In a soap operatic financial saga, former NFL player Will Allen lost big on a loan to current NHL player Jack Johnson.
The loan plays a major role in the Securities and Exchange Commission’s civil suit, unsealed today, that accuses Allen of running a Ponzi scheme. Johnson, for his part, filed for Chapter 11 bankruptcy protection last year.
Allen, a former Miami Dolphin who lives in Davie, was deposed last year in Palm Beach County as part of his lawsuit against Johnson. Allen said he began doing business with Johnson in 2012, during the NHL lockout.
Allen said he first loaned $250,000 to Johnson and charged his standard origination fee of 3 percent, or $7,500.
“I don’t remember him making any payments at all,” Allen said in the deposition.
Even so, Allen agreed to make a larger loan of $1.4 million to Johnson at a one-month interest rate of 12 percent — even though the financially troubled Johnson’s credit score had plunged 100 points.
“I kind of started, to be honest, feeling, not sorry, but like feeling like, you know, we can help him and we can make 12 percent,” Allen said. “I mean, why not, you know.”
During the deposition, Johnson’s attorney, Michael Furbush of Orlando, seized on the steep interest rate, which he said violates Florida’s usury law. After all, 12 percent in one month equates to 144 percent for the year, Furbush said.
“Do you understand that the rate being charged on the $1.4 million loan is illegal under Florida law?” Furbush asked.
“Don’t answer the question,” said Allen’s attorney, Mark Heinish of Boca Raton.
Florida’s usury statute limits annual interest rates to 18 percent on loans of $500,000 or less. For loans of more than $500,000, the maximum rate is 25 percent.
The SEC says the loan amount to Johnson later ballooned to $3.4 million — but Allen told investors the amount was $5.6 million.