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NBA player charities often a losing game

Published December 26, 2008 6:04 pm

Special report » Tax records reveal pattern of mismanagement despite some success stories
This is an archived article that was published on sltrib.com in 2008, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The only way Peter Nicholas could have been more surprised last summer is if Deron Williams had walked into his office wearing his Jazz jersey, with a check in hand.

Instead, Nicholas, director of Salt Lake City's Carmen B. Pingree Center, took a call from a Williams associate asking if his school for autistic children would like to benefit from a charity golf event put on by Williams' Point of Hope Foundation, an offer that resulted in a $28,500 donation to the school.

"This was just a shot out of the blue for us," Nicholas said.

In only his fourth NBA season, Williams has become nearly as aggressive off the court in giving through his charitable foundation as he is on the court as the Jazz's star point guard. Williams so far has contributed $400,000 to numerous causes.

"Maybe in the future, we'll narrow it down to one thing, but right now, I just think there's so many areas that need to be touched that you just spread the love," he said.

Williams is one of five Jazz players - and nearly 100 others in the NBA - who have shown such philanthropic passion. Often raised in modest circumstances before parlaying their talent into multimillion-dollar NBA contracts, these players devote a portion of their wealth to charity, frequently targeting children with backgrounds similar to their own. Players also are drawn to charitable giving by a desire to boost their star power and their "brand."

But an analysis by The Salt Lake Tribune of hundreds of tax documents filed by NBA player charities has found these foundations face a dizzying array of problems, especially those set up by the athletes themselves, without outside expertise.

Among the findings of The Tribune's analysis of 89 stand-alone NBA player charities:

» Together, they reported revenue of at least $31 million between 2005 and 2007, but only about 44 cents of every dollar raised - or $14 million of that $31 million - actually reached needy causes. The average NBA player foundation put just 51 cents of each dollar it spent toward charitable programs, well below the 65 cents most philanthropic watchdog groups view as acceptable. Tax records show budgets are quickly eaten up by poor planning and administrative costs.

» While a handful of player charities appear to be well-financed and tightly managed organizations that do good, a larger number are unimpressively funded and their activities poorly documented. Up to a quarter of NBA player charities analyzed lacked even basic documentation required by the Internal Revenue Service.

» In spite of their celebrity, NBA athletes seeking public donations often struggle for years before building a viable stream of donations. About a third of NBA player charities analyzed instead remain funded by the athletes' own wealth. Many close for lack of support or because athletes move on.

» Few player-run charities hire full-time directors to manage daily operations, and players commonly put family members, friends and former sports associates on their boards, despite IRS rules requiring that a majority of board members be nonrelatives.

» Some player charities hold lavish fundraising galas that cost tens of thousands of dollars but actually lose money.

Though shining examples of NBA charity work abound - including noteworthy efforts by the five Jazz players, all of whom run effective charities - player foundations' noble motives often go awry, as even the league acknowledges.

''We don't shy from it,'' said NBA Senior Vice President Kathy Behrens, adding the league has tried with limited success to maintain a database on player foundations. ''There are horror stories . . . of guys who set them up because their agent said to or they thought it was a good idea and they had good intentions, but not a good plan. That causes trouble.''

Ways to give » Charitable giving by NBA players takes multiple forms.

Documents show some write five-figure checks to existing charities or lend their names to established causes. Others work through one or more of 29 NBA team foundations, which in turn dole out the money to various causes.

Some set up "donor-advised" funds that entrust their charities' operations to an umbrella organization with philanthropic expertise. About a dozen of the NBA's biggest names - Yao Ming of the Houston Rockets and the Jazz's Carlos Boozer among them -- have foundations run by the Giving Back Fund, which manages charities for more than 40 NBA, NFL and Olympic athletes. Giving Back had $1.1 million in revenue in 2007 and gave $824,092 to charitable causes.

Yet despite these alternatives, personal foundations have become ''fashionable'' at the expense of other avenues of giving, said Greg Johnson, executive director of the Sports Philanthropy Project in Boston.

Sincere altruism may motivate formation of player-run foundations. But starting a foundation also has become an element of an athlete's branding, often pushed by sports agents, Johnson said.

"We push it a lot because we want a well-balanced client," agent Bill Duffy said. "We want one of the entities to be giving back and getting involved because you can be an inspiration to others."

But he added starting a foundation is something that should be done with forethought and preparation.

"It's a real full-time business, and I think a lot of players don't understand the significance of the endeavor," said Duffy, who represents Ming as well as Phoenix Sun point guard Steve Nash and Denver Nuggets forward Carmelo Anthony, both of whom operate successful foundations.

He encourages younger players he represents to observe what his older players have done with their foundations and educate themselves. "It's not something you jump into right away."

Player-run foundations » No official numbers exist, but The Tribune found at least 85 players who have filed with the IRS seeking tax-exempt status for one or more charities, although only 59 of those foundations have filed forms required by law for charities pulling in more than $25,000 yearly. Combined, these player-run charities raised $31 million from 2005 to 2007.

But that number doesn't tell the complete story, said Scott Tainsky, who researched the foundations as a graduate student at the University of Michigan.

The average amount raised by player-run foundations - $325,564 in 2006, according to The Tribune analysis - is inflated by the largest of them, leaving the median in the low six figures, said Tainsky, now a professor at the University of Illinois.

''Just because someone's foundation only has $15,000 in assets doesn't mean they're not putting a lot of their money or time elsewhere, but you can't get around the fact that these are some of the smallest foundations you come across,'' he said. "Most of the time the recommended assets to start with are well over what a lot of these foundations have, which certainly should cause anyone who's inclined to question the authenticity of the intentions.''

Big names, small results » That's not to say all player-run foundations fit that mold. Those run by former Houston Rockets center Dikembe Mutombo, retired Miami Heat center Alonzo Mourning, the Suns' Nash, retired Sacramento Kings forward Shareef Abdur-Rahim and the Nuggets' Anthony each have yearly budgets of $1 million or more.

President Bush, in fact, saluted Mutombo in his 2007 State of the Union address as an example of ''heroic kindness, courage and self-sacrifice'' for helping to build the first new hospital in the Democratic Republic of Congo, Mutombo's homeland, in 40 years.

But even as celebrity involvement can bring notoriety and cash to a cause that might otherwise languish, it also can give donors a false sense of security, said Laurie Styron of the American Institute of Philanthropy.

Superstars whose charities have stumbled include Chicago Bulls superstar Michael Jordan, whose foundation closed in 1996 after criticism over administrative costs and the hiring of his sister as executive director. L.A. Laker Kobe Bryant has dissolved at least one charity as well.

Phoenix Suns center Shaquille O'Neal's Real Models Foundation may have closed as well after the Miami Herald reported in early 2007 that it failed to file required documents in Florida. The foundation could not be reached at the telephone number listed on its 2006 tax filings, the last received by the IRS.

Foundations run by former NBA Most Valuable Players Allen Iverson (Detroit Pistons) and Dirk Nowitzki (Dallas Mavericks) could not be reached for comment at their IRS listed phone numbers.

The most recent tax documents available show Iverson's Crossover Foundation took in $10,000 in 2005 and $5,000 in 2006, which, after $11,895 in donations to charity, left the organization $3,664 in the hole. Nowitzki's foundation increased revenue more than sixfold in one year, from $5,926 in 2006 to $37,020 in 2007, but still carried a $14,879 deficit at the end of 2007.

Denver Nuggets shooting guard Dahntay Jones' charity, devoted to providing college scholarships and mentoring, took in $9,795 in 2005 and lost $8,102 in 2006. Charity vice president and Jones' mother, Joanne Jones, said a death in the family forced the organization to cancel its big annual fundraiser one year.

''There's so much competition out there,'' she explained, citing fundraising, paperwork and finding volunteers all as challenges. "We can't afford to pay [staff] because we're trying to pay money into it so we can give scholarships out.''

Operational expertise » The Tribune's analysis found only a dozen or so among 89 player run-charities that had hired full-time directors, often leaving board members reporting only a few hours of work each in charge of administration.

''If you're going to have an effective organization - and ours is a very, very complicated sort of organization - in general, you do need somebody who is a professional'' to run it, said Joan Mandle, Orlando Magic center Adonal Foyle's adopted mother and director of his foundation, Democracy Matters, which mentors college-campus activists.

The Tribune's analysis also found that players commonly rely on family members instead of independent experts to staff their boards, in many cases, violating IRS rules intended to ensure adequate oversight.

More than two-thirds of player-run foundation filing IRS forms between 2005 and 2007 had family members, friends or past sports associates on their boards. In several cases, the boards were made up entirely of family members.

''They are all illegal,'' said Marc Pollick of the Giving Back Fund. ''The IRS just doesn't have the arms to go after everybody.''

Yet family members are often who athletes, suddenly thrust into the ranks of the hyperwealthy, trust the most. And, as in the case of Mutombo's uncle and aunt, Louis and Mireille Kanda, both medical doctors, family members can bring crucial expertise. Said Susan Johnson, Mutombo's foundation director: ''Sometimes relatives are an asset and can be a plus.''

Fundraising challenges » Players typically start foundations with their own cash, reaping an immediate tax benefit but aspiring to eventually turn their operations into publicly supported charities. Fundraising, however, is often more difficult than they imagined.

''You're always having to give credibility and justify, when it's a sports celebrity, because people are skeptical,'' Johnson said. Charities often labor and sacrifice for years, sometimes decades, before establishing a good reputation with prospective donors.

Another pitfall: Player charities often hold annual lavish fundraising events that barely break even or lose money. Pollick at the Giving Back Foundation said these galas can turn into ''fun-raisers instead of fundraisers.''

NBA free agent Robert Horry's Big Shot Foundation reported $206,086 in fundraising expenses for 2005, its first year of operation, but, according to tax returns, the efforts raised nothing.

The year's tab included $38,000 in artist's fees; a total of $23,126 in building and venue rental; a $27,486 expenditure on an unitemized "commission"; $23,005 in food; $25,905 in golf course fees; $17,368 on hotels; along with other four-figure expenditures on a disk jockey, sound and lighting, trophies, video rental, logo shirts and security.

Attempts to reach a foundation spokesman at the phone number listed on tax returns were unsuccessful.

Retired NBA power forward Chris Webber's Foundation holds an annual star-studded poker and golf extravaganza at Planet Hollywood Resort and Casino in Las Vegas, called C-Webb's Bada Bling. Now in its fourth year, the party is billed as "a celebrity weekend'' with a 56-star guest list including comedian Jamie Foxx and singer Gladys Knight.

In 2006, the first year the event was held, party organizers reported spending $243,000 on catering and $327,561 on event production. The foundation also reported losing $530,590 on special events for the same year, tax returns show.

Foundation official Ericka Bjork put that loss down to the challenge of building the reputation of a large-scale celebrity charity event. She said Webber committed up front that ''no general funds or grant money would be affected'' and added that revenue from the bash have grown in its subsequent two years.

What to do » The NBA and the NBA Players Association know there's a problem. They have begun to address it as a formal part of the league's annual rookie orientation. The NBA's Behrens said the sessions offer straight talk on starting foundations.

''We tell the players to take their time, that the first thing they need to do is not go out and set up a foundation,'' she said. "It's a lot to take on and we really encourage the guys to just do it intelligently. It's like starting your own business and sometimes people forget that.''

Kimberly Haynes, an Atlanta-based celebrity charity consultant, maintains that "99.9 percent of [players] come to it because it is their passion.''

But, Haynes and other experts say, while motives are noble, players all too frequently get in over their heads. ''Education of the athlete is key.''

About the project

A Salt Lake Tribune analysis of NBA player-run charities found they face a wide range of problems, from meager funding and high administrative costs to a lack of professional staffing and oversight. Tax records indicate these 89 charities together raised at least $31 million between 2005 and 2007, but only about $14 million of that actually reached the needy causes.