Federal Anti-Trust Lawsuit Holding Up Change in College Basketball

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Former Adidas executive James Gatto, Adidas consultant Merl Code Jr. and runner Christian Dawkins were convicted on federal wire fraud (and conspiracy to commit wire fraud charges) and assistant coaches from Arizona, Oklahoma State and USC have each accepted plea deals for their roles in bribery and kickback schemes – but other than The Commission on College Basketball’s issuance of “recommendations” to clean up the game, little else has been done to put a halt to the unseemly underworld of college basketball recruiting in the 17 months since their arrests. Whispers of corruption continue to run rampant throughout the sport.

There are a couple of valid reasons for the delayed response to eliminating the unscrupulous behavior. For starters, the independent commission remains unwilling to implement change until the underlying accusations work their way through the criminal justice system (Chuck Person’s trial will start in June). They’re also awaiting a decision on a lawsuit (Grant-In-Aid, trial concluded in Dec.) that will determine if the NCAA has been in violation of federal antitrust laws, by limiting the amount in which colleges can pay athletes (currently cost of attendance). Ramsey Chamie, a sports lawyer and adjunct professor at the NYU Tisch Institute for Global Sport, also noted that the NCAA is in “no rush to kick the hornet’s nest. March Madness remains enormously popular, the arrests did not negatively impact fan interest or ad revenue, and it doesn’t hurt to have bad actors brought into the light and to give off the perception that the game is being cleaned up a bit.” 

Howie Long-Short: The various investigations should ultimately lead to the elimination of some under-the-table dealing, but don’t expect college basketball to suddenly become a collective of choir boys. As Ramsey reminded me, the NCAA “is a billion-dollar enterprise and they don’t have to pay the athletes. They’ll do the recommendations. They’ll set up independent bodies to monitor the athlete/agent relationship and work to better out corruption – but there’s no real incentive to do more than that right now. It’s a matter of what the corporate entity can do, versus what it must do [in the case of the anti-trust lawsuit].

The FBI’s case against Gatto, Code and Dawkins was based on the premise that by conspiring to pay high school prospects, they had defrauded the Universities issuing valuable athletic scholarships; accepting money would have rendered the players ineligible by the NCAA. Yes, the FBI claims that it was the schools who were harmed in the bribing of elite prospects to play for their programs (insert eye-roll here). The high-profile case will end on March 5th when the 3 defendants are sentenced to between 2-5 years in prison. Lamont Evans (Oklahoma State), Tony Bland (USC) and Book Richardson (Arizona) all plead guilty to taking money to steer players to agents. The triumvirate will face sentences of up to 5, 1 and 2 years in prison, respectively.

For the sake of this conversation, we’re going to assume that the court rules amateurism is a valid defense for the NCAA to restrict player compensation. Under that scenario, Ramsey believes “allowing athletes to pursue compensation for their name, image and likeness” would be among the first Rice Commission suggestions to be implemented and the one most likely to help clean up collegiate sports. “If the players can make a few dollars, then the under the table money becomes less of an incentive. I think you’ll also see NBA and NBPA eliminate the one and done requirement.” Of course, none of that is imminent. Chuck Person (Auburn) first heads to trial on bribery charges in June and the Grant-In-Aid lawsuit is sure to be appealed.

Fan Marino: Code, who spent 14 years at Nike prior to joining Adidas, is on tape telling federal investigators that Nike schools [Duke, North Carolina, Syracuse, Kentucky] pay too.” That would seem obvious considering Adidas wasn’t bidding against themselves, but that doesn’t mean fans of those programs should be worried about getting wrapped up in a federal (or NCAA) investigation. As Ramsey said, I suppose there is a chance those programs could be ensnared, but the New York District Attorney is not a specialized agency designed to govern the NCAA – the Justice Department and the U.S. Attorneys’ Offices are our enforcement bodies for federal criminal laws. The feds have certainly made their point. So, while it could happen, I don’t think anyone is waiting for the next batch of indictments to drop.” As for additional NCAA investigations, Ramsey said, “I would be surprised if the NCAA goes after the programs that you mentioned, they’re the biggest college basketball programs and it’s a member organization after all.”

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Author: John Wall Street

At the intersection of sports & finance.

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