Editor’s note: This article was first published in March 2015, and the cases and circumstances it describes reflect the situation at that time.
No one is safe from being swindled when they decide to hand their money to a financial adviser, and celebrities are no exception. That’s why, whatever your net worth, there is one universal piece of advice when it comes to money: “Whether you are going to invest or to place your money in someone else’s hands, you must FIRST learn at least the basics of financial education.”
Only then can we tell whether the risk/return equation an adviser is “selling” us sounds reasonable.
The problem with some celebrities is that they find sudden success and, overnight, large amounts of money start coming in. They know they need to make that money work, so they turn to the professionals.
Stars such as Sting and Rihanna have been robbed by their accountants, while Nicolas Cage was hit with the news that he had evaded taxes when, according to the actor himself, he had not approved anything illegal with his money and it was all down to how his advisers had acted (the different versions are hard to verify).
Other celebrities such as Lady Gaga, Michael Bolton and Kim Kardashian have supported charitable causes, believing they were doing good, only to be accused later of taking part in scams because the money did not go where it had been promised.
But perhaps the most notorious cases, and the ones that show how a celebrity can end up ruined, are the investment scams, whose biggest protagonists have been Bernie Madoff and Kenneth Starr.
1. Uma Thurman
Uma Thurman was not immune to Kenneth Starr’s financial fraud. Apparently, when suspicions began that Starr had taken money from his clients, Thurman was one of the first to go after the financial adviser. The actress is said to have got her money back the next day, although unfortunately most clients were not so lucky. Starr was arrested and sentenced to several years in prison. He paid Thurman with other clients’ money. That’s why, in cases like this, those who act first gain an advantage.
2. Kevin Bacon
Kevin Bacon was one of the people hit hardest by Bernie Madoff’s Ponzi scheme, which defrauded more than $65 billion, making it the largest Ponzi scheme in history.
Madoff had a great reputation among celebrities because he was paying his clients very high returns. What they didn’t know was that the earlier investors were being paid with the new investors’ money.
The exact amount Bacon lost is not known, but in an interview he said he had been advised to put a little of his money there and that he put in most of it, leaving him practically broke. Fortunately, Bacon was later able to recover much of that money.
3. Billy Joel
The singer Billy Joel sued his former manager. He also sued his lawyers and his accounting firm. It seems they were all “in cahoots” to take more money than was due to them and use Joel’s capital for their own benefit. A court ruled in the singer’s favour and, after a long trial, he was awarded $8 million in compensation.
4. Ben Stiller
Ben Stiller was also a victim of Dana Giacchetto, the “financial adviser to the stars” who was sentenced to three years in prison for taking $10 million from his clients’ accounts. Stiller lost around $250,000.
5. Elton John
Elton John sued his own accounting firm, claiming he had been defrauded of about $29 million. But the court ruled against him after serious spending problems in the singer’s life came to light: he had allegedly wasted more than $60 million himself in less than two years. So he lost the case, plus $10 million in legal fees.
Finally, there are other celebrities such as Martin Scorsese, Sylvester Stallone and Al Pacino who have also, to a greater or lesser extent, been defrauded by their financial advisers.
That’s why, when it comes to your money, you have to look after it as if it were your own, because there will always be people who want to get their hands on it.
Featured image: Filip Maljković, CC BY-SA 4.0, via Flickr.
