- The Washington Times - Monday, February 7, 2000

Fred Taylor had it all 17 months ago. Taylor was 22 years old, a rookie starting at running back for the NFL's Jacksonville Jaguars. He had a $5 million signing bonus fresh in the bank and a 1,200-yard season ahead.
The money is gone now, and Taylor finds himself appearing at autograph shows to earn extra cash.
It wasn't the sports world cliche of drugs, alcohol and gambling that wiped out his seven-figure nest egg. Rather, it was another culprit, one rapidly becoming an expensive pitfall for pro athletes: bad investments.
The stakes have never been higher. Average salaries in the four major pro sports leagues the National Football League, the National Basketball Association, Major League Baseball and the National Hockey League have doubled since 1994 and million-dollar paychecks are commonplace. Athletes now find handling their paychecks is a risk-filled, full-time job.
"There's just so much bad advice out there being given to these guys now. It's really kind of scary," said Trace Armstrong, a Miami Dolphins defensive lineman and the president of the NFL Players Association. "I think the general population gets plenty of bad investment advice, too. But when you consider the dollars involved now, the visible public profiles and how naive any young kid is about this stuff, it's almost like they're magnets for bad advice."
Jocks losing thousands or millions in a dry oil well, a failed restaurant or a shady real estate deal is nothing new. Hall of Fame NBA center Kareem Abdul-Jabbar lost $59 million during the 1970s and '80s when his business manager made dozens of sour investments without his knowledge.
Not only are the dollar amounts now much more staggering, but the methods of losing a fortune are increasingly creative, subtle and maddening.
Taylor, for example, lost the $5 million signing bonus $3 million after taxes in a Ponzi scheme he claims was set up by his agent, William "Tank" Black. About 15 other NFL players also lost money roughly $15 million total in the scheme.
"I'm a prime example [of what can go wrong]," Taylor told the Miami Herald. "I can talk to anybody about that. I ought to give seminars."
Embezzlement also is becoming commonplace. A San Diego financial planner posing as an agent was convicted last year of stealing $12 million from pro athletes. Dallas Cowboys defensive back Darren Woodson alone lost nearly $4 million.
Leagues and agencies are taking steps to protect players. The NFL Players Association is attempting to register every financial adviser representing a player in the league. The move, expected by the end of the year, will force the legion of small and home-based NFL agents to either get additional training and fully adhere to standard industry ethics or farm out their clients' financial services needs to other companies.
But many agents, particularly in baseball, hockey and basketball, have already determined the need for help in handling their clients' bank accounts. Each of the large global conglomerates representing pro athletes, particularly Octagon International, SFX Sports and IMG, have certified full-time, in-house financial planners working to counsel pro athletes. Most of those planners are finding themselves constantly in need of more staffers.
"It's a real education process. We try to sit down with the athletes as soon as possible even at 18, 19 years old and start planning long-term and for retirement," said Jan Plewes, vice president of financial services for Octagon in Vienna. "The aim is to get a habit of saving established as soon as possible."
That, however, is also the greatest challenge. The agencies preach ultraconservative investment principles the opposite of most players' wants. Many athletes, in addition to buying luxury cars, houses and clothing, want to invest freely in businesses or ventures run by friends and family all desires that can easily tap out monthly budgets set by advisers.
"Athletes, generally, are a trusting lot and they want to help out as many people as they can," said Derek Sanderson, an adviser with Boston-based State Street Research. The firm runs a special mutual fund exclusively for pro athletes.
"The guys come in all the time and say their uncle or whoever has got a restaurant or driving range or something like that, and they help them out. I tell them to have their uncle or whoever send the financials so I can look at them. I'm still waiting for those financials. I have not gotten a single one, which is a clear red flag," Sanderson said.
Unlike most financial advisers working with athletes, Sanderson is a walking cautionary tale. Like Taylor, Sanderson once had it all. He was the NHL's rookie of the year in 1968 and a member of the Boston Bruins 1970 championship team. He signed a $2.65 million contract with the World Hockey Association Philadelphia Blazers in 1972 and was the highest-paid athlete in the world.
That was a quantum leap from his $35,000 salary with the Bruins, and Sanderson found himself unable to manage his money. He was 26 years old, knowledgeable about little besides hockey, and an easy target for con men. He returned to the Bruins a year later virtually broke, and by 1978, he was both out of hockey and out of cash.
"I didn't know any of the terms, the investment speak, and no one took the time to teach me, like we do now with our guys," he said. "I bought a Rolls and did a lot of the typical things when you strike it rich, but most of [the money] went into a black hole."
Not surprisingly, the most financially successful athletes are almost always the ones who learn how money works and take an active role in managing their portfolios.
Former Denver Broncos quarterback John Elway has lent his name and fame to several investments, most notably a chain of auto dealerships in Denver and the new MVP.com, an on-line sporting goods store. Elway, who holds a net worth of more than $100 million, maintains a strict hands-on policy and hires only experienced staffers instead of friends and family to manage his businesses.
That helped Elway turn a single auto dealership into a six-store chain he sold to Wayne Huizenga's AutoNation USA for $82.5 million.
Michael Jordan, the Washington Wizards' new president of basketball operations and another MVP.com partner, has done even better. Jordan has built an estimated net worth of $357 million by taking many endorsement fees in the form of stock, limiting his upfront investments in businesses to which he lends his name, and buying large blocks of shares of established Internet companies. He, too, admits he's something of a control freak with his finances and business ventures.
"I have a lot on my plate, but what I like about my new situations is that I have a chance to control things and make decisions and roll up my sleeves," Jordan said at the recent launch of MVP.com. "That's what business is about."
Athletes like Elway and Jordan remain the exception.
"Most guys these days do know more about stocks and such, certainly more than I did," Sanderson said. "But still a lot of them give up control by signing a power of attorney letter, maybe as much as 10 percent of them. It's the worst thing you can do. Instead of doing that, these guys should be learning about life, balancing a checkbook, working a mortgage. Life skills."

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