Is this the final nail in Dykstra's coffin?
Aug 10th 2009 12:30PM
Updated Dec 4th 2009 1:28PM
Looks like it is going to be a rough week for former baseball great Lenny "Nails" Dykstra. For those of you not familiar with the situation, Nails was a star outfielder for the New York Mets and Philadelphia Phillies who, in retirement, became an entrepreneur and investment guru of sorts.
Unfortunately, last month, thanks to what he called "bogus lawsuits," Dykstra declared bankruptcy. At the time, he listed less than $50,000 in assets and between $10 million and $50 million in debts.
Late Friday, Dykstra was accused of having "engaged in fraudulent and deceitful acts" by one of his major creditors, Index Investors. This could get ugly. Index Investors has asked that Dykstra be replaced as a trustee of his estate, along with a request that his Chapter 11 bankruptcy claim be converted to a Chapter 7 bankruptcy.
Index contends that Dykstra "induced" them to make loans by offering financial reports that showed his net worth was greater than $58 million. The initial loan was to cover attorney fees and to purchase an engine for his private Gulfstream jet. Index states that Dykstra has never made a payment on the loans.
Should Dykstra have to take the Chapter 7 route, he will find less protection than under Chapter 11 bankruptcy. Chapter 11 is usually used by businesses with substantial assets and allows for a reorganization of the assets. Under Chapter 7 bankruptcy, Nails would have to liquidate his assets, including his home, which was once owned by professional hockey legend Wayne Gretzky. Dykstra purchased the massive house in 2007 for $18.5 million. The biggest problem for Nails is that this home is collateral in two loans, one for $770,000 and the other for $12 million.
At the root of the filing is the contention that Dykstra flat out lied to his creditors and then failed to pay for the loans. Dykstra's attorney is going to file his own motion in the case today, and says that the allegations "are absurd." Dykstra, who it seems is grasping at straws, claims that he has no assets now because of mortgage fraud. Index Investors believes that there is "no reasonable possibility" of reorganization and feels that this situation must now be decided in the courts.
So, did Dykstra really dupe people or did he legitimately try to make his business venture work and is now dealing with the fall out of failure? An ESPN report back in April suggested that Nails really was in a tough situation and turned to his family for money. One thing is certain, Nails' dream has turned into a nightmare.