Wednesday, 28 August 2013

Following the Money: Why Footballers are Prone to Bankruptcy

Her husband [...] had been one of the most powerful ends that every played football at New Haven - a national figure in a way, one of those men who reach such an acute limited excellence at twenty-one that everything afterward savours of anti-climax.
                                                                                            - The Great Gatsby, p. 11

Party at Gatsby's, courtesy of Baz Luhrman. Gatsby/footballers can't afford zebras forever. (from )

I learnt recently that Dennis Bergkamp is, due to his canny investments, the 500th richest person in the Netherlands. He has an estimated personal wealth of 55 million, making him the second-richest Dutch footballer, behind Ruud Van Nistelrooy. In 2004, the BBC estimated his personal fortune at £37 million, second only to David Beckham in the UK. At 2004 exchange rates (roughly 1.5 Euros to the Pound), this means that his wealth hasn't changed value for seven years. Which may not seem that impressive, but when you remember that he's been retired for all of that period (although he does work as assistant manager at Ajax, it seems unlikely that his salary there is comparable to his salary at Arsenal) and that there has been a major recession in the interim, Dennis is doing pretty well for himself.

Bergkamp's successful wealth retention looks far better when compared to the unfortunate case of Kenny Sansom. Sansom, who played for Arsenal for eight seasons in the eighties, is England's second-most-capped left-back of all time, after Ashley Cole. Recently, the Sun revealed that Sansom was homeless, and struggling with alcohol and gambling addictions. “I've been living homeless for 10 days,” he said. “That's because I've got no money, I'm a drunk, I'm feeling not very well and I'm a gambler. I've been living on the street.”

The fact is that the retired lives of most professional footballers are far closer to Sansom's than Bergkamp's. The sporting charity Xpro estimates that up to 60% of footballers face bankruptcy within five years of retiring from the game. The chairman of the Professional Footballers' Association, Gordon Taylor, disputes these figures, claiming that bankruptcy rates are closer to 10%, but even this seems shockingly high for such a well-remunerated profession. Bankruptcy is not at all unusual for athletes: for example, Sports Illustrated estimate that “By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.” There seems to be something about young athletic millionaires that renders their wealth unstable.

In the case of Kenny Sansom and others like him (Paul Gascoigne comes to mind), the shortcomings are very obvious. Addictions like alcohol, gambling and cocaine can be ruinous to a player's bank-balance. Indeed, ex-pros may be especially vulnerable to these kinds of dependencies. Football has long had a culture of drinking in the dressing rooms as well as on the terraces. Worse, it has had a macho attitude that has disdained asking for help or admitting you have a problem. I suspect that footballers, due to the stress and prominence of their positions, and the deflating effect of such early retirement, may be unusually predisposed towards addiction, and the culture around them exacerbates this predisposition.

Football culture can be toxic in other ways. It's most obvious problem is extravagant, short-term expenditure. The Secret Footballer, for example, describes a night out in Las Vegas. Two groups of footballers are enjoying $5,000 minimum spend tables at TAO. Their “fixer” has arranged for high class prostitutes for the evening. When one particularly attractive call-girl appears, the Secret Footballer's table is outbid by the one behind, who offer to double the girls' fees. This financial humiliation provokes a "champagne war," where each side continues to gift one another bottles of champagne until one party can no longer pay. The eventual bar bill is “$130,000, excluding tip”. None of the players are going to see this money again, and none of them will be able to spend like this when they stop earning.

Such decadence is common-place, appearing weekly in our tabloids. Liam Ridgewell used £20 notes as toilet paper. Mario Balotelli commissioned a statue of himself. The QPR team, on a winter 'training camp' in Dubai, took the opportunity to party: “We had all day to ourselves. That meant shopping, the pool, nightclubs. We were on holiday, it was just a party. Some of the bar bills were enormous, huge, in the tens of thousands of pounds for one night. Two or three players couldn’t train the next day. It was that bad.”

Such spending is wasteful and likely to facilitate an addictive lifestyle. It is also completely unsustainable. Sports Illustrated quote American money-manager Michael Seymour: athletes buy $20,000 watches, "but if they invested in a five percent, Triple A insured, tax-free municipal bond for a period of 30 years that $20,000 would be worth $86,000 at that tax-free rate of return. And needless to say, they buy more than one $20,000 Rolex." What footballers fail to understand is that they are spending not just their current salary, but their future salary as well.

Furthermore, when players do try to invest their money wisely, they often make poor choices. This is mostly because they lack the interest and education necessary to manage a multi-million pound portfolio. There is a reason wealth-fund managers are so well paid. Managing large amounts of money is a skill, and it is not one taught in football academies, where subjects like basic maths, let alone risk management or economics, are mostly off the curriculum by 14 or 15. Simply speaking, footballers don't know how to use their money, and earn it so early in their lives that they never even have experience of managing their own budgets or of slowly scaling up their wealth. Asking a footballer to manage £20 million is like asking a ten-year-old to play in a Champions League match: they might be able to do it eventually, but they aren't prepared for it right now.

Footballers' financial naïvety is more often neglected or exploited by advisers than it is mitigated. Agents will try and take as much money as they can from a player. Many agents are not even professionals, but just the friends or family members of the players, with no expertise to justify their position. Such hangers on are potentially incapable of giving good advice even if they wanted to. Friends and contacts take the opportunity of a player's success to make some money themselves. The baseball player Torii Hunter gives an illuminating example (again in Sports Illustrated). Hunter looked at the financial statements of a teammate: "It turns out he was paying this guy [his financial adviser, an acquaintance from the old days in the Dominican Republic] $5,000 a month on insurance for two cars in the Dominican Republic," Hunter says. "I got three cars, and I only pay $250 a month. He'd been with and trusted this guy [for almost 18 years]!"

Given that athletes are so vulnerable to exploitation from their own friends and family, it is no surprise that they are targeted by professional fraudsters. A particularly interesting case is that of Luigi DiFonzo, an author, convict, con artist, businessman, FBI snitch and pretend Italian count. DiFonzo “looked like a pimp”, according to his attorney, and served a three-year sentence for defrauding a dead friend's widow out of her $120,000 inheritance. In 1996 he founded a company called DFA Italia to defraud potential investors. DiFonzo would particularly target athletes because they were highly visible and easily trickable millionaires. He even recruited a former pro-football player, Duval Love, as a salesman to make the pitch easier to other athletes. To add to his allure, he posed as a member of the Italian nobility. He and his crew laundered the fraud-money through the MGM Grand Hotel and Casino in Las Vegas to reduce the paperwork; presumably the gambling milieu provided both the glamour DiFonzo craved and a welcome pool of potential investors. (All DiFonzo information from here.)

DiFonzo's writing partner, Jesse Kornbluth, described him as a “Sicilian Gatsby”. I find the image curiously poignant. Gatsby is a fantasist, a triumph of delusion over reality. “Gatsby, who represented everything for which I have an unaffected scorn. If personality is an unbroken series of successful gestures, then there was something gorgeous about him” (F. Scott Fitzgerald, The Great Gatsby, p. 8 (London: Penguin, 2000; fist published 1926)). Gatsby, who money-voiced Daisy can never love; Gatsby, whose riches diffuse with drops of his blood in his unused swimming-pool.

Gatsby is an apt symbol for our bankrupt athletes. He and they were never meant to be rich, born in deprived areas and parachuted like lottery winners into the dangerous lives of multimillionaires. To lament the problems of the ultra-rich may seem churlish, but it doesn't mean they don't have problems. Footballers can all too often be gross caricatures of modern consumer capitalism, wasting money without Gatsby's elegance or pretensions. Their lives can be nasty, brutish and short. It is this brevity that gives it poignancy. They only earn for, at most, twenty years, but they insist on living as if the present will last forever. Perhaps they have to, to avoid thinking about a bleak retirement. A retirement where they will face constant scams and the worst faces of society. A retirement where their standard of living will, mostly likely, sharply decline, and where the temptations of powders and potions may prove too strong to resist. A retirement where they will no longer be able to do the only thing they know how to do well.

The saddest thing of all, however, is that their wealth is not the only thing that fades. The single biggest factor in athletes' bankruptcy is divorce. Divorce rates are between 60% and 80%. The diminishing lifestyle faced by a post-retirement lack of income tends to cause and exacerbate problems in relationships. For too many, the end of the good life is also the end of their love life.

“They were careless people, Tom and Daisy – they smashed up things and creatures and then retreated back into their money or their vast carelessness, or whatever it was that kept them together, and let other people clean up the mess they had made” (Gatsby, p. 170). Footballers cannot retreat into their own carelessness. The money runs out and they can't replace it. It's been wasted away, on champagne and hookers, yachts and skis, depreciating properties and bad investments. Worse, it's been taken away, by parents and agents, brothers and brokers, wives and children. I find it hard to blame these men for their plight. They were never ready for their wealth, never prepared, never capable. The misery they suffer is the result of a system that ceases to care when they leave the pitch, of clubs and businessmen more interested in trophies than pension plans, and of a culture that overvalues material success over education, ephemerality over sustainability.

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