Bankruptcy: a Financial Destiny for Some Athletes

Harmon Killebrew had 573 career home runs, a Most Valuable Player award and, 14 years after he retired from baseball, not a penny to his Hall of Fame name. Brooks Robinson could stop just about anything at third base, but he could barely lay a glove on the debts that piled up in the 1970s. Kareem Abdul-Jabbar was the greatest basketball player of his time, yet his cash flow nearly ran out before his time did.

For all their huge contracts and lavish lifestyles, more than a few professional athletes have learned that money can’t buy financial security. Yes, even the rich and famous can go broke. It was not a short list that former New York Islander Bryan Trottier joined recently when he filed for Chapter 7 protection under the Federal Bankruptcy Code. Many other stars have attested to the pitfalls that can cost a fortune:

--Bad advice.

--Extravagant spending.

--Exorbitant loans from lenders who think an athlete is a good risk because he makes so much.

--”Can’t-miss” business schemes pitched by relatives and friends.

--Bad luck.

It can happen to the best of them. Johnny Unitas filed for bankruptcy in 1991. So did former Detroit Lions running back Billy Sims. Four-time batting champion Bill Madlock owed the Internal Revenue Service nearly $1 million at the start of this year. Graig Nettles filed for bankruptcy in 1988, before his 21st and final big league season. Relief pitcher Rollie Fingers lost much of his savings in business ventures.

Tony Gwynn filed for bankruptcy in 1987, the year he earned $600,000 and hit .370. Willie Mays was near bankruptcy after one of the greatest careers in baseball history. Even Mickey Mantle was not financially secure until the memorabilia boom in the ‘80s made him a valued property.

Trottier’s case--$9.5 million in debts against $141,000 in assets, mainly because of a failed office building and ice rink--wasn’t even unique to the past month or so. Former Dallas Cowboys quarterback Danny White filed for bankruptcy protection three weeks before Trottier, listing nearly $13 million in debts and $50,000 in assets and citing real estate transactions gone wrong. “The last 10 years, every penny I made went into a black hole,” White said recently.

The problem is so widespread that one prominent agent said roughly half of major league ballplayers with salaries of $500,000 or more in the 1980s had little or none of their baseball earnings left four years after they retired. Some financial managers specialize in setting up programs to keep athletes afloat. It has become part of every agent’s job to make sure that their clients’ massive earnings don’t wind up going, going, gone.

“I think the fellows believe the same thing the public does about them, that they have so much money, it just can’t run out,” said Jim Barrons, president of First Financial Strategies Inc. of Phoenix. “They’re just competitors by nature and they believe they can always succeed.”

Barrons, a certified public accountant, established his firm six years ago when an acquaintance, Alan Bannister, said he and other former major leaguers needed advice. Now he represents Andre Dawson, Jack Morris, Scott Sanderson and at least one ex-pitcher whom Barrons had to convince to move out of a luxury home, pay off his car loans, move into a modest house and start working as a sales rep. “He’s not earning a six-figure income,” Barrons said, “but he’s living comfortably.”

That some utility infielders and long-relief pitchers are set for life is testimony to the kind of planning that eluded some big stars. “There’s nothing magic about it,” agent Jim Bronner said. “It’s merely making a budget for a lifetime.

“We work backwards. We try to understand what a player’s long-term goals are and show them how to make assumptions: How long they’re going to play, what their earnings are going to be. And then we take a conservative approach to investing that will help them reach their goals very easily,” Bronner said. “It isn’t so much ‘Do this or do that, invest in this or invest in that.’ It’s more a matter of making sure they don’t spend it all.”

Ron Shapiro is the agent whose studies indicated that about half of the $500,000-a-year ballplayers lost most or all of their money in the ‘80s. As a result, he encourages his clients to invest conservatively and passively--in larger, traditional businesses rather than any venture that requires the athlete to be a hands-on owner, such as a sports bar.

Barrons tells his clients to start their portfolios with low-risk municipal bonds. He also lets them know that business, like any sport, isn’t as easy as it looks from the outside. “Honestly, I’ve had players tell me, ‘Jim, if I can’t make it in baseball, I’ll make it outside of baseball.’ I have to tell them they probably won’t be earning 10% of what they’re making now,” he said.

Every agent would like to keep his client from becoming the next Jack Clark. A three-year, $8.7-million deal with the Boston Red Sox was not enough to keep the power hitter from going nearly $7 million in debt two years ago. Clark had splurged on a $2.4-million home and 18 cars, including a $700,000 Ferrari. He filed for Chapter 11 bankruptcy, then jumped into the risky world of drag racing. He’s a rookie driver on the National Hot Rod Assn. circuit.

“I paid everybody back 100% on the dollar,” he told reporters this past summer, referring to his Chapter 11 filing. “It’s one of those things where you couldn’t keep up with everybody all at once. It’s a business decision that’s available to everyone.”

As Trottier said: “It’s just a new challenge for Bryan Trottier. I like to hit challenges head on. That’s the way I played hockey, that’s the way I am in life.”

But life and sports sometimes don’t offer the same rewards. The very qualities that can make someone a champion can make him a big debtor. An athlete can recall how tenacity and resolve fueled a comeback from four runs down in the bottom of the ninth or scored a touchdown in the last second, and believes the same can happen in business.

“There’s a sort of macho outlook that doesn’t allow them to recognize trouble when they’re sinking deeper and deeper into a hole,” Shapiro said.

Shapiro was the securities commissioner for Maryland in the early 1970s--”the age of tax shelters,” he said. “Doctors and professional athletes were the two primary targets of bad investment deals.”

After he left that post, someone with the Baltimore Orioles called him about helping the nearly-bankrupt Robinson to overcome debts caused by some of those bad deals. Shapiro did that, and soon established his own sports management company--with Robinson as a partner--that now represents Dennis Martinez, Eddie Murray and others.

“What we have done--and not always with the level of success I’d like--is battled the lifestyle-earning curve. In this country, as we earn, we spend. That’s all of us: teachers, journalists, lawyers,” he said.

Athletes are just like anyone else, only more so, as they say. Business managers have to talk players out of buying the most unique house in town or a convoy of classic autos. Convincing them isn’t easy.

“Sometimes it’s like negotiating a whole new contract,” Shapiro said. “That isn’t saying a guy earning 5 or 6 million isn’t entitled to a luxury car. But two or three of them means trouble.”