Former Mets and Phillies outfielder Lenny Dykstra has been indicted by a federal grand jury for white collar crimes including bankruptcy fraud and obstruction of justice. The indictment handed down on Friday accuses Dykstra, who filed for bankruptcy in 2009, of hiding or destroying assets that would have gone to his creditors, then lying about it under oath.
Dykstra’s attorney calls the federal criminal charges “heavy-handed and overbearing” and accuses the government of “using an indictment to punish a debtor.”
Former baseball star accused of destroying artwork and sports memorabilia to keep it from going to his creditors
As in many cases of alleged white collar crime, whether Dykstra actually committed any criminal acts may depend largely on how events are interpreted.
The former outfielder nicknamed “Nails” became an investment advisor after his successful baseball career. Both careers were lucrative, enabling him to buy a $17.4-million mansion once owned by Wayne Gretzky. The investment advising business failed with the “Great Recession” in 2009, however, leaving him with assets totaling $24.6 million, but debts of $37.1 million.
Dykstra filed for Chapter 11 bankruptcy, which would have allowed him to reorganize his debts. He told the court he could repay the debts if he were allowed to pursue lawsuits against various parties. Creditors opposed the reorganization, however, and ultimately forced him into an involuntary liquidation bankruptcy, which is still pending.
Dykstra fought the liquidation vigorously, managing to keep creditors at bay for months. As the bankruptcy proceedings dragged on, Dykstra was accused of misbehavior, such as uprooting the for-sale sign from the lawn of mansion.
The U.S. Attorney’s Office accuses the 48-year-old former baseball star of hiding, stealing and destroying more than $400,000 in assets belonging to the bankruptcy estate, which is the collection of assets to be sold to pay off creditors in a bankruptcy case. Dykstra is alleged to have destroyed personal sports memorabilia and artwork, along with chandeliers and sconces from the mansion.
Federal prosecutors claim he then lied about doing so in his bankruptcy declarations and in court, leading to the obstruction of justice charge.
According to the bankruptcy trustee, Dykstra’s alleged crimes were “an egregious abuse of the bankruptcy system,” that would “not be tolerated.” If he is convicted on all 13 counts in the indictment, he could face up to 80 years in prison.
Dykstra’s attorney insists that the former player has done nothing wrong and that the criminal charges are meant to punish him for resisting the liquidation.
“This is payback by the U.S. government to Lenny Dykstra’s resistance to the trustee’s dismantling of his property and assets in the bankruptcy,” he said in a statement late Friday. “When all the facts come out, we’ll show that Mr. Dykstra acted in good faith and behaved properly.”
- Los Angeles Times, “Lenny Dykstra indicted on fraud, obstruction of justice charges,” Victoria Kim, May 6, 2011
- Los Angeles Times, “Ex-baseball star and bankrupt financial ‘guru’ Dykstra envisions a comeback,” Alejandro Lazo, October 5, 2010