$55-Million Action Alleges Financial Mismanagment : Abdul-Jabbar Sues Former Manager

Lakers’ basketball star Kareem Abdul-Jabbar filed a $55-million suit Friday against his former business manager, complaining that a long history of financial mismanagement had left him with a string of bad investments and unable to meet his debts.

Thomas M. Collins, who for the past six years had virtually sole control over Abdul-Jabbar’s millions, took thousands of dollars out of his client’s accounts, used Abdul-Jabbar’s money to help finance his own investments and pocketed the money after he sold the basketball player’s car, according to the lawsuit filed in Los Angeles Superior Court.

Abdul-Jabbar said he was frequently reduced to borrowing money from Collins to meet his living expenses and pay his mounting debts, while Collins “allowed” him to spend “excessive sums of money” on his personal residence and several ill-advised investments.

Collins, in a series of million-dollar real estate investments made on his client’s behalf since 1980, failed to consider Abdul-Jabbar’s announced retirement after the 1986-87 season and the fact that his income will be substantially reduced, said the suit filed by Los Angeles attorney John Gaims.

‘Amicable’ Parting

Collins, who has earned about $125,000 a year as Abdul-Jabbar’s agent since November, 1980, could not be reached for comment late Friday. Attempts to reach Abdul-Jabbar and Gaims were also unsuccessful.

However, when the two terminated their contract earlier this year--after negotiating what was to be a final, $2-million contract between Abdul-Jabbar and the Lakers--Collins described it as an “amicable” parting of the ways, recognizing Abdul-Jabbar’s plans to eventually enter the entertainment field.

“It’s time to push him out of the nest,” Collins said then.

The voluminous lawsuit paints a picture of a long series of huge investments in which Abdul-Jabbar had little or no active role. The 39-year-old center said Collins typically “perfunctorily” described a potential investment in “highly favorable terms,” often after it was already an accomplished fact, then quickly had Abdul-Jabbar sign the necessary papers.

Abdul-Jabbar said he signed the documents without reading them, a reflection of the “complete faith and trust” he placed in Collins’ financial stewardship. Yet many of the documents turned out to be bank notes obligating him for far more than his own share in an investment--and they were investments in which Collins himself had a financial stake, the lawsuit alleges.

For example, Abdul-Jabbar said he was asked to join 10 other partners in acquiring and rehabilitating the Balboa Inn in Newport Beach, an investment that was to cost him $405,000 for his 22.5% share. Collins himself was to invest $90,000 for a 5.25% share.

Yet among the papers that Abdul-Jabbar said he unthinkingly signed was a business loan agreement for $1.8 million, effectively obligating him for the entire amount of the loan. Moreover, the basketball player’s company, Ain Jeem Inc., became obligated for a $4.05-million guaranty agreement on the Balboa Inn and a similar venture in Laguna Beach, the suit said.

Partnership Interest

Similar transactions were negotiated in subsequent years--for the Balboa Restaurant, the Hotel Redmont in Birmingham, Ala., a Tony Roma’s restaurant in Addison, Tex., a limousine company and the Los Angeles Sports Club--all granting Abdul-Jabbar a small partnership interest, yet obligating him as a guarantor on the capital loans for nearly all the investors.

Moreover, many of the partnerships began suffering “severe financial difficulties,” with debts mounting so quickly that they exceeded Abdul-Jabbar’s ability to meet them, the suit said. Yet Abdul-Jabbar said he was unaware of any problems, because he was never provided with any regular financial statements.

Abdul-Jabbar said he began to learn the extent of his financial problems when he hired an independent auditor last fall.

Line of Credit

The auditors found instances in which Collins had withdrawn money without authorization from his client’s accounts--$8,000 in cash, $60,000 against a line of credit and $20,000 in cash that was transferred to another account but never traced--apparently for Collins’ “personal gain,” according to the suit.

An additional $213,000 had been taken from Abdul-Jabbar’s account to be used “for the benefit” of Collins’ other clients, the suit said.

Collins’ other clients include Ralph Sampson, star center for the Houston Rockets; Terry Cummings of the Milwaukee Bucks; Alex English of the Denver Nuggets and Ricky Sobers of the Seattle SuperSonics.

Abdul-Jabbar said he also learned that his state and federal income and payroll taxes had been filed late in many instances, costing him $182,000 in penalties and interest to the Internal Revenue Service and more than $24,000 to the state. An investment in cattle feed, allegedly made for “tax purposes,” cost him $297,000, he said.

The lawsuit, alleging negligence, fraud, conversion and breach of fiduciary duty, among other things, seeks $5 million in general damages and $50 million in punitive damages.