NEW YORK, Sept. 6, 2018 /PRNewswire/ -- With massive salaries and lucrative product endorsements and sponsorships, it is no surprise that fraudsters target professional athletes. What is surprising however, is the fraudsters' success.
According to a new analysis by the EY Forensic & Integrity Services practice, professional athletes alleged $494 million in fraud-related losses from 2004 through 2017. The number and value of known fraud cases have also steadily increased nearly every year for the past decade.
This is a problem across all major sports. Due in part to each professional football team's roster size, 41% of identified fraud victims were professional football players. Professional basketball players made up 22% of the identified victims, professional baseball players 15%, and professional hockey players another 10%. Professional soccer players and boxers each accounted for 5%. Fraudsters also target groups of athletes that can span across a variety of leagues; of the $494 million in potential fraud targeting athletes, $114 million (23%) related to cases involving athletes from multiple sports.
"Professional athletes' wealth and profile put them at high risk of being fraud victims," said Brian Loughman, EY Americas Leader, Forensic & Integrity Services. "Instances of fraud among athletes are likely to be much higher than what our analysis revealed, with many cases never becoming public. Being a victim of fraud not only takes a significant personal toll, but for some professional athletes, can even lead to financial downfall and bankruptcy."
Falling victim to a scheme
Methods used to target athletes vary, but they are all linked to one common theme: gaining the athlete's trust – either directly or through mutual contacts – and leveraging that relationship of trust into the fraudster's own financial windfall. Common schemes include:
- Making recommendations based on undisclosed conflicts of interest
- Posing as financial professionals to dupe athletes out of their money
- Using access to make unauthorized and overly risky investments
- Making unauthorized cash withdrawals from athletes' bank accounts
- Providing athletes with false or misleading financial information
- Using athletes' names and images for endorsement deals and loans without permission
Factors increasing athletes' risk of becoming fraud targets
As a high-profile individual, an athlete's estimated worth is well known to the public. Factors that increase athletes' risk of being targets of fraud include:
- Shortage of time to manage their own finances
- Relying on unqualified or inexperienced people because of previously established relationships
- Misplaced trust in financial advisors, business managers, or even family members
- Qualified and experienced advisors with unchecked access
- Exploitation from family and friends
"Because of athletes' large steady cash flows and limited time to oversee their finances, athletes can easily overlook improper management or theft of their assets," said Steve Spiegelhalter, Forensic & Integrity Services Principal, Ernst & Young LLP (EY). "To avoid becoming a fraud victim, athletes need to hire reputable, vetted external parties, rather than inexperienced advisors. Athletes should also conduct due diligence on their financial representatives and potential investments in advance, including background and reference checks, interviews, and audits of financial reports. Finally, they should do what we all should do periodically: take a hard look at where their money is, how much is left, and who can control it."
Methodology: EY analyzed industry data and public news and legal filings related to professional athletes that were affected by fraud.
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This news release has been issued by Ernst & Young LLP, a member firm of EY serving clients in the US.