Kevin Garnett Supports Fraudster, Loses $77 Million to Said Fraudster

$77,000,000.00. It’s equivalent to 27,402,135 gallons of gas or the total median income of 1,304 families in the United States. It’d provide 1,305,084 students Amazon Prime or 583,864 families a yearly Netflix subscription.

 

It’s also the amount Kevin Garnett alleges an accountant, Michael Wertheim, and his accounting firm, Welenken CPAs, enabled Garnett’s financial advisor, Charles Banks IV, to defraud him.

 

Wait a minute, you might be saying, why isn’t Garnett suing the financial advisor who “enabled” the accountant to steal $77 million? Well, that dude’s in prison for four years for defrauding another professional athlete, Tim Duncan, of $7.50 million. None of Duncan’s $7.5 million has been recovered, so Garnett probably won’t recover a dime either. Therefore, Garnett is going after the accountant who was allegedly aware of years worth of transactions that led to such a monstrous fraud. Maybe, Wertheim and Welenken CPAs have some money.

 

WAIT A MINUTE, you might be pleading, you’re saying Garnett knew his financial advisor was charged with securities fraud by the SEC in 2016 (for activity from 2012) and later found guilty in 2017 and didn’t think he might be getting screwed too?

 

Garnett not only continued to trust his financial advisor after he was sent to jail for four years, Garnett showed up at Banks’ sentencing IN SUPPORT OF BANKS:

(Emily Baucum is a San Antonio news reporter.)

 

It wasn’t until a few months later when Garnett’s wife filed for divorce that CPAs were hired to look through Garnett’s finances (as is typical in big money divorces). The CPAs identified the alleged issues by Banks and the accountants. (Sadly, Duncan’s fraud was also initially identified due to a divorce.)

 

This is one of the weirdest cases of fraud against a pro athlete, a testament to the huge role our psychology plays in fraud, one where Garnett’s trust of someone can be so omnipotent that he’s blind to reality and risk.

Dropping the Hammer

According to the lawsuit filed by Garnett against the accountants, Garnett’s primary vehicle for investments was called Hammer Holdings LLC, an entity set up to make various private investments.

 

Garnett and Banks each held a 50% interest in Hammer Holdings, meaning that they would share in profits 50/50. The lawsuit alleges Banks advised Garnett throughout the years that all contributions made by Garnett would be matched by Banks, hence the splitting of profits down the middle.

 

You may not be surprised to hear that Banks only contributed “a mere fraction” of Garnett’s contributions. But you may be surprised to hear, according to a sworn affidavit by the accountant being sued, Michael Werhtheim, Banks owed Hammer Holdings more than $21,924,000 in unpaid loans. These “loans” by Banks were likely made to create a bogus paper trail of contributions to Hammer Holdings.

 

All in, Garnett contributed $57 million to Hammer Holdings while Banks contributed approximately $2.5 million. I’m no Math major, but I don’t think that’s 50/50.

 

While we’re on the subject of numbers, Banks used Hammer Holdings, in part, to fund at least 20 entities/companies, many of which he directly or indirectly owned. The lawsuit states “most (if not all) of these companies are currently illiquid and valueless.”

 

Banks also allegedly used funds from Hammer Holdings for his own purposes, including paying credit cards, mortgages, personal investments which Hammer had no interest, hire private jets, and take his family on vacations. Banks even sent money to Hong Kong and Norway for some unknown reason.

 

Amazingly, Werthheim stated, “I have never spoken to or communicated with Garnett about Hammer,” and Wertheim said, “Mr. Banks stated to me that ‘he would make it right’ with Garnett.”

 

Sigh.

One Terrible Defense

For a Defensive Player of the Year and a nine-time NBA All-Defensive First Team recipient, Garnett left his bankroll wide open. Banks had control of bank accounts in Garnett’s name. As seen below on the Hammer Holdings, LLC corporate documents filed with the California Secretary of State, Banks was listed as the sole manager and had sole control of Hammer:

There is no mention that Garnett held money with Banks elsewhere, such as Banks’ prior financial advisory firm, CSI Capital, or later at SunTrust after it acquired CSI. This all prompts the reader to question whether all of Garnett’s money for investments was in Hammer Holdings. If so, the lack of diversification of Garnett’s money into the public markets (equities and fixed income) would have been an immediate and enormous red flag given how much money was held with Hammer Holdings for private investments.

 

You may be asking, like so many others do when these seemingly incomprehensible frauds occur, “how could this defrauded athlete possibly let this happen? If the athlete just looked at his accounts, wouldn’t he have noticed the problems?”

 

Maybe, maybe not. Remember that the same financial advisor is responsible for providing you reviews on your accounts. If he’s committing fraud or financial abuse, he probably won’t tell you. He will likely conceal the fraud via forgeries, lies, and omission of material facts. Pro athletes aren’t taught to identify red flags of fraud. They see their bank accounts increase as their contracts increase, and they think all is well. Until it’s gone.

How BrightLights Would Have Prevented the Fraud

The level of power that Garnett provided Banks over his bank accounts and Hammer Holdings would have immediately generated a high risk rating of fraud. If these powers given to Banks were identified at the beginning of their relationship, BrightLights would have consulted Garnett that if he truly wanted to give this much power to another individual then BrightLights would have to continuously monitor all accounts held in Garnett’s name as well as any corporate entities that he had an interest, including Hammer Holdings.

 

BrightLights would have also advised Garnett that having all his investment money in Hammer Holdings was incredibly irregular and risky and created a very high risk of investment abuse.

 

Do you think Banks would have had the guts to steal money from Garnett when a Certified Fraud Examiner was watching every movement of money? Banks would know any transactions would be questioned immediately with a need to see any supporting documentation. His bogus “loans” to create a paper trail would have been questioned, but it’s likely Banks would not have done something so risky if someone working in Garnett’s best interest was providing oversight instead of some lacky of an accountant.

Say It Ain't So

Watch this interview with former Spurs great and NBA Champion, Sean Elliott, taken on the day of the prison sentencing of Charles Banks for Tim Duncan’s fraud:

 

  • There are so many things Elliott said here that stands for the reason BrightLights exists, but here are the quotes that jump out:
  • “Every athletes gone through their troubles with people financially. I don’t know if there’s any athlete that’s immune to being deceived out of money in one way or another.”
  • “My eyes have been open. I’ve known about stuff like this for years. As I said, it is what it is…If you have money, people come after you.
  • Question: "Were you approached by these capital management type companies trying to get your business?"
  • Answer: "Oh absolutely, yes...Your salary is in the paper, people know you have money, and there are people lined up trying to take it away from you."

IT IS WHAT IT IS.

 

Hearing that phrase in response to despicable humans taking advantage of others really grinds my gears. It’s almost an acknowledgement that there’s no way athletes can avoid these hucksters, and that’s just wrong. But that belief is instilled in the mind of so many pro athletes.

 

Despite the extreme distrust that athletes have of outsiders approaching athletes or business (which sadly, but understandably, includes me! Without being referred by a trusted source, I look just like any other person with his hand out), they completely and blindly trust those managing their money.

 

Which sounds a bit counterintuitive, right? If pros don’t trust anyone outside their circle because people are lined up to take it all away, then why do pros think no one inside their circle would be capable of the same thing?

 

This blind trust is not naive to pros. Everyone trusts their financial advisor. The only checks and balances occur when the client actually understands finance well. But usually that person, like me, manages his/her own money.  

 

There really is no reason to trust your financial advisor given the perverse incentives of the industry and a host of other issues which I’ve talked about ad nauseum on my blog. So you’re supposed to trust but verify. But this doesn’t happen because the system in finance and sports is broken and corrupted.

 

Don’t listen to me, listen to former NBA pro and now employee of the NBA’s union, Dale Davis:

 

“The system is just broken. In any situation, you take a kid from 19 to 23 years old, and you do everything for him, so he’s not really exercising that decision-making muscle. You give him a ton of money and access to things, and then when he’s done, he’s done. There’s no real training on life.”

 

Just remember, Dale, it’s operating exactly how those in power want it to operate. So let’s keep fighting.


Write a comment

Comments: 0