correction: A previous version of this article incorrectly listed Michigan State as a college basketball team that was sponsored by Adidas.
The federal investigation that sent shock waves through college athletics and the sports apparel industry this week began in late 2014, when a little-known financial adviser to a few professional athletes in Pittsburgh became an FBI informant.
That November, according to court documents unsealed Tuesday in New York, Marty Blazer agreed to help the FBI investigate the black market surrounding major college sports. Since 2000, Blazer later would admit, he had paid college athletes if they agreed to become his clients when they turned pro, and he could introduce FBI agents to others he had met along the way.
Three years later, that investigation burst into public view Tuesday, with the arrests of 10 men — including four assistant basketball coaches at Division I schools and a top Adidas executive accused of arranging six-figure bribes for basketball recruits — and a news conference in which a federal prosecutor implied more arrests could come.
How far the fallout from this investigation extends — how many schools, coaches and athletes will be implicated — likely depends on a series of conversations that will take place over the next few months between prosecutors and lawyers for the 10 men arrested late Monday and Tuesday on charges that include conspiracies to commit money laundering, wire fraud and bribery.
In those discussions, according to those familiar with federal investigations, prosecutors probably will apply pressure as they seek evidence against the people not named in the complaints unsealed Tuesday: "Senior Executive-1" with the apparel company later identified as Adidas; "Coach-2," who works at the university later identified as Louisville; and others at schools referred to without descriptions who apparently also were bidding for players.
In one wiretapped conversation described in the complaint, Adidas executive Jim Gatto discussed paying one high school player $100,000 and then was informed by an underling that another school — sponsored by a rival apparel company — was willing to pay $150,000.
Attorneys for Gatto did not respond to requests to comment. Adidas also did not respond to a request to comment.
Adidas sponsors more than 90 NCAA programs, according to the company's website, including high-profile basketball teams at Indiana and Kansas. Kansas athletics spokesman Jim Marchiony, in an email Wednesday, said Gatto had not been involved in the school's negotiations with Adidas and Kansas has not been contacted by federal law enforcement. Officials at Indiana did not reply to requests to comment.
Blazer did not reply to a phone call Wednesday, and his attorney declined to comment. Two weeks ago, according to a witness cooperation agreement, Blazer pleaded guilty to charges including wire fraud, securities fraud and identity theft. In exchange for his cooperation, prosecutors agreed not to pursue other charges against Blazer, whose roster of former athlete clients includes former Cleveland Browns wide receiver Greg Little and former NFL running back Anthony Allen.
Through Blazer, court documents allege, FBI agents were able to infiltrate a group of men who collaborated — and profited from — steering star high school basketball players to Adidas-sponsored schools, in exchange for the promise that those players, when they turned professional, would wear Adidas and retain the other men — who included a financial adviser and an agent — for their services.
"You can make millions off of one kid," sports agent Christian Dawkins said in one wiretapped call, prosecutors allege.
Dawkins is another central figure in the prosecution's case, according to complaints. Fired in May from his previous agency for allegations of unauthorized use of an NBA player's credit card, Dawkins was trying to start his own sports agency, and Blazer and an undercover FBI agent posed as prospective investors in this new venture. In one wiretapped phone call, prosecutors allege, Dawkins spoke with the father of a Louisville recruit, arranging a meeting for the father to pick up a $19,500 payment.
In another phone call, according to the complaint, Dawkins told an undercover FBI agent that an Adidas independent contractor named Merl Code had reimbursed Dawkins for the payment to the recruit's father.
Code was quoted explaining the bribery scheme in another wiretapped call, the complaint alleges: Adidas was "not engaging in a monetary relationship with an amateur athlete; we're engaging in a monetary relationship with a business manager, and whatever he decides to do with it, that's between him and the family."
Sonny Vaccaro, a former marketing executive for Nike, Adidas and Reebok, said he was "shocked at the enormity" of the scheme outlined by prosecutors.
"We've seen scandals before. It's usually a coach and a player," said Vaccaro, 78, who is credited with creating the now inextricable relationship between shoe companies and major colleges in the 1980s. "This is the whole ball of wax. We've got the shoe company. The head of the company's marketing for basketball. The father of an athlete. A financial adviser. An agent. We have an assistant coach . . . and they're all on tape."
In a July 27 meeting in a Las Vegas hotel room that the FBI recorded with video cameras, prosecutors allege, an unnamed Louisville assistant coach, Dawkins, an AAU coach from Florida named Brad Augustine and Blazer discussed a bribe for a high school junior whose mother was apparently anxious to start getting paid.
"Mom is like . . . we need our f------ money," said Dawkins, the agent, according to the complaint. The men agreed to funnel the money through Augustine, the AAU coach, who took an envelope from an undercover FBI agent containing $12,700 cash meant for the recruit's mother.
Later in the meeting, the complaint alleges, Dawkins told the men that a recruit whose family was getting $100,000 for him to attend Louisville had benefited from a bidding war. The recruit's family originally had agreed to a lower price, but another athletic apparel company was "coming with a higher number," so Dawkins needed to enlist an unnamed coach at Louisville who had strong sway with Gatto, the Adidas executive.
Phone records reviewed by the FBI, according to the complaint, show a phone number used by "Coach-2" had three calls with Gatto in late May and early June. The last call was on June 1. On June 3, the recruit made a surprise decision to attend Louisville.
"Coach-2" is never named in the complaints, and no one from Louisville basketball has been charged with a crime. Also not identified is "Coach-3," who allegedly asked Gatto to arrange a $150,000 payment to send a recruit to "University-7," a school whose description matches Miami, another Adidas school. Neither is "Senior Executive-1," another Adidas employee who was supposed to meet with this recruit, Gatto said on a wiretapped phone call, according to the complaint.
Lee Richards, a former U.S. attorney and white-collar criminal defense attorney in New York, said prosecutors probably will try to negotiate plea deals with those charged in exchange for evidence against high-ranking officials on all sides of the alleged scheme.
"They're going to seek to get cooperation from the group arrested and think about whether they can move up the chain," Richards said. "Typically, the government will be looking for evidence against people with more senior positions involved."
Since leaving the shoe business, Vaccaro has become an outspoken critic of the NCAA and an advocate of ending amateurism in college sports and allowing the players to seek shoe contracts and other endorsements. As he read the complaints, Vaccaro said, he was most struck by the meeting in the hotel room in Las Vegas and all the men seeking to profit from an unnamed high school basketball player.
"Everybody around him in that meeting that the justice department unraveled is making money off of him, and he's 17 years old," Vaccaro said. "And he's not even in the game yet."