Denver Nuggets basketball star Carmelo Anthony filed a lawsuit in federal court last week alleging that his former financial and business adviser transferred more than $2 million from his accounts without his knowledge or consent.
In the complaint, filed in U.S. District Court for the Eastern District of California in Sacramento, he alleged that his former financial and business manager Larry W. Harmon and employees associated with the latter's company transferred $1.75 million of Mr. Anthony's money last year to a firm with which Mr. Harmon was affiliated.
The complaint also alleged that the defendants invested an additional $265,000 with other third parties between 2005 and last year, also without Mr. Anthony's knowledge.
Earlier this year, Mr. Anthony fired Mr. Harmon and hired a new business manager and consultant.
The complaint also alleged that Mr. Harmon and his associates turned over books and records to the new manager that were incomplete and incorrect.
“Over the past few years, it has become increasingly prevalent for fiduciaries to view their [athlete] clients as "prey,' ”said Robert Hirsh of Robert Hirsh & Associates of Beverly Hills, Calif., who is representing Mr. Anthony.
Mr. Harmon wouldn't make himself available when phoned for comment at Larry Harmon & Associates PA, his Roseville, Calif., firm, which describes itself on its website as a “full-service tax, accounting and financial services firm.”
Some advisers say that the number of similar cases will continue to increase unless advisers devote more energy to communicating and educating clients about their investments.
“We stress education first,” said Christopher Franklin, chief executive and owner of Titan Financial Services Inc., which has $40 million in assets under advisement and has worked with many professional athletes over the past 15 years.
“The client has also to own his own vision [for his investments],” he said.
Titan Financial, based in Waldorf, Md., doesn't make investments without vetting them first with the clients, he said.
FINANCIAL EDUCATION
Other advisers agree that financial education may be the biggest challenge facing professional athletes just starting out.
“Many of these athletes didn't get the same type of education that a high-net-worth individual in the business world received,” said David Hasson at Lebenhart Seckendorf Hasson & Reilly CPAs LLC. The Lake Success, N.Y.-based company specializes in providing advice and accounting services for affluent clients, including athletes and entertainers.
“We want to keep them updated on their affairs,” Mr. Hasson said. “They are more responsible that way.”
Advisers also have to be comfortable turning down investments and deals.
“For these professionals, people are always coming to them and saying they have a deal for them,” Mr. Hasson said.
Advisers also need to reach out to other experts and consultants to conduct due diligence on deals or investments on which their expertise is limited.
“Some advisers are afraid to let other advisers get near their clients because they are afraid they may lose the client,” Mr. Hasson said.
The concern about athletes choosing advisers led the Washington-based National Football Players Association in 2001 to establish a program that pre-screens advisers and maintains a resource list for players.
Athletes have special planning needs because their careers tend to be very short, said Dana Hammonds, the program's director.
In the NFL, the average career can be just three and a half years, she said.
“The other challenge has to do with the youth and inexperience of the individuals,” Ms. Hammonds says.
Like other investors, they may not be used to opening up their account statements or paying attention to finances. “Clearly, these factors make them more vulnerable,” Ms. Hammonds said.
The adviser program vets advisers based on education, experience, certification and insurance.
E-mail Sue Asci at [email protected].
