Go to ...

News in Arkansas

Arkansas News Online

RSS Feed

September 26, 2017

NFL’s Darren McFadden Learns Lesson From Financial Fumble


Dallas Cowboys running back Darren McFadden thought he could trust his former family friend and financial adviser, Michael Vick of Pulaski County.

Not long after the Arkansas Razorbacks’ former star running back was drafted to the NFL in 2008, McFadden gave power of attorney to Vick, allowing him to have complete control over his finances.

The decision backfired. In June, McFadden filed a lawsuit accusing Vick of “gross incompetence, self-dealing and outright theft” of more than $15 million. McFadden also listed 10 other defendants who were unidentified at the time he filed suit in June in U.S. District Court in Little Rock.

Vick has denied the allegations and asked that the case be dismissed. Vick’s attorney, Willard Proctor Jr. of Little Rock, didn’t return a call to Arkansas Business.

Entering his ninth NFL season, McFadden’s contracts have been worth a total of $64.25 million, according to the website Spotrac.com, which tracks players’ contracts.

The alleged theft and mismanagement haven’t left McFadden bankrupt, said a friend who spoke only on condition of anonymity because of the pending lawsuit.

“This isn’t Darren woke up one day and went to the ATM and it said he couldn’t pull out any money, or no one foreclosed on his house,” the friend said.

There were no obvious warning signs, “which is why it took a while” to discover, the friend said.

McFadden isn’t the only athlete from Arkansas who has accused a financial adviser of fraud.

In March, Scottie Pippen’s former financial adviser, Robert Lunn of Illinois, was sentenced to three years in federal prison for bank fraud. Lunn also was ordered to pay $400,000 in restitution to Pippen, who played basketball at the University of Central Arkansas at Conway and then for the Chicago Bulls.

McFadden’s confidant said McFadden’s other representatives started going over his finances because his playing career is winding down.

It’s unclear where the $15 million went, according to the lawsuit. McFadden has asked for an accounting of the funds that Vick handled.

“The problem of financial fraud against professional athletes is pervasive,” said Laurence Landsman, a partner at the Chicago law firm Block & Landsman. His practice area includes investment fraud, and he represents athletes and others who are victims of investment fraud.

“It happens with alarming frequency, and it is a difficult crime to detect before the money’s gone.”

McFadden told the Dallas Morning News in June: “You have to be careful who you choose. … For me personally, I just feel like I put too much trust in one person and things didn’t get handled right.”

When investors are defrauded, they “feel so foolish for being so trusting and so naive,” said securities attorney Christopher Bebel at Tefteller Law PLLC of Gilmer, Texas. “And they’re not eager to let people know about this.”

(Also see: Investment Fraud: Anyone Can Be a Victim.)

Vick’s Connection

Vick grew up just blocks away from the McFadden family in Little Rock, according to an ESPN.com article in 2008.

Vick attended Southwest Junior High School and J.A. Fair High School in Little Rock. After high school, he held a number of jobs, including being a cashier at Wal-Mart in Little Rock and a telephone sales rep for Sears, according to his file at the Financial Industry Regulatory Authority.

In the fall of 1996, Vick entered Hendrix College in Conway. After graduating from the private college, he landed a job in November 1999 with the wealth management company Merrill Lynch Pierce Fenner & Smith as a financial consultant in its Little Rock office.

But that didn’t last long. In October 2000, Vick was fired for “inability to perform to associated financial consultant standards,” according to the FINRA report. The filing doesn’t release any more details about the termination, but the report doesn’t indicate that his termination was tied to any misconduct.

Vick wasn’t out of work for long, though. In December 2000, he was hired by American Express Financial Advisors in Little Rock as an independent contractor or employee financial adviser. (American Express became Ameriprise in 2005.)

McFadden’s Rise

Meanwhile, McFadden became a standout running back at Oak Grove High School in North Little Rock. He joined the University of Arkansas football team in 2005, where his success continued. He was the runner-up for the Heisman Trophy in 2006 and 2007.

In early 2008, McFadden said that he would forgo his senior year and enter the NFL draft. He was the fourth overall pick that year by the Oakland Raiders and signed a six-year, $60 million contract.

McFadden was referred to Ameriprise, which “agreed to provide valuable business and financial management services,” according to McFadden’s lawsuit. Ameriprise then recommended Vick to oversee McFadden’s money.

The 2008 ESPN article said Vick also advised four other NFL players. That story focused on Vick because he shared the name of the disgraced Atlanta Falcons quarterback who was then serving a 23-month federal prison sentence for running a dog fighting ring. The article, however, didn’t name those players, and Arkansas Business couldn’t determine who they were.

On Aug. 10, 2008, two days after the Raiders’ first game of the season, McFadden gave Vick power of attorney to handle his finances. That gave Vick the responsibility of monitoring and controlling all of McFadden’s earnings and bank accounts.

Signing over power of attorney can be dangerous because such authority can be ripe for fraud and abuse, according to securities attorney Bebel.

“Especially intense supervision is required,” Bebel said.

$3M Bitcoin Investment

In October 2010, Vick voluntarily left Ameriprise and let his financial adviser licenses and registrations lapse, according to McFadden’s lawsuit. But McFadden said he didn’t learn that until years later.

And that kind of independence can create even more risks, Bebel said. Collecting damages can be harder when an adviser is not affiliated with an established broker-dealer and doesn’t have the money or insurance to cover claims.

Bebel said he’s declined to represent a number of investors who have been defrauded because “although liability is clear, collectability serves as a major question mark.”

Vick, however, presented himself “as someone who knew what he was talking about when it came to managing money,” the person close to McFadden told Arkansas Business. “And over the years, it seemed like things were going fine.”

But things weren’t going fine, according to the lawsuit.

Vick invested $3 million of McFadden’s money in a bitcoin business venture that hadn’t paid any return to McFadden since 2010, according to the lawsuit.

The alleged mismanagement came to light when Vick offered to sell McFadden a building that Vick bought with McFadden’s money. The lawsuit didn’t give specific details about the transaction. McFadden’s attorney, Simran Singh of Beverly Hills, California, didn’t respond to emailed questions from Arkansas Business.

After McFadden’s other representatives began to comb through Vick’s purported transactions, including spreadsheets that were allegedly fabricated, it was revealed that “Vick had stolen and lost millions of dollars of” McFadden’s money, the lawsuit said.

He was fired as McFadden’s financial adviser on May 15, 2015. In January, Vick sold his 1,400-SF house in Mabelvale for $100,000, according to Pulaski County Assessor’s Office records.

McFadden said that his damages are at least $15 million, but he won’t know for sure until financial documents from Vick are released to him. McFadden’s claims include fraud, breach of fiduciary duty and breach of contract.

“The tragic aspect of the story is when you have large sums of money and you have hefty levels of trust being placed in the broker, that type of scenario has given rise to outrageous levels of fraud since the beginning of time,” Bebel said. “It’s a reoccurring tragedy.”

A jury trial is set to begin in August 2017 before U.S. District Judge Kristine Baker in Little Rock.

Dallas Cowboys running back Darren McFadden thought he could trust his former family friend and financial adviser, Michael Vick of Pulaski County.

Not long after the Arkansas Razorbacks’ former star running back was drafted to the NFL in 2008, McFadden gave power of attorney to Vick, allowing him to have complete control over his finances.

The decision backfired. In June, McFadden filed a lawsuit accusing Vick of “gross incompetence, self-dealing and outright theft” of more than $15 million. McFadden also listed 10 other defendants who were unidentified at the time he filed suit in June in U.S. District Court in Little Rock.

Vick has denied the allegations and asked that the case be dismissed. Vick’s attorney, Willard Proctor Jr. of Little Rock, didn’t return a call to Arkansas Business.

Entering his ninth NFL season, McFadden’s contracts have been worth a total of $64.25 million, according to the website Spotrac.com, which tracks players’ contracts.

The alleged theft and mismanagement haven’t left McFadden bankrupt, said a friend who spoke only on condition of anonymity because of the pending lawsuit.

“This isn’t Darren woke up one day and went to the ATM and it said he couldn’t pull out any money, or no one foreclosed on his house,” the friend said.

There were no obvious warning signs, “which is why it took a while” to discover, the friend said.

McFadden isn’t the only athlete from Arkansas who has accused a financial adviser of fraud.

In March, Scottie Pippen’s former financial adviser, Robert Lunn of Illinois, was sentenced to three years in federal prison for bank fraud. Lunn also was ordered to pay $400,000 in restitution to Pippen, who played basketball at the University of Central Arkansas at Conway and then for the Chicago Bulls.

McFadden’s confidant said McFadden’s other representatives started going over his finances because his playing career is winding down.

It’s unclear where the $15 million went, according to the lawsuit. McFadden has asked for an accounting of the funds that Vick handled.

“The problem of financial fraud against professional athletes is pervasive,” said Laurence Landsman, a partner at the Chicago law firm Block & Landsman. His practice area includes investment fraud, and he represents athletes and others who are victims of investment fraud.

“It happens with alarming frequency, and it is a difficult crime to detect before the money’s gone.”

McFadden told the Dallas Morning News in June: “You have to be careful who you choose. … For me personally, I just feel like I put too much trust in one person and things didn’t get handled right.”

When investors are defrauded, they “feel so foolish for being so trusting and so naive,” said securities attorney Christopher Bebel at Tefteller Law PLLC of Gilmer, Texas. “And they’re not eager to let people know about this.”

(Also see: Investment Fraud: Anyone Can Be a Victim.)

Vick’s Connection

Vick grew up just blocks away from the McFadden family in Little Rock, according to an ESPN.com article in 2008.

Vick attended Southwest Junior High School and J.A. Fair High School in Little Rock. After high school, he held a number of jobs, including being a cashier at Wal-Mart in Little Rock and a telephone sales rep for Sears, according to his file at the Financial Industry Regulatory Authority.

In the fall of 1996, Vick entered Hendrix College in Conway. After graduating from the private college, he landed a job in November 1999 with the wealth management company Merrill Lynch Pierce Fenner & Smith as a financial consultant in its Little Rock office.

But that didn’t last long. In October 2000, Vick was fired for “inability to perform to associated financial consultant standards,” according to the FINRA report. The filing doesn’t release any more details about the termination, but the report doesn’t indicate that his termination was tied to any misconduct.

Vick wasn’t out of work for long, though. In December 2000, he was hired by American Express Financial Advisors in Little Rock as an independent contractor or employee financial adviser. (American Express became Ameriprise in 2005.)

McFadden’s Rise

Meanwhile, McFadden became a standout running back at Oak Grove High School in North Little Rock. He joined the University of Arkansas football team in 2005, where his success continued. He was the runner-up for the Heisman Trophy in 2006 and 2007.

In early 2008, McFadden said that he would forgo his senior year and enter the NFL draft. He was the fourth overall pick that year by the Oakland Raiders and signed a six-year, $60 million contract.

McFadden was referred to Ameriprise, which “agreed to provide valuable business and financial management services,” according to McFadden’s lawsuit. Ameriprise then recommended Vick to oversee McFadden’s money.

The 2008 ESPN article said Vick also advised four other NFL players. That story focused on Vick because he shared the name of the disgraced Atlanta Falcons quarterback who was then serving a 23-month federal prison sentence for running a dog fighting ring. The article, however, didn’t name those players, and Arkansas Business couldn’t determine who they were.

On Aug. 10, 2008, two days after the Raiders’ first game of the season, McFadden gave Vick power of attorney to handle his finances. That gave Vick the responsibility of monitoring and controlling all of McFadden’s earnings and bank accounts.

Signing over power of attorney can be dangerous because such authority can be ripe for fraud and abuse, according to securities attorney Bebel.

“Especially intense supervision is required,” Bebel said.

$3M Bitcoin Investment

In October 2010, Vick voluntarily left Ameriprise and let his financial adviser licenses and registrations lapse, according to McFadden’s lawsuit. But McFadden said he didn’t learn that until years later.

And that kind of independence can create even more risks, Bebel said. Collecting damages can be harder when an adviser is not affiliated with an established broker-dealer and doesn’t have the money or insurance to cover claims.

Bebel said he’s declined to represent a number of investors who have been defrauded because “although liability is clear, collectability serves as a major question mark.”

Vick, however, presented himself “as someone who knew what he was talking about when it came to managing money,” the person close to McFadden told Arkansas Business. “And over the years, it seemed like things were going fine.”

But things weren’t going fine, according to the lawsuit.

Vick invested $3 million of McFadden’s money in a bitcoin business venture that hadn’t paid any return to McFadden since 2010, according to the lawsuit.

The alleged mismanagement came to light when Vick offered to sell McFadden a building that Vick bought with McFadden’s money. The lawsuit didn’t give specific details about the transaction. McFadden’s attorney, Simran Singh of Beverly Hills, California, didn’t respond to emailed questions from Arkansas Business.

After McFadden’s other representatives began to comb through Vick’s purported transactions, including spreadsheets that were allegedly fabricated, it was revealed that “Vick had stolen and lost millions of dollars of” McFadden’s money, the lawsuit said.

He was fired as McFadden’s financial adviser on May 15, 2015. In January, Vick sold his 1,400-SF house in Mabelvale for $100,000, according to Pulaski County Assessor’s Office records.

McFadden said that his damages are at least $15 million, but he won’t know for sure until financial documents from Vick are released to him. McFadden’s claims include fraud, breach of fiduciary duty and breach of contract.

“The tragic aspect of the story is when you have large sums of money and you have hefty levels of trust being placed in the broker, that type of scenario has given rise to outrageous levels of fraud since the beginning of time,” Bebel said. “It’s a reoccurring tragedy.”

A jury trial is set to begin in August 2017 before U.S. District Judge Kristine Baker in Little Rock.

Source:

Leave a Reply

Your email address will not be published. Required fields are marked *

More Stories From Arkansas Business

About GeorgeMartin