The latest scandal involving young, amateur athletes was a long time coming, according to financial advisors.
As another NCAA college basketball season begins, a pay-to-play scandal touched off by Louis Martin Blazer III, a Pittsburgh financial advisor, threatens to shake up the popular sport and might even change the way advisors serve young athletes and their families.
Blazer, formerly the principal of Blazer Capital Management, was implicated in an SEC case accusing him of taking $2.35 million from professional athletes’ accounts between 2010 and 2012. Facing a list of SEC charges, including wire fraud, Blazer accepted a plea bargain without admitting or denying the charges and became a government witness in a case that has led to the arrest of four NCAA basketball coaches, agents and an executive at top apparel company Adidas. Also among those arrested were a sports agent and Munish Sood, a financial advisor.
Sterling Sullivan, a Chicago-based wealth advisor with Calamos Wealth Management who serves professional athletes as part of his clientele, says that the scandal has revealed only a small portion of the poorly behaving advisors, coaches and other officials surrounding college athletics.
“Being in the business of working with athletes, I think all of the honest advisors out there saw this coming,” says Sullivan. “My belief is that this is quite pervasive because there’s so much money that is changing hands in amateur and collegiate athletics.”
With Blazer’s testimony, prosecutors have already uncovered a long-running scheme to pay and lend money to young amateur athletes to convince them to stay on as advisory and management clients. According to federal prosecutors, NCAA coaches were bribed to steer players to certain agents and companies after they became professionals.
Josh Sailar, an investment advisor at Los Angeles-based Miracle Mile Advisors, says that Blazer’s case is far from unique in the shady world of collegiate and pre-collegiate amateur athletics.
“I can almost guarantee that there’s exploitation being swept under the rug here,” says Sailar. “I assume that this is something that has happened on a regular basis for decades.”
Recognizing that they can get more assets under management by attracting athletes earlier in their careers, agents, advisors and others are enticed by a perverse incentive to target ever younger, more vulnerable prospects, says Rick Buoncore, managing partner at Cleveland-based MAI Capital Managment.
While corruption and amateurism issues plague all sports, high-level amateur basketball seems to be most effected, Buoncore says, adding that players often come from socially disadvantaged backgrounds, with little legal knowledge or financial literacy.