Who do you trust with your money?
Many of us would probably list “parents” near the top of that list. Which is why the tale of Columbus Blue Jackets defenseman Jack Johnson is so shocking and deplorable.
Aaron Portzline of the Columbus Dispatch reported on Thursday that Johnson filed for bankruptcy on Oct. 7, claiming assets of less than $50,000 and debts of more than $10 million. Sources tell Portzline that his debts could be closer to $15 million.
According to Cap Geek, Johnson’s made $20.9 million in his career on three NHL contracts; that money’s all but gone. His current one runs through 2018, and has him making $5 million a season; much of those future earnings have been ear-marked for repayment of loans. He’s had wages garnished from his paycheck from the Blue Jackets for last two seasons in order to settle one of three lawsuits he’s participated in.
The catalysts for this financial calamity are his parents, Jack Sr. and Tina Johnson. According to the paper, Johnson signed away his power of attorney to his mother after signing a 7-year deal with the Los Angeles Kings in 2011, three years after parting ways with super agent Pat Brisson.
She went on to borrow about $15 million in Johnson’s name via ridiculously high-interest loans.
Bad advice abounds in this story. The Johnsons were convinced by a financial advisor named Simon Vo, whom they knew through a connection to Johnson's days at the University of Michigan, to “monetize” Johnson’s contract, i.e. borrow against future earnings. That led to loans such as:
- a 12-percent interest rate loan of $1.56 million to buy their Manhattan Beach house.
- a 12-percent interest rate loan of $2 million from Rodney L. Blum, who is now a U.S. congressman from Iowa.
- a 24-percent interest rate loan from Pro Player Funding in New York, which specializes in monetizing contracts.
- an 18-percent loan from Adam Blum (not relation to Rodney) for $400,000.
Rodney Blum and Pro Player Funding sued Johnson, and he settled with both. Adam Blum has an active lawsuit against Johnson for fraud on the loan application, but the bankruptcy filing has frozen that.
Read the full story here and cringe.
To the surprise of no one, Johnson has cut off communication with his parents. He’s also surrounded himself with professional financial planners. From the Dispatch:
Johnson’s Columbus-based attorney, Marc Kessler, said Johnson has surrounded himself with a network of people who, finally, are serving his best interests.
“Jack’s financial situation was detrimentally affected by the actions of those who were trusted to handle his business affairs,” Kessler told The Dispatch.
“Unfortunately, these were predatory lenders going so far as to use Jack’s NHL contract as collateral.
“In order to best protect his future, he’s filed for Chapter 11 bankruptcy protection and he’s enlisted a new group of professionals who are helping him get through these matters. Jack remains focused on hockey. He appreciates the support of the entire Blue Jackets organization and the fans during what is a pretty difficult time.”
This news comes one day after MLB slugger Ryan Howard’s financial fight with his own family came to light, with a $2.7 million lawsuit between him and his twin brother.
As Patrick Burke of the NHL notes, the League has a financial planning component to its rookie orientation, including speaking gigs for former players who have seen their wages disappear.
But it’s one thing for a League to say “don’t trust predatory lenders.” It’s another thing for a player not to trust his own mother with his finances.
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