Pro Athletes, Amateur Money Managers
After the first day of his fraud trial on Aug. 30, Rumeal Robinson was chewing on a steak at a downtown Des Moines restaurant. Dressed in an olive suit, he wore a Seiko watch bearing the logo of his alma mater, the University of Michigan. Back in 1989, Robinson gave the Wolverines their only national basketball championship, nailing two free throws in the final seconds to edge Seton Hall by a point. While he never blossomed into a National Basketball Assn. star, the former first-round draft pick earned about $5 million during six years in the league and hundreds of thousands more playing overseas. Now, according to prosecutors, it's all gone—and as he ran through the money, they allege, Robinson committed 11 counts of financial fraud, including a kickback to his banker related to a failed real estate deal.
While other former NBA players have squandered their riches—bigger earners such as former Celtics All-Star Antoine Walker and Nets 1990 top draft pick Derrick Coleman each filed for bankruptcy protection in the past 12 months—none are looking at 30 years in prison. That's what Robinson, 43, could get if he's found guilty. What rankles him, though, is that the entire defense strategy of his lawyer, J. Keith Rigg, rested on Robinson's incompetence as a businessman. "For all his good intentions, Rumeal doesn't have a background in finance, business, or development," Rigg told the jury. "Mr. Robinson doesn't know what he's doing."
If that's the case, he's not alone. An alarming number of professional athletes suffer financial ruin late in their careers or after they've retired. Walker and Coleman lost their earnings in unwise real estate investments. New York Jets backup quarterback Mark Brunell's Florida property ventures landed him in bankruptcy court this spring with $24.7 million in liabilities and $5.5 million in assets—which may explain why, at 40, he's still playing pro football. Ex-Philadelphia Phillies center fielder Lenny Dykstra tried to create a one-man financial empire—including the ill-fated Players Club magazine—built on bad checks. He sold off his World Series ring to pay creditors.
From 6 percent to 8 percent of NBA players end up broke, estimates National Basketball Players Assn. spokesman Dan Wasserman. Sports Illustrated, however, has reported that 60 percent are in serious financial trouble within five years of retirement. "Usually it's one or a combination of three things," says Joseph Geier, a financial adviser for New York Yankees first baseman Mark Teixeira and other athletes. "Lifestyle, family, or bad business ventures." For some it's all three. Walker earned more than $110 million in the NBA, but he supported a large entourage and gambled recklessly. He also started a venture capital firm and real estate company that both hemorrhaged money. Coleman, who made more than $87 million playing basketball, picked a bad time to invest in Detroit real estate. Since both men's earning curves peaked in their mid-20s, it was increasingly difficult for either to recoup such losses with each passing year.
To avoid this fate, the NBA and the NBPA co-host a three-day seminar on financial management for incoming rookies each summer. (Professional football and baseball have similar programs.) "It's Finance 101," says Mike Bantom, the NBA's senior vice-president of player development. The emphasis is on saving, spending habits, and investing. "You get your paycheck, but you don't get any instructions with it," says Los Angeles Clipper star Baron Davis. And there's social pressure to maintain a luxurious lifestyle, says former Sacramento Kings forward Lawrence Funderburke. "Chris Webber and Mike Bibby used to make fun of me because I drove the same car to practice for two years," he says.
Robinson insists he lived modestly for someone whose first contract in 1990 brought him, before taxes and agent fees, $4.7 million. "I bought a Nissan 300ZX and a penthouse apartment in Atlanta," he says. "They were my only big purchases." His brother, Donald Barrows, says Robinson blew money partying at strip clubs and even paid strippers to undress and clean his apartment. Robinson denies this: "Doesn't Don know that when you're in the NBA you don't need to pay strippers?"
Whether or not he paid them, it wasn't the strippers who threatened Robinson's future. Between 2004 and 2005 he received more than $700,000 in loans from Community State Bank in Des Moines, ostensibly for a development project in his native Jamaica. In exchange, Robinson sent $100,000 directly to the loan officer, Brian Williams, who has himself pleaded guilty to conspiracy to commit bank fraud. Meanwhile, Robinson hasn't paid back a dime. In their investigation, federal prosecutors found bank statements showing that Robinson spent the money on luxury cars, a Miami condo, and designer clothes. The property in Jamaica that Robinson claimed to be developing is controlled by a Florida investment company that says it never dealt with him.
Most Americans would be happy with a nest egg of a couple of million dollars—the amount Robinson pocketed during his career. "But even if [an athlete] has invested wisely and has tons of money in the bank, there's still the question of what to do when you wake up in the morning, which is why I think so many are drawn to business," says George Foster, a professor at Stanford's NBA Business Opportunities Program, which provides off-season multiday seminars to NBA players interested in business. "Virtually no ex-pro athlete wants to work a regular nine-to-five job."
There are exceptions. After retiring from the NBA in 2005, Funderburke earned his MBA and opened a personal finance business. Dan Marjele, an All-Star for the Phoenix Suns, is now not only an assistant coach with the team but also owns several eponymous restaurants. "I'm closely involved with the day-to-day business," Majerle says. "And I also made sure I didn't expose myself to risk that I couldn't afford. I put up a small amount of money to start the first restaurant, and then, when it was successful, I bought out other investors." Baron Davis—signed to a five-year, $65 million contract with the Clippers—has taken a similar approach to the production company he co-founded, Verso Entertainment. "What I've tried to do is save as much of my salary as possible and use my endorsement money to live off and invest," he says.
It's a prudent financial strategy, but for every Davis or Funderburke there's a Walker or Coleman. After briefly playing professionally in Puerto Rico, Walker recently failed in his bid to make an NBA comeback. For Coleman, drafted the same year as Robinson, there was no such option. Perhaps the only way to ensure against such flameouts would be to put a big chunk of players' salaries into escrow each year, says Dan Fegan, an agent who represents this year's top draft pick, John Wall. That's unlikely to happen, he adds. The NBA can tell its players what kinds of clothes to wear on the bench, but it can't tell them what to do with their money. And despite the cautionary tales, "Players still think, 'That'll never happen to me,' " says Funderburke. "And things could get worse in the near future," he says. There may be a lockout after this season—a strong possibility for the National Football League as well—and it remains unclear if the Bush tax cuts for the wealthy will be renewed.
For his part, Robinson insists he just hasn't caught his big break. While he claims he still has money—"I have a billion dollars in bonds," he says, straight-faced—he skips lunch before his trial hearing and decides to order steak for dinner after finding out Bloomberg Businessweek is footing the bill. Afterward, he walks a few blocks and phones a friend for a ride back to his hotel.