The Wall Street Journal reports on large award for former NFL star represented by Mike Bishop and Brian Smiley
ATLANTA — As a defensive end in the National Football League, Larry Roberts worried about blowing his newfound fortune. His pay had soared to $1.6 million, but he knew he had just a few years to play – the average NFL career is only 3 1/2 years and had heard horror stories about athletes being duped on Wall Street.So he stashed his money in a bank until he retired. But when a sports agent referred him to Brian Smith, then a broker with Dean Witter Reynolds Inc., Mr. Roberts bit. They were two peas in a pod: Both had played for Southern colleges (Mr. Roberts at Alabama, Mr. Smith at Auburn) and in the NFL (Mr. Smith for the Vikings and the Rams, Mr. Roberts for the 49ers), and they even suffered similar knee injuries that shortened their careers.
The relationship began in 1995 with promises of outsize investment gains. It ended the following year with the 6-foot-6-inch, 280-pound Mr. Roberts scuffling with Mr. Smith, 6 feet 6 and 265 pounds — and moving to throw him out a 30th-floor window in his Atlanta office.
Mr. Roberts is among several current and former NFL players who have accused Mr. Smith in arbitration claims of running their portfolios into the ground. Some say he stuffed their accounts with a risky real-estate deal that went bust. Others claim he forged checks or diverted money; more than a million dollars has vanished.
So has Mr. Smith.
What happened helps answer a question that lurks amid all the hoopla over this weekend’s Super Bowl XXXIII: Why do football players and other professional athletes seem so vulnerable to investment swindles? In one noted case a few years back, a star Shearson Lehman broker and former athlete was sentenced to 41 months in prison after misappropriating more than $2 million from football and baseball players.
Mr. Smith, who is 32 years old, couldn’t be reached for comment. In testimony last year before the National Association of Securities Dealers, he denied doing anything improper. Dean Witter told the NASD it had no knowledge of the real-estate deal. The company, now part of Morgan Stanley Dean Witter & Co., declines to comment on the Smith matter.
Through it all runs a broader investing lesson. Those who otherwise may be skeptical of brokers managing their money often let their guard down when dealing with people they know or relate to well.
Mr. Smith “got my trust by being someone like me,” says the soft-spoken Mr. Roberts, 35. “Not only was he another black, he was an ex-football player, he came from Alabama and went to the same schools.”
Robert Bontempo, a Columbia Business School professor who was trained as a social psychologist, says, “When someone has markers of similarity — the same religious group, the same way of dressing — or shared historical experiences like pro football, there is assumed to be a bond there and a feeling they’re less likely to be taken advantage of. But the only predictor of future behavior is past behavior.”
Mr. Roberts met Mr. Smith in 1995 through sports agent Terry Bolar, who often played host to athletes at his Marietta, Ga., home. There, the players kicked back on his deck talking football, fishing — and finance. One night, Mr. Roberts says, Mr. Bolar told him of athletes getting returns of as much as 40%, and introduced him to Mr. Smith.
Within days, Mr. Roberts had visited Dean Witter ‘s bustling Atlanta headquarters. Mr. Smith’s tiny office was littered with football paraphernalia, including trophies and clippings about his career.
His title was associate director of Dean Witter ‘s sports-services group. Actually, the group was just Mr. Smith and another broker. But the Dean Witter name helped put athletes in the comfort zone: The firm managed the 401(k) plan for the NFL Players Association. The firm passed out promotional tapes and marketing brochures suggesting it was an expert in handling athletes’ finances. In one Dean Witter “educational seminar” for NFL players, Gene Upshaw, executive director of the players association, says: “With . . . the threat of serious injuries always looming, it’s essential for every player to prepare financially for life after football.”
Mr. Roberts was wowed. And he felt at ease with Mr. Smith, who he says peppered his talks with football jargon: Let’s set up a game plan, execute it and get to the goal.
Mr. Smith scoffed at the returns Mr. Roberts got at the bank, he says, and, swiveling around his computer screen, showed his prospective client the accounts of other players. “You don’t want to do this crap,” Mr. Smith warned, as he revealed one player spending $10,000 in two weeks.
Mr. Roberts, retired and doing volunteer work at the time, says he stressed how serious he was about keeping the account from steep losses. “This is my nest egg, this is money that I saved from my football,” he says that he told the broker.
The broker laid out his strategy, Mr. Roberts says, and in the process offered his inside view of how race intersected Wall Street: “The black guys don’t get all the good stocks; they go to whites. But the white guys give me information — and when I get it, we’ll run with it.”
Mr. Roberts listened. Then he forked over $100,000 to invest in stocks, bonds and mutual funds on a “trial run,” plus $500,000 in a money-market fund. Still squeamish, he then looked Mr. Smith in the eye and warned him: “If you screw this up, I’ll kill you.” Mr. Roberts insists he was serious; he says Mr. Smith simply smiled.
Mr. Smith seemed impressed with his new client. Mr. Roberts was a “bright guy,” the broker testified in the NASD case, someone who was itching to learn about the stock market. “He was one of the first new guys,” Mr. Smith testified, “to ask to see my personal account, to ask me where my money was.”
Actually, Mr. Smith didn’t make a great deal. Despite a flashy style — tailored suits and shirts, spit-polished shoes, a blue BMW — his annual income from the brokerage business was just $60,000 to $70,000, other testimony showed.
But he handled the accounts of about 20 current and former NFL players, and Dean Witter had high hopes for him. “He presented himself extremely well,” his former branch manager, Harry Haas, testified. In his job interview, Mr. Smith told Mr. Haas he wanted to work on Wall Street because his older brother, also an NFL veteran, had mismanaged his assets and had no money to show for his football career.
Besides, most brokers had a tough time luring sports accounts, a potential gold mine for Wall Street firms. “Other people have tried to work with athletes — they’re a very difficult group to capture as clients,” Mr. Haas testified. “Most of them are very cautious . . . to the point where they don’t seem to trust hardly anyone.”
Mr. Roberts seemed to be getting over that. Mr. Smith had put him in blue-chip stocks such as Merck and Coca-Cola, plus mutual funds. Propped by the 1995 bull market, the account was thriving, though not at a 40% clip.
Mr. Smith then pitched a potentially more profitable investment: CMS Consulting LLP. He described CMS as a company that bought, renovated and sold homes through a program of the Department of Housing and Urban Development, two clients say, and said it had government guarantees that stood behind the mortgages, as well as private insurance. Clients say Mr. Smith assured them Dean Witter had checked it out.
The pitch to Mr. Roberts: Invest $150,000 in a partnership interest and get 24 monthly payments of $12,500 each, totaling $300,000. “I’m invested in the deal,” he says Mr. Smith told him. Mr. Roberts was tempted.
But when the broker told Mr. Roberts he must “act now,” he balked. He flashed back to his days with the 49ers, when players would talk about getting scammed on “can’t miss” deals. CMS “looks too good to be true,” he told Mr. Smith.
He quickly gave it a second look. He says another former NFL player, Eric Curry, told him that he had invested in CMS and gotten a $33,000 check already, and that everything was working out well. Mr. Curry couldn’t be reached for comment.
Meanwhile, Mr. Roberts says, Mr. Smith persisted, telling him one day in late 1995 that “there’s an opening” to invest in CMS, “but you have to take it today.”
He did. Mr. Roberts put up $140,000, signing the CMS contract at Dean Witter . And he didn’t just invest in the partnership. He also had CMS, which was based in Tucker, Ga., handle the renovation of his colonial-style house in an Atlanta suburb. He says he was told the job would cost less than $10,000.
Trouble signs soon surfaced. Mr. Smith called to say CMS had submitted a work bill — for $40,000. What work? Mr. Roberts demanded to know. His kitchen still had no counter tops. There was no carpet upstairs. New wallpaper already was falling down. Air vents had protruding screws.
And the house still lacked appliances. When a CMS crew arrived to install a stove, Mr. Roberts says, it was a 25-year-old model with a broken door handle and grease oozing from the base. “Where you guys going with that?” Mr. Roberts recalls saying. “Put that s– back on the truck.”
He called to complain. He says CMS officials never answered his calls, so he hounded Mr. Smith, who he says promised to get to the bottom of it, but didn’t.
It was now March 1996. Mr. Roberts was growing more worried. He still hadn’t received any payments from his CMS investment. Then, over a lunch at an Italian restaurant in Buckhead, Ga., with a sports adviser and a mortgage broker, he was given a very different take on CMS: The company wasn’t a HUD-approved lender, it had no guarantees or private insurance, and the state had revoked its mortgage-broker license. (CMS now is defunct, and its former officials couldn’t be reached for comment.)
Mr. Roberts rushed to Dean Witter ‘s high-rise offices, where he found Mr. Smith sitting back in his chair. “What’s going on with CMS?” Mr. Roberts asked.
“What are you talking about?” he says Mr. Smith answered. “I’ve been out of that since October.”
At first Mr. Roberts thought Mr. Smith was kidding. No, come on, he repeated. CMS.
According to Mr. Roberts, Mr. Smith rolled back his chair and started laughing. “If you’re in, that’s your deal.”
The realization hit him: His CMS investment had vanished. He slowly circled around Mr. Smith’s desk, screaming: “Where the hell is my money?” Mr. Smith stood up. “I don’t know,” he said. They were face to face.
Mr. Roberts recalls his one thought: “I was going to throw him out the window.”
As their voices rose, a Dean Witter administrative officer passed the office, then ran in. Another employee heard the skirmish and scampered down the hallway to get Mr. Haas, the branch manager, telling him, “Come quick, we’ve got a major problem.”
Mr. Haas dropped the papers in his hand. “There’s another giant football player in Brian’s office and they’re going at it,” the aide said. Mr. Haas’s mind was racing as he bolted to Mr. Smith’s office. In testimony, he recalled thinking that “one or both” of the players “could throw me out the window.”
When he got to Mr. Smith’s office, he was relieved to see that the administrative officer, Cindy Stoll, had managed to coax Mr. Roberts into the hall before anyone got hurt. Mr. Roberts “was so upset that he was literally shaking,” Mr. Haas testified.
After hearing Mr. Roberts’s complaint, Mr. Haas confronted Mr. Smith. He says the broker told him Mr. Roberts had invested in CMS on his own and knew Dean Witter had nothing to do with it.
In brief NASD testimony, Mr. Smith said he didn’t “remember exactly” what was said. “I told him I didn’t put him in it, and I didn’t put him in it. That was what we were shouting about.”
But during the case, it became clear that Mr. Smith was deeply involved in CMS. Mr. Roberts’s lawyers introduced evidence that the broker had received commissions from CMS for steering his Dean Witter clients to the investment. Part of his payment: the use of a BMW 740.
Last year, the NASD arbitrators awarded Mr. Roberts more than $221,000, even though he invested just $140,000 on the CMS deal, according to J. Michael Bishop and Brian N. Smiley, his lawyers at Page Gard Smiley Bishop & Porter LLP of Atlanta.
Among other Smith clients who bought CMS was James Joseph Jr., who met Mr. Smith in high school in Phoenix City, Ala. Mr. Joseph played with Mr. Smith at Auburn and later for the Cincinnati Bengals and Philadelphia Eagles.
Mr. Smith pushed the CMS deal to Mr. Joseph while he was in training camp in 1995 with the Bengals. Mr. Joseph later alleged in a New York Stock Exchange arbitration claim that Mr. Smith forged his signature on a $50,000 wire transfer and that he improperly took a $33,000 payment from CMS due Mr. Joseph.
Dean Witter denied the allegations but settled that matter late last year for $137,500 without admitting liability, according to regulatory records. It declined to comment on the case, as did Mr. Joseph through his lawyer. Mr. Smith didn’t respond to the allegations.
Some current NFL players also claim Mr. Smith betrayed their trust. James Stewart of the Jacksonville Jaguars alleged in a Big Board claim that Mr. Smith forged a wire transfer of $115,000 out of his brokerage account at the firm. Mr. Stewart declines through his lawyers to comment on the matter, which is pending. Morgan Stanley Dean Witter denies his allegations and says Mr. Stewart had been sent a notice of the wire transfer. The claim wasn’t filed against Mr. Smith, and he hasn’t commented
Mr. Smith left Dean Witter in 1996 for Merrill Lynch & Co., where he flourished for a time. Cortes Bicking, the Merrill branch manager who hired Mr. Smith, invited him to his home for Thanksgiving in 1996. They sat on the floor with several friends, munching Kentucky Fried Chicken and watching the Iron Bowl between Auburn and Alabama. At the Super Bowl two months later, Mr. Smith rented a room and managed to persuade several NFL players to open new brokerage accounts with Merrill.
“I have to tell you, he’s the kind of guy you’d almost trust your life to,” Mr. Bicking says. “He was impressive — he was comfortable with black people, comfortable with white people, and he didn’t play up his role” as an ex-NFL player.
But problems soon caught up with him at Merrill, too. Willie Anderson, a young Bengals lineman who invested his entire bonus check of about $2.8 million with Mr. Smith, complained to Merrill that his account had losses of $1 million and that $500,000 was missing.
Mr. Anderson was hesitant to file a written complaint with Merrill because he said Mr. Smith “has been good to me,” according to Mr. Bicking. He eventually did so, though, and Merrill now is investigating the matter. Mr. Anderson, who still has his account at the firm, declines through his lawyer to comment.
In October, the NASD’s enforcement department filed a civil disciplinary case against Mr. Smith, accusing him of ignoring requests to explain the Anderson complaint. Mr. Smith hasn’t responded.
Mr. Smith left Merrill in 1997; the NASD revoked his brokerage license last year. After briefly testifying in the Roberts matter, he vanished. Investigators hired by Mr. Roberts, Dean Witter and Merrill are still trying to find him.
Merrill’s Mr. Bicking has come the closest. When Merrill began its probe into the Anderson matter, Mr. Bicking called an investment company to which some of Mr. Anderson’s money had been transferred. He wanted to find out more about Mr. Smith’s activities. A man with a deep voice answered the phone.
“Who am I speaking to?” Mr. Bicking asked.
“This is Brian Smith,” the man replied. “Who’s this?”
“Brian, this is Cortes Bicking,” the Merrill manager said.
By Michael Siconolfi