Submitted by Jen Jones on Sat, 08/22/2009 - 9:42pm
Back in July, Lenny Dykstra, one of Major League Baseball's most recognized center fielders for several years, filed for Chapter 11 bankruptcy protection. Like many retired professional athletes, Dykstra prospered in off the field activities as well, becoming as recognized for his financial wisdom as he was for his batting average.
For a number of years, it was a great story. A former baseball star batting .1000 on Wall Street. He focused heavily on helping his fellow professional athletes invest money during and after their contract periods, providing a dependable resource that could recognize the specific investment needs of professional athletes, who often stop working before they're 35.
Unfortunately for Dykstra, a few fast balls got by him. And then came the lawsuits. The former New York Met, Philadelphia Phillie and World Series winner was facing 20 legal fights upon filing in California as a result of his money handling strategies and business investments. He listed $50,000 in assets and up to $50 million in liabilities on his petition. In April of this year, he cited a net worth of over $60 million and owned a private jet.
Like so many others who need to file bankruptcy, Dykstra's was set in motion by the faltering economy, and the subsequent foreclosure of his residence. Of course, within his income range at the time, the foreclosure involved a $17 million home he purchased from Wayne Gretzky.
Despite the size of the debts and the enormity of the assets and even for the ultra-wealthy and famous, the same bankruptcy rules apply. One of Dykstra's attorneys stated that the former NL MVP runner-up understands now that "...bankruptcy is truly a protective act." The attorney also added that Washington Mutual, the primary lien holder at the time he bought the home before being acquired by JPMorgan Chase, is to blame for misleading Dykstra about his ability to afford the home.
It may be easy at first to dismiss any mentioning of Dykstra not understanding the nuances of his loan given his success as a financial planner. However, a very similar instance occurred in the financing of The Yellowstone Club in Wyoming, a private ski resort that was purchased for well over $100 million and later became part of a very trying, very convoluted bankruptcy as a result of errant lending practices.
Dykstra's case is growing in notoriety because he is challenging many of the legal claims against him. And now, it was brought to light that appearing on his list of assets, next to an assigned value of $10,000, is his German Shepherd. Man's best friend indeed.
Bolstering the controversy is the U.S. Trustee's efforts to convert his Chapter 11 filing to a Chapter 7 liquidation. The switch is being considered because there is conflict over unpaid insurance on the California home. Official court papers filed by Dykstra indicate the house was insured at some point in time, but in reality, the coverage was canceled pre-bankruptcy due to lack of payment. Dykstra's legal team is claiming that Dykstra honestly believed his mortgage holder was footing the insurance bill.
However he ends up making it around the bases, it's pretty clear that Lenny Dykstra's bankruptcy case is going to require extra innings. Highlights at 11:00.
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