Published March 19, 2012
Last week Gary Busey passed a mandatory online financial management course in an attempt to convince a U.S. Bankruptcy court he'll start sensibly managing his money.
The veteran actor recently filed for Chapter 7 bankruptcy. But in Hollywood, going broke is just about as as common as a leaked nude photos; just ask Toni Braxton, Larry Wilcox, Vince Neil, Mike Tyson, and Stephen Baldwin, all of whom have recently filed for bankruptcy.
Not to mention Zsa Zsa Gabor’s husband, who was forced to put their Bel Air mansion on the market last year to pay the ailing star’s medical bills; Wesley Snipes, who was imprisoned for three tax-related misdemeanor convictions; and Nicolas Cage, who lost one of his homes to foreclosure and has been plagued by IRS issues.
So how is it that some of the most well-paid people on the planet can end up with next to nothing? We talked to financial management experts and they ticked off the top five ways rich celebs lose it all (or close to it).
5. They have no idea how money management works.
“Most celebrities have extremely creative minds. But in my experience, the most creative folks tend not to want to spend time dealing with business issues,” tax and business expert Joseph M. Doloboff, Partner at Blank Rome LLP in Los Angeles told FOX411’s Pop Tarts column.
But don’t famous folks hire financial planners and business managers to take good care of their millions?
“Most of them do, but at the end of the day, these accounts are still in a celebrities’ name, which gives them ultimate control over their wealth,” said Certified Financial Counselor for Financial Advice for the Artist, Erin Elizabeth Burns.
Which can mean big spending, big mistakes and…
4. Bad advice.
Pete Krainik, Founder and CEO of The CMO Club, a networking resource for top marketing executives, noted that some celebrities do not have the skill sets to identify and determine the right business/financial managers for their needs.
“Because they don’t think of themselves as brands, they don’t put the efforts or plans in place to maximize their value for endorsement deals,” he explained. “They should have themselves significant additional revenue streams – it is not just about getting the next role, but getting the next deal.”
But some such "additional revenue streams" can also run in the red..
Last year, the Las Vegas rendition of Beso – the restaurant/nightclub co-owned by Eva Longoria – filed for bankruptcy to restructure nearly $5.7 million in debt and other liabilities. Prior to that, the Jay-Z owned 40/40 sports bar in Sin City shut its doors a mere eight months after opening. Britney Spears’s southern-inspired Nyla Restaurant reportedly hit monetary blows before she also severed ties, and both Jennifer Lopez’s “Sweetface” clothing line and restaurant Madres went dark.
3. Theft and fraud.
Hollywood's highest profile people are actually human, which means they too are susceptible to being screwed by business managers, badly worded deals and corrupt advisors. Just ask Kevin Bacon and wife Kyra Sedgwick, who were taken to the cleaners by Ponzi schemer Bernie Maddoff.
Doloboff also said prominent factors in a celeb’s financial crumbling is their tendency to bring "friends" -- or family -- into the fray as business partners or employees.
“Many professional athletes and entertainers want to help their friends while simultaneously helping themselves,” he said. “The best advice is to refrain from doing business with friends. True friends don’t condition their friendship upon doing business together.”
Comedian Dan Cook will probably adhere to that – in 2010, his half-brother Darryl McCauley was ordered to pay the comic $12 million in restitution after pleading guilty to embezzling funds from him. McCauley allegedly stole $12,500 a month as Cook’s business manager.
Friends and fraud – double whammy!
2. Drugs, booze, and bad habits.
Stars are known to fall when the temptations of drugs/alcohol/hard partying turns into a dangerous addiction. It can also be more than an expensive habit, as addiction often impacts other areas.
“You are far more likely to make poor decisions when under the influence of drugs or alcohol. When you’re dealing with celebrities, the problem is that their support groups, (friends, family, entourages, et al), often consist of enablers,” explained Richard Taite, the Founder and CEO of rehab center Cliffside Malibu. “It comes as no surprise that a successful celebrity can face financial destitution if they are abusing drugs or alcohol and are left to their own devices.”
1. Ridiculous overspending.
Last but not least, some beautiful yet broke folks just lead foolishly fabulous lives (we're talking to you, MC Hammer) and refuse to accept that fame (and its fortune) can be fleeting.
“Most celebrities have luxuries such as a cook, a driver, a personal stylist, a personal assistant etc.,” said Burns. “They become accustomed to this lifestyle, but when their contract isn’t renewed, or when the films offers stop coming in, they are still living this life of luxury with the expectation that they will always be in demand.”
Yes, sadly, not every Hollywood tale has a happy ending. But with some good financial advise, the ending doesn't have to be tragic.