It’s become a familiar story. High-paid professional athletes, advised by aggressive financial managers, put their assets in investments that go bust. In football alone, casualties have included Tony Dorsett, Lawrence Taylor and the late Johnny Unitas. Now several former pro football players burned out of an estimated combined $20 million believe they have a case against both their league and union. On Thursday, March 29, they got a major piece of good news in Atlanta federal court. U.S. District Judge Julie E. Carnes denied a motion to dismiss their civil suit against the National Football League, the National Football League Players Association, and several unidentified entities whose job it was to perform background checks of investment managers.
Last June, seven former NFL defensive stars – Steve Atwater, Blaine Bishop, Marco Coleman, Ray Crockett, Carlos Emmons, Clyde Simmons, and Al Smith – filed suit to recover losses from an alleged fraud scheme masterminded by an Atlanta-based hedge fund manager, Kirk S. Wright. Wright had been arrested the previous month in Miami Beach on fraud charges. He and his company, International Management Associates (IMA), face a massive suit filed by the Securities and Exchange Commission. The SEC says Wright had collected as much as $185 million from up to 500 investors since 1997 by deliberately overstating the value of investments. Much of the money either is missing or has been sunk into luxury real estate, cars and furnishings.
One would think that NFL advisers would have performed due diligence on Wright, a high-flying fund manager in his mid 30s. That’s what the aforementioned NFL players were counting on, too – before they were out $20 million. Their civil complaint alleges that the NFL and the players’ union failed to do their jobs, and that the NFL Players Association in particular had endorsed the services of IMA knowing Wright already had liens placed against his assets. Plaintiffs also included the wife of one of the players, plus various entities set up by the players or for the players’ benefit. An amended suit, filed in July, dropped Coleman as one of the plaintiffs.
The NFL and the players’ union had filed for a dismissal of the case because under the league’s collective bargaining agreement players are solely responsible for their own finances. Moreover, they argued, the agreement requires arbitration, not litigation, of disputes of a nature raised in the lawsuit. But in the end Judge Carnes wasn’t convinced, and she permitted the players’ suit to proceed. Kirk Wright, recently slapped with a $20 million fine, currently is awaiting trial, though no starting date has been set. As for the players, they want their money back. (Associated Press, 3/30/07).