The Persistence of Predatory Money Managers in Professional Sports

The Persistence of Predatory Money Managers in Professional Sports

The world of professional sports has seen its fair share of financial scandals, The latest indictment involving four individuals charged with defrauding professional basketball players of over $13 million underscores the need for increased vigilance in managing athlete finances. In this blog post, I will discuss the details of the indictment, provide a brief history of other famous athletes who have fallen victim to financial fraud, offer suggestions for better monitoring of athlete finances, and emphasize the importance of greater vigilance as professional athlete salaries continue to rise.

On March 23, 2023, the Southern District of New York (“SDNY”) and Federal Bureau of Investigation (“FBI”) announced the unsealing of an indictment that charged four men – Darryl Cohen, Brian Gilder, Charles Briscoe, and Calvin Darden, Jr. – in connection with two schemes to defraud professional basketball players, including Jrue Holiday, Chandler Parsons, and Courtney Lee.^[1] The case highlights the ongoing prevalence of such schemes, and reinforces the need for strict monitoring of professional athlete finances as salaries grow across all major sports in the United States.^[2]

A Summary of the Indictment and Brief Explanation of the Alleged Crimes Committed

Four men, Darryl Cohen, Brian Gilder, Charles Briscoe, and Calvin Darden, Jr., have been indicted on multiple counts related to schemes that defrauded professional basketball players of over $13 million.^[3] The six-count indictment alleges that the four defendants were involved in two distinct fraudulent schemes.^[4]

In the first scheme, registered investment adviser Cohen and independent financial planner Gilder orchestrated a scheme to defraud three professional basketball players (Athlete-1, Athlete-2, and Athlete-3) of over $5 million.^[5] The indictment alleges that Cohen and Gilder engaged in the following fraudulent activities:

1. Fraudulently inducing the athletes to purchase viatical life insurance policies at massive markups without disclosing that Gilder had arranged for a law firm he controlled to purchase the policies and then sell them to the athletes at markups of 222%, 310%, and 244%, respectively. Law Firm-1 made approximately $4.5 million in profit from these sales, which Cohen and Gilder used to pay for their personal expenses.^[6]
2. Directing $500,000 from the accounts of Athletes-2 and -3 as purported donations to a non-profit organization, but then using around $238,000 of the funds to build athletic training facilities in Cohen’s backyard without the athletes’ authorization.^[7]
3. Using a sports agency and another law firm to channel approximately $328,125 of Athlete-2’s money to repay a former professional baseball player (Athlete-4), who was a disgruntled client of Cohen’s, without Athlete-2’s authorization.^[8]

In the second scheme, NBA agent Briscoe and previously convicted fraudster Darden, Jr. defrauded other professional basketball player clients.^[9] The indictment alleges that:

1. Briscoe and Darden, Jr. deceived a professional basketball player (Athlete-5) into transferring $7 million for the purchase of a professional women’s basketball team (Team-1) through a company purportedly controlled by a relative of Darden, Jr. However, none of the money was used to purchase the team, and instead, the funds were misappropriated by Briscoe and Darden, Jr. for their personal use and expenses.^[10]
2. Briscoe and Darden, Jr. also defrauded Athlete-2 by convincing him that they had signed a highly touted athlete (Athlete-6) to their sports agency (Agency-1) and that a $1 million loan was needed for Athlete-6’s preparation for the professional basketball draft. In reality, Athlete-6 had not signed with the agency, and the loan was never received by Athlete-6. Instead, Briscoe and Darden, Jr. misused the funds for their personal purposes.^[11]

Each defendant faces charges of conspiracy to commit wire fraud and wire fraud, carrying maximum sentences of 20 years in prison. Additionally, Cohen is charged with investment advisor fraud, which has a maximum sentence of five years in prison, and Briscoe is charged with aggravated identity theft, carrying a mandatory prison term of two years.^[12]

Brief History of Famous Athletes Defrauded by Financial Advisors

Unfortunately, this is not the first time that professional athletes have fallen victim to unscrupulous financial advisors. Some notable examples include:

• Mike Tyson: The former heavyweight boxing champion sued his financial advisor for allegedly embezzling over $300,000 and giving him bad financial advice, ultimately contributing to Tyson’s bankruptcy in 2003.^[13]
• Tim Duncan: The retired NBA star sued his former financial advisor for over $20 million, alleging that the advisor had defrauded him through a series of investments and misrepresentations.^[14]
• Kareem Abdul-Jabbar: The NBA legend sued his financial advisor for $55 million, claiming that the advisor had mishandled his finances and led him to lose millions of dollars in investments.^[15]

Suggestions for Better Monitoring of Athlete Finances and Avoiding Fraudulent Advisors

To protect themselves from financial fraud, professional athletes should consider the following measures:

• Thoroughly vet financial advisors: Athletes should conduct comprehensive background checks on potential financial advisors, including verifying their certifications, checking for any past disciplinary actions, and seeking references from other clients.^[16]
• Maintain active involvement in financial decisions and establish consistent audits: Athletes should not blindly trust their financial advisors but should stay informed about their investments and financial decisions, regularly reviewing account statements and asking questions to ensure they understand their financial situation. They should also leverage the resources of their players’ unions to conduct regular audits on their accounts.^[17]
• Establish a team of trusted professionals: Athletes should consider assembling a team of financial professionals, such as accountants, attorneys, and investment advisors, who can provide a system of checks and balances and help prevent fraudulent activity.^[18]
• Utilize financial education resources: Athletes should take advantage of financial education resources and workshops designed for professional athletes to help them better understand financial management and identify potential red flags.^[19]

The Importance of Greater Vigilance as Professional Athlete Salaries Increase

As professional athletes’ salaries continue to rise, the potential for financial fraud also increases.^[20] With more money at stake, unscrupulous individuals may be more motivated to target athletes for financial gain. As a result, it is more important than ever for athletes to take a proactive approach to monitoring their finances and protecting themselves from potential fraud.

In conclusion, the recent indictment of four individuals charged with defrauding professional basketball players serves as a stark reminder of the need for increased vigilance in managing athlete finances. By thoroughly vetting financial advisors, maintaining active involvement in financial decisions, establishing a team of trusted professionals, and utilizing financial education resources, athletes can better protect themselves from potential fraud. As professional athlete salaries continue to increase, the importance of greater vigilance and proactive financial management cannot be overstated. By taking these steps, athletes can ensure they are safeguarding their hard-earned wealth and securing their financial futures.