College-Hoops Bribe Plot Defrauded Top Schools, Jury Is Told

(Bloomberg) -- U.S. college basketball went on trial in New York Tuesday with a prosecutor telling jury members they’d see what corruption in the sport looks like.

In meetings in hotel rooms and parking lots, a former Adidas AG executive and two other men funneled cash to family members of prospects in exchange for a commitment to play for university programs sponsored by the maker of shoes, team jerseys and other athletic wear, Assistant U.S. Attorney Eli Mark told the jury at the start of the trial.

"It was a blatant and brazen violation of the most fundamental rule in college basketball, that you can’t pay to play," Mark said.

James Gatto, the former Adidas executive, Merl Code, a consultant with ties to Adidas, and agent Christian Dawkins are among 10 people charged in a sweeping probe into illicit kickbacks in National Collegiate Athletic Association basketball that reached the highest levels of the sport. More trials are pending.

Gatto’s lawyer said in her opening statement that he broke NCAA rules but isn’t guilty of a crime. The three men have argued that they were trying to help schools recruit top talent with the knowledge of coaches.

"NCAA rules are not the laws of this country," Casey Donnelly said.

Donnelly likened the NCAA and its rules to "a kids’ after-school soccer league" that takes in $1 billion a year. She and the other defense lawyers said their clients were trying to help the players’ families meet their expenses, help sponsored schools win top recruits and help Adidas make connections with players who might someday become NBA stars.

Hoops are one of the two revenue-generating sports at most big colleges. The profits from football and basketball help fund other programs and support big-ticket expenses like new arenas and coaches’ contracts. But critics say they also spur sporting-goods companies and their representatives to bribe prospects to play for the programs that the companies sponsor.

One prominent coach -- the University of Louisville’s Rick Pitino -- lost his job last year amid allegations that Adidas paid the family of a recruit. Pitino isn’t accused of wrongdoing.

Louisville’s basketball program turned an NCAA-best $27.7 million in profit off $45.6 million in revenue in 2016. Kansas’s team made $7.1 million profit on $18.3 million in revenue.

‘Dirty Business’

"College basketball is a dirty, dirty business," David Ridpath, a sports administration professor at Ohio University and former president of the Drake Group, a coalition aimed at preserving academics in the world of commercialized college athletics, said in an interview. He’s not involved in the case. "The more ugliness that gets exposed, the more impetus there is for change."

While the outcome of the trials won’t be important to many fans, there’s great anticipation for what might be revealed. Potential jurors were told of 12 Division I programs that might be mentioned, along with a list of well-known college coaches, including Arizona Wildcats coach Sean Miller, University of Kansas’s Bill Self and University of Miami’s Jim Larranaga. Athletes, like Duke’s Zion Williamson and North Carolina’s Nassir Little may also be mentioned. None of them are accused of wrongdoing.

A key issue in the case is whether schools are victims, as prosecutors claim. The government says schools like Kansas, Miami and Louisville were the victims of fraud because they were exposed to NCAA rules violations that caused financial and reputational harm. But the defendants dispute that claim.

In the case of Louisville’s successful efforts to recruit Brian "Tugs" Bowen, a small forward from Saginaw, Michigan, consultant Merl Code "stepped up and did what Pitino, the face of Louisville and the big dog there, wanted," his lawyer, Mark Moore, told the jury. He urged jurors to "think about whether he was doing this to defraud a university or whether he was doing it to help a university and its basketball program.”

Mark, in the government’s opening statement, told jurors that the three defendants planned to pay Bowen’s father about $100,000, with the first installment of about $20,000 handed over in a cash-stuffed envelope in a parking lot in New Jersey.

Prosecutors will present testimony from Brian Bowen Sr., who was granted immunity, Mark said. Jurors will hear excerpts from dozens of phone calls tapped by the FBI, he said. The trial is expected to take as long as a month.

Dawkins’s lawyer, Steven Haney, said his client intended to help players with the goal of one day becoming a prominent sports agent.

The arrests date to last September, when prosecutors announced the results of a two-year probe that detailed how shoe executives, middlemen and assistant coaches helped coordinate illicit payments to recruits and their families. The evidence emboldened those who criticize the NCAA for its refusal to compensate athletes beyond scholarships, and forced the governing body to admit that its system was broken.

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