Sun, Sep 24, 2006 - Page 17 News List

Hey, big spender

By Timothy L. O'brien  /  NY TIMES SERVICE , NEW YORK

Buffalo Bill, Michael Jackson, Mike Tyson, Wayne Newton, Elton John and other public examples of spending run amok were, or are, all entertainers, and entertainers offer ready fodder for tsk-tsking — largely because gossip columns make it easy for the rest of us homely paupers to take quiet satisfaction in their plight. Entertainers, for the most part, are also peculiarly vulnerable when it comes to personal finance.

“You have people who are struggling for a long time and then overnight, boom, they hit it,” says Shelley Finkel, Mike Tyson’s manager. “If they don’t have someone watching out for them ... it will be very hard for them to be grounded financially.”

UNHEEDED ADVICE

Finkel, a genial, elfin 62-year-old New Yorker who began his own career promoting a A-list rock stars like Jimi Hendrix, said he had always advised musicians and athletes to protect their wealth by socking away a chunk of their earnings into annuities or pensions. Few of them have heeded that advice, he said, including Tyson, who Finkel believes earned and lost more than US$400 million in his boxing career.

“It’s very hard to tell them ‘Don’t!’ because they love the instant gratification,” Finkel says.

Foreman, unlike most entertainers and athletes, had homegrown financial antennae, and his budgetary acumen surfaced at a relatively early age. He slugged his way into prominence by winning a gold medal at the 1968 Olympics, and a year later, when he was 20, he turned pro. Schooled, he said, in the perils of errant spending by the financial predicament of the boxing legend Joe Louis, he decided to form the George Foreman Development Corporation in 1971.

“I had so much time alone,” he recalls. “Not many people thought I would be champ of the world. Didn’t have any friends at all. And what I would do is walk to the bookstore, and I’d buy books. And they were books on taxes, accrual taxes, estimated taxes, and you better make a corporation.”

Foreman says his homework persuaded him to put about 25 percent of what he earned at every bout into a pension and profit-sharing plan controlled by his corporation. “I had all this time dreaming of this, so that when money came upon me I was already prepared,” he says.

Despite how closely Foreman tended his nest egg, most of his assets remained exposed. He describes the way he invested his unencumbered cash, about US$5 million, as a series of blunders: “Oil wells, gas wells, banks, flop, flop, flop.”

Entertainers aren’t the only rich people with holes in their pockets. Business people, seemingly prepared to have a better handle on their balance sheets than celebrities, have wound up as big debtors as well. William Randolph Hearst, of the publishing empire, the San Simeon estate and a 70m yacht, stood at the edge of insolvency in the late 1930s. John DeLorean, Motor City dream weaver and inventor of a streamlined sports car that bore his name, filed for bankruptcy in 1999 after financial and legal problems.

Questioned in 1991 about the reasons rich people hit the skids, the multibillionaire investor Warren Buffett told an audience at Notre Dame that debt and alcohol were ever-present culprits in financial demise. “I’ve seen more people fail because of liquor and leverage — leverage being borrowed money,” he said, according to a transcript of his comments.

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