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Inside job So-called hot tips land Edelstein in hot water
When you have some money to invest, there's nothing quite like inside information. A hot tip sends the brain cells into overdrive. You start to think you have an edge. You know it's too good to be true, yet you do it anyway -- you buy into a "sure thing." And then some funny stuff starts to happen and, thud, it's over. The money is gone and you want to hide from everybody. It can happen to anyone, even the smartest and the most successful of us. Consider the case of Eugene Parker, the NFL superagent who has built one of the most successful sports-representation businesses anywhere. If he were to gather his NFL clients, he could stage his own Pro Bowl. According to a federal indictment filed in U.S. District Court in Philadelphia last month, Parker and 10 others made the mistake of listening to Fred Edelstein, the editor and publisher of Fred Edelstein's Pro Football Insider, an NFL newsletter. In the indictment, Edelstein is accused of having defrauded Parker and the others of $945,000 in investments based on his inside information. The FBI uses a different term for Edelstein's tips. The bureau calls them "false representations" and says they are crimes punishable with a maximum of 25 years in jail and a $1.25 million fine. In his pitch to Parker in December 1998, according to the charges, Edelstein said he had a sure-thing deal with "a prominent NFL owner" that promised an enormous profit. Edelstein claimed he could turn a $100,000 investment into $167,500 in just four months. That's not a bad return. But Edelstein's real hook was the involvement of the team owner. It was, of course, too good to be true. This must be an embarrassing situation for Parker. If one of his clients were to have come to him asking for advice on the deal described in the indictment, he likely would have told the player to stay away from it. There are also undertones of conflict of interest here. If Parker was in business with an NFL owner, how could he represent a player in contract negotiations with that team? Neither Parker nor Edelstein will discuss the matter. Other "victims" described in the Edelstein indictment include former NFL all-pro linebacker Bill Bergey and Marc Ganis, an NFL consultant who helps the league and its owners with complex stadium deals. Ganis says Edelstein offered him a piece of an initial public stock offering in Ariba Technology in June 1999. Edelstein's claim was that he had control over a chunk of the stock from a broker who, according to the indictment, "owed him a favor." The IPO was a bonanza for the people who bought into it, but, according to Ganis, Edelstein had none of the stock. When Ganis demanded a refund, former 49ers owner Eddie DeBartolo wrote him a letter asking him to give Edelstein some time to recover. Ganis sued Edelstein in Circuit Court in Chicago and won a fraud judgment against him for the $50,000 he had invested plus the promised profits. Trying to keep his investors happy, Edelstein kept sending them checks. Some of the investors were lucky. The checks did not bounce, and they got their money back. But the repayments were, according to the indictment, "made with money fraudulently obtained from others." It was a kind of Ponzi scheme that finally collapsed when Edelstein bounced 44 checks for a total of $1.9 million. While awaiting trial next year, Edelstein says he will continue to publish his newsletter. The first issue is due out next week. He may have some terrific inside information on the NFL, but there is a lesson in all of this: If someone with inside information offers you a deal that seems too good to be true, it is. Do what Parker would tell his players to do -- stay away from it. Sports Illustrated legal analyst Lester Munson regularly holds court on
sports law and business matters on CNNSI.com. The opinions expressed here are
solely those of the
writer.
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