“BALLIN” TO BANKRUPTCY: ANOTHER NFL STAR LOSES MILLIONS
DAVID J. LISKO, PHILIPPA J. BALESTRIERI
On June 17, 2016, the National Football League Players Association (“NFLPA”) alerted every one of its members to the fact that NFL running back Darren McFadden had filed suit against his former manager and financial advisor, Michael Eugene Vick, and unnamed co-defendants 1-10 for Vick’s alleged misappropriation of $15 million of McFadden’s money. Vick is not, and never has been, registered with the NFLPA as a Certified Financial Advisor.
In the Complaint, McFadden, the University of Arkansas Great and the fourth overall pick by the Oakland Raiders in the 2008 NFL Draft, alleges that he and Vick entered into a business relationship in 2008.** At the time, Vick was employed as a financial advisor with the security firm Ameriprise Financial Services. McFadden alleges that Vick specifically targeted him and that Vick represented to McFadden that he would benefit from the confidence, convenience, and continuity of having all of his financial matters handled and administered by an individual singularly devoted to his business management needs. McFadden claims that, to induce him, Vick greatly inflated his alleged specialization in the financial management of professional-athlete clients, expressing that this specialization would result in McFadden’s reaping the benefit of unprecedented financial returns.
** All of the factual allegations referenced in this article are based upon the Complaint filed by McFadden in the United States District Court, Easter District of Arkansas, on June 7, 2016, which is publicly available. Thus, the author does not endorse the alleged facts as anything other than allegations made by a complainant.
Vick allegedly left Ameriprise Financial Services in 2010 to begin working solely with McFadden. McFadden claims that he did not learn that Vick had left American Financial Services, however, until years later. McFadden also alleges that Vick ceased to be registered or licensed as a financial advisor after leaving Ameriprise Financial Services, in violation of the requirements of the Arkansas Investment Advisers Act. McFadden was none the wiser at the time, however, since Vick told McFadden, according to the Complaint, that he was registered per the Arkansas Investment Advisers Act and that he would handle McFadden’s finances with the utmost care, avoiding any kind of self-dealing. McFadden alleges that, to the direct contrary, however, Vick misappropriated McFadden’s money to the tune of $15 million.
Vick was in control of this large amount of McFadden’s assets because McFadden had granted Vick power of attorney on August 10, 2008, a grant which McFadden alleges was fraudulently obtained. A second document related to the power of attorney was executed on January 13, 2009. It reiterated Vick’s appointment to act on McFadden’s behalf in financial matters. This power of attorney granted Vick total control of McFadden’s finances, including: withdrawing funds, signing checks and entering into contracts on McFadden’s behalf. McFadden claims that, shortly after the power of attorney was obtained, Vick began using McFadden’s income for Vick’s own personal use, even creating fake records and spreadsheets to conceal his alleged theft and mismanagement.
The supposed-theft and mismanagement took shape by way of Vick’s purchasing properties and businesses with McFadden’s money and then transferring the title into Vick’s name. One such business involved manufacturing bitcoins (digital assets that operate like currency); McFadden claims that roughly $3 million of his funds were used to start the venture only to have Vick keep all of the profits for himself. McFadden also alleges that Vick would make direct transfers of funds from McFadden’s bank accounts into Vick’s personal bank accounts. Why didn’t these transactions create red flags at the banking institutions? McFadden alleges that Vick used his connections at these specific banks to conceal his theft and misappropriation.
McFadden contends that he did not realize anything nefarious was afoot until very recently when Vick offered to sell McFadden a building Vick had in fact purchased with McFadden’s funds. When McFadden discovered the con, he revoked Vick’s power of attorney and fired Vick as his financial advisor. It was around this time, May 2015, that McFadden learned Vick had not been affiliated with Ameriprise Financial Services for nearly five years. It took McFadden until October 2015 to get any financial statements from Vick. In his lawsuit, filed in United State District Court in Little Rock, Arkansas, McFadden is seeking damages for fraud, breach of fiduciary duty, conversion, and breach of contract, among other things. Further, McFadden desires an accounting of all managed funds and that a constructive trust to be imposed over funds in Vick’s control during the pendency of the suit.
This appears to be a classic example of a professional athlete trusting the wrong person and suffering the consequences as the result. Why does this appear to happen so often? Perhaps the HBO television series “Ballers,” starring Dwayne “The Rock” Johnson as a financial advisor to professional athletes in Miami, is indicative of the glamorization of the very warning signs that should prevent a professional athlete from entrusting their money with a shady financial advisor. Maybe professional athletes are like many wealthy individuals who fall victim to confidence men; they want to believe that an exceptional individual, who is already a tremendous success, will take them to the financial “promise land.” This desire to be special and the exception causes many professional athletes to ignore what, in hindsight, are clearly red flags. Generally, I believe it is a mixture of both the glamorization of the con and the exceptionalism with one additional caveat; professional athletes trust very few people but, the people that they come to trust, they trust entirely and, oftentimes, blindly.
The allegations made by McFadden in his Complaint appear to exemplify what the above trends may cause and mirror what I see on a daily basis as a commercial litigation attorney dealing with fraud and as an NFL Agent working with professional athletes. McFadden essentially alleges that he trusted Vick, a local guy from Arkansas, who exuded confidence and claimed to be well connected. Perhaps he did, in fact, know and help out a few professional athletes from the University of Arkansas but, none as big a star as McFadden. McFadden was Vick’s golden ticket. Once McFadden made the decision to trust Vick, he did so wholeheartedly and even signed over a power of attorney to him, giving Vick unfettered access to McFadden’s financial accounts. McFadden trusted Vick so much that Vick was able to leave Ameriprise Financial Services without McFadden even realizing it for several years.
There are a few easy and simple things that, if done, could have prevented Vick from allegedly defrauding McFadden. They are things of which we, as lawyers, agents, or both, must be mindful given our role as fiduciary agents to our clients.
First, do not presume that what was once true continues to be true. It appears, based on the Complaint, as though Vick was once a licensed financial advisor working for Ameriprise Financial Services. McFadden’s trusting that this remained so despite Vick’s loss of licensure and cessation of work for American Financial Services for a period of years is lamentable. If McFadden had remained more vigilant and monitored what Vick was doing more closely, maybe he would not have allegedly suffered such tremendous damages.
Second, professional designations and certifications matter. Vick has never been certified with the NFLPA. The NFLPA vets and tests its certified financial advisors and also forces its certified financial advisors to maintain a certain level of professional liability insurance. If McFadden had chosen to trust an NFLPA certified financial advisor, as opposed to the uncertified Vick, he would have been protected somewhat from potential cons by a further level of oversite and things may have resulted differently for him.
Third, historic performance is the greatest indicator of future performance. If, instead of choosing to trust and blindly follow Vick, McFadden had trusted Vick with a relatively small amount of money and then judged Vick’s performance like a tryout, he may have prevented what he alleges to be $15 million in damages. Empirical testing is the bain of any Snake Oil Salesman— financial or otherwise.
Fourth, only entrust your finances to someone whom you can effectively sue and actually collect judgement on—preferably pursuant to a professional liability insurance policy. The first rule of filing a lawsuit is that you only file a lawsuit on which you can recover. If you have no chance of getting paid at the end of the day, a lawsuit is not worth filing. I do not know if it was worth filing a lawsuit against Vick but I do know that it is highly unlikely that McFadden will ever receive anywhere close to $15 million from Vick, even assuming McFadden wins, which will be expensive and is not a guarantee.
These things seem simple but, history is riddled with confidence men like Bernie Madoff who run Ponzi schemes and those who fall for them. As my friends at the Securities and Exchange Commission and Department of Justice often tell me, it is amazing how much money some people are willing to entrust to people who have one single attribute and no others: confidence.
Hopefully, professional athletes and those advising them will take a close look at the mistakes McFadden made in trusting Vick’s confidence and refrain from allowing their clients to make similar mistakes. There will always be fraudsters conning people and there will always be people— including professional athletes—who get conned. But, if you resist the urge to entrust your money to someone resembling the Rock’s character from Ballers, you and your clients will stand a much better chance of preventing fraud before it starts. While this may mean less glamour on the frontend, the many more millions left in your pocket on the backend should be worth it.
David J. Lisko is a commercial litigation attorney at Holland & Knight, LLP based out of its Tampa office. He is also a former Ohio State University football player and a Certified NFLPA Contract Advisor. http://www.hklaw.com/David-Lisko/
Philippa J. Balestrieri is a commercial litigation attorney based out of Holland & Knight, LLP’s San Francisco office. She, like Mr. Lisko, never ceases to be amazed by how many legal disputes arise from a single element: misplaced trust. https://www.hklaw.com/Philippa-Balestrieri/