial advisers) indicate that:

• By the timethey have been retired for two years, 78% of former NFL players have gonebankrupt or are under financial stress because of joblessness or divorce.

• Within fiveyears of retirement, an estimated 60% of former NBA players are broke.

• Numerousretired MLB players have been similarly ruined, and the current economic crisisis taking a toll on some active players as well. Last month 10 current andformer big leaguers--including outfielders Johnny Damon of the Yankees andJacoby Ellsbury of the Red Sox and pitchers Mike Pelfrey of the Mets and ScottEyre of the Phillies--discovered that at least some of their money is tied upin the $8¬†billion fraud allegedly perpetrated by Texas financier RobertAllen Stanford. Pelfrey told the New York Post that 99% of his fortune isfrozen; Eyre admitted last month that he was broke, and the team quickly agreedto advance a portion of his $2 million salary.

The Wall Streetmeltdown is only the latest threat to athletes' financial health. "Athleteshave a different set of challenges from, say, entertainers," says moneymanager Michael Seymour, the founder of Philadelphia-based UNI Private WealthStrategies. "There's a far shorter peak earnings period [in sports] than inany other profession, and in many cases they lack the time and desire tounderstand and monitor their investments."

In 2005 Butowskybegan inviting sports figures--some well off, some not--to what he calls hisfinancial "boot camps," elementary sessions that go from defining abond to explaining a diversified portfolio as the equivalent of a balancedmeal. There is no charge for the sessions or pressure to sign up with Chapwood,according to Butowsky, who calls this service his "mitzvah to sports."The financial adviser, who helps counsel Thunder forward Kevin Durant pro bono,hopes merely that the sessions will reflect well upon Chapwood. Such goodwillis easy to earn: The bar for radically improving the financial habits of proathletes, Butowsky acknowledges, is low enough for a toddler to trip over.

"Oh, I'veseen it all," says veteran agent Bill Duffy, whose clients include Sunsguard Steve Nash and Nuggets forward Carmelo Anthony. "A pro athlete'smoney is supposed to outlive his career. Most players never get that."

Why? Where dothey go wrong?


The Lure of TheTangible

Over the yearsRocket Ismail's portfolio has contained a passel of dubious inventions andrisky investments. After mentioning that he once poured money into a religiousmovie, the gregarious father of four goes uncharacteristically mum about thedetails. "I don't really want to go over that agony," he says, smilingthinly.

Ismail played twoyears in Canada and 10 in the NFL, estimating that he earned $18 million to $20million in salary alone. He made an abortive NFL comeback attempt in 2006,never getting beyond workouts with the Redskins, and then navigated thereality-TV circuit (Pros vs. Joes, Ty Murray's Celebrity Bull RidingChallenge). Today he does a Cowboys postgame show on Fox Sports Net. Ascautionary tales go, Ismail's could've been worse: He has his Notre Damedegree, and he never filed for bankruptcy, had legal trouble or got divorced.Yet he lost several million dollars, he admits, through "totalignorance."

It began in thewinter of 1991 when he sank $300,000 into the Rock N' Roll Café, a themerestaurant in New England designed to ride the wave of the Hard Rock Cafe andPlanet Hollywood franchises. One of his advisers pitched the idea as"fail-proof, with no downsides," Ismail recalls. He never recouped hismoney and has no idea what became of the restaurant.

Lesson learned?If only. After that Ismail squandered a fortune funding not only thatinspirational movie but also the music label COZ Records ("The guy was areal good talker," says Rocket); a cosmetics procedure whereby oxygen wasabsorbed into the skin ("We were not prepared for the sharks in the beautyindustry"); a plan to create nationwide phone-card dispensers ("When Iwas in college, phone cards were a big deal"); and, recently, three shopsdubbed It's in the Name, where tourists could buy framed calligraphy of namesor proverbs of their choice ("The main store opened up in New Orleans, butdoggone Hurricane Katrina came two months later"). The shops no longerexist.

You might sayIsmail had a run of terrible luck, but the odds were never close to being inhis favor. Industry experts estimate that only one in 30 of the highest-caliberprivate investment deals works out as advertised. "Chronic overallocationinto real estate and bad private equity is the Number 1 problem [forathletes] in terms of a financial meltdown," Butowsky says. "And I'venever seen more people come to me about raising money for those kinds of dealsthan athletes."

For therisk-averse investor, an adviser such as Butowsky would suggest allocating 5%to private equity, 7%-12% to real estate, 50%-65% to a mix of public securities(stocks, mutual funds and the like) and the rest to alternatives such as goldand hedge funds. Yet with athletes, who are often uninterested in eitherconservative spending or the stock market, those percentages are frequentlyflipped. Securities are invisible, after all, and if you don't study them,they're unintelligible. Not to mention boring. Inventions, nightclubs, cardealerships and T-shirt companies have an advantage: the thrill oftangibility.

Many players,consequently, are financial prey. "Disreputable people see athletes' moneyas very easy to get to," says Steven Baker, an agent who represents 20 NFLplayers. In May 2007 former quarterbacks Drew Bledsoe and Rick Mirer and fiveother NFL retirees invested at least $100,000 apiece in a now-defunct start-upcalled Pay By Touch--which touted "biometric authentication" technologythat would help replace credit cards with fingerprints--even as the company waswracked by lawsuits and internal dissent. (The players later sued thefinancial-services firm UBS, which had encouraged its clients to invest in PayBy Touch, for allegedly withholding information about the company founder'scriminal history and drug use.)

About five yearsago, Hunter says, he invested almost $70,000 in an invention: an inflatableraft that would sit under furniture. The pitch was that when high-rainfallareas were flooded, consumers could pump up the device, allowing a sofa tofloat and remain dry. "The guy I invested with came back and wanted me toput in more, about $500,000," Hunter says. "Then I met [Butowsky], whojust said, Hell no! I wound up never seeing that guy--or any of mymoney--again."

Hunter, who inNovember 2007 signed a five-year, $90 million contract, has been able to absorbthe loss. But innumerable other athletes have not been so lucky. Former (andperhaps future) NFL quarterback Michael Vick filed for Chapter 11 bankruptcylast July and recently put his mansion in suburban Atlanta on the market.That's partly because he is unable to repay about $6 million in bank loansthat he put toward a car-rental franchise in Indiana, real estate in Canada anda wine shop in Georgia. "It's always so predictable," Butowsky says."Everyone wants to be the next Magic Johnson."

But Johnson isthe rare, luminous exception of tangibility gone right. In 1994 he started achain of inner-city movie theaters and diligently built a business empire.Today Magic Johnson Enterprises includes partnerships with Starbucks, 24 HourFitness, Aetna and Best Buy, and its capital management division has investedover a billion dollars in urban communities.

The rule,unfortunately, is a mogul manqué like McAllister. According to a civil suitfiled on Feb.¬†20 by Nissan, the running back owes the car company morethan $6.6¬†million plus almost $300,000 in interest on his car dealership.Or Muhammad, whose Cleveland music company, Baylo Entertainment, is being suedby Wachovia for allegedly failing to pay back $24,603.24 on a Visa BusinessRewards credit card. Muhammad's 8,200-square-foot lakeside estate, which boastsa custom spa and the "largest residential aquarium in the Southeast,"can now be had on eBay for $1.95¬†million, $800,000 less than he initiallyasked for.

"Withoutquestion, this recession is increasing the velocity of what's taking place withathletes," Butowsky says. "They're suffering tremendously." RetiredNBA forward Vin Baker's seafood restaurant in Old Saybrook, Conn., wasforeclosed on in February 2008 due to nearly $900,000 in unpaid loans. (It hassince reopened with help from an anonymous investor.) And former major leagueinfielder Junior Spivey's portfolio of real estate has lately assumed the formof a sinkhole. "I'm taking a huge hit," says Spivey, who has beenbuying homes to sell and rent since 2001. (He won't say how many properties heowns.) "It's very tough, especially for someone like me who's notplaying."

Then there arethe unnamed athletes and team personnel who pawned 400 title rings to theonline reseller over the past three months, a spike ofabout 33% from the same period last year. (A 2008 Giants Super Bowl ring wasamong them.) "It's mostly younger players who've been selling," saysTim Robins, the site's owner. "It's the economy. Selling these items isalways embarrassing, a last resort."



Salary aside, theclosest analogue to a pro athlete is not a white-collar executive. It's alottery winner--who's often in his early twenties. "With athletes, there'san extraordinary metamorphosis of financial challenge," says agent LeighSteinberg, who has represented the NFL's No. 1 pick a record eight times."Coming off college scholarships, they probably haven't even learned thebasics of budgeting or keeping receipts." Which then triggers two fatalmistakes: hiring the wrong people as advisers, and trusting them far toomuch.

"That's thekiller," Magic Johnson says. Johnson started out by admitting he knewnothing about business and seeking counsel from the power brokers who satcourtside at the old L.A. Forum, men such as Hollywood agent Michael Ovitzand Sony Pictures CEO Peter Guber. Now, Johnson says, he gets calls from starplayers "every day"--Alex Rodriguez, Shaquille O'Neal, Dwyane Wade,Plaxico Burress--and cuts them short if they propose relying on friends andfamily. "It won't even be a conversation," says Johnson. "They hirethese people not because of expertise but because they're friends. Well,they'll fail."

Says Hunter,"They'll say, 'I got this guy, a cousin who's an accountant.' But he'susually an accountant in the 'hood. You hire him, you're doing him afavor."

Stricklandrealized that all too late. In 2001, when a "friend of a close friend"of the nine-year NBA vet proposed a real-estate deal in Georgia, Stricklandturned to his business manager: his dad, Matthew, a retired lieutenant colonelin the Air Force. The paperwork on the plot of land, which was on sale for$1.8 million but supposedly had been appraised at as much as$3 million, appeared legitimate, and Strickland bought it. "I trustedmy father to help look it over for me because I was hooping and didn't havetime," Erick says. "He checked it out. But he didn't go that extralength."

The land wasn'tworth anything close to what Strickland was told. "I had to take thathit," he says. "I wish my dad hadn't been put in that position. He justdidn't have the knowledge." As for his close friend? Strickland says theman secretly got a cut of the deal, and the conflict caused a permanent"falling out" between them.

Relatives are notthe only ones foolishly trusted with athletes' money. One up-and-coming guardin the NBA allows his entire fortune to be managed by his former AAU coach, whohas the player's power of attorney. In a meeting with Butowsky in December, theguard's dad admitted that he has no idea who the son's accountant is and saidhe wanted a financial "intervention."

The NBA player'signorance of his own affairs is not unique. According to Bob Young, themanaging director of Apex Wealth Management in Doylestown, Pa., "You'll sayto a player, 'How are you doing?' A lot of the time they'll respond, 'I have noidea.' All the bills are paid by someone else, and none of the statements go to[the athlete]."

In fact,according to the NFL Players Association, at least 78 players lost a total ofmore than $42 million between 1999 and 2002 because they trusted money tofinancial advisers with questionable backgrounds. In this rogues' galleryRobert Allen Stanford looks almost presidential--and shows that even whenathletes trust financiers of high repute, things can go disastrously wrong. Thedubious advisers included Luigi DiFonzo--a former felon who claimed he was anItalian count and defrauded players such as Hall of Fame running back EricDickerson before committing suicide in August 2000--and disgraced agent William(Tank) Black, who built a pyramid scheme that took a total of about$15 million from at least a dozen players, including Patriots running backFred Taylor.

Just last May,Atlanta hedge fund manager Kirk Wright was convicted on 47 counts of fraud andmoney laundering in a scheme involving more than $150 million. His clientlist included at least eight NFL players; former safeties Blaine Bishop (wholost $4 million, according to court documents) and Steve Atwater (who lost$2.7 million) had recruited former Broncos stars Terrell Davis and RodSmith to Wright's firm, unwittingly making them victims too. Soon after hisconviction Wright committed suicide in prison.

In October,Atwater himself received an investment pitch from a fellow athlete. Formerquarterback Jeff Blake sent 102 other retired players an e-mail on behalf ofTriton Financial, an investment firm in Austin, whose "athleteservices" department Blake directs along with three other ex-QBs: ChrisWeinke and the brothers Detmer, Ty and Koy. In the e-mail, a copy of which wasobtained by SI, Blake claimed without caveat that "Triton is averaging 32%annualized return on its investments within the past five years."

Triton is anofficial partner of the Heisman Trophy Trust and the sponsor of the TritonFinancial Classic, a PGA senior tour event. Its CEO, Kurt Barton, told SI thatthe firm manages "about $300 million" in assets, and he claimed thatTriton registered with the SEC (as is required by law of investment adviserfirms with at least $25 million in assets under management) "roughlysix months ago, around October." But the Texas State Securities Board andTriton chief compliance officer David Tuckfield said that the company has not,in fact, done so. "Right now, we're only registered with Texas,"Tuckfield said. "But we're passing the [assets] threshold, and we'reconfident that we'll need to file this year."

Says Paul Cohen,a real estate investor who owns properties in Austin, "In this economy,especially in real estate, anything you bought in the last two years is deeplyunderwater. I guess what [Triton is] saying could happen. But then again, Icould target the moon with my rifle and shoot, but I ain't gonna hit it."(Barton did not dispute the e-mail's 32% figure, but he and Tuckfield admittedto SI that Blake should not have sent it out. Barton also conceded that Tritonwas "not supposed to publish specific numbers about past performance"without significant disclaimers, including a disclosure of what the company hadinvested in.)

On a much smallerscale, Torii Hunter and Astros pitcher LaTroy Hawkins recall the story of aformer major leaguer from the Dominican Republic whose adviser took care of allhis financial matters. One day the player's mail came to the clubhouse andHunter playfully asked to see it. "It turns out he was paying this guy$5,000 a month on insurance for two cars in the Dominican Republic," Huntersays. "I got three cars, and I only pay $250 a month. He'd been with andtrusted this guy [for almost 18 years]!"

Advisers warnthat such overcharging is the most common form of financial bloodletting forathletes. "It's basically large-scale shoplifting," Butowsky says."Athletes don't know industry standards, so virtually every one of them isbeing robbed." Brokers will encourage them to buy bonds with longermaturities because the commissions on them are often larger. Or they'llovercharge on portfolios--2% or 3% instead of the customary 1%.

A few years ago,Butowsky recalls, he met with a former high-round NFL pick whose adviser, alsoa former player, said that he couldn't reveal how much he was charging tomanage the athlete's tax-exempt municipal bonds "because of the PatriotAct." According to Butowsky, he was taking $146,000 every year.



In 1996, whenPanthers owner Jerry Richardson--a former NFL flanker turnedbusinessman--addressed his players, one of them asked, What's the mostdangerous thing that could happen to us financially? "Without blinking aneye," Ismail recalls, "Mr. Richardson said, 'Divorce.' "

Players todaywould not disagree. In a survey reported by the financial-services firmRothstein Kass in December, more than 80% of the 178 athletes polled--each witha minimum net worth of $5 million and two thirds under the age of 30--saidthey were "concerned about being involved in unjust lawsuits and/or divorceproceedings." By common estimates among athletes and agents, the divorcerate for pro athletes ranges from 60% to 80%.

In divorceproceedings, of course, husbands routinely lose half of their net worth. Butfor athletes there is an aggravating factor: when the divorce happens. Mostsplits occur in retirement, when the player's peak earnings period is long overand making a comparable living is virtually impossible. Such timing is noaccident. "There's this huge lifestyle change," says former NBA centerMark West, a licensed stockbroker who is now the Suns' vice president of playerprograms. "You and your wife are suddenly always at home, bugging eachother. Before, you'd always say, 'I gotta go to practice.' Now you don't haveto practice. You have to finish conversations."

Which ofteninvolve an incendiary subject: infidelity. "A friend of mine is a footballplayer, and I asked him why he cheated on his wife," says Anita Hawkins,LaTroy's wife of 11 years. "He just said, 'I love her dearly, but I feellike I got married too early and didn't get to do what I wanted to do when Iwas young.' "

Given all thepressures on a pro athlete's marriage, one safety valve might be the prenuptialagreement--something "very strongly" recommended by agent David Falk,who surged to prominence representing Michael Jordan (who did not have one)."The percentage of prenups amongst athletes is appreciably lower comparedwith nonathletes at the same economic level," says celebrity divorce lawyerRaoul Felder, who has represented the ex-wives of Patrick Ewing, Jason Kidd andMike Tyson.

In 1994, when NBAcenter Dikembe Mutombo was engaged to Michelle Roberts, a med student, Robertsrefused to sign a premarital contract the day before the wedding. Five hundredguests--including a large party from Mutombo's native Democratic Republic ofCongo--had begun flying in to Washington. "[Roberts] never signed,"Falk says, "and Mutombo never married the girl." Calling off thenuptials reportedly cost him $250,000.

It's nocoincidence that the woman a pro athlete often chooses to marry--and often at ayoung age--is his hometown sweetheart. For that reason he can't envision aruinous divorce. "That was how you could tell if she really liked you, ifshe knew you before you made it," says West. But when a player does makeit? "The question [for the athlete] becomes, When you get off the farm andsee Paris, so to speak, can you really go back to the farm?"

Children almostalways complicate the issue. How to limit paternity obligations is a challengefor pro athletes. Former NBA forward Shawn Kemp (who has at least sevenchildren by six women) and, more recently, Travis Henry (nine by nine) haveseen their fortunes sapped by monthly child-support payments in the tens ofthousands of dollars. Last month Henry, who reportedly earned almost$11 million over seven years in the NFL, tried and failed to temporarilyreduce one of his nine child-support payments by arguing that he could nolonger afford the $3,000 every month. Two weeks later he was jailed for falling$16,600 behind in payments for his child in Frostproof, Fla.

An aversion tofamily planning goes hand in hand with neglect of other forms of financialforesight, which can affect what happens to athletes' fortunes even after theydie. Hall of Fame linebacker Derrick Thomas, who died at 33 following a January2000 car crash, had ignored the urging of his financial adviser to make a will,and his entire estate was left for the court to divide, touching off a legalbattle among the five mothers of his seven children. (Of the estimated$30 million Thomas had earned in the NFL, he had only $1.16 millionin valued assets at the time of his death.)

"Derrickdidn't care about meeting with his planner, and we tried to set him up to do it10 times," says Steinberg, who was his agent. "The sad truth is thatthere was a certain group of athletes who actually believed that if they eversat down to write their wills, they were going to die."



The thorniestquestion for a pro athlete, however, isn't how he handles himself and thoseclosest to him. It's "how you handle the new people suddenly emerging inyour life," says Richard Lapchick, director of the University of CentralFlorida's DeVos Sport Business Management program. "They'll be expectinghelp or money or jobs. Often players don't know how to say no."

It's all part ofthat ossified notion of how a pro athlete should live and provide for thosearound him. If he isn't consuming conspicuously, then he hasn't made it."When I was a young buck," says Hawkins, "I was trying to spend allmy money. Now I try to preach to young guys in the clubhouse who are like that.I've got all this stuff from 10 years ago--jewelry, rims--that I think, Why thef--- did I even buy this?"

Two years agoRockets forward Ron Artest had a similar change of heart. He dismissed sixfriends who were involved with his record label and doing odd jobs for himwhile they lived in a house he was leasing for $30,000 a year. This entourage's"level of helpfulness," said Artest's publicist, Heidi Buech, "was50 percent." (The house they occupied had also been broken into whileArtest was abroad.)

As soon as anathlete goes pro, people in search of handouts tend to stretch the definitionsof family and friends. When Hunter went to his hometown of Pine Bluff, Ark.,for his grandmother's funeral last August, he found Old St. James BaptistChurch packed, the line of cars outside stretching for blocks. "But mygrandma didn't know anybody," Hunter says. "She just lived athome." When he stepped outside the church, people "came running, alldressed up, chasing after me," Hunter says. "They were throwing CDs,projects, letters. . . . They were yelling, My sister's brother went to schoolwith you!"

A different butequally potent pressure operates in the workplace--the clubhouse, the lockerroom and the team plane. "For rookies, it's like an unspokeninitiation," says Strickland. "You're trying to get in good with theveterans, so you go beyond your means. You drive the nice car, splurge on ahouse."

The veteransdon't mind giving explicit instructions. "I got ripped my first three yearsin the NFL, every day," says Tubbs. "I got on planes with a cassetteplayer, and [a teammate] would tell me, 'They make CD players. You're in theNFL now.' "

Perhaps the upperlimit on spending was set by the famously profligate Shaquille O'Neal,who--according to a document obtained by the Palm Beach Post during O'Neal'scanceled divorce filing in January 2008--spends a total of $875,015 each month,including $26,500 for child care, $24,300 for gas and $17,220 for clothing. ButO'Neal, who also has been known to fund charities anonymously and cover medicalbills for complete strangers, has the wherewithal to remain solvent.

Imitators havebeen less fortunate. When former NBA guard Kenny Anderson filed for bankruptcyin October 2005, he detailed how the estimated $60 million he earned inthe league had dwindled to nothing. He bought eight cars and rang up monthlyexpenses of $41,000, including outlays for child support, his mother's mortgageand his own five-bedroom house in Beverly Hills, Calif.--not to mention $10,000in what he dubbed "hanging-out money." He also regularly handed out$3,000 to $5,000 to friends and relatives. (Along with Ismail, he enlisted asboth a Slamball coach and a Pros vs. Joes participant last year.) Former bigleague slugger Jack Clark filed for bankruptcy in July 1992 while stillplaying, listing debts of $6.7 million and ownership of 18 cars--17 ofwhich still had outstanding payments.

Financialadvisers have come to call it "the problem of the $20,000 Rolex." If a22-year-old spends $20,000 on a watch or on a big night out at a nightclub,that money is either depreciating or gone. "But if they invested in a fivepercent, Triple A insured, tax-free municipal bond for a period of 30years," money manager Seymour says, "that $20,000 would be worth$86,000 at that tax-free rate of return. And needless to say, they buy morethan one $20,000 Rolex."

Four years agofuture NBA Hall of Famer Scottie Pippen unsuccessfully sued his former law firmfor allegedly losing $27 million of his money through poor investments.(He had earned about $110 million in salary alone over a 17-year career.)In February 2007--around the same time as Pippen's failed NBA comebackattempt--the Missouri Court of Appeals upheld a ruling that the player owedU.S. Bank more than $5 million in principal, interest and attorneys' feesfrom a dispute regarding a Grumman Gulfstream II corporate jet that he'dpurchased in 2001.

In an era inwhich banks are lambasted for using taxpayers' money to fly their executives onluxury private planes, it's a smart bet for players not to use their own cashto do the same. "In this economy, especially, the goal shouldn't be livingthat kind of lifestyle or trying to get richer," says West. "It needsto be about trying to maintain the wealth."

Sometimes,though, a jock just can't shake the temptation to try to hit the jackpot.Butowsky believes that "there's something in an athlete's mentality"that drives him to swing for the fences financially--usually at his own peril."The solution to the problem is, without a doubt, education," theadviser says. "Change won't happen until grown men start wanting tolearn."

Old habits diehard. Despite all his dreadful experiences, and lessons absorbed the hard way,not even Ismail is done yet. This time around, the project in which he'sinvested $250,000 is a special mouth guard--available online for $79.95--that'sdesigned to help the body "physiologically perform at the highestlevel," he says. The science behind it involves relieving pressure on thetemporomandibular joint and holding the jaw in an "optimal" position.(Ismail made the investment before he began consulting with Butowsky.)

It might soundfamiliar, Rocket admits, but there's at least one distinction between this andhis previous six ventures: He didn't embark on it so blindly. He actually usedthe mouth guard during his playing career. He says he's close friends with theguy who designed it. ("He's my boy.") And, perhaps most important,Ismail saw the plan develop from the ground up.

Hours afterButowsky's boot camp in Dallas is over, Rocket calmly lays out his rationale:"You know that statistic we heard about how one in 30 private equityinvestments works?" He smiles broadly. "Well, Lord willing, this isgoing to be my one."

Somewhere headsare nodding.



Pablo S. Torre provides more details on questionableinvestment strategies by active and retired professional athletes.


Professional athletes' salaries have risen steadily inthe last three decades. But by the time NFL players have been retired twoyears, 78% of them either have gone bankrupt or are under financial stressbecause of joblessness or divorce.
Hunter once invested almost $70,000 in an inflatableraft that would sit under furniture in areas at risk for floods.
The closest analogue to a pro athlete isn't awhite-collar executive. It's a lottery winner--often in his early twenties.
What's the most dangerous thing that could happen toan athlete financially? The owner was succinct: "Divorce."
If an athlete isn't consuming conspicuously, then hehasn't made it. "You're trying to get in good with the veterans," saysStrickland, "so you splurge."
Hunter was smart: He quit investing in long shots and protected hismoney.
McAllister filed for bankruptcy for his car dealership and allegedly owesNissan almost $7 million.
Usually eager to share his wisdom, Johnson won't work with those who rely onfriends and family.
Having fathered nine kids by nine women, Henry has been jailed for fallingbehind in child-support payments.
PHOTOGREG NELSON VinnieChase no more
Artest sent home six members of his entourage to minimize hisliabilities.
Ismail is more prudent with his money now, but he hasn't given up at least oneof his old habits.
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