Newswise — BLOOMINGTON, Ind. -- The college basketball world was rocked this week when federal investigators made public a series of complaints alleging four assistant coaches and a shoe-company executive arranged expensive bribes for promising high school athletes. Indiana University experts in business law and media studies offer their perspectives.
Focus on amateurism could be legally challenging
Nathaniel Grow, associate professor of business law and ethics in the IU Kelley School of Business, said the FBI indictments are particularly interesting because part of the case “relies heavily” on the NCAA’s code of amateurism as a basis for the government’s fraud allegations.
“This is a rather novel attempt to criminalize the NCAA's code of conduct, one that could potentially face some resistance in the courts considering that the entire concept of amateurism is currently being challenged under federal antitrust law in a different ongoing court case (Jenkins v. NCAA),” he added. “As a result, one could question whether this is the type of conduct that the FBI should be prosecuting.”
Grow thinks the most likely outcome will be that the assistant coaches and other defendants named in the complaints all will agree to some sort of plea bargain to avoid going to trial.
“But if one of the defendants were to fight the indictment in court, he could raise an interesting legal question of whether an agreement to circumvent the NCAA's amateurism policies can serve as the basis for criminal fraud. The only reason the payments to players are at all problematic legally is because the NCAA schools have agreed not to pay their players beyond their scholarships," Grow said.
“Some -- including the plaintiff's attorneys in the Jenkins v. NCAA case -- have suggested that the NCAA's amateurism rules are themselves illegal, constituting an illicit price-fixing agreement among competing universities. So the FBI's case here is, basically, alleging that the defendants defrauded several universities by circumventing a rule that itself may be illegal.”
Another potential issue that Grow identified is whether the universities were truly unaware that these players were receiving money under the table.
“Given how commonplace many believe such conduct to be, one can question whether the schools were truly deceived or defrauded by the defendants' alleged conduct,” he said. “In pretty much any other industry, there is nothing illegal about paying an intermediary to help deliver a talented employee to a new employer. That is the entire basis of the headhunting and corporate recruiting professions. The only difference here is that the NCAA schools have agreed to forbid one another from paying their players. Absent that prohibition, it's unclear whether the under-the-table payments to players alleged in the complaint would necessarily be illegal.”
Grow, whose research interests also include both the application of federal antitrust and labor law to the professional sports industry, can be reached at [email protected] or 812-555-8191.
Lack of investigative tools stymies NCAA enforcement
Galen Clavio, director of the National Sports Journalism Center and associate professor in The Media School at IU Bloomington, said the cases highlight how difficult it is for the NCAA to enforce its own policies of amateurism.
"There's little doubt that the sort of conduct detailed in the FBI complaints has been taking place in college basketball recruiting for years, but the NCAA's admitted lack of subpoena power makes it difficult to compel testimony," he said. "The FBI has certainly gone where the NCAA is unable to go on these sorts of cases."
The allegations also make it clear that there is a thriving underground market for highly talented basketball players, he said -- and those players possess a considerable amount of market value in the eyes of apparel companies and agents.
"We have seen a lot of attention on the alleged crimes over the past 48 hours, but equal or greater attention should be paid to the perilous system that has grown up around major college basketball and the recruitment of athletes," Clavio said. "My hope is that the member institutions of the NCAA take a long look at their policies and use this scandal to consider real change that takes into account the value of highly skilled athletes in a worldwide market."
Clavio can be reached at [email protected] or 812-855-3367.
Probe raises issues of business ethics as well as law
Todd Haugh, assistant professor of business law and ethics in the IU Kelley School of Business and the Jesse Fine Fellow at The Poynter Center for the Study of Ethics and American Institutions, compared NCAA investigations with the effectiveness of a Department of Justice probe.
“Unlike an NCAA investigation, the Department of Justice has the power to subpoena individuals and organizations to ferret out illegal conduct," he said. "Through the power of charging those involved with multiple felonies, they can exert an incredible amount of pressure that leads to cooperation."
Haugh said there is a reason that more than 97 percent of federal cases end in a plea agreement.
“The wiretap evidence detailed in the complaints demonstrates this," he said. "It was secured by warrants only the DOJ can get, based on evidence from a cooperating witness -- a witness trying to lessen his own criminal exposure. Expect lots of plea agreements to come and lots more avenues of investigation opening up as cooperators come forward.”
The question is one of illegality but also of business ethics, Haugh said.
“One of the complaints provides evidence of a shoe company executive advancing $100,000 in cash to a prospective college player, all so the player will attend the university where that company has an exclusive apparel contract,” he said. “Submitting false invoices to cover bribe payments, how this scheme worked, is a well-known tactic seen in many white-collar cases; it just hasn’t been seen at this scale in collegiate basketball.
“But the U.S. Attorney’s Office in the Southern District of New York -- the office that has jurisdiction over Wall Street and thousands of companies -- has seen this before, and they are very good at following the money,” Haugh said. “… The question is how far up the company did knowledge of the payments go and how many other companies are engaged in the same type of conduct."
Haugh can be reached at [email protected] and 812-855-6539.
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