Basketball Recruiting on the Nonprofit Margins
Tax-Deductible Donations From College Athletic Boosters to AAU Programs Are a Common Practice

By Eric Prisbell
Washington Post Staff Writer
Sunday, December 31, 2006

For one college basketball coach, it's a familiar and frustrating conversation. It starts with a phone call to the coach of an AAU team to discuss a recruit. Soon, the AAU coach begins making casual references to the fact that his program is set up as a nonprofit charity under IRS guidelines. Eventually, the AAU coach lets it be known that the program accepts tax-deductible donations.

The AAU coach doesn't have to directly ask for any money; the college coach understands the message.

"You say, 'Let's talk,' " the college coach said. "You keep it going as long as you can until you can figure out a way around it or until you decide to donate maybe less than what they want just to stay in the equation. As soon as you say, 'No,' you are out. You have to do what you have to do to get the player."

The funneling of cash recruiting inducements between colleges and AAU programs in the form of tax-deductible donations, usually made by college athletic boosters at the behest of a coach, has become common, according to 11 Division I head coaches and five AAU coaches, located throughout the country, interviewed for this story.

Two AAU coaches said college recruiters offered them donations without being prompted. One AAU coach said that over the past decade almost two dozen college coaches, including some from the Pacific-10 and Big Ten conferences, have offered to arrange for donations, ranging from $20,000 to $50,000, to his foundation.

"Everyone is doing it," one prominent AAU coach said. "But if there is a seller, there is a buyer, too, and it involves everyone from agents, runners, college coaches and boosters. AAU coaches say, 'This is a better, easier way.' It may seem right, but ethically it is laundering money. While it is different from handing someone a bag full of cash, the intent is the same."

Sonny Vaccaro, a prominent shoe company representative who helped create the current youth summer basketball league system nearly two decades ago, confirmed that the practice is popular, calling it "brilliant." "It is a unique, newer and cleaner way of getting money to people who have players who may or may not end up at your school," said Vaccaro, who now works for Reebok.

NCAA rules prohibit a college to pay, or arrange for its boosters or coaches to pay, any portion of a recruit's expenses for any period before he enrolls in college. Donations to a recruit's AAU team violate that prohibition, the NCAA ruled in a June 2005 decision involving Baylor University. An IRS spokesman declined to comment on whether the practice violated tax laws.

Vaccaro estimated 10 to 15 colleges arrange for booster donations of more than $20,000 to the foundations in a given year. In exchange, they get an inside track on recruiting players. "Why would you remember someone who did not help you, as opposed to someone who did help you?" Vaccaro said. "The person who gave the money would not give the money unless they thought it helped them. There is no benevolence on this level for saving mankind."

Over the past year, The Washington Post has written more than a dozen articles about the shortcomings in the troubled U.S. basketball player development system. A common theme has been that AAU programs have surpassed the high school game and become the dominant force in youth basketball despite operating with little or no oversight on or off the court. Because AAU coaches can offer players free clothing and shoes and travel to high-profile national tournaments, they control the pipeline to colleges and the NBA.

The Post spent six months investigating the financial practices of the AAU programs. It reviewed hundreds of pages of tax documents and spoke to more than two dozen college and AAU coaches. In addition, the newspaper sent 30 AAU coaches a request for additional documents with postage-paid return envelopes.

In interviews, four AAU coaches and two college coaches denied knowing about the donations. The Post found many lower-level AAU programs whose players aren't good enough to warrant such a practice and their foundations serve as a way to gather legitimate contributions so children can play basketball.

"For some reason, people think we're street agents and thugs," said Mitch Malone of the Texas Bluechips. "We're not thugs. The main group of guys who have done this for years have families and deeply care about the kids in their program."

All of the college coaches and all but one of the AAU coaches who confirmed the practice said they had never made or received donations because they believe them to be improper. The college coaches, many of whom said they lost recruits because they refused to make the donations, spoke on the condition of anonymity because they feared their statements would hurt their chances of signing AAU players. The AAU coaches refused to be identified for fear of being ostracized by peers.

All the sources agreed that the donations do not guarantee that a player will sign with a particular school.

"Donating to a foundation is like buying a raffle ticket where the prize is a car," one of the college coaches said. "If you buy the raffle ticket, it does not mean you definitely will get the car. But if you don't buy it, you have no chance. The other problem is, if you buy the raffle ticket, you don't know how many other raffle tickets have been sold. You may have one raffle ticket, and the guy next to you may have bought 30."

A prominent college coach, however, said a very large donation usually means the team is guaranteed to land all but the most elite players. "You could spend $75,000 in recruiting or $25,000 to guarantee that you will get a player. What's the better investment?" said the coach, who added that he had been solicited for donations six times over the past decade.

Some donations are more to maintain relationships than to secure players. One AAU coach said colleges must "neutralize" their surrounding territory by placating the AAU programs within their area by making donations. Without this sort of maintenance, schools from outside the area can swoop in and make stronger bids for players.

"It's a huge problem for coaches if you want to recruit the best players," one college head coach said. "It's something coaches would like to see go away, but we know that if it goes away, AAU coaches will just find the next thing to do, the next way around everything. The AAU coaches are street smart. The NCAA is book smart. Who wins that?"

The NCAA did not comment specifically on any of the circumstances described in this story. Erik Christianson, an NCAA spokesman, said "our rules clearly preclude boosters from being involved in recruiting prospects, and any evidence that suggests collusion between college coaches and boosters would be a concern."

The NCAA has documented one case of a coach making donations to an AAU nonprofit in exchange for recruiting help. Former Baylor coach Dave Bliss was found to have solicited boosters for at least $87,000 that was donated to a Houston AAU program and donated $28,000 of his own money to Texas AAU programs, according to an NCAA investigation in 2004.

The Post identified 45 of the top AAU teams in the country and found that at least 30 were set up as nonprofits, according to IRS records. Because tax laws do not require nonprofits to identify their donors, almost all of them don't, making documenting the frequency of the practice difficult. There's no way of monitoring how the donations are spent.

"In a lot of cases, these [players] don't see any money," one AAU coach said. "Some of the good coaches will put it back into the program, some may keep it for themselves. There are guys who don't have jobs. This is their full-time job."

The lucrative nature of the donations has prompted one AAU coach who didn't have a foundation to set one up. The AAU coach said that even though the foundation will not be finalized until 2007, he has commitments from coaches at four schools for a total of $100,000 in donations. Because of the contributions, he said he plans to give those schools preferential treatment in the recruitment of his players.

He said he expects the money will come in checks from wealthy boosters who will then take a tax write-off. He said he will put the money back into his summer league program. "If it came in cash," he said, "I would just keep it for myself."

One prominent AAU coach said Vaccaro encouraged him to create a nonprofit foundation a decade ago as a way to "clean your money." The coach said he declined because he felt it was illicit, but acknowledged that if he were presented with the idea now he would consider it because it is an effective money-maker.

"This is the most clever, best way of doing it," Vaccaro said. "There is no hiding. The guy who gave the check has to issue it. The guy who receives it has to deposit it. How they disperse the money is the discretion of the team, which I don't feel there is anything wrong with. You worked in the shadows prior to this new way of doing it."

Two head coaches said that when they got jobs as assistants at high-level college teams in the 1990s, they learned to drop notes under the doors of high school coaches and donate to foundations. One of the coaches said, you have to decide whether you want to "sell your soul."

"If you're a young assistant, how are you going to get the AAU coaches to talk to you?" the coach added. "How are you going to make your phone call stand out from the rest? It's something you have to do. . . . If you go to the bar and don't drink, you don't get any girls. It's money to show that you are serious, that you are willing to dance."

Business of Basketball

Summer basketball programs can be big business, with some reporting budgets of more than $100,000 to the IRS. The programs with the players rated the best in the nation are sponsored by Adidas, Nike or Reebok, which compete vigorously to outfit and financially support the best teams.

For the shoe companies, the investment serves a dual marketing purpose: Not only does it ensure that the top up-and-coming players wear their gear (and maybe one day endorse their products if they become NBA stars), but having idolized youngsters wearing their products can make lesser players, classmates and fans want to wear them, too. Add the fact that Vaccaro said the investment is tax-deductible, and the marketing expense becomes quite attractive for the companies.

Summer teams are commonly referred to as AAU programs although some only compete in shoe company-sponsored events that are not run under the auspices of the Amateur Athletic Union, which stages close to 300 national championships per year.

The Richmond-based Squires Boys Basketball Education Foundation received $18,000 in 2003 from Adidas to sponsor its program, while another Virginia area organization, the Boo Williams Summer League, received $115,000 in 2004 from Nike.

The coaches said they need more money because there are more age groups within each program and more events to attend each year. Teams usually play in five to 10 tournaments per year in the spring and summer, and top players attend one of three shoe company-sponsored camps in July, where they are scouted by hundreds of college coaches.

A late-July event annually attracts 600 teams to Las Vegas, where teams can sometimes play as many as four times in one day. Some teams travel by bus around Las Vegas, while others cram into minivans. Summer league coaches pay for everything from food to airfare to hotel rooms. The 2004 expenses for the Squires program included $7,945 for airfare, $3,582 for food, $2,625 for lodging, $9,495 for tournament and AAU fees and $3,016 for telephone costs.

Several summer league coaches said they hold fundraisers to supplement money their programs receive from shoe contracts. And still some said they are forced to pay some travel and expense costs from their own pockets. Dwaine Barnes, the coach of the Ohio D-1 Greyhounds team that featured high school all-American O.J. Mayo, said: "I've been paying out of my own pocket before Reebok came [to sponsor the program]. And I'll still be paying out of my own pocket once Reebok leaves. Every program has to work its butt off and fundraise."

Barnes, who said his nonprofit foundation has never solicited boosters of colleges for donations, said one way to raise funds is to ask corporations for donations. "If you write 1,000 letters to them," he said, "you might get 100 responses." Tony Johnson, the director of the Dallas Mustangs, said his program sought nonprofit status because "people told us that is how you make money," although he said he has never solicited boosters of colleges for donations.

A nonprofit foundation with income of more than $25,000 per year is required to complete an IRS Form 990 each year. An examination of 30 nonprofit foundations run by summer league or high school coaches, however, revealed that many failed to file the form or filed an incomplete version.

One of the AAU teams that identified its top donors is the Georgia Stars, a strong program based in Atlanta. The Stars got $40,000 from Nike in 2005, $35,000 in 2004 and $15,000 in 2003, according to tax records.

According to their tax records, George Levert, an Atlanta businessman, donated more than $26,000 in cash and stock to the program between 2003 and 2004. Levert, according to an article on the Web site of the Georgia Tech athletic department, is an alumnus and prominent booster of Yellow Jacket athletics. Georgia Tech recruited the Georgia Stars' Louis Williams, a top 10 player nationally, until he signed with Georgia in 2004. Instead of playing in college, Williams entered the 2005 NBA draft and is now with the Philadelphia 76ers.

Levert said Thursday that he donated to the team because his son, William, played for the Stars six years ago. Levert said he was not asked by any Yellow Jackets coaches to make a donation and was unaware of any possible NCAA ramifications.

The NCAA has attempted to make moves in recent years to curb the influence of summer league programs. Beginning with the 2004-05 season, the NCAA prohibited colleges from holding exhibitions against so-called club teams, which received as much as $25,000 for games. The problem was that colleges sometimes recruited from the summer league programs whose coaches were affiliated with the exhibition opponent. There was no policing where the money went. The NCAA adopted the rule change in the spring of 2004 after an exhibition between Connecticut and a makeshift traveling team brought attention to the longtime practice.

"As soon as someone does something new," one prominent summer league coach said, "everyone else will be doing it within 90 minutes."

For example, one summer league coach suggested that he will create a 1-900 phone number so he can make money when college coaches call him each day. Summer league coaches already charge college coaches for what they call scouting reports that are often little more than lists with players' names. The AAU coaches have also earned money from speaking at summer camps run by college coaches.

The Baylor Case

The only documented case of a coach donating to an AAU foundation in exchange for recruiting favors received almost no national attention. The revelations came as part of the NCAA investigation that followed the 2003 murder of Baylor player Patrick Dennehy and were overshadowed by the other, more unseemly details of the case.

NCAA investigators uncovered a pattern that mirrors what The Post found: A college coach urges boosters to make donations to AAU programs, and the AAU coaches then steer their players to that school. In Baylor's case, Bliss, then the head coach at the school, also made personal donations to the programs.

One of the AAU teams involved in the case was the Houston Superstars, which is called the Texas Superstar Foundation on its tax forms. It counts NBA players Daniel Ewing and T.J. Ford among its former players.

In October 2002, according to the final NCAA report, Bliss met with Jim Turner, a Baylor booster and member of the school's board of regents. At the meeting, Bliss asked Turner to have his company contribute $50,000 to the Houston Superstars foundation. Bliss told Turner that the money would help offset the AAU team's travel expenses and enable Baylor to better recruit players in the program, the NCAA said.

On Oct. 25, 2002, a recruit, not named in the report, made an official visit to Baylor while accompanied by the director of the Houston Superstars. Two $25,000 checks that were dated Oct. 26 were written by Turner and given to Bliss, who passed them to the AAU team's official. One check was deposited Nov. 7, the other deposited Dec. 13, according to NCAA documents.

Bliss told Turner that a $50,000 charitable gift did not violate NCAA rules. Each year, Turner said, he and his company, Dr Pepper Bottling Company of Texas, had donated hundred of thousands of dollars to charitable and youth groups and that the request seemed routine.

Two years ago, Turner released a statement that said: "The Houston Superstars Foundation was a 501(c)(3) organization, and we were assured that the donation was proper under NCAA rules. The Foundation appeared to fit our guidelines and mission statement as far as its qualifications to receive the money. No one informed us that Mr. Bliss should not have been soliciting money for this organization. Dave Bliss was aware of my longtime commitment to support youth athletics, and I feel that I was taken advantage of. We work hard to make sure our contributions in the community are done the right way."

In June 2003, Bliss also targeted members of the Sixth Man Club, the school's basketball booster organization, for donations. Between April and July 2003, at least 15 boosters gave Bliss checks made out to the Houston Superstars in amounts from $2,000 to $5,000.

Wes Bailey, another member of the school's board of regents, said that in the spring of 2003, Bliss asked him and his father to make a $1,500 contribution to the Houston Superstars in lieu of a contribution to the Sixth Man Club.

"Later I learned that under NCAA rules, the coach should not have been asking for money for this group although the contribution itself was legal by IRS standards," Bailey said in a statement issued through the school. "Of course, I detest the fact that our family was unknowingly used, and I am committed to my work as a regent to make sure the athletics department operates ethically and honestly."

In all, the NCAA found that Bliss solicited at least $87,000 from 17 boosters and two regents for the Houston Superstars foundation, according to NCAA documents. Bliss, who requested donations both individually and during meetings attended by several boosters, delivered the money to the director of the Houston Superstars himself.

Houston Superstars President John Eurey said Thursday that Bliss did nothing wrong in helping his program.

"All the money that they donated went to the travel to help those kids go to college," Eurey said. "That's it. I have nothing to say to those people, the [NCAA] investigators, because there was nothing illegal on my part. I took the donations. They want to donate? Fine. If people want to donate to the United Way, nobody questions that. But when it's a program, and basketball players are involved, people say it's illegal. It's a donation. I didn't profit from it. I gave it to the kids. They ate first-class, they traveled first-class. They went to every tournament in the country. We paid for gyms, we paid for programs."

Between June 2002 and May 2003, Bliss also donated at least $28,600 of his own money to five AAU programs, ranging in amounts from $1,000 to $16,600, according to the NCAA report. Bliss disclosed only one $5,000 donation on Baylor's 2002-03 financial disclosure form.

One Baylor booster, in a letter to Baylor, said he made the AAU donation because he believed it would help in recruiting: "Our support would make him [Bliss] able to get recommendations from these coaches about talented players to evaluate and make the players and their families feel that Baylor and Waco were committed to the kids that might consider Baylor in the future."

The Houston Superstars recruit who made the Oct. 25 visit signed to play for Baylor on Nov. 13. He was one of four players from the Superstars program to enroll at the school.

Getting in the Game

The summer league programs are also reaping donations from agents, according to Vaccaro, court records and some of the AAU coaches interviewed for this story.

The AAU coach said at least five representatives of sports agencies have offered to make donations of similar amounts, in hopes of representing his players in professional contract negotiations.

A former employee of sports agent Dan Fegan accused Fegan in a sworn deposition of making donations to at least three summer league programs in exchange for help in landing the players as clients. In a sworn deposition that was part of a 2002 breach-of-contract lawsuit filed in Los Angeles Superior Court, Brian Dyke accused Fegan of making donations to Adidas-sponsored summer basketball programs in an attempt to sign some of their players.

According to court documents, Dyke testified that in 2000 he saw Fegan put more than $1,000 in a FedEx envelope that was sent to an AAU coach. When asked what Fegan told Dyke he had to do to get players, Dyke said in the deposition, "Usually it was paying money one way or another." But Dyke said he did not recall payments made directly to players; instead they were made to the players' summer league basketball programs.

Fegan's San Francisco-based law firm, King & Kelleher, did not dispute that Dyke's payments took place, but argued that "there is no evidence that the payments were illegal or improper."

The newest twist on foundation donations involves parents of top high school players creating nonprofits to solicit donations from college boosters or sports agents in exchange for a better chance to sign their son, Vaccaro said.

One prominent college coach pointed to the chair in his office where he said the mother of a recruit once sat and told him she had joined a charity foundation that accepts donations. The coach said he understood the message.

Staff writer Adam Kilgore, in Atlanta, and researcher Julie Tate contributed to this report.

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