September 23, 2011

Top 10 Worst Financial Meltdowns by Athletes

These superstars blew through their hoards of cash long before retirement, which means they could've used some good financial advice

Mike Tyson was once the most feared man in the boxing world; in the financial world, not so much. (Photo: AP) Mike Tyson was once the most feared man in the boxing world; in the financial world, not so much. (Photo: AP)

The salaries paid to professional athletes are sometimes impossible for the average fan to comprehend. A $100 million here, a $100 million there and pretty soon it adds up to real money, to borrow loosely from an esteemed politician of the past.

Despite the crazy salaries, the sad (or satisfying, depending on your viewpoint) fact is that many professional athletes burn through their hordes of cash, often before hitting retirement.

Sports Illustrated looked into the reasons athletes go broke and published its report in 2009. One of the most common mistakes they make is sinking money into startups. It’s a bad bet to invest in a restaurant franchise trying to take on an established chain (Raghib Ismail). Then there’s profligate spending (Mike Tyson and others), divorce (see Mike Tyson) and drugs (Maradona).

With the pitfalls in mind, AdvisorOne presents its list of the Top 10 Worst Financial Meltdowns by Athletes.

Johnny Unitas10. JOHNNY UNITAS, football: About $4 Million Lost

Like many athletes, Johnny Unitas, who many consider the greatest quarterback in NFL history, was not as adept at making business decision as he was at driving his Baltimore Colts to last-minute victories, including in the 1958 championship game. In 1991, two decades after retiring, he filed for bankruptcy. No details of his assets or debts were listed, but the culprit was $4 million in loans he made to a circuit-board company. His big mistake? Personally guaranteeing the loans.

Darren McCarty9. DARREN McCARTY, hockey: More Than $6 Million Lost

Darren McCarty starred for the Detroit Red Wings and Calgary Flames for 13 seasons, made as much as $2 million some seasons. Bad decisions, gambling, divorce and a battle with the bottle landed him in bankruptcy court where he listed $1.9 million in assets against $6.2 million in debts. Working his way back to solvency was an ordeal, but at least he has a new job. This month, he joined the crew of  “Hardcore Pawn,” truTV’s most popular series. Seems like he would have a lot of empathy for the customers he’ll encounter.

John Elway8. JOHN ELWAY, football: $15 Million Lost

Hall of Fame quarterback John Elway has often made bold decisions. Drafted by the Baltimore Colts, whom he deemed unworthy of his talents, he threatened to stick with his fledgling baseball career in the minor leagues for the New York Yankees unless he was traded.He got his wish and enjoyed a stellar career with the Denver Broncos.

There’s one decision we are sure he wishes he could do over: $15 million sunk into what prosecutors say was a $71 million Ponzi scheme called Mueller Capital Investment. There’s no hint that Elway is broke (he raked in more than $80 million from the sale of five auto dealerships) and he is an executive with the Broncos. And he can take solace in the fact that more than five dozen others fell prey to the Ponzi scheme, including former Janus fund manager Blaine Rollins.

Raghib Ismail7. RAGHIB ISMAIL, football: Nearly $18 Million Lost

He was called the “Rocket” on the field for his blazing speed and electrifying moves as a wide receiver and kick returner, but in the investment world Raghib Ismail turned out to be a dud.

In a 10-year career in the Canadian Football League and the NFL, Ismail took home at least $18 million. But most of it was lost through bad investments, including $300,000 in a Hard Rock Café knock-off and a big chunk of change in a cosmetics procedure that was touted to make the skin better absorb oxygen. All may not be lost, though. Ismail did find an investment that is apparently working out: Bite Tech mouth guards, a brand now preferred by many athletes.

Maradonna6. MARADONA, soccer: $26 million Lost

Diego Maradona is arguably the greatest soccer player who ever lived. His feats on the pitch for Argentina in the World Cup, Barcelona, Sevilla and Napoli among others made him a one-name legend. But the legend had a darker side, too. The Italian stop may  have been his Waterloo. There was the 1991 suspension for failing a cocaine test. That lasted 15 months.

Maradona’s troubles didn’t end with retirement. The Italian years caught up with him in 2009 when Italian tax authorities ruled he owed 37 million euros ($26 million at the time) in back taxes, penalties and interests. Having only paid a fraction of the bill (reportedly 42,000 euros, two wristwatches and some earrings), Maradona’s salary as head coach of Argentina’s national team was being garnished before he was dismissed from that post following a lackluster performance by Argentina in the 2010 World Cup. Now, however, he has scored a lucrative coaching gig with Al Wasl FC in the United Arab Emirates league. Hopefully, someone helps him start practice on time.

Sheryl Swoopes5. SHERYL SWOOPES, basketball: $50 million 

Hey, you didn’t think making bad investments was exclusive to male athletes, did you? Sheryl Swoopes was the face of the WNBA, starring for the Houston Comets. She was the first woman to have Nike name a shoe after her. But that could not stop her from losing $50 million, forcing her to file for bankruptcy declaring debts of about $700,000. She does get credit for being honest, though: Swoopes is the only athlete on the list who blamed her own mismanagement for ending up broke.

Michael Vick4. MICHAEL VICK, football: At Least $50 Million Lost

The story of Michael Vick’s spectacular fall from grace has been well documented. The dynamic quarterback who led a woeful franchise, the Atlanta Falcons, to Super Bowl contention tossed it all away by investing in dog fighting. Then came prison and bankruptcy. Back in the NFL with the Philadelphia Eagles, Vick last month signed his second $100 million contract ($40 million guaranteed). The happiest people might be his creditors, who stand to see much more of the $20 million they were owed than they might have expected.

Lenny Dykstra3. LENNY DYKSTRA, baseball: At Least $60 Million Lost

As unlikely as it seemed, Lenny Dykstra, a player nicknamed “Nails” for his gritty play on the diamond, remade himself as a financial advisor to superstar athletes. The rough-and-tumble jock, who helped the New York Mets win a World Series and the Philadelphia Phillies get to another, went on to publish The Players Club, a high-end magazine. He even took a star turn on the voluble Jim Cramer’s CNBC show “Mad Money” making stock picks. Then it all fell apart. The $17.9 million mansion and Rolls Royce are gone. Now in addition to bankruptcy, “Nails” faces even tougher times: charges of fraud and theft.

Derrick Coleman2. DERRICK COLEMAN, basketball: $87 Million Lost

Derrick Coleman had a very good career in the NBA. And being very good in the NBA translated into $87 million in pay over 14+ seasons, mostly for the New Jersey Nets and Philadelphia 76ers. You have read this far, so you know there’s no happy ending coming. But Coleman’s story does have a twist. Coleman didn’t squander his fortune on fast cars, big houses or other symbols of the celebrity culture (OK, he did have a Bentley and five fur coats). Rather, he tried to help his ailing city, Detroit. For his investments in various real-estate deals and business, Coleman still ended up where many athletes find themselves: in bankruptcy court. His debts were listed at $4.6 million and his assets at $1 million.

Mike Tyson1. MIKE TYSON, boxing: $400 Million Lost

Mike Tyson was on top of the world: Heavyweight champ, career earnings of about $400 million and all the adult toys anyone could want. But outrageous spending ($173,000 for a gold and diamond necklace, a pricey divorce, fancy cars and two Las Vegas mansions) and big tax bills (nearly $14 million owed in the U.S. and Britain) helped lead Tyson to bankruptcy court. There he declared debts of more than $27 million, to a former trainer, a former financial manager and even a music producer, among others. By that time Tyson’s $30 million paydays were a distant memory.

But he has gotten a measure of redemption, appearing in parts 1 and 2 of the hit comedy film, "The Hangover," and being inducted into the Boxing Hall of Fame this year.

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Top 10 lists from AdvisorOne:

(All Photos by The Associated Press)

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