Nike Being Probed by SEC on Illicit-Payment Claim, Jury Told
Nike Being Probed by SEC on Illicit-Payment Claim, Jury Told
(Bloomberg) -- Nike Inc. is being investigated by the U.S. Securities and Exchange Commission over claims it made illicit payments to elite youth basketball players, according to a lawyer for Micheal Avenatti, who is on trial for allegedly trying to extort millions of dollars from the company.
Defense attorney Howard Srebnick disclosed the probe for the first time in his opening statement to a jury in Manhattan on Wednesday. He said the Justice Department, which started an earlier investigation of Nike and competitor Adidas AG, handed over evidence to the SEC. A former Nike lawyer later confirmed the investigation in court testimony.
Avenatti, a celebrity lawyer, was charged last year with trying to extort as much as $25 million from the company during March 2019 settlement talks in which he was representing a California coach who claimed Nike made improper payments to his players.
Avenatti gained a national profile while representing adult-film actress Stormy Daniels in a lawsuit against President Donald Trump. The 48-year-old lawyer claims Nike falsely accused him of extortion to curry favor with prosecutors by delivering a high-profile target who was disliked by the president.
Judy Burns, an SEC spokeswoman, declined to comment. Nike didn’t immediately respond to a request for comment.
The embattled California lawyer argues that his former client, youth coach Gary Franklin, hired him to expose the allegedly illicit payments by Nike.
In their settlement talks, Avenatti allegedly threatened to cause billions of dollars in damage to Nike by going public with evidence handed over by Franklin if the company didn’t pay the coach $1.5 million. Avenatti also demanded that he and a colleague be paid as much as $25 million to conduct an internal probe of Nike, prosecutors said.
Franklin, who may be a government witness at the trial, claims Avenatti defrauded him by using the coach’s allegations to try to line his own pockets, prosecutors said.
Former Boies Schiller Flexner LLP lawyer Scott Wilson, who represented Beaverton, Oregon-based Nike in the talks with Avenatti at the law firm’s Manhattan office, confirmed the SEC probe on the witness stand Wednesday.
‘Broader Than Just Nike’
Under questioning by the prosecutor, Wilson, the first witness in the case, said he believes the SEC investigation “is broader than just Nike.”
Assistant U.S. Attorney Robert Sobelman said in his opening statement on Wednesday that Avenatti “didn’t bet on Nike going straight to the authorities” after settlement talks in which the lawyer “crossed the line.”
“This trial is about how Nike was victimized by the defendant,” Sobelman told the jury. “Even if Nike did wrong, that did not give the defendant the right to do what he did.”
Nike hasn’t been charged with wrongdoing in the investigation, which is ongoing.
The government’s wide-ranging probe into bribery in college basketball dates back to 2014. The DOJ went public with the investigation in September 2017, when federal prosecutors unveiled criminal charges against 10 coaches, managers, financial advisers and an Adidas executives accused of facilitating illicit payments to players.
The indictments shed light on what had long been an open secret in college sports -- that young prospects and their families were often given cash to influence what school they’d attend, or what sneaker company they’d sign with.
That investigation later widened to include some of college basketball’s biggest programs, including some outfitted by Nike. That initial set of arrests led to a handful of convictions, including for Adidas executive Jim Gatto, who was sentenced to nine months in prison.
The case is U.S. v. Avenatti, 19-cr-00373, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporters on this story: Erik Larson in New York at elarson4@bloomberg.net;Eben Novy-Williams in New York at enovywilliam@bloomberg.net
To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Peter Blumberg
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