Oct 12, 2012
kosmo - See all 772 of my articles
When John L. Smith’s financial woes made the news, it was reported that the Arkansas football coach owed $25 million in debts related to bad real estate deals. Later court filings showed that this figure was not accurate. Smith actually owed $40 million. Prior to this year, Smith’s highest salary was $1.35 million at Michigan State in 2002. recently, he’d been earning $130,000 as the head coach at Weber State.
How could Smith manage to incur $40 million in debt? That’s a great question. It definitely seems like some bankers were asleep at the wheel when they gave Smith loans. Could an average Joe get loans for such a high multiple of their annual income? I doubt it.
If the bankruptcy court discharges Smith’s debts, he’ll wash his hands of them and begin anew.
Smith is 53, and if successful, could conceivable have around 15 more years of coaching left. He could earn $20-$30 million during that time – with none of it going toward his creditors.
Does that seem right to you? What this precedent would do is set up a win-win proposition for people like Smith. These people would essentially be playing with house money. They’d keep all the money they win but get other people to pay for their losses.
“Wait a minute,” you say. “Maybe Smith will make an honest effort to pay back his creditors. Maybe he just needs some time to straighten things out.”
That’s a noble thought – but you need to pick a different hero. We recently found out that Smith deferred 70% of his 2012 salary. Why? To make it more difficult for is creditors to get at they money. The bankruptcy court may call an unsportsmanlike conduct penalty on Smith and force him to reach a repayment plan with his creditors – a plan that would garnish his salary.
A footbal coach, of course, it a leader of young men – someone who will mold them. Perhaps some parents should have second thoughts about sending their sons to play football at Arkansas.
Bobby Petrino left Arkansas in disgrace, but I’m not sure that the Razorbacks traded up when they go John L. Smith.
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