Dissecting "the Dark Underbelly of College Athletics" & What Lies Beyond the FBI Investigation

Turns out the madness stretches well beyond March's NCAA Men's Basketball Tournament. Early into the workday last Tuesday, September 27, a Press Conference Advisory from the United States Attorney's Office for the Southern District of New York went out for immediate release calling for a noon meeting time and complete with attachments, stating, "There will be a press conference today at noon to announce charges of fraud and corruption in college basketball. Federal criminal charges have been brought against ten people, including four college basketball coaches, as well as managers, financial advisors, and representatives of a major international sportswear company." Here is a breakdown of who is involved, the two distinct schemes, the laws implicated, and what we can anticipate to follow in the short term and the long term.

The Defendants & Schools Involved (to date)

Chuck Person: Auburn Basketball assistant coach.
Anthony "Tony" Bland: Southern California Basketball assistant coach.
Emanuel "Book" Richardson: Arizona Basketball assistant coach.
Lamont Evans: Oklahoma State Basketball assistant coach.
James Gatto: Adidas' director of global sports marketing.
Merl Code: former Clemson player who recently left Nike for adidas.
Johnathan Brad Augustine: The League Initiative president and 1 Family AAU Program (an Adidas-sponsored program) program director.
Christian Dawkins: NBA agent who recently lost his job from ASM Sports after an NBPA investigation revealed he misused $42,000 when he charged Uber rides on an athlete's credit card without his permission.
Munish Sood: financial advisor & founder of Princeton Capital, an investment services firm that manages athletes' finances as part of its offerings.
Rishan Michel: former NBA official and Thompson Bespoke Clothing Line founder.

With respect to the schools involved, we have those which employed the four arrested assistant coaches as well as two other schools not specifically named but described as (1) "a public research university located in Kentucky. With approximately 22,640 students and over 7,000 faculty and staff members ... University-6 fields approximately 21 varsity sports teams in NCAA Division I competition, including men's basketball", and (2) "a private research university located in Florida. With approximately 16,000 students and over 2,600 faculty members ... University-7 fields approximately 15 varsity sports teams in NCAA Division I competition, including men's basketball". Anyone semi-interested in college sports quickly realized that only two schools fit those descriptions, though. So, those two schools acknowledged their part in the investigation shortly after the FBI and US Attorney's Office made their announcement Tuesday morning.

University of Auburn
University of Southern California
University of Arizona
Oklahoma State University
University of Louisville: currently on probation since June for violating NCAA rules when a former staffer "arranged sexual favors for players and prospective recruits"
University of Miami: completed probation sanctions from 2013 last October for violating NCAA rules when a booster scandal gave basketball and football players impermissible benefits

The Corruption Schemes

The U.S. filed three claims against the various actors involved in the two unveiled NCAA Basketball corruption schemes based on the degree of involvement and specific acts violating federal law that the evidence suggests: (1) U.S. v. Chuck Person and Rashan Michel; (2) U.S. v. Lamont Evans, et al.; and (3) U.S. v. James Gatto, et al. [Click the link for a PDF of the respective complaint!] The actors had a simple goal with the series of bribes - to "convince, either directly or indirectly, future college basketball stars to sign with a particular college or convince future NBA players to hire a bribing financial advisor at the start of those players' NBA careers," utilize particular people's services, and go all-in for Adidas once turning pro.

1. Alleged Coaches Bribery Scheme

This part of the overall NCAA basketball scheme involves two complaints and has numerous accusations with similar factual links and actors.

Screenshot of the live press conference on 09/26/2017. [Like my kickball team Filthy Animals group chat in the corner?]

First, it is claimed that a government agent, in a conspiracy working with Dawkins and Sood, paid Arizona basketball assistant coach Richardson $20,000 to use his influence to aim at getting Arizona players to hire Dawkins and Sood for their respective business services. Second, the complaint says that Dawkins and Sood themselves paid USC basketball assistant coach Tony Bland $13,000 in exchange for the same thing and also paid $9,000 to the family of two incoming recruits along the same lines. Third, Dawkins had allegedly paid bribes previously to then-South Carolina assistant coach Evans, and when Sood found that out, he paid at least $22,000 (at a rate of approximately $2,000 per month) to Evans in exchange for him using his influence to get South Carolina players & then Oklahoma State players once he switched schools to hire Sood & "Cooperating Witness-1" for their business services when they go into the NBA.

In the other complaint, Michel allegedly told "Cooperating Witness-1" that Person needed money, which prompted Michel to bribe Person with over $91,500 total in exchange for telling Auburn players to use Cooperating Witness-1's advising services and to buy suits from Michel's clothing label. The allegations paint a beautiful narration where Person bragged about the quality of players coming in and was able to negotiate more money because of the high level of influence he supposedly had over them.

2. Alleged Sportswear Company Fraud Scheme

Screenshot of the live press conference on 09/26/2017.

Dawkins and Sood worked with three people affiliated with Adidas (Gatto, Code, and Augustine) in organizing quite the deal. It was not anything complex or multi-tiered, and that essentially was the beauty of it. In exchange for giving prospective student-athletes six-figure payments, all the high schoolers had to do was commit to play at the two described top-tier NCAA Basketball programs (i.e., Louisville and Miami) and, after college, retain Sood's and Dawkins' services and endorse Adidas.

Gatto, Sood, and Code allegedly paid $100,000 at the request of a Louisville assistant to recruit Brian Bowen ("Player-10" in the Gatto complaint) to get him to commit to Louisville and, additionally, hire Sood for money management and sign an endorsement deal with Adidas after college upon entering the NBA. Furthermore, after hearing that Bowen needed more money before he could commit, Louisville basketball head coach Rick Pitino ("Coach-2" in the complaint) allegedly contacted Gatto in connection with the scheme. Phone records do show that Pitino did, in fact, call Gatto twice on May 27 and once on June 1. Bowen committed to Louisville on June 3 (aka MY BIRTHDAY!). I will just leave that there.

It then claims that Code tried to get Gatto to agree to paying Nassir Little (speculated "Player-12" in the complaint who plays for Augustine's AAU team) $150,000 to switch his prior commitment from Arizona to the University of Miami. Since the lawsuit was filed, Little's family denied that it was offered or asking for money, and Little tweeted that he may open up his recruitment, but that tweet was deleted shortly thereafter.

Moreover, it is said that Code, Gatto, Dawkins, and Augustine did transmit $150,000 to Player-12 in exchange for committing to Miami and for signing with Adidas and hiring Dawkins' services upon going pro.

The Laws Violated, Cited & Explained in Context

The Alleged Coaches Bribery Scheme: U.S. v. Person and Michel & U.S. v. Evans, et al.

18 U.S.C. section 371: Conspiracy to commit offense or to defraud United States

"If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both."

18 U.S.C. section 666: Theft or bribery concerning programs receiving Federal funds

"(a) Whoever, if the circumstance described in subsection (b) of this section exists— (1)being an agent of an organization, or of a State, local, or Indian tribal government, or any agency thereof— (A)embezzles, steals, obtains by fraud, or otherwise without authority knowingly converts to the use of any person other than the rightful owner or intentionally misapplies, property that— (i) is valued at $5,000 or more, and (ii) is owned by, or is under the care, custody, or control of such organization, government, or agency; or (B) corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization, government, or agency involving any thing of value of $5,000 or more; or (2) corruptly gives, offers, or agrees to give anything of value to any person, with intent to influence or reward an agent of an organization or of a State, local or Indian tribal government, or any agency thereof, in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more; shall be fined under this title, imprisoned not more than 10 years, or both.

(b) The circumstance referred to in subsection (a) of this section is that the organization, government, or agency receives, in any one year period, benefits in excess of $10,000 under a Federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance.

(c) This section does not apply to bona fide salary, wages, fees, or other compensation paid, or expenses paid or reimbursed, in the usual course of business.

(d) As used in this section— (1) the term “agent” means a person authorized to act on behalf of another person or a government and, in the case of an organization or government, includes a servant or employee, and a partner, director, officer, manager, and representative; (2) the term “government agency” means a subdivision of the executive, legislative, judicial, or other branch of government, including a department, independent establishment, commission, administration, authority, board, and bureau, and a corporation or other legal entity established, and subject to control, by a government or governments for the execution of a governmental or intergovernmental program; (3) the term “local” means of or pertaining to a political subdivision within a State; (4) the term “State” includes a State of the United States, the District of Columbia, and any commonwealth, territory, or possession of the United States; and (5) the term “in any one-year period” means a continuous period that commences no earlier than twelve months before the commission of the offense or that ends no later than twelve months after the commission of the offense. Such period may include time both before and after the commission of the offense."

18 U.S.C. section 1343: Fraud by wire, radio, or television

"Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency (as those terms are defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)), or affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both."

18 U.S.C. section 1349: Attempt and conspiracy

"Any person who attempts or conspires to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt or conspiracy."

18 U.S.C. section 2: Principals

"(a) Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.

(b) Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal."

Explained in Context

In U.S. v. Chuck Person and Rashan Michel, the two defendants are charged with one count of bribery conspiracy, one count of solicitation of bribes and gratuities, one count of conspiracy to commit honest services fraud, one count of honest services wire fraud, one count of conspiracy to commit wire fraud, and one count of travel acts conspiracy.

In U.S. v. Evans, et al., the defendants are charged with one count of conspiracy to commit bribery, one count of conspiracy to commit honest services fraud, three counts of honest services wire fraud, one count of wire fraud conspiracy, and one count of travel act conspiracy. Furthermore, the coaches are charged with one count each individually of solicitation of bribes and gratuities by an agent of a federally funded organization, and Dawkins and Sood are charged with one count of payment of bribes and gratuities to an agent of a federally funded organization.

So, how did the FBI get involved, & what does this all mean? First, the U.S. has jurisdiction over these schemes because the bribes that allegedly took place did so across state lines whenever someone traveled or communicated from state-to-state in any way. This kind of activity between people across different states, "interstate" activity, gives rise to federal law being able to govern instead of one state's law. The federal government could launch its investigation, gather evidence, and charge the actors for violating federal laws on conspiracy, bribery, and fraud, among other things.

Second, there are two big observations that are vital to the U.S.'s charges against these men: the federal law's bridge between attempt and conspiracy and its bridge between principal actors and other actors like accessories, accomplices, and - most importantly here - conspirators.

Criminal law for many crimes requires only an intent to do a particular thing in order to have a case against the defendant. So, those who attempt to do something illegal or who conspire to do something illegal are charged with the full-fledged commission of the crime. That is exactly what we see here under U.S.C. Title 18, which governs federal "Crimes and Criminal Procedures." Also, under criminal law, a principal is any actor who is primarily responsible for the criminal offense. In most cases, that means a principal is anyone who actually participates in the commission of the crime, and an actor's presence at the scene is not required to be considered a principal. Under U.S.C. Title 18, though, we see section 2 state that whoever commits a crime against the United States shall be charged as a principal. Here, the universities receive federal funds and, therefore, are government actors. Hence, these are crimes against the federal government.

The Alleged Sportswear Company Fraud Scheme: U.S. v. Gatto, et al.

18 U.S.C. section 1343: Fraud by wire, radio, or television [see above]

18 U.S.C. section 1349: Attempt and conspiracy [see above]

18 U.S.C. section 1956: Laundering of monetary instruments

"(h) Any person who conspires to commit any offense defined in this section or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy."

18 U.S.C. section 2: Principals [see above]

Explained in Context

In U.S. v. Gatto, et al., Gatto, Code, Dawkins, Augustine, and Sood are charged with one count of wire fraud conspiracy, two counts of wire fraud, and one count of money laundering conspiracy. Although it is noticeable that the two schemes have similar actors and similar violations, the fact patterns are different enough to warrant separate lawsuits because these instances specifically involve people within Adidas committing the wire fraud and transporting money for the bribe as well. Like the two lawsuits filed for the Alleged Coaches Bribery Scheme, the federal government has jurisdiction over these actions for the same reason. What these men did constitutes interstate activity, triggers federal law applying over state law, and the U.S. could do its thing. Likewise, the same federal laws regarding attempt and conspiracy and principals applies here, 18 U.S.C. section 1349 and section 2.

What's Next?

Short Term

First and foremost, the federal investigation will continue because there is "a lot more work to do" as Acting United States Attorney for the Southern District of New York Joon H. Kim explained. I would expect many more tips to be disclosed in the near future since it is no longer a covert operation. Basically, the FBI does not do a press conference unless it has reached that insanely confident point that they have enough evidence to definitively allege proper charges. They did one, and that says something.

We will hear about more actors. We will hear about more exploits. We will hear about corruption in other schools. This, as I am sure you are all aware, is the worst kept secret in sports, but the scary part is we may be scraping the surface of what lies beneath. Any actors we hear about who received monetary benefits can additionally go down for tax evasion, too, because they received big payments and would not have reported those earnings on their tax returns. The current student-athletes described in the complaints have a high likelihood of being permanently ineligible for college athletics if the NCAA or their school chooses to investigate even a little bit since most of the players can be deducted through the FBI's descriptions.

When it comes to the schools' verbal reactions, they have sounded very much alike one another. The schools have put out public statements saying something along the lines of, "We are sorry to hear about these deeply disturbing and troubling allegations. [Insert school name] takes seriously the high standards of conduct expected in our athletic department and does not tolerate deviations from those standards. We will remain committed to complying with the ongoing federal investigation and providing information as necessary." Even the NCAA president's statements echoed loudly, saying, "Coaches hold a unique position of trust with student-athletes and their families and these bribery allegations, if true, suggest an extraordinary and despicable breach of that trust." Oh, trust. It is a delicate thing.

Apart from words, we have also already begun to see the schools' physical actions. Coaches have been released, and executives have been dismissed. The employee turnaround will not be the only activity we will see in the short run, however, because all the schools that have athletic apparel sponsorship deals with Adidas have a choice to make - to stay or not to stay? For most schools, it will likely depend on when the current contracts expire. If they are up for possible extensions in the relatively near future (e.g., within the next couple of years), those schools will probably ride out these contracts and elect not to extend past the current term. That way, they can accept bids from other apparel companies without any cost of exiting the contractual relationship with Adidas early. On the other hand, if they are stuck in a longer term deal with Adidas, those schools may be better off leaving their contract early through express language (where applicable), finding a loophole, or paying up, which may cost less than remaining associated with a tainted brand even so.

The timing of this investigation breaking could not be less opportune for Louisville, which entered into a contract extension with Adidas just last month that lasts until the 2027-2028 season. It is sitting pretty as one of the most lucrative contracts in college sports being worth $160 million, but surely Louisville has to be rethinking the relationship. Louisville would be able to leave the contract early without penalty, unlike other institutions in similar sponsorship deals, if it could point to language that Adidas breached their agreement. Louisville president Gregory Postel already anticipated one route to take to potentially get out of the agreement. Last week, he penned a letter last week to then-athletic director Tom Jurich stating his and the trustees' frustration that they were not consulted about the Adidas deal in a "timely" manner.

Long Term

Surely, all this shows how out of hand the current collegiate sports model has become and how incompetent the NCAA is at self-monitoring. These two corruption schemes - as they originally sat with the FBI - started off as a criminal issue, but from here on out, they will most definitely be an NCAA issue as well. In the long term, this could lead to the NCAA taking at least one of a few different measures, either willingly or by mandate.

Since Kim's press conference, it has been hard to steer clear of conversations that mention the Big Daddy of All NCAA Sanctions, "the Death Penalty". Should Louisville get the Death Penalty? More appropriately, will the NCAA be willing to dust off the old playbook and lay down the Death Penalty on Louisville when it has not even used that play in three decades and, materially, placed that playbook on the uppermost shelf evidencing zero intention of relying on it again? To them, I say, "Unleash it." To the naysayers, I say, "Watch them do it." I believe the NCAA will give Louisville the Death Penalty for a few reasons. So long as the NCAA can get the current players onto other tracks w/ other teams if they want to, I can realistically see the NCAA laying down the Death Penalty on Louisville because (a) the NCAA has to continue to strongly defend its definition of "amateurism" if it has any hope of maintaining it in part or in full; (b) it shows they will actually enforce meaningful sanctions rather than half-assing it; & (c) it needs more evidence supporting its supposed student-athlete-centric mindset since they are the ones taken advantage of & exploited, here & always. Moreover, I agree with my friend Sean's article posted on The Sports Esquires on this, which y'all should read for detailed explanation citing NCAA rules.

Some analysts believe that this incident will cause an inverse trend in athletic apparel sponsorship deals with universities. Rather than the steep increase in investment we have witness in recent years, it is possible that we may see Adidas, Nike, Under Armour, and the like back away from increased investment opportunities because of the heightened risks revealed and discomfort surrounding this black market for the professionally hopeful student-athletes. In contrast, I believe the trend will remain strong. It seems like there has never been higher demand from consumers for college sports merchandise, and that is not going to go away because of shady dealings that do not directly affect the consumer base. We can expect these business transactions to be more regulated moving forward, but the demand will keep the suppliers in a good business position for university sponsorship deals (and perhaps student athlete sponsorship deals in the future, eh?).

Furthermore, there are three lawsuits as of now, after all, and these legal battles will take a long time to play out.

The most considerable long term effect this case can have is as the spark of long term change in the NCAA business and philosophical structure. When all is said and done, it is the NCAA who cashes the checks from shoe companies indirectly instead of doing its own thorough investigation into the matter & discovering corruption schemes like this before the FBI gets involved, right? At the very least, this thing that began as a criminal investigation - and rightfully so, as the NCAA has neither jurisdiction over everyone involved nor subpoena power - is now a major priority the NCAA must eventually take action on. It is possible that the current ongoing FBI investigation and accompanying lawsuits could set fire to the NCAA's definition of "amateurism" in a derivative lawsuit and sue the NCAA itself. There is enough of a link. This is what I, along with many other economics-minded attorneys, have been waiting for - a lawsuit with a powerful plaintiff with the "right" set of facts who can argue that the NCAA restrictions (i.e., prohibition, in essence) on student-athletes making money from their name, image, and likeness violates Section 1 of the Sherman Act as an unreasonable restraint of trade. Alternatively, this story can only help Kessler's argument in the current lawsuit he is advocating for that is trying to reach a similar goal.

Seriously. Can you think of a more powerful entity to sue the NCAA than the federal government? The NCAA is not easy to intimidate, and I bet it was sweating throughout the later stages of the O'Bannon case before it received a ruling ultimately in its favor, but if nothing else good comes from the current situation where a bunch of kids are taken advantage of, ending that practice to open up the market can happen. Maybe it is done before a lawsuit can mature, or maybe the change will be mandated by a court of law after what could be one of the most exciting legal stories to see a courtroom. My friend Marc Edelman wrote a real beauty on how a free market provides the best shot at limiting or eliminating this black market, and anyone interested in the student-athlete market should pause now, read it, & then come back here!

Better yet, how about the best case scenario as the supreme long term effect, as expressed by Scott Andresen:

A blonde can dream, right?

I believe the end game of student-athletes being able to seek their value in an open market is closer. That is the light in this dark, corrupt situation.