A few professional athletes are financially set for life due to the fortune of raking in millions in endorsement deals, but the other 99% are required to be financially savvy and make their “paltry” salaries last. Unfortunately, many athletes fail to do so and find themselves bankrupt. It follows as no surprise that as negotiations between the NFL and the Players’ Union show little signs of progress, the union issued a statement to the players in December advising them to save their final three paychecks of the season (a total of $56,469 for a rookie making the league minimum) and prepare for a “lack of income.” And while some players are left to wonder how they are going to survive the offseason, the average American family, with a median income of $49,777, cries shame on you.
Although most law students avoid a course in bankruptcy like the plague, a look at the three major sports leagues – the NFL, NBA, and MLB – reveal that a large majority of the athletes in each league seem eager to be educated by the bankruptcy courts. For example, in 2009 Sports Illustrated reported that within two years of retirement, 78% of former NFL players have either gone bankrupt or are under financial stress. Former NBA players manage a little better. After five years, only 60% of NBA players are broke. In baseball, Johnny Damon and Jacoby Ellsbury and other players currently have millions tied up in a billion-dollar fraud case involving Texas investor Robert Allen Stanford. The financial struggles of athletes are not a recent trend either. Athletes who appeared set for life have struggled for decades. Among the most prominent names include: Lawrence Taylor, Jonny Unitas, Dick “Night Train” Lane, Dorothy Hamel, Leon Spikes, Marion Jones, and John Arne Riis.
Although this article could focus on the athletes in any of the leagues, due to the recent financial shortcomings of Antoine Walker (attempting to pay off his $8 million debt) and Tim Hardaway (the Miami Heat graciously bought his Miami estate after the IRS put a lien on it), I will limit my specific examples to former NBA players. Scottie Pippen earned $120 million over his epic career, but bad investments and failed lawsuits have left him in a “desolate” condition. In 2004 he sued his former law firm for failing to exercise proper oversight on his investments causing him to lose $27 million. In 2007, he lost another $6 million when the Missouri Court of Appeals affirmed a ruling that he owed U.S. Bank principal, interest, and attorneys’ fees from a dispute regarding a Gulfstream jet he bought in 2001. His courtroom woes did turn around last June, however, when he won a $2 million lawsuit against another former law firm alleging that they failed to inform him of all the details in the purchase of the jet. While Pippen may simply be a victim of bad judgment, Kenny Anderson’s downfall appears to be self-inflicted. He earned around $60 million in his career, yet he still filed for bankruptcy in 2005. How? He spent nearly $40,000 a month to pay child support for eight children and maintain his eight cars. The final straw, however, was the $5.8 million that he lost in a prenup agreement.
To use the words of Latrell Sprewell, who recently defaulted on two multi-million dollar homes, “[you] got a family to feed” and if $21 million is not going to cut it, then you may well be on your way to bankruptcy. In my opinion this mess all boils down to one thing: the athlete did not get the right lawyer. So for all you young-budding lawyers hoping to break into the sports law market, there is no shortage of work. I suggest you partner with an athlete that needs a bright lawyer to help him to avoid the pitfalls of his predecessors . . . and review those bankruptcy and tax books just in case.