In his prime, Johnny Unitas was the guy you wanted quarterbacking a football team. The Hall of Famer set seven lifetime NFL passing records during his storied career. But he might not be your pick to run a circuit-board maker.
In 1984, Unitas and partners bought National Circuits for $3.5 million. The company foundered, and six years later they could only sell it for $1 million. Unitas declared bankruptcy in 1991 after he couldn’t pay back loans he took to purchase National.
“The No. 1 reason athletes lose money is they invest in areas they don’t really understand and not related to their expertise,” says Alan Lancz, a wealth manager who works with a number of professional athletes.
Björn Borg’s another good example. When he retired from tennis at the age of 27 in 1983, the Swede had won 11 Grand Slam championships. He tried to replicate his on-court success in the world of fashion with the Björn Borg Design Group; it didn’t work.
The company quickly ran into liquidity problems and shut down in 1989. Borg refused to take outside financing for fear of losing control of the company. Creditors later sued Borg, but he claimed he couldn’t pay because he was “more or less bankrupt.”
While failed business ventures often take a wrecking ball to an athlete’s net worth, they are hardly the only source of money woes. There’s also the expensive cars, the jewelry, the lavish parties, the mansions. The cost of the lifestyle adds up.
In a Prince & Associates survey of sports agents, 69.1% said their athlete clients live a luxurious lifestyle. The Rothstein Kass-sponsored survey also found only 26.4% of those athletes worried about paying for the lifestyle. More should be so concerned.
One estimate pegs Mike Tyson’s career earnings at $400 million. But the hard-punching heavyweight, who earned up to $30 million for some of his fights, declared bankruptcy in 2003. Documents from Tyson’s divorces said he spent $400,000 a month on care for his pet tigers, legal fees, limos and plenty more.
”He spent enormous amounts of money that were inappropriate at best,” a lawyer for Tyson’s ex-wife told The New York Times after the bankruptcy filing. ”Part of it can be attributed to a lack of willpower.”
Jack Clark was in the middle of a three-year $8.7 million contract with the Boston Red Sox in 1992. The power-hitting designated hitter was also filing for bankruptcy. In a filing, Clark revealed debts of $11.4 million. His assets only totaled $4.8 million.
“He had some expensive hobbies, and I think they got ahead of him,” Clark’s lawyer told a reporter. Clark’s bankruptcy filing revealed he owned 18 cars, one a 1990 Ferrari that cost $717,000. He still owed money on 17 of them.
Another potential financial pitfall for pro players: Their big paychecks make them a target. The agents in the Prince survey say they’ve seen 77.5% of their athletes exploited by friends and family. They’ve seen 71.9% exploited by advisers.
When NHL great Bobby Orr retired in 1978, one accountant estimated the defenseman owed more money than he had. A few years later, Orr accused his agent Alan Eagleson of mismanaging his finances. The former Boston Bruin sat in the courtroom when Eagleson pleaded guilty to schemes to defraud National Hockey League Players. Justice was served, but it didn’t bring the money back.