PICKING THE WRONG ADVISER OFTEN LEAVES JOCKS STRAPPED: WEALTHY PRO ATHLETES FALL FOR HUSTLERS POSING AS PLANNERS

It was a maneuver that even Junior Seau couldn’t see coming.

The San Diego Chargers linebacker and 18 other professional athletes, including San Francisco 49er receiver J. J. Stokes, were blindsided by financial adviser John W. Gillette Jr. to the tune of $10.5 million. Six non-athlete clients lost even more, a total approaching $12.5 million.

Facing seven to 10 years in prison, Mr. Gillette, part owner of San Diego-based Pro Sports Management International, awaits sentencing this month after pleading guilty to 37 counts of grand theft and one count of forgery. Among his crimes: luring wealthy clients into phony real estate investments, marketing fictitious redevelopment schemes and accepting money for multimillion-dollar bond purchases that never went through.

Although the Gillette case is new, the game plan is familiar. Athletes have been targets of scams for years. They have money – sometimes lots of it – showered on them at a young age. And while they’re adept on the playingfield, many are no match for a slickster hawking limited partnerships.

That’s especially true if the adviser has wormed his way into the athlete’s inner sanctum. Many athletes have insulated themselves with a handful of close associates, trusting few outside the circle. Word-of-mouth from other athletes is another way to get a foot inside the locker room.

While many legitimate financial advisers salivate at the thought of having their favorite sports heroes as clients, it’s a hard clique to break into. It’s also far from the glamorous business it appears to be. Even something as simple as buying a car can become a nightmare.

An adviser tells the story of a National Basketball League player who wanted to buy a Lexus from a presumably friendly seller.

“I told him to call us if he had any major transactions,” recalls Donald Stukes of New Rochelle, N.Y. “But he felt comfortable he could do it without us.”

A loan was taken out in the athlete’s name, yet the ball player gave the car broker cash to pa
y off the loan. Before the car was delivered, the athlete was traded from a West Coast team to a Midwest one. The Lexus never made it.

“The broker went to Las Vegas and gambled the money away,” Mr. Stukes says. “The bank loan was on the line. It took months to sue the guy and liquidate his assets. . . . All this happened because he was a friend.”

who do you trust?

Soon after a young player has made it to the pros, everyone from high-school buddies and brothers and sisters to insignificant others, such as long-lost aunts and uncles, comes out of the woodwork.

“Lots of people see this as their payday,” Mr. Stukes, a former sports agent, explains. “As a result, you end up getting someone (as an adviser) who really doesn’t have expertise.”

Players have “a totally warped sense of who to trust,” adds Andy Blackman, a partner and creative artist specialist with the New York accounting firm of Shapiro & Lobell.

Even agents can get in the way, says Mr. Stukes, a certified public accountant. “The agent doesn’t want to introduce them to a good professional. The agent has a group of people he works with – sometimes, one of these people is his brother-in-law.”

In the San Diego case, Mr. Gillette cemented his relationships with his investors, who were pleased to see other athletes as clients, by stressing his Christian beliefs. Calls for comment to Mr. Gillette’s lawyer were not returned, but the adviser reportedly conducted prayer sessions with clients and his marketing materials include religious references.

Yet Mr. Gillette employed some decidedly un-Christian tactics.

He used his victims’ money to acquire his own assets on the sly. He obtained, for instance, a 50% interest in a holding company that operates Junior Seau’s popular San Diego sports bar and restaurant, a place often packed with fans seeking a glimpse of their 250-pound homegrown hero.

Mr. Gillette also faked a letter, purporting to be from a San Diego public official, stating that
49er Mr. Stokes had indeed purchased municipal bonds.

“The letter was written on city letterhead,” Mr. Gillette admitted in court last month, “and I forged the seal and signature . . . to make the letter appear authentic.”

According to the San Diego District Attorney’s office, Dallas Cowboys safety Darren Woodson lost $3.7 million, the most of any Pro Sports Management International investor. Next in line are Mr. Seau and Washington Redskins safety Stanley Richard, who each lost $1.25 million.

an escalator clause

Such heavy losses were rare in the late 1970s, when Bernard R. Wolf was a goaltender for the National Hockey League’s Washington Capitals. Mr. Wolf, these days a financial adviser in Chevy Chase, Md., remembers when $25,000 was enough to get in on the ground floor of an investment deal. “Now they want $100,000,” he says.

At the same time, average annual NHL salaries have jumped from $100,000 to $1.3 million. The average salary for a National Basketball Association player is now $2.2 million. The National Football League pegs its minimum rookie salary at $131,000 and minimum veteran salary at $275,000.

Mr. Wolf, who counts a golfer, football players and a dozen hockey players as clients, puts their money primarily in mutual funds and municipal bonds. Occasionally he’ll purchase individual stocks, especially if a client has signed a contract with the likes of Nike.

But some athletes aren’t content to be restricted to plain vanilla investments. Their taste for adrenalin applies off the field as well as on.

“A lot of times, because the players are in a fast sport, they’re looking for deals with a lot of pizzazz . . . and I rain on their parade,” Mr. Wolf says. “Quite often, the guys that are wondering about the risk of triple-A municipal bonds will come to me with a crazy hotel or restaurant deal.”

As strange as those deals sound, it’s not surprising that athletes consider them. After all, they know their success – and the money stream att
ached to it -could be fleeting.

financial fitness

“They can’t be compared to surgeons, who also make a lot of money,” Mr. Wolf says. “Surgeons could do a few more operations down the road and make up any loss.”

Mr. Wolf advises sports clients to sock away as much as they can. He wants them to be mortgage-free and as unladen by debt as possible when they retire from the pro ranks, usually in their 30s. Injury can cause a career to end sooner.

Education is key to an athlete’s keeping the fortune he accumulates during his career, Mr. Stukes adds. “We want the athlete to be an active participant in picking their stockbroker, private banker and other professionals.”

If athletes are not involved in picking qualified financial professionals, they may have to turn to legal advisers later.

Two months before criminal charges were filed against Mr. Gillette, former San Diego Padres pitcher Greg Harris and San Diego-based triathlete Mark Allen filed a $2 million suit against Mr. Gillette and the Mauricio Family Trust, a 49% shareholder in the Pro Sports Management enterprise.

(Mauricio family lawyer Mark W. Hansen, a partner with San Diego law firm Luce Forward Hamilton & Scripps, says his clients had invested $1 million in Mr. Gillette’s business but were not involved in day-to-day operations. Mr. Hansen also notes that $350,000 his clients had put into the company was never placed in investments.)

A month after the civil suit was filed, lawyers for Mr. Seau, Mr. Woodson and Mr. Richard forced Mr. Gillette and his business entities into bankruptcy. The following month, the district attorney filed criminal charges.

For his part, Mr. Wolf figures it’s hard enough for some athletes who worry if they’ll be physically fit for retirement, much less fiscally fit.

“Sports are tough on your body,” the former goalie says. “I walk like a 75-year-old and I’m in my late 40s. It takes its toll on you.”