Monday, February 13, 2012

Friends, Family & Futbol

It may sound like a dream come true for many entrepreneurs: an entourage of wealthy friends happy to invest millions in your idea, no matter whether it’s legitimate or plausible. But an ex-professional soccer player’s story serves as a sobering reminder. These types of initial investors might be “fools,” but you could still be on the hook for a deal gone bad.
In a story reported last month, former professional English soccer player Michael McIndoe was linked to an investment scheme in which multiple other professional players participated. Apparently, the business idea involved offering exclusive access to nightclubs and private jets to these individual investors. The plan was sold as a guaranteed-return investment with interest of 20% per month, collected by the investors on the first day of each month at a hotel in London. (Yes, one related comment did mention how many times soccer players hit the ball with their heads.)
Despite the claim by a financial consultant for professional athletes that the scheme was well known and he kept his clients away from it, most investing players did not ask questions; they knew other player-investors were collecting their interest on a regular basis. Beginning last April through this fall, upwards of £1.9 million was invested in the business (one player supposedly invested £1.0 million individually, which, according to my sources, equals about $1.58 million in U.S. dollars). But starting in November, the monthly hotel visitors began returning empty-handed, and many now believe the scheme was a Ponzi-style play, meaning most recent investors will lose all of their money.   
While there are a myriad of lessons one could draw from this fateful story, from the perspective of an entrepreneur it can’t hurt to receive an occasional reminder regarding the risks of the game (pun intended). McIndoe enjoyed a successful soccer career, and was reported as being a “charismatic and popular figure” among other players. He spoke openly about his successful battle to overcome a tough upbringing, and is married to glamour model Emma Frain. He ultimately left professional soccer last year to concentrate on his business career, which includes directorships for a number of businesses in the concierge services, property, and restaurant industries. Although he became a director for the business discussed in this post and helped promote the venture, several articles have mentioned that there has been no suggestion of wrongdoing on his part.
Despite all of this, it is now being reported that gangsters are travelling to Scotland to find McIndoe’s family, that McIndoe has vanished from his flat, and that he has had to hire personal protection. The players do not want to report their losses to the police for fear of getting into trouble with their soccer clubs (and just generally looking stupid), so the only other avenue for blame is their former friend who was involved in the business and encouraged their investment.
While I’m not suggesting that any of our faithful entrepreneur followers would ever suffer such ill fortune, it’s worth noting that even without thugs after you, the U.S. securities laws can also punish promoters of schemes-gone-wrong in a pretty harsh way. Ultimately, the message is that you should always perform your own due diligence and have confidence in any investment you endorse, since no matter how foolish a business’s initial investors may be, when the money dries up, all eyes will be on you.
For those eager to dig into the details of McIndoe’s story, you can read more here, here, here, and here.


A Post by Karen Wenzel, Guest Blogger

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