Friday, August 14, 2009
Where Vick's Eagles money will fly
By Lester Munson
Michael Vick has a brand new NFL contract that could pay him a total of $9.8 million over the next two seasons if the Philadelphia Eagles pick up the second-year option and he meets the incentives in the deal. But based on recently filed court documents in his bankruptcy case, Vick will never see a good chunk of that money.
His next hearing in front of Judge Frank Santoro in bankruptcy court is scheduled for Aug. 27, when Vick's lawyers will ask the judge to approve their plan for payment of creditors. It is their third attempt to obtain approval of a plan. Most of the creditors have agreed to it, but the judge's approval will not be automatic. The plan requires a down payment of about $2 million, and the judge will inquire about that issue. Where will that money come from? Vick's team will claim that it will come from liquidation of some investments that still have value, and from the sale of real estate, boats and horses.
The plan that will be offered will leave Vick with one house (instead of five) with a big mortgage, one vehicle (instead of eight) and his NFL retirement money (all of it). There will be a forced auction of four pieces of real estate, and there are substantial mortgages on those properties. Market uncertainty and the large loans will limit the money that will go to Vick and his creditors.
Vick's NFL income, under this version of the plan, will be distributed thusly:
• From the first $750,000 earned, 10 percent will go to creditors.
• From $750,001 to $2.5 million earned, 25 percent will go to creditors.
• From $2,500,001 to $10 million earned, 30 percent will go to creditors.
• And from any income above $10 million earned, 40 percent will go to creditors.
Although Santoro was skeptical of previous plans and rejected them, the Eagles contract will now be a major factor in his consideration of this third plan. It will help as the lawyers ask for approval.
The advantages to Vick from this plan are: He is showing good citizenship in his willingness to pay his debts instead of simply discharging them in a straight bankruptcy and stiffing his creditors; he has made peace with the IRS, a substantial achievement; he will avoid an adjudication of bankruptcy that would follow him in all financial transactions (loans, credit cards) indefinitely; most of the people who were living off his money (mother, brother, sister, etc.) will be on their own; and he will be under the supervision of a financial team that, one hopes, would prevent him from digging himself into another deep hole of expenses and debt. It might work.
The plan that Vick's lawyers will present on Aug. 27 for the judge's approval is more than 300 pages long. It is highly complex. The first 14 pages are a glossary of the terms used throughout the plan. Under this plan, Vick will pay $800,000 for administrative expenses (court reporters, document searches, investigators, photocopying) from the bankruptcy and will pay the attorneys 50 percent of what they billed. If the plan is approved, the attorneys will collect about $2 million. That is an estimate, but it is as close as we can get for the moment.
Lester Munson, a Chicago lawyer and journalist who reports on investigative and legal issues in the sports industry, is a senior writer for ESPN.com.