If knowledge is power, then I have a superpower. I can help prevent financial crimes before they occur. You think I am joking?
Here’s how I do it: I wrote the book on professional athletes and money. If you follow my advice, you cannot fail. Here’s the plan: Make as much money as possible, maximize savings, invest conservatively, avoid financial scammers. Live happily ever after. It’s really that simple—and I defy anyone to come up with a better strategy. That advice is free.
And here’s what’s insane: Some people who provide the worst advice or outright steal money from clients often charge exorbitant fees.
The most recent cautionary tale comes from members of the music group Black Eyed Peas, who got hooked up with a shady “business manager” named Sean Larkin.
When Will.i.am and other members of the Black Eyed Peas began working with Larkin, he was a recent accounting grad who offered his services to the then-fledgling band. For a long time, everything appeared to be okay.
Then a startling, disastrous discovery: Larkin went years without filing clients’ federal and state income tax returns. Why? He claimed it was “an inadvertent oversight.” Please. An accountant or business manager’s primary job is to make sure his clients’ tax matters are in order—and to file whatever is required by law. Failing to do so is the height of incompetence and, likely, a criminal act.
So, what are the lessons professional athletes and coaches can learn from the Black Eyed Peas?
Dude, where’s my taxes?
When it comes to filing taxes and paying whatever is owed, you are ultimately responsible, even if you hire others to take care of your business. A shady business manager can assure his clients that the taxes were filed, but that’s not enough.
Here’s the law:
“You are required to sign your tax return. By signing the return, you are declaring under penalty of perjury that your tax return is accurate.”
Of course, a shady business manager can fail to file or fraudulently sign a client’s name. In Larkin’s case, he apparently opted to not file.
As much as I despise people who prey on anyone, including high-paid professional athletes and entertainers, victims of financial crimes bear some responsibility. If you don’t read over monthly bank and brokerage statements, you run the risk of not finding out about something bad happening until it’s too late. Even better than receiving monthly statements is to ensure that you have direct access to your online accounts. If you’re on top of your business, scam artists will run. Conversely, if you’re passive when it comes to your finances, you become easy prey.
Don’t grant anyone broad powers of attorney
“Power of attorney” grants another person the legal right to act on your behalf in a specified manner. There are circumstances in which you will need to grant limited power of attorney. But you should never grant unlimited power of attorney. This gives the appointed person the ability to do absolutely anything legal in your name, such as transferring money in (or out) of accounts electronically, investing in your name, and signing documents. It is against the law to commit fraud or embezzle money, but the chance of getting victimized by such a crime, increases dramatically when limits are not put in place.
Hire real financial and legal pros
The catchphrase from the movie Jerry Maguire was, “Show me the money.” Having a competent, ethical accountant is crucial, particularly when money is flowing in many directions and multiple people may have access to your accounts.
An accountant or business manager should advise you how, within the limits of the law, to structure your financial dealings to minimize taxes. A good accountant will also ensure that your financial records are organized, your taxes are filed on time, and you are in good shape to survive an audit.
Be involved…or get screwed
It is easy to set up systems to ensure that money is only paid from your accounts to specified bills such as mortgages, car payments, utilities, credit card companies and brokerage accounts. For one-time major transactions, such as buying a new house or making investments, you should always require your written authorization.
Direct oversight and efficient checks and balances make it less likely that you be will be victimized by fraud or mismanagement, and that if wrongdoing takes place, you will catch it early…before the major damage is done.
About Marc Isenberg
Marc Isenberg is a nationally-recognized athlete advocate for high school, college and pro athletes. A national columnist for Basketball Times, Marc is a frequent speaker at elite basketball camps and athletic programs and teams, including UCLA, RbkU and the Orlando Magic. In 2012, Marc, with Nolan Smith of the Portland Trail Blazers, founded Hoops Family , an organization devoted to educating and mentoring basketball players—and advocating on their behalf.
Go Pro Like a Pro