As colleges prepare for athletes to profit from their names, images and likenesses, a federal appeals court has confirmed that amateurism remains alive and well—so much so that criminal law protects it.
On Jan. 15, Second Circuit Judge Denny Chin wrote an opinion on behalf of a three-judge panel. The panel rejected an appeal by former Adidas executive James Gatto, former Adidas consultant Merl Code and client recruiter Christian Dawkins. A jury had convicted of them of wire fraud and conspiracy in 2018. They were later sentenced to six to nine months in prison. One of the three judges, Gerard Lynch, partially dissented due to concerns about the admissibility of evidence.
While the particulars of each defendant’s wrongdoing varied, they all partook in the same basic scheme: bribing five-star recruits to attend Adidas-sponsored programs at North Carolina State, Kansas, Louisville and other schools. The family of current Pacers forward Brian Bowen, for example, was paid $100,000 so that he’d pick Louisville.
The arrangement also carried the tacit expectation that when the recruits declared for the NBA draft a year or two later, they’d hire the co-conspiring agents/advisors and sign endorsements with Adidas. Everyone in the conspiracy seemingly gained: The recruits were paid; Adidas saw their sponsored programs enhanced; coaches were credited with landing prized players; and agents and advisors secured marquee clients.
Gatto, Code and Dawkins didn’t act alone. Four college coaches (Lamont Evans, Book Richardson, Tony Bland and Chuck Person), clothing executive Rashan Michel and investment advisor Munish Sood avoided trials by negotiating plea deals.
The bribes constituted obvious violations of NCAA rules. But why would—to employ a non-pejorative synonym—“paying” high school students to attend a particular college represent a criminal act?
The Justice Department has advanced a theory that has thus far prevailed. The defendants used wires (banking transactions, phone calls, texts, etc…) to transmit bribes across state lines. Colleges, in turn, awarded scholarships and other financial aid to prized, but NCAA-ineligible, recruits. Had universities known the truth, they would have awarded financial resources to eligible, if less coveted, players.
Stated differently, colleges were victims rather than beneficiaries. They landed recruits who could get them in trouble with the NCAA. The fact that those same recruits could help colleges win basketball games, sell tickets, market merchandise, boost TV ratings, attract donations and draw admissions applications was deemed beside the point.
This type of misconduct is seen as depriving schools of “honest services.” Coaches at Adidas-sponsored colleges were contractually obligated, Judge Chin stressed, “to be stewards of NCAA rules and report any suspected violations.” By facilitating rule violations, the coaches betrayed their duties.
Honest services fraud also surfaced in Operation Varsity Blues, the college admissions scandal that ensnared Lori Loughlin, Felicity Huffman and other parents who paid the organizer of a scheme that led to admissions into elite colleges. There, the schools were deprived of the honest services of academic administrators and coaches who profited from payments. Had those parents simply donated the money to the schools, it wouldn’t have been a crime.
Gatto, Code and Dawkins portray the government’s theory as backwards. They insist their intent was to help, not harm, schools. During the trial, Judge Lewis Kaplan denied them—wrongfully, the defendants charged—the opportunity to have an expert testify to “the myriad of benefits, both quantitative and qualitative, that a successful men’s basketball program bestows upon a university.” Judge Chin found nothing wrong with such a denial, noting “the law is clear: a defendant cannot negate the fraud he committed by wishing that everything works out for his victim in the end.” He added that “the perceived unreasonableness or unfairness of the NCAA’s amateurism rules”—rules that N.C. State, Kansas and Louisville voluntarily accepted—was not on trial.
For similar reasons, Judge Chin rejected the defendants’ theory that they “were convicted of a fraud they did not know about” and thus lacked the fraudulent intent necessary for guilt. He emphasized that Gatto, Code and Dawkins “were sophisticated actors who were involved in all aspects of top-tier basketball in America.” He also noted that wiretap evidence confirmed the co-conspirators knew “that their conduct violated NCAA rules” and could lead to forfeited scholarships.
Gatto, Code and Dawkins can petition the U.S. Supreme Court, but they’d face long odds. The Court, which will soon hear NCAA v. Alston, only agrees to hear about 1% to 2% of petitions. The trio’s odds would increase if Supreme Court justices have reservations about prosecutors predicating criminal charges on what amounts to violations of a private, nonprofit organization’s rules.
While NIL will open up a new world of opportunities for college athletes, recruiting inducements remain off limits.