In opening statements in the first trial tied to the FBI’s investigation into corruption throughout college basketball, a lawyer representing James Gatto, Adidas’ former director of global sports marketing, asserted that her client’s payments to the families of top high school basketball recruits were only made to compete with similar payments being made by Nike and Under Armour.

Potentially ensnaring Nike and Under Armour as well as a few more universities, Oregon, Arizona and Maryland, in the pay-for-play scandal was only one bombshell heard in opening statements Tuesday in New York’s U.S. District Court.

The other surprise was Gatto’s attorney Casey Donnelly readily admitting that NCAA rules were broken in funneling cash to families of college recruits. She argued that making the illicit payments to players didn’t hurt anyone and violated no law.

“NCAA rules were broken,” Donnelly told Judge Lewis A. Kaplan and the jury, according to ESPN. “We are not going to waste your time pretending these families did not get funds.”

She added, “The NCAA rules are the not the laws of the country. It’s like a kids’ after-school soccer league, if that soccer league also brought in $1 billion a year. These aren’t the laws. They’re the equivalent of the rules in your apartment building. If you break them, you haven’t broken the law. It is not against the law to violate NCAA rules.”

Indeed, Donnelly described the schemes from Gatto as a “win-win-win” scenario that benefited three parties: the universities, players and Adidas. The schools secured top recruits, the players’ families earned some money until the recruits could play professionally and Adidas saw elite players attend Adidas-sponsored schools. Donnelly alleges Gatto was essentially making the payments at request of universities and was ultimately helping the schools drive revenue.

“The basketball coaches would ask for Jim’s help in recruiting particularly talented basketball players to their programs,” Donnelly said. “I suspect you know what kind of ‘help’ the coaches wanted from Jim. He’s not a guidance counselor. Jim understood that Adidas should help the families out if that’s what the coaches wanted.”

Prosecutors say former Gatto, along with former Adidas employee Merl Code and business manager Christian Dawkins, defrauded so-called “victim schools” Kansas, Louisville, Miami and N.C. State, all of which are sponsored by Adidas with the payments to the recruits. Overall, 10 individuals were arrested by the FBI in September 2017 as part of the federal government’s investigation.

The attorneys for Code and Dawkins also largely admitted to the scheme and likewise touted the three-pronged benefits to Adidas, schools and players’ families.

Mark Moore, Code’s defense attorney, stated, “It’s not a crime to pay somebody in cash. It’s not a crime to create a fake invoice. It’s only a crime if you do so with the intent to defraud a specific school.”

Overall, Gatto has admitted to:

  • Agreeing to send $100,000 to the family of top 2017 recruit Brian Bowen to exchange for Bowen enrolling in Louisville.
  • Paying $40,000 to the family of Dennis Smith Jr. while Smith was playing at North Carolina State. He is now with the Dallas Mavericks in the NBA.
  • Paying $20,000 to recruit Silvio De Sousa, who attends Kansas.

The attorney said Gatto’s orchestration of a $100,000 payment to send five-star prospect Bowen to Louisville was a way to “level the playing field” for Adidas in securing recruits. The payment to Bowen’s father, Brian Bowen Sr., came only after Nike-sponsored the University of Oregon offered the recruit an “astronomical amount of money” to sign with the Ducks, Donnelly stated, according to Yahoo Sports.

The controversial recruitment of the 6-foot-7-inch wing to Louisville led to the firing of legendary coach Rick Pitino. The court is expected to hear from Bowen’s father during the trial. He has cut a deal with prosecutors and is expected to testify.

In a statement Tuesday night, Oregon said: “The university is aware of the claim made by a defense attorney in New York’s U.S. District Court as part of opening statements in a criminal trial related to college basketball recruiting. To date, the University of Oregon has not been contacted by the federal government or any other party involved in these proceedings. We take the claim seriously and will monitor the court proceedings closely for any further details.”

The revelation about Oregon came as a surprise because the university had not been mentioned in the indictment.

Attorney Steven Haney Sr., representing Dawkins, said his client had known Bowen many years and believed any financial help fell under an NCAA exemption permitting help to be given by anyone with a pre-existing relationship with the athlete. Haney said Dawkins believed that “helping these poor families was what the schools wanted … by any means necessary.”

In a second case, Gatto’s attorney argued that Gatto, Code and Dawkins schemed to pay Nassir Little’s family $150,000 to attend Miami but only after Arizona, a Nike school, offered to pay the same amount for Little to play for the Wildcats. The 6-6, five-star forward ended up signing with the University of Miami after Gatto matched the offer.

Gatto “was told Arizona was going to pay or had offered to pay (Little) $150,000 if he went to Arizona,” Donnelly said. “Jim was asked to level the playing field so Nassir could go to Miami, an Adidas school.”

Mark Moore, Code’s defense attorney, likewise said Code “discovered that Arizona was going to pay Mr. Little $150,000 to get Little to Arizona. He discovered that Mr. (Jim) Larranaga wanted Little for Miami, a school that was sponsored by Adidas.” Larranaga, Miami’s head coach, contends the program was unaware of a pay-for-play scheme involving Little.

Moore said, “The competition between Nike, Under Armour and Adidas to recruit the top basketball players can be pretty intense.”

Arizona’s reported offer to Little was first alleged in a federal complaint released a year ago. Little is now a freshman at North Carolina, a Nike/Jordan Brand school, and is a projected top-10 pick in next year’s NBA Draft.

Dawkins’ attorney, Haney, said the would-be agent had “no dialogue with Little or his family” about money. Little’s family has maintained it did nothing wrong.

In the third case, the defense argued that Under Armour offered to pay $20,000 to encourage Silvio De Sousa to play for Maryland. The recruit wound up at Kansas, an Adidas school.

Donnelly added that her client “was not trying to hurt these universities, he’s trying to help them. … He’s supposed to help these schools shine,” Donnelly said. “When Jim was helping these families, he felt he was doing his job.”

The allegation comes almost three months after the university revealed that the FBI had sent two subpoenas that included a request for information related to De Sousa’s recruitment. Maryland coach Mark Turgeon hasn’t addressed the De Sousa allegation, but vehemently denied any involvement into an alleged payment from agent Andy Miller to former Maryland center Diamond Stone, the subject of that second subpoena, while Stone was a freshman at Maryland.

Finally, Donnelley said Gatto paid the family of Dennis Smith Jr. $40,000 to secure his commitment to play basketball at N.C. State. Smith was not named in the indictment and is not charged with any crimes, but Donnelly’s comments Tuesday were the first time his name has been explicitly mentioned, possibly implicating N.C. State.

N.C. State athletic director Debbie Yow issued the following statement: “We’ve worked tirelessly to establish a culture of compliance and accountability within NC State Athletics. When that culture is threatened, we will always act appropriately. If any former employee was involved, they knew they were breaking the rules and chose to keep it hidden. We have no tolerance for those who would choose to damage the reputation of this great university. NC State will continue to operate with integrity, winning the right way and succeeding with character. We will continue to fully cooperate with the U.S. Attorney’s Office and keep the NCAA updated throughout this process.”

At Wednesday’s hearing, the big news was financial planner Munish Sood testifying that he paid associates of Philadelphia 76ers guard Markelle Fultz and Los Angeles Lakers forward Kyle Kuzma while they were in college. According to Yahoo Sports, Sood said he gave a $30,000 loan to one of Fultz’s associates and paid Kuzma’s associate an undisclosed amount. Fultz spent the 2016-17 season at the University of Washington while Kuzma played at the University of Utah from 2014-17.

Sood also indicated he gave about $19,500 last year to Brian Bowen Sr. as an incentive for his son to commit to Louisville.

In August, Sood, the CEO and chief investment officer of Princeton Advisory Group in Princeton, NJ, pled guilty to felony conspiracy to commit bribery, honest services fraud and travel act offenses, payments of bribes to an agent of a federally funded organization and wire fraud conspiracy.

The prosecution is arguing Gatto defrauded multiple schools by committing NCAA violations that made student athletes ineligible under NCAA bylaws. The Department of Justice sees the crimes as federal in nature because money was conspired to be delivered across state lines.

From June to September 2017, the FBI used wiretaps to monitor calls from cell phones belonging to Gatto, Code and Dawkins. ESPN reported that the earliest wiretaps were placed June 19, roughly two weeks after Bowen committed to Louisville. In his opening remarks, Assistant U.S. Attorney Eli Mark pointed to fake invoices, secret second phones and cash handoffs behind the scheme as evidence of wire fraud and conspiracy.

“This is what corruption in college basketball looks like,” Mark told the jury, according to ESPN. He added, according Courthouse News, “They wanted to profit off of the young player’s talent.”

This is the first of three scheduled federal trials pertaining to the college basketball corruption scandal. Those arrested in the scandal include four prominent assistant coaches and six others, including Gatto and Code. The case has raised broader questions about the outsized influence that athletic footwear companies wield in amateur sports.

Image courtesy Adidas