How to cut your throat while cutting a deal is the lesson to be learned from the case of fallen superagent LaRue Harcourt. Harcourt, now 60, started out as a high school and junior college basketball coach, taught business courses at Cerritos (Calif.) College and became one of the prime movers in baseball's free-agent boom of the late 1970s. Content at first to negotiate contracts, he later moved into financial planning and put his clients in tax shelters and other investments that he freely describes as "high-leverage things." These included partnerships formed to purchase Learjets and lease them to commuter airlines and the United Parcel Service; other deals involved trucks, yachts, computer software and liquor stores.
The investments eventually became intermingled so precariously that they tumbled like a house of cards, and down came a host of major league baseball players, among them Bill Campbell, Dave Goltz, Rick Wise, Doug Rau, Ken Reitz and Don Sutton. "Major assets of one partnership were notes from another," says Dan Grigsby, attorney for former major league pitcher Matt Keough, another of Harcourt's clients. "You'd discover that rather than owning this real property or auto-leasing company, someone else owned it, and instead you'd find a note. You wouldn't have cash, just a note from a partnership that didn't have money. Harcourt was robbing Peter to pay Paul."
At last count some 14 athletes had lost a total of $6 million through Harcourt's investments; because of disallowed tax shelters, they stand to lose as much as $15 million more in pending IRS audits. Campbell & Co. appear to have taken the biggest hits.
Among the many lawsuits that have been brought, former NBA player Dick Snyder has one for some $5 million pending against Harcourt and others for fraud, breach of fiduciary duty and misrepresentation. Cardinals pitcher Bob Forsch sued Harcourt for fraud and misrepresentation in federal district court in St. Louis in 1983 and was awarded $192,491.60. That amount was reduced by $10,000 as a result of Harcourt's countersuit, in which he claimed that Forsch's lawsuit and conversations with other players "destroyed my career."
October 18, 1987
Harcourt calls himself—with some justification—the "victim of unforeseen" economic circumstances. His plane-leasing deal was hurt by the energy crunch and by airline deregulation, and other investments collapsed in part because of rising interest rates and the IRS crackdown on tax shelters. Harcourt also justifiably faults players for not knowing or caring enough about their investments. "Let me tell you," he says, "the most dangerous thing in the world is giving advice and helping people with their finances who are ignorant of the technicalities, because you don't know what they don't understand. You don't know until it's too late."
Many of Harcourt's clients were startlingly ill-informed about their own financial affairs. Here's part of a deposition from Goltz, one of those who found some of his funds invested in Piper aircraft:
Q. How many planes did you purchase, sir?
A. I have no idea.
Q. More than one?
A. I think so.
Q. More than two?
A. That, I don't know.
Q. Can you tell me how you acquired the Piper airplane that is at question?
A. All I know, it was through Mr. Harcourt....
Q. Do you know where you were when the agreement was signed?
A. No, that, I don't....
Q. Did you read this document before you signed it, sir?
A. I can't remember.
But if the athletes were derelict, Harcourt was guilty of sloppy bookkeeping and overspeculation. "He always believed you could go into the gray area of investing," recalls Twins pitcher Bert Blyleven, another former client, who sued Harcourt to obtain an accounting of his investments and later settled out of court, "In the short life of a ballplayer, you can't go into gray areas. If the assets aren't any good, and you get audited and can't pay, you have to liquidate."
Some of Harcourt's clients charge that he made little effort to inform his clients about the details of the various deals and, at times, actually discouraged them from getting involved. "It was a fight, a battle to get information," says Campbell's wife Linda. "I never got an answer—just the runaround," says ex-major league pitcher Paul Splittorff, another former Harcourt client.
The tales of woe go on and on. Campbell, who had a 14-year career with the Twins, Red Sox, Cubs, Phillies, Cardinals and Tigers, says he lost an estimated $800,000 with Harcourt. "I don't like to get going on the subject," he says. "It ruins my whole day." Linda keeps the phone numbers of 10 attorneys on the nightstand next to her bed. "That way," she says, "I can get to them quickly if I need to." She often needs to. The Campbells' tax returns for eight years, dating back to 1978, have been audited. Linda fears that when all the negotiating with the IRS is over, they may owe another $800,000 in back taxes.
Reitz's story is equally sad. He arrived in the majors without even rudimentary knowledge of financial matters. "I was just 21, sitting in the locker room in St. Louis with Jose Cruz, and neither one of us knew how to bank, how to write a check," he says. "We used to cash our paychecks, take what we needed and put the rest of the money in the closet."
Reitz, a onetime Gold Glove third baseman, says he has "no idea" where the $1 million he grossed over the last four years of his career—including a $500,000 buyout of his contract by the Cubs in 1982—has gone. He was more than $90,000 in debt and living with his sister, Judy, in San Jose last season while making $100 a week as a utility in-fielder-bullpen coach for the San Jose Bees of the Class A California League.
Rau, 38, averaged 15 wins a year from 1974 to '78 as a lefthanded starter for the Los Angeles Dodgers before arm and shoulder injuries forced him into early retirement in '82. A farm boy who went on to get a degree in finance from Texas A & M, Rau was one Harcourt client who kept himself, as even Harcourt acknowledges, "extremely well informed."
Most of his money—what's left of it—is tied up in partnerships under audit. Rau says, "I'm scrambling to stay afloat. It's a tedious way of living, waiting, no real direction in life. If we lose the tax case, I go back to baling hay."
Then there's Wise, who won 188 games in his big league career and retired in 1982 with a net worth of $2.2 million. Today he is more than $800,000 in debt and is being forced to sell his dream house in Oregon. Wise supports himself, his wife, Susan, and their two teenage children by working as a minor league pitching instructor for the Astros for $25,000 a year. "We've lived a miserable five years now," he says. "Five bleeding years have taken their toll. Not only on my family but on my life. The stress has been, well, the English suggest a stiff upper lip. but at times"—he starts to shake his head—"you just cry. You just flat cry."
Wise says he has paid five different lawyers to help him with his legal troubles. "You try to put up a front and we have," he says, "but the sheriff and the process servers come to your door in the middle of the night. We never harmed anyone. We never stole, we never tried to hurt anyone.... Well, four years to my pension. I'm looking forward to that."
It may or may not comfort these players that Harcourt isn't doing so well himself. He was recently hit with a $2.5 million summary judgment for a deficiency remaining on five Beech airplanes and says he now earns a "couple hundred" a week working behind the counter at Casa de Liquor in Yorba Linda, Calif., owned by Dahn Inc., of which his wife is president. "I feel compassion for them," he says of his former clients. "But I feel no guilt. They have no idea how much effort I put in."