An earlier version of this story cited a person with knowledge of the investigation as saying Josh Jackson was one of the Kansas players. The timeline of events in Tuesday’s indictment does not match Jackson’s career at Kansas.
An Adidas executive arranged tens of thousands of dollars in secret payments meant for the families of top high school players to ensure they played for Kansas and North Carolina State, according to court documents unsealed in New York late Tuesday.
The allegations, which came in an indictment adding wire fraud charges against Adidas global marketing director Jim Gatto and two others, drag two more top schools — one a Final Four team last month — into the ongoing Justice Department probe of college basketball’s shadow economy. Gatto arranged the payments through others, including an unnamed Adidas consultant and an unnamed coach at N.C. State, to ensure the players committed to schools endorsed by Adidas and signed with Adidas when they entered the NBA, prosecutors alleged.
The fraud charges are all based on the same disputed legal theory, proposed by prosecutors, that by paying the families of college players, Gatto and others defrauded the universities, which could have been sanctioned by the NCAA for violations of rules regarding amateurism had these payments come to light.
Gatto’s attorney did not respond to a request for comment Tuesday. In a statement, an Adidas spokeswoman said the company is cooperating with the investigation.
The players are not identified, but the career timeline of the N.C. State player described resembles that of point guard Dennis Smith Jr., who was taken ninth overall in last year’s draft by the Dallas Mavericks. A person close to the investigation, speaking on the condition of anonymity because he was not authorized to discuss the case publicly, confirmed the players referred to in Tuesday’s court documents included Smith.
Smith was unable to be reached for comment late Tuesday. He ultimately signed an endorsement deal with Under Armour.
A second unidentified player on this year’s Kansas team is also referenced, which could prompt an NCAA investigation of a Jayhawks team that went 31-8, won the Big 12 and advanced to the Final Four before losing to eventual national champion Villanova.
In a statement Tuesday, a Kansas spokesman pointed out the indictment does not allege involvement by Kansas coaches in any payments to the families of players.
“We will cooperate fully with investigators in this matter,” said Kansas spokesman Joe Monaco.
In a statement, N.C. State said it had no knowledge of the payments, or the identify of the unnamed coach, and would cooperate with the investigation.
For the payments to the family of one Kansas player, prosecutors alleged, Gatto routed the money through one of Adidas’s grass-roots youth basketball teams, with the assistance of an unnamed Adidas consultant. In October 2016, the indictment states, Gatto made a $50,000 payment to the Adidas grass-roots team. A sham invoice described the payment as for “Basketball Team Tournaments Fee.” Ten days later, the consultant withdrew the money in cash and delivered $30,000 to the player’s mother in a hotel in New York.
In January 2017, Gatto arranged a $90,000 payment from Adidas to the same grass-roots team. The next day, the consultant delivered $20,000 in cash to the mother in a hotel room in Las Vegas. In May 2017, Gatto arranged a $70,000 payment to the same team, described on an invoice as “Tournament Activation/Fee.” A few weeks later, the consultant wired $15,000 to the mother.
Gatto and the consultant also conspired to make payments to the guardian of another top high school player to get a recruit to Kansas, prosecutors alleged. The player’s guardian told the Adidas officials another school, sponsored by another apparel company, had already paid for the player’s commitment but the player wanted to attend Kansas. On Sept. 11, 2017, in a wiretapped phone conversation, the consultant told Gatto he needed “another $20,000″ to get the recruit “out from under” the deal to attend the other school, prosecutors alleged.
The N.C. State allegations involve an unnamed coach who was not charged with a crime Tuesday. In 2015, the indictment alleged, the unnamed coach informed the Adidas consultant that Smith, who had already publicly committed to N.C. State, was having second thoughts. Gatto and the Adidas consultant agreed to pay $40,000, the indictment alleges, to ensure Smith followed through and played for the Wolfpack. In October 2015, the consultant gave the $40,000 to the coach to give to Smith’s father, Dennis Smith Sr.
It is unclear, from the indictment, if the money actually made its way to Smith Sr., who was unable to be reached for comment late Tuesday.
Gatto, the Adidas executive, now faces three charges — one count of wire fraud conspiracy and two counts of wire fraud — along with Adidas consultant Merl Code Jr. and aspiring NBA agent Christian Dawkins. Code and Dawkins were involved in similar alleged pay-for-play schemes to get recruits to Louisville and Miami.
In a statement Tuesday evening, Mark Moore, attorney for Code, said his client is not guilty and “intends to meet these charges head-on.”
The trial for Gatto, Code and Dawkins is scheduled for Oct. 1. Assistant coaches at Auburn, Oklahoma State, Arizona and Southern California, also charged in connection with allegations they took payments from an agent and a financial adviser and agreed to steer star athletes their way as clients, are scheduled for separate trials in 2019.
Read more coverage: