Mo Vaughn Strikes Out In Court

Yet another pro athlete has lost millions of dollars because he chose the wrong financial advisor. In this case, it is former Met Mo Vaughn who is the victim.

Following Vaughn’s retirement after the 2003 MLB season, Mo hired financial advisor Ra Shonda Kay Marshall and her company, RKM Business Services Inc., to manage his financial affairs including investing money, paying his taxes and bills, etc. During the four years Marshall was his financial advisor, she embezzled approximately $2.77 Million dollars from Vaughn. It wasn’t until 2008 when Vaughn examined his records personally that he discovered Marshall’s fraud.

Marshall was so corrupt that she did not bother to file a tax return for Vaughn for the 2007 tax year and did not pay the taxes owed on his 2006 return.

Vaughn obviously did not do a lot of research in his choice of financial advisor. A good primer on how to choose a financial advisor can be found on an earlier blog post of mine at  http://www.davidsilversmithcpa.blogspot.com/2015/12/clinton-portis-files-for-bankruptcy-two.html

Vaughn eventually filed his 2007 tax return late and paid his 2006 and 2007 tax liabilities. This drew late payment and late filing penalties of $1,037,158.25 for 2006 and $102,106.76 for 2007.

Vaughn paid the lower amount and went to court to dispute the late payment and late filing penalties on his 2006 return. He argued that his reliance on his financial advisor constituted “reasonable cause” (which would negate the IRS penalties) and not “willful neglect” (which would incur the penalties).

The court sided with the IRS ruling that because Vaughn did not make even a minimal effort to oversee his finances, he did not display “ordinary care or prudence”. This lack of oversight constituted “willful neglect” and Vaughn now has to pay up.

Besides doing research on a prospective financial advisor, the lesson learned from this debacle is that no matter who does your taxes or handles your finances, you still have a duty to oversee your affairs.

The appellate court decision upholding the IRS fines and penalties can be viewed at http://www.ca6.uscourts.gov/opinions.pdf/15a0818n-06.pdf.