How to cut your throat while cutting a deal is the lesson to be learned from the case of fallen superagent LaRue Harcourt. Harcourt, now 60, started out as a high school and junior college basketball coach, taught business courses at Cerritos ( Calif.) College and became one of the prime movers in baseball's free-agent boom of the late 1970s. Content at first to negotiate contracts, he later moved into financial planning and put his clients in tax shelters and other investments that he freely describes as "high-leverage things." These included partnerships formed to purchase Learjets and lease them to commuter airlines and the United Parcel Service; other deals involved trucks, yachts, computer software and liquor stores.
The investments eventually became intermingled so precariously that they tumbled like a house of cards, and down came a host of major league baseball players, among them Bill Campbell, Dave Goltz, Rick Wise, Doug Rau, Ken Reitz and Don Sutton. "Major assets of one partnership were notes from another," says Dan Grigsby, attorney for former major league pitcher Matt Keough, another of Harcourt's clients. "You'd discover that rather than owning this real property or auto-leasing company, someone else owned it, and instead you'd find a note. You wouldn't have cash, just a note from a partnership that didn't have money. Harcourt was robbing Peter to pay Paul."
At last count some 14 athletes had lost a total of $6 million through Harcourt's investments; because of disallowed tax shelters, they stand to lose as much as $15 million more in pending IRS audits. Campbell & Co. appear to have taken the biggest hits.
Among the many lawsuits that have been brought, former NBA player Dick Snyder has one for some $5 million pending against Harcourt and others for fraud, breach of fiduciary duty and misrepresentation. Cardinals pitcher Bob Forsch sued Harcourt for fraud and misrepresentation in federal district court in St. Louis in 1983 and was awarded $192,491.60. That amount was reduced by $10,000 as a result of Harcourt's countersuit, in which he claimed that Forsch's lawsuit and conversations with other players "destroyed my career."
Harcourt calls himself—with some justification—the "victim of unforeseen" economic circumstances. His plane-leasing deal was hurt by the energy crunch and by airline deregulation, and other investments collapsed in part because of rising interest rates and the IRS crackdown on tax shelters. Harcourt also justifiably faults players for not knowing or caring enough about their investments. "Let me tell you," he says, "the most dangerous thing in the world is giving advice and helping people with their finances who are ignorant of the technicalities, because you don't know what they don't understand. You don't know until it's too late."
Many of Harcourt's clients were startlingly ill-informed about their own financial affairs. Here's part of a deposition from Goltz, one of those who found some of his funds invested in Piper aircraft:
Q. How many planes did you purchase, sir?
A. I have no idea.
Q. More than one?
A. I think so.