Special Victims Unit: Sports Stars?

November 21, 2013

By: Sara Kropf

In certain fraud cases, defendants allegedly target groups of victims, such as the elderly or members of an ethnic or religious group (commonly known as “affinity” fraud). But, today, I bring you two cases that involve a very specialized group: professional athletes.

There have been cases where the government has accused sports stars themselves of using their status to defraud others. For example, Willie Gault of the Chicago Bears (and of “Super Bowl Shuffle” fame) was accused by the SEC of investor fraud. Daniel “Rudy” Ruettiger settled SEC charges in 2011 for a “pump and dump” scheme involving an energy drink.

But the cases I’m covering today are the other side of the coin—professional athletes who are the victims of fraud, not the perpetrators.

They may not be the most sympathetic victims. Relatively speaking, they have wealth and the ability to hire professional financial advisors to help them invest that wealth. At times, though, those financial advisors are the problem.

United States v. Phillip Kenner and Tommy Constantine (E.D.N.Y.). Mr. Kenner and Mr. Constantine were indicted for allegedly participating in a $15 million scheme to defraud current and former National Hockey League players. Mr. Kenner advised the players on investments. Mr. Kenner allegedly encouraged his clients to invest in various Hawaiian real estate investments, in a prepaid debit card company called Eufora LLC and in a “global settlement fund” that would profit when certain litigation succeeded. Mr. Constantine (aka “Tommy Hormovitis” and, no, I’m not making up that nickname) is accused of assisting in the conspiracy. The two men would divert the money invested by the NHL players into their own accounts. They were charged with wire and mail fraud, money laundering and conspiracy.

Here’s an interesting New York Daily News story about how NHL player Bryan Berard helped law enforcement with the case.

United States v. Joseph Lombardo (S.D.N.Y.). Joseph Lombardo was the founder of a company called Prim Capital Corporation. He recently pleaded guilty to mail fraud and obstruction of a grand jury investigation. He was accused of trying to defraud the National Basketball Players Association (“NBPA”). Prim was hired by the NBPA to help with the management of $250 million in assets, reviewing investments of players and conducting seminars on financial management for players. During a government investigation, Mr. Lombardo gave the Department of Labor an agreement purportedly signed with Gary Hall, the NBPA general counsel. The contract contained a much higher fee for Mr. Lombardo and was supposedly in force for five years. It turned out that the late Mr. Hall’s signature was forged and the contract had not been approved by the NBPA. That lead to charges and this guilty plea. He will be sentenced in March 2014.


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