Jim Gatto was director of global marketing for the sportswear company Adidas, Merl Code was a consultant to Adidas, and Christian Dawkins was the owner of a sports-management business. Gatto was convicted of defrauding three universities — the University of Louisville, North Carolina State and the University of Kansas — by participating in schemes to make secret payments to the families of star high school athletes in exchange for the athletes’ agreeing to attend and play basketball at those universities. Code and Dawkins were found guilty of taking part with Gatto in the Louisville scheme.
The payments themselves were not illegal; it’s not a crime to pay someone to induce attendance at a particular university. If these had been professional athletes, the payments would have been considered signing bonuses. But the payments did violate NCAA rules, which prohibit student-athletes from receiving money or other benefits in connection with their participation in college athletics. If the payments came to light, the students would be ineligible to play, and the universities could be fined and otherwise sanctioned.
Prosecutors argue that by participating in the scheme the defendants caused the universities to award scholarships to students who were in fact NCAA ineligible, and that this was a crime. The government’s theory is that the defendants defrauded the universities of the scholarship money and of the right to control how that money was distributed.
But there’s a big problem with the government’s fraud claim: Fraud typically involves a defendant who intends to injure the victim and profit at the victim’s expense, but these defendants intended neither. They did not want to injure the universities — just the opposite. They were trying to help the universities attract some of the best players in the country. That, in turn, would potentially have huge financial benefits for the athletic programs — which were sponsored by Adidas — and for the universities generally. What’s more, any injury to the universities (which would have occurred only if the payments were discovered) would have injured the defendants, as well. The three men would benefit from the scheme only if the universities also benefited — they were all on the same team, so to speak. Harming the universities, the purported “victims,” was the last thing any of the defendants wanted.
In a fraud case, the defendant also typically obtains money or property from the victim. But the defendants here pocketed nothing from the scheme. Any scholarship money went to the athletes, not the defendants. And in return for those scholarships, the universities received exactly what they had hoped to receive: the services of a star player.
Finally, fraud also typically involves deception of the victim. But the evidence at trial demonstrated that coaches at the universities were aware of and condoned the recruiting violations. It’s hard to see how the defendants deceived the universities when the university employees most directly involved — the coaches — knew exactly what was going on. The universities would no doubt prefer to be portrayed as innocent victims in this whole affair, but it’s more accurate to consider them willing participants happy to take part in the scheme until it came to light. It brings to mind Captain Renault in “Casablanca,” who professes shock at the gambling going on at Rick’s Cafe while pocketing the winnings.
This prosecution lacks all the typical indicia of a fraud. Without the NCAA rules, there is no fraud theory, and the government has no case. These defendants deserved to be disgraced for taking part in the sleazy process that athletic recruitment has become. They deserved to be fired or otherwise disciplined. But they shouldn’t be branded felons and sent to prison for breaking the rules of a private organization, with the seemingly willing participation of their supposed victims, through conduct that was otherwise perfectly lawful.
The NCAA undoubtedly needs to clean house. A good start would be to do away with the fiction that Division I student-athletes are amateurs and to let them share in the proceeds of the multibillion-dollar business that is college athletics. But federal prosecutors should have better things to do with their time than helping the NCAA clean up its mess by effectively turning its internal rules into criminal statutes.