College basketball fans might want to mark down September 26th 2017 as a day that will go down in infamy. Ten individuals, including 4 active assistant coaches were indicted on federal corruption charges Tuesday. Accused of perpetuating a system that funneled blue-chip basketball recruits to certain programs, agents, and footwear companies, these 10 men likely represent the tip of a very large iceberg.
The coaches involved were from Auburn, Oklahoma State, Arizona and USC. A current marketing director at Adidas was also named, along with a current Adidas and recently-former Nike staffer. You have AAU organizers and agents wrapped in there too.
It appears the University of Louisville is also likely embroiled in this controversy. The FBI complaint includes a reference to a “public research university located in Kentucky.” Whether that is UK or Louisville is difficult to discern, but the Adidas connection along with timing and enrollment figures point pretty squarely at the Cardinals.
Most ominous about this is the prosecutor’s declaration that, “We have your playbook. The investigation is ongoing.”
It is unlikely any 18S reader is surprised that shoe money flies through the grass roots and college basketball circuits to shape the futures of young talents. What is so unique about today is that the federal government, specifically the DoJ and FBI, have inserted themselves into the equation. The haphazard inconsistency of the NCAA is something we fans have come to accept. It is how many programs have managed to stay afloat while operating under NCAA incompetence. Now that the DoJ is on the case, just how far will all of this go? When and where will the other shoes drop? Clearly this wasn’t just Adidas. Nike and UA are also significant players in the youth and college basketball.
More to come as this story develops.
Rick Pitino is unbelievable. I hope this is the moment that finally brings his program down.
Asked & Answered
https://www.sbnation.com/college-basketball/2017/9/27/16370060/rick-pitino-fired-louisville-basketball-college-fbi-scandal
The sources on that are all dubious at this point. Eaves has #BBN on his twitter profile. I’m going to wait until someone more credible than SBN cites a real source.
I hope it is true, I believe it will happen, but I also though hookergate would be the end too.
How ’bout now?
http://www.courier-journal.com/story/sports/college/louisville/2017/09/27/rick-pitino-fired-louisville-basketball/705193001/
I love this! It’s about time the field was leveled out. Great job Joe!
“When and where will the other shoes drop?” I shoe love that line. Good work Joe Schu! Shoe’ve really outdone yourself this time.
It would be wonderful to see the sewer that is college basketball at many institutions get cleaned up.
How long do you think it will be before North Carolina gets brought into this?
Well… that’s hard to say.
First, you have the fact that Adidas seems to be caught red handed. I can assure you the shredders in Beaverton (and probably Baltimore) were working overtime yesterday. I’m also assuming you’ll find some very creative expense accounting being done to hide tracks on that side of the fence. For these companies, funneling shareholder marketing dollars into public bribes puts them afoul of any number of statues and fair business practices. The fines could be massive. UNC is (and has been) a Nike/Jordan school for a long time. I don’t think there’s a soul on the planet that believes Nike is clean in all of this. The question is how well did they cover their tracks.
Second, you can’t link the academic scandal with this. The reason the NCAA stayed out of UNC’s case (so far) is that it was an academic accreditation issue. Those fake classes were available to every UNC student, and thus weren’t impermissible benefits to the athletes. Of course, if UNC has to vacate those credit hours, all the players in the courses would likely be ineligible. It is a shame the NCAA doesn’t want to take that step, but I also don’t think they want to death penalty a “signature” program in one of the fastest growing areas of the country at the heart of their premier conference.
I agree with the sentiment that we’d like to see all this get cleaned up. The truth is that big time shoe money probably is only well spent on the top 10 kids in every class. Moreover, those top 10 kids have no interest in a college degree. They need an NBA preparatory education. They don’t need to go to an NCAA member school to achieve that. The best result here would be the shoe companies setting up their own developmental teams/leagues or expanding the G-League to include 18 year olds who don’t want to go to school.
I’d love to believe the NCAA will use the power of the FBI to root out perpetual bad actors like Pitino and Calapari, but I’m skeptical. They’ve held these guys up as the charismatic leaders/molders of young men. If you kick them all to the curb and create a power vacuum, what fills in that space? Just how badly can you beat up the golden goose?
Thanks for the thoughtful analysis.
I didn’t realize that North Carolina was a Nike school. The reason I brought them up is the academic scandal. I understand the technical reason why the NCAA didn’t do anything, but it galls me to see them come down on ND for a single individual helping a few players fake some term papers, while letting an entire university go free when it institutionally conspired to fake a student athlete’s transcript (As an aside, I don’t blame Southern Cal fans who are angry about their substantial penalty for two players, Bush and Mayo, while North Carolina is allowed to proceed untouched).
There was an interesting article on The Ringer the other day about how Cuban wants to set up an NBA developmental system similar to what European soccer has. The article was 99.9% about the soccer model, and how FC Dallas has a bit of it (but no actual rights to players), with a quote from Cuban thrown in about how he wants to do it for the NBA.
I’ll be the Negative Nancy: why is any of this illegal? And, even if it is, why are the FBI and SDNY wasting their resources on it?
I’ll be a little more specific: I can see how there is a reasonable debate as to the benefits or virtues of amateurism and whether the *NCAA* should enforce that, but I cannot possibly see how those benefits or virtues could ever be worthy of the resources of federal law enforcement.
I’m generally fine with the federal government investigating and prosecuting corruption and likely bribery wherever they can find it, especially when including state employees and collegiate institutions as Joe mentioned above.
I do agree that this type of case probably ought to be a relatively low priority in the big scheme of an entity like the FBI to investigate and enforce. However federal agencies are very vast (over 40,000 FBI agents out there) so their abilities can be pretty wide-spread with that kind of budget and man-power.
Here’s a hot take on the matter: https://www.bloomberg.com/view/articles/2017-09-26/fbi-is-doing-the-ncaa-s-dirty-work-in-college-basketball-case
He plays the “who’s being harmed” card, along with the “we already knew this” sentiment. Turning it in to the time-honored, “The mean NCAA should pay those poor athletes” song-and-dance.
Totally missing the point. Only the very top 0.1% of guys should get paid. Let everyone who wants a damn degree play by the rules as stated.
The coaches were indicted because they accepted money from agents and financial managers to steer kids towards those agents and financial managers. I’m going to go out on a limb and assert that any agent or financial manager who bribes a coach to steer him business is probably not the best agent or financial manager that some clueless 18 year-old should choose (I don’t mean clueless as a pejorative – I mean literally clueless about how the world works at that age). If these guys are willing to pay a coach hundreds of thousands of dollars it means they plan to “harvest” a large multiple of that amount form their “clients”.
I think that is worthy of federal attention, or at least as worthy as any other corporate bribery case.
Sure, of course, but the question is is the harm of steering them towards sub-optimal agents in exchange for them getting *more* of the value they create worthy of federal attention? I think it’d be hard to argue that overall the kids are worse off because of the bribes – that requires being steered to a *really* bad agent/financial adviser to make up that difference. As per my comment below, ultimately the real victims of this type of bribery are rule-following coaches and athletic administrators, who to my mind are not particularly sympathetic even if they are playing by the rules, given that they are ultimately overpaid because of their artificially cheap labor force.
And, so, that gets back to the point of the original comment: is this system something that federal law enforcement should be propping up with its limited resources (the federal government does have to pick and choose its battles, notwithstanding the comment above)? I think the answer is ultimately no.
I am kind of scratching my head at your comments. I think this is an egregious act by those coaches and advisers. It is dishonorable in the extreme.
“I think it’d be hard to argue that overall the kids are worse off because of the bribes – that requires being steered to a *really* bad agent/financial adviser to make up that difference.” If the Feds opened a bribery case against a county engineer who accepted hundreds of thousands in bribes to steer a bridge contract to some crony I would support that too – even if that bridge probably wouldn’t fall down anyway.
I don’t view college basketball as a particularly honorable endeavor (it’s fun entertainment, not public service), and in particular I don’t view keeping players from some of the value they create in college basketball as honorable at all. Now, would it be better if these guys could just negotiate their own shoe deals in a legally enforceable way instead of through under-the-table cash payments/bribes? Of course.
The engineer analogy doesn’t really work, because in this world in the absence of the bribe the bridge wouldn’t be built at all – that is, the bridge equivalent in this analogy is the players getting paid (i.e., the right thing getting done). So the question is, by analogy, is whether it better that the bridge got built even if it wasn’t done in the best way, or that it never get built at all?
I think one of the key ingredients being missed is the role of the honest company. The reason the bridge bribe is an issue is not because the bridge wouldn’t get built, but because an honest bridge building company doesn’t have the real chance to make a bid on the project.
While bribery in itself is an issue, and the kids getting sub-par agents could be an issue, what is being ignored in the conversation of why the FBI is involved is the person trying to break into the world of sports agency, trying to do it the right way, that might have had some chance (as slim as it might be) to land one of these kids and make a name for themselves, and has that chance removed because the kid is steered to someone else under the table.
In short, the bribery is undercutting the free market model that the US holds up so highly.
Sure, absolutely, but this needs to be thought about at a higher level: the bigger market is not the agent market, but who those agents serve. While the bribery distorts the agent market for sure, a much greater distortion in terms of absolute dollars is done to free-market principles by the NCAA cartel fixing the price of labor in college athletics. That price-fixing is the direct or indirect cause of all the other distortions.
And, to get back to my greater point, I don’t think federal prosecutors and the FBI should be propping up that regime in order to improve upon problems that the regime causes.
And, back to the bridge analogy, it just doesn’t work here: there is no “honest salesman” looking to pay the players immediately out of high school who is getting undercut by the bribing agents. That’s the whole problem! That honest salesman should exist, but doesn’t because of the NCAA rules.
Because illegal thing Y is a problem, illegal thing X should be ignored doesn’t sound like a great stance to me. It seems like a false dichotomy.
If the argument is BOTH should be fixed, great.
If the argument is X should not be illegal – there may be discussion and disagreement, but it’s a worthwhile topic potentially.
If the argument is, X is being addressed by the FBI, that reminds me of Y, let’s talk about Y needing to be fixed. Well you might get topic-hijacking complaints… but sure I’m still on board at some level for the discussion.
But simply saying because Y is an issue, X should not be addressed. I don’t get it.
I’m saying that, to the extent this is a federal priority, which it probably needn’t be at all, the feds should be focused on Y (the NCAA’s price-fixing) and less focused on X (the stuff that results from the NCAA’s price fixing, such as all the activity alleged here), even where X is more classically viewed as bad behavior.
You’re assuming resources spent on X are even allocatable to Y. But since it likely wouldn’t even be the same (sub-)branches within the FBI, focusing on one does not have any great affect on the treatment of the other.
The FBI may be one single organization, but it has branches designated to different type of crimes. Thus the resources and man power for fraud and bribery are not taking away from, nor realistically transferable over to the resources and man power that might consider “price-fixing.”
My thoughts exactly. If you accept corruption at any level, where does it end?
I suppose I view NCAA-style amateurism as inherently corrupt in the first instance given its price-fixing, so the entire thing is at least somewhat rotten. The bribery and whatnot are just second-order effects of the system.
That’s a great question! I asked myself the same thing. In some ways, this is a victimless crime. If you simply look at it as the shoe companies eating into their 50% margins with some under-the-table marketing spending that gets funneled to kids and families that need the cash – then you could question who’s being hurt by this?
As Alstein pointed out when I first floated this line of thought – it is obviously anyone who played by the actual rules and got beat that was screwed by this shady behavior.
The angle that got the fed’s involved is pretty simple – these guys are state employees at institutions that spend federal and state taxpayer money, and they used those positions to collect bribes. They likely did this across state lines. This is a pretty straightforward thing. Technically, they’re gov’t employees taking bribes. This is something the federal government takes pretty seriously.
And that’s a great answer. And, framed that way, at least plausibly worthy of the effort – basically, the coaches are defrauding their schools.
Though, really, I’m not convinced even that is worthwhile – it’s basically money that otherwise would be split between the shoe companies and the school (i.e., absent bribery, “aboveboard” shoe deals should be marginally more valuable) and giving it to the coaches and the players. So ultimate victims, realistically, are the other coaches who don’t take bribes, who would get paid marginally more as a result of the more valuable shoe deals, and the athletic department administrative bureaucracy, which would likely be bigger/maybe paid more for the same reason. The beneficiaries are the cheating coaches and players. As a moral matter, I think the money would be better placed in the latter category inasmuch as most of all this money we’re talking about is ultimately made off of the latter group, because that includes the players. Even if it involves breaking rules. Because those rules are there at least in part – and, who’s kidding who here, probably primarily – to act as a cartel to make those shoe deals (and the TV deals, and the radio deals, etc.) more valuable for the two parties to the “aboveboard” contracts, at the expense of the primary value-creators here.
So, maybe it’s understandable that it’s illegal, but I think it’s still bad to enforce it.
I don’t think it’s their job to morally evaluate whether the victims here are “worthy” or “sympathetic” enough. I would also say that from a competitive standpoint, other victims include: financial advisers and other personal managers, other apparel companies, AAU programs, etc. None particularly sympathetic in the abstract, but there are normal, decent people working in those industries that deserve the rules to be upheld. There are also all sorts of tax-related implications, which I won’t get into, but I think it’s crazy to think that they should just ignore what’s going on here.
I’ll also throw out this slightly hot take: this was probably a lay-up by FBI standards. The financial adviser at the center of much of it was indicted last year, so the start of this whole case pretty much fell into their laps. Compared to much of what they do, the resources they expended here are probably fairly minimal. There is very little danger involved, and the targets of this investigation aren’t exactly criminal masterminds. As noted above, the FBI is a massive organization, so this was maybe .0001% of their workforce devoted to this case. I just think it was small potatoes for them, so why not take the win?
That’s mostly fair enough, I suppose. On the other hand, the investigation itself sounds like a sting operation, and the press conference yesterday included the acting U.S. Attorney for SDNY as well as the FBI agents yesterday, one of whom threatened that they’d be going after more of this going forward (http://nypost.com/2017/09/26/feds-vow-crackdown-on-ncaa-corruption-after-busting-coaches/). My maybe hot, maybe lukewarm take is that they shouldn’t take affirmative steps to do that. And my hotter take is they should even think twice if something falls into their lap.
“I’ll also throw out this slightly hot take: this was probably a lay-up by FBI standards.”
I see what you did there.
The other thing is that even facilitating a bribe, even if you don’t take a skim, is illegal. If you’re a US based company/organization, even facilitating a bribe where it is legal/common practice is illegal.
Even without state and government employees being involved. The FBI and other policing bodies have departments dedicated to corruption. These are FBI agents whose entire job is to weed out corruption. Why wouldn’t they focus on something with as much money at stake as college basketball and shoe companies?
These are not the people who would be investigating NCAA price-fixing. That would probably require some type of anti-trust suit and labor law stuff. Which is sort of, maybe, underway? I don’t understand how they keep dodging these things. I agree there are way bigger issues with the NCAA, but these things are in no way mutually exclusive or legally related (albeit they are clearly logically related).
This is a group of investigators similar to the SEC. Pitino has probably taken more money than some dudes in prison for insider trading.
These are the 2 reasons this investigation is happening, which seems like it should be more than enough for an FBI investigation.
1. Illegal activity.
2. Huge amounts of money.
People get apoplectic over companies bribing banana republic officials to get work done in third world countries with big fines and jail time hanging over their heads. Bribery in the good ole US of A by some of the top names in collegiate sports should be brushed off as nothing? Nike, Adidas, Under Armour should be held harmless b/c they work in a discretionary space?
Direct to D league is long overdue in basketball. Remove the one year BS requirement and send the non-students directly to the developmental league out of high school if they can make the cut. For those outside the top 10-20 recruits in the country – the college education, paid development and platform for showcasing your skills are by far worth more than the shoe deal to those kids.
Is this a kind of generational issue? I’m older and I see corruption of any kind as an evil that must be stamped out at every opportunity. It seems like the younger generation has a more blasé attitude towards it.
I’m pretty young and see corruption and conflict of interest as two of the most harmful things in our society.
Are there bigger injustices than spending shoe company dollars on coaches and high school players? Absolutely. But should we just ignore it? Certainly not.
My perspective is that this moderately bad thing is caused by a much worse bad thing that is unaddressed and allowed. So I’m kinda “meh”
I think a better analogy than the bridge example used above is a closer one. If Google was bribing professors at Stanford/Cal tech to push PhDs to working there- that would be illegal. However it also wouldn’t happen because they can reward those students directly.
Money flows to value, and we have arbitrarily pretended that value isn’t there. So this just kinda feels hollow.
“Instead, we get this: An investigation into the shadows where the silhouettes have been plainly outlined for decades. Clearly, it’s a bad thing when coaches are taking money and then steering athletes toward a guy that swung at ’Nique courtside (pay your suit bills, though, ’Nique) or an agent who stole $42,000 in Uber rides from a client. Of course it’s bad! It’s also the inevitable outcome of regulation meant to direct money and profit to people in power creating a black market. This is always what was going to happen; it’s the nature of the NCAA. No black market is going to end up with a ton of empathetic characters controlling the money.”
https://deadspin.com/the-ncaa-finally-got-the-lawsuit-it-deserved-and-the-o-1818829862
Yes, yes, I know Deadspin is disfavored here, with pretty good reason, but this article is dead on.
Goddammit I thought Gawker was supposed to be dead and buried by now
Does this prove that the ACC is a major disappointment?
The issue I am curious about is whether the NCAA will step in, too? Or do they only feel the need to punish ND for tutors helping type reports or for players’ girlfriends buying them boxing tickets?
Really curious to see if USC and Louisville manage to lose scholarships or whatever.
Also, given the Adidas involvement…is Michigan not necessarily a definite for being involved? I mean if a University is the “flag-ship” for a brand, wouldn’t any legal issues be more likely at that flag-ship?
This feels a little like Christmas (as long as we aren’t involved). I love seeing some rivals go down.
Lets not get to Schadenfreude here. Right now only Adidas is named, but you can be certain Nike and UA schools will be right behind. The complaint even mentioned that Miami (University 7) got $150K for a player because they were afraid another school/sneaker company was going to give the kid that much. You can be sure the feds know about it, and I am sure there is a school very nervous right now.
I have skimmed the indictment, and I am still not sure this is a federal crime justifying these resources, but at least I can see it now.
Perhaps it will cause all these one and dones, the only ones you would pay $100K to come to your school, to go the the D-league. One and done is a sham and an insult to the schools, in their truest sense. Not to their minor league basketball operation, where it makes perfect sense.
The FBI issued subpoenas to Nike yesterday. I’m not so sure UA will be involved – the dots that one needs to connect are pretty easy to find, in that it’s the sneaker companies the top kids sign with, and they haven’t signed any top kids. They might not have been able to outbid Nike and Adidas, or they might have decided it wasn’t worth it, or (guffaw) they might have better ethics.
The Louisville case could get really interesting from an NCAA perspective. If they cannot in any way connect anyone from the program to the $100,000 paid to Bowen, and Bowen never steps foot on the court in a game for Louisville, the school could make the argument that no impermissible benefits were ever given by a member of the Louisville staff or received by a player who stepped on the court. In that case, would the NCAA be overreaching to punish the program? Who knows what they’ll do, but it should be really interesting to watch it play out.
They’re already connected – the FBI has a Louisville assistant on video telling a kid they need to be careful with how they get him the money because they’re already on probation. On video! It also came out today that they have evidence of Pitino talking directly to the Adidas exec involved in the case, presumably on Bowen’s behalf. I don’t know if they have harder evidence that he was actually talking money, but there’s no question about whether there’s a connection between Louisville and the payments.
https://www.cbsnews.com/news/rick-pitino-louisville-basketball-coach-bribery-scandal-adidas-ncaa/
Also, it’s worth noting that the NCAA recently said the head coach’s direct knowledge of any bad actions is irrelevant, he’s still accountable for everything that goes on in the program. So whether Pitino knew or didn’t (or, more accurately, whether it can be proven) is irrelevant. He is toast. Full stop.
There is another angle to this story that explains FBI involvement. Federal securities law requires publicly offered corporations (in other words, you can buy stock in Adidas) to give investors (current and potential) honest information about the nature of their expenditures, versus revenue. This minimizes insider information, and as much as possible, levels the playing field for all investors.
Paying bribes, needless to say, doesn’t get reported on the corporate books which violates federal securities laws (I’m pretty sure paying bribes violates other federal laws). Thus, it’s my guess that the FBI got involved from this angle at first, and it grew from there.
Exactly. While you can feasibly bury it as a marketing expense, that isn’t transparent and given SOX accounting requirements, you could see very high level people in these companies going to jail.
Tax evasion? I doubt anyone paid income tax on those bribes…
@How much of a state tax was missed out on those hookers and strippers, too? If I have to pay a 1 cent “hospitality tax” on hotels, Louisville’s kind of hospitality has to be worth double, maybe triple that.@