College Sports Faces Bribery Scandal After Conviction of Adidas Marketers

January 25, 2021 by Tom Ramstack
The USC bench celebrates after the Trojans blocked a field goal attempt by Utah in the first quarter at the Los Angeles Memorial Coliseum on Friday, Sept. 20, 2019. (Luis Sinco/Los Angeles Times/TNS)

A federal court in New York on Friday upheld the convictions of three Adidas shoe company executives for paying bribes to basketball recruits to direct them to specific universities.

The bribes were to ensure the recruits signed with Adidas-sponsored schools. If they later turned pro, they also agreed to endorse Adidas products.

Federal prosecutors successfully argued the marketing scheme violated NCAA rules, similar to the earlier bribes paid by parents to coaches to get their children into good schools under fraudulent athletic scholarships.

The prosecutors said the payments to recruits or their families defrauded the universities of their right to recruit athletes eligible under NCAA rules. The recruits were headed to the University of Louisville, North Carolina State University and the University of Kansas.

They also convinced the court that the executives behind the scheme, former Adidas marketing head Jim Gatto, former Adidas consultant Merl Code and sports agent Christian Dawkins, knew they were committing illegal acts.

The three men denied knowing there was anything wrong with the payments.

Instead, they claimed they were trying to ensure the schools won top athletes. They also said the universities knew they were making the payments or intentionally avoided checking them out.

Their allegations that school officials knowingly overlooked the pay-to-play scheme was supported by a statement from the U.S. attorney who led the prosecution.

Joon H. Kim said when the charges were announced Sept. 26, 2017, “The picture of college basketball painted by the charges is not a pretty one – coaches at some of the nation’s top programs taking cash bribes, managers and advisors circling blue-chip prospects like coyotes, and employees of a global sportswear company funneling cash to families of high school recruits.”

He added, “Month after month, the defendants allegedly exploited the hoop dreams of student-athletes around the country.”

Similar to the 2019 Varsity Blues scandal in which 50 wealthy persons were charged with bribing coaches to get their children into the nation’s best schools, the allegations against Adidas executives raised concerns over the role of money in college sports. Prosecutors estimated the total amount of bribes paid in the Varsity Blues scandal — including by Hollywood stars Felicity Huffman and Lori Loughlin — at $25 million.

Corporations like Adidas sometimes pay universities millions of dollars per year for marketing rights, which can include putting logos on flat surfaces at sporting events, hanging banners in rafters, sponsoring fan festivals and half-time giveaways.

Adidas GM, a sportswear company, is one of the nation’s largest sponsors of college sports teams. Others include Coca-Cola Company and Ford Motor Company, Nike Inc. and Under Armour Inc.

Schools with the best athletes and playing records get the most air time on television, which means their corporate marketing is seen by a greater number of potential customers.

The Center for Research in Intercollegiate Athletics at the University of North Carolina estimates universities will receive $500 million this year for selling their marketing rights. The deals included a 10-year $150 million marketing deal for the University of California at Los Angeles.

Gatto, Code and Dawkins said they were merely doing what marketing executives are hired to do, namely helping their company by building relationships with top athletes who could bring further marketing and endorsement opportunities if they become professional athletes.

Judge Denny Chin of the Second Circuit disagreed when he announced that the men’s appeal of their convictions was denied.

“The ends, however, do not justify the means, and that others are engaging in improper behavior does not make it lawful,” Chin’s written opinion said.

“Here, as the jury could have reasonably found, defendants deprived the universities of property — athletic-based aid that they could have awarded to students who were eligible to play — by breaking NCAA rules and depriving the universities of relevant information through fundamentally dishonest means,” Chin added.

The universities continue to face possible sanctions for violating NCAA rules based on preliminary evidence they knew about the bribes.

The case is USA v. James Gatto, Merl Code and Christian Dawkins, case numbers 19-0783, 19-0786 and 19-0788, in the U.S. Court of Appeals for the Second Circuit.

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