On Tuesday, September 26, 2017 the United States Attorney for the Southern District of New York announced the arrest of ten individuals, including four Division I coaches, in a college basketball scandal. Corporate executives from global sports company Adidas, as well as coaches from Auburn, the University of South Carolina, the University of Arizona and the University of Southern California were named as defendants. The Criminal Complaints describe two separate corruption schemes involving wire fraud and money laundering.
The first scheme involved college basketball coaches taking cash bribes from athlete advisors, including business managers and financial advisors, in exchange for using their influence to steer college players to certain Division I schools and to retain the services of bribe-paying agents (“advisors”) after they entered the NBA.
In the second scheme, a senior executive at “Company-1” (Adidas), working in connection with the corrupt advisors, funneled bribe payments to high school-aged players through their AAU program to obtain those players’ commitments to attend universities sponsored by Adidas, rather than schools sponsored by Nike or other sports apparel brands.
A criminal complaint is a written instrument accusing someone (the “defendant”) of a crime. The complaint alleges that federal statutes have been violated; it is supported by the affidavit of an investigating law enforcement agent. A complaint is enough to hail a defendant into court but prosecutors have to present evidence to a grand jury and obtain an indictment in order to proceed to trial.
Once indicted, under speedy trial rules, the Government has 70 days to bring a defendant to trial minus any excludable periods of time. Generally speaking, there is more flexibility prior to, rather than after, an indictment is filed. Sometime after a defendant is arraigned on a criminal complaint, the judge sets a date by which the Government must indict or the complaint will be dismissed (See Fed.R.Crim. Pro. 48(b)). Many courts will extend the Government’s time to indict if the defendant is not in custody and the parties consent. This is especially common where there is a request for, or an attempt by, a Defendant to provide “cooperation”. “Cooperation” refers to a process by which a Defendant is required to provide assistance to the Government (colloquially, “snitching”) in order to obtain a favorable plea bargain.
The three complaints in this case charge four coaches (Chuck Person, Lamont Evans, Emanuel Richardson, and Anthony Bland); three athlete advisors (Christian Dawkins, Munish Sood & Rashan Michel) a senior executive at Adidas(James Gatto), an employee of Adidas(Merl Code) and an AAU program director (Jonathan Brad Augustine).
Gatto is the head of global sports marketing for Adidas. Merl Code was an employee of Adidas and prior head of Nike Elite youth basketball. Jonathan Brad Augustine, is an AAU program director and head of a Florida 501©(3) non-profit whose purpose is to benefit high school age athletes and provide mentors.
Dawkins worked at a sports management company in New Jersey but was not a registered agent. His main duties included recruiting athletes to the firm and maintaining client relationships. In May 2017 he was fired for misusing an athlete’s credit card to pay for ride company services. He then tried to open his own sports management business. Sood founded an investment company in 2002 and is a registered investment advisor. Sood was an investor in Dawkins’ new sports management business.
The non-university coach defendants (Gatto, Sood, Dawkins, Code and Augustine) are charged in Criminal Complaint #17-MAG-7120, pending before United States Magistrate Judge James Cott. Those defendants are charged with one count of conspiring to commit wire fraud, two counts of actually committing wire fraud (substantive counts) and one count of money laundering. The criminal acts are alleged to have been committed between May 2017 – September 2017.
Count One – charges a conspiracy to commit wire fraud and agreeing to a scheme to defraud by obtaining money by false pretenses. The defendants and others employed at “University 6” & “University 7” made bribe payments to high school athletes and/or their families in exchange for the player’s commitment to play basketball at those schools. This resulted in the universities unknowingly giving scholarship money to athletes who were ineligible because they had accepted bribes (this is also the substantive wire fraud charge in count 2). The Government’s theory is that the universities were thereby deprived of control over their money and could have been subjected to financial penalties under NCAA rules. (substantive wire fraud charge under count 3). Count Four charges money laundering; i.e. conducting financial transactions knowing the money is proceeds of illegal activity.
How the Schemes were Allegedly Carried Out
The remainder of complaint, paragraph numbers 8-47, outline the factual background of investigation. Since 2015 the FBI and US Attorney for the Southern District of New York have been investigating the criminal influence of money on coaches and players in college basketball.
Bribes paid by athlete advisors and high level apparel companies to student athletes were facilitated by coaches at Division I universities. The money was paid to athletes (or their families) playing at Division I schools or intending to attend a Division I college after high school in exchange for a committment to attend a particular school and then to hire the “bribe-payors” as agents or in other similar capacities once they enter the NBA.
Sometimes payments were concealed by paying the money to third party or non-profit organizations controlled by the defendants and encouraging players and their families to make false representations to these schools to conceal their violation of NCAA rules. Two defendants, Gatto and Code, employees at Adidas (“company 1”) conspired to pay athletes to entice them to attend Adidas sponsored schools and then sign with Adidas once they entered the NBA. Dawkins, Sood and Augustine facilitated the payments from Gatto and Code to the players and then got the players to commit to hiring Dawkins, as their agent/business manager, and Sood as their financial manager, after they turned professional.
In order to gather proof against the Defendants, the Government used a cooperating witness who operated a business management firm that catered to professional athletes and provided investment related advice. In September 2017 this cooperator pled guilty to securities fraud, wire fraud, aggravated identity theft and making false statements pursuant to a cooperation agreement. The latter reference is not explained in the Complaint but most likely means the cooperator lied to his federal “handlers” during the course of the investigation.
An FBI undercover agent posed as a potential backer for the sports management company Dawkins was trying to set up with Sood. Dawkins instructed Sood and the undercover to make a $25,000 payment to a player with a promise they would be reimbursed by virtue of their positions with the sports management company. The FBI captured Dawkins on a wiretap and were intercepting his phone calls.
Adidas generated sham purchase orders since they couldn’t use funds to directly pay a player without risking the illegal payment being discovered. Gatto was putting the purchase orders “on the books” and listing them as payments to an outside consulting company with which Code was affiliated. Gatto also made payments “off the books” to Code’s working group within Adidas. Code complained in one conversation that when he tried to submit an invoice to Adidas from Code’s consulting company for the “university 6 situation” the consulting company didn’t have a vendor number in Adidas’ system. It would take Code several weeks to create a vendor number and purchase order and he couldn’t afford to wait. He was upset that Gatto wasn’t using his position to push it through so Code asked Dawkins to have Sood and the undercover to make a $25k payment to player 10’s father.
Player 10’s father had been putting pressure on them to get paid. In return, Player 10 would then agree to sign with Dawkin’s company to represent him when he turned professional. The Government also intercepted conversations between the defendants about how other apparel companies mask similar payments to high school athletes. Code stated that by funneling payments through a third party company like Dawkins’ he could do whatever he wanted with it because Adidas was not engaging in a monetary relationship with an amateur athlete. Rather, he characterized it as engaging in a monetary relationship with a business manager. Dawkins expected that if the kid was “one and done” that he’d be a top 20 draft pick but if he played two years of college he’d be a top ten pick. 
A week and a half after the NBA Summer League ended in Las Vegas, Augustine met in hotel room there with an assistant coach from Louisville, an undercover agent and a cooperating witness. They discussed certain difficulties they were having with their recruitment scheme. In addition to Player 10, they were recruiting another player to attend Louisville but the player’s mother was demanding payment immediately. Adidas had agreed to pay player 10 a certain amount but a rival apparel company (and university 4) was “coming in with a higher number”. Dawkins discussed how once they finished paying Player 10 they had to then pay his father $2,000 / month. He also talked about giving Augustine $5,000 per month to give to the other player’s mother so she could pay her bills. Dawkins admitted to the FBI undercover agent that some of the payments are “illegal”.
While most media commentators have welcomed the federal prosecution as helping to clean up college basketball, there have been some who have criticized it as federal “overreaching”. Others have called the public shaming of only a small number of schools a “drop in the ocean” and even a misplaced effort:
“Last month, Adidas agreed to pay $160 million over 10 years for the University of Louisville to wear its apparel. That’s called a “deal.” But if the company then pays a high school athlete to attend the school, that’s called a “bribe”? But that’s an issue for the NCAA, not law enforcement. The NCAA has real power to enforce its rules, because it can destroy the careers of both players and coaches who cross it. And despite the obvious fact that college basketball and football are multibillion-dollar businesses, with coaches and others being paid millions of dollars, the NCAA remains adamant that no money ever touch a player’s hand. That’s really the crux of the issue here.”
See “Why is the FBI trying to enforce NCAA rules”, Joe Nocera, New York Post 2017
 The case was brought in federal court, as opposed to state court, because the scheme involved individuals and businesses acting across state lines and the universities received federal funding.
 In the two other complaints, Chuck Person and Lamont Evans are accused of executing another scheme where athlete advisors bribed university coaches to steer players to those athlete advisors once they entered the NBA.
 The NCAA Division I manual provides: “student athletes shall be amateurs in an intercollegiate sport”. NCAA bylaws define “agent” as anyone who seeks to obtain directly or indirectly any type of financial gain or benefit from a student athlete’s potential earnings as a professional athlete”. The definition includes “marketing advisor, financial advisor, contract advisor or brand manager”. Athletes, coaches and staff have to certify each year that they are in compliance with NCAA rules in order to participate in NCAA sponsored sports. They also have an affirmative obligation to report any violations of NCAA rules including whether they have any knowledge of rules violations by others.
 Last year’s top pick, Ben Simmons, signed a four-year contract worth up to $26.6 million with the first two years and $12.1 million guaranteed. By comparison the 16th pick in the draft received a deal worth $9.1 million with $3.9 million guaranteed. See “Here’s how much money players lose when they fall in the NBA Draft”, Cork Gaines/Diana Yukari, June 2017, Business Insider
 A series of off-season competitions during which National Basketball Association teams try out different rosters of players typically consisting of a mix of rookies, second year players, and unsigned free agents.