The recent superseding indictment charging James Gatto, Merl Code and Christian Dawkins with wire fraud provides additional details about alleged illicit payments funneled from Adidas to family members of high school basketball prospects. According to the allegations, certain AAU basketball teams sponsored by Adidas were payment conduits facilitated by sham invoices submitted under the guise of team travel expenses and tournament fees.
The superseding indictment further alleges the payments were facilitated and made in exchange for commitments to have the prospects play at schools sponsored by Adidas and later sign lucrative contracts with Adidas, and in some instances, Dawkins, upon turning professional.
The new details provide further grounds for criticism of so-called grassroots basketball and the sneaker money and product that supports it. The criticism is not new.
Back in 2001, George Dohrmann, then a writer for Sports Illustrated, co-authored a blistering piece, entitled A School For Scandal, unmasking shady activities in grassroots basketball in Southern California, some of it fueled by sneaker company money and product. Part of the focus of that article was on Pat Barrett, then director of an AAU program sponsored by Nike, who exploited a chasm of regulation, boasting he was not bound by high school or NCAA regulations.
Dohrmann went on to spend eight years examining what he referred to as "the grassroots basketball machine," chronicling the journey of a youth basketball coach and his prodigy prospect. The odyssey resulted in Play Their Hearts Out, Dohrmann's award-winning expose' on youth basketball that was published by Ballantine Books in October 2010.
The book is loaded with eyebrow-raising misconduct, with Joe Keller, the antagonist AAU coach, frequently in the middle.
After negotiating what would have been his first sneaker deal with Sonny Vaccaro, who was about to start his stint at Reebok, Keller, then coaching a team of seventh-graders, is quoted by Dohrmann as stating:
That shoe deal, it shows you have credibility. And the product you get, you can bribe people with. In a way, the product is more important than the money. In this business, with the kids, the product is what matters most.
According to Dohrmann, Keller's deal with Reebok fell through, in part because Vaccaro later discovered that Reebok had struck a deal with Barrett, who was recently dropped by Adidas.
Keller eventually locked a sponsorship with Adidas, a five-year deal set to expire after his prized prospect played his last season on the grassroots circuit. To say Keller was emboldened by the Adidas contract would be quite the understatement. After Keller lost a player who was unhappy with playing time, Dohrmann quotes him as stating "but I have one big thing going for me: Shoe Company money. With that, I can buy a hundred kids as good . . ."
According to Dohrmann, Keller eventually asked Adidas if it had an arrangement with a specific sports agent and, if not, whether Adidas would mind if Keller pursued one. The response of Daren Kalish, the Adidas executive:
I don't think it is wrong for you to do that, but for me, ethically, being part of Adidas, it is not right. . . If you want to get kids for agents, that's part of your business. I am not going to be against that.
Dohrmann also reveals a kickback solicited from a representative at Adidas. According to Dohrmann's account, when Keller was negotiating a sponsorship for his girls Jr. Phenom Camp, the Adidas representative insisted on a $10,000 under-the-table payoff that Adidas would never know about before agreeing to give Keller $25,000 to cover expenses. Dohrmann recounts that Keller initially complained about the tax consequences, but ultimately acquiesced.
For all of the disturbing conduct unearthed during his project, Dohrmann exuded pessimism about things changing for the better. At one point, he states "smart and subtle criticism of the grassroots basketball machine has as much impact as spitting in the ocean."
That same sentiment was aired by the Boston Globe in July 2006 when it ran a story scrutinizing the conduct of TJ Gassnola, director of the New England Playaz, another grassroots program sponsored by Adidas. The Globe reported that "the system has created a cottage industry in which corporate agents such as Gassnola lavish free travel, shoes, gear and other benefits on predominatly needy youths with basketball skills." After identifying the "most egregious case" of Myron Piggie, the former coach of a Nike-sponsored grassroots team who was alleged to have paid some of his players in exchange for a cut of their future NBA earnings and who later pled guilty to fraud and failure to file a tax return, The Globe wrote, "[s]ubsequent efforts by the NCAA to crack down on abuses in summer youth basketball have produced few results largely because of its limited jurisdiction."
According to The Globe's investigation, Gassnola gave cash to his players for expenses unrelated to basketball and offered free airfare or Adidas merchandise to parents in an attempt to land players. The piece also reported that Gassnola had three convictions for larceny or receiving stolen property and had his driver's license suspended or revoked 24 times. In the article, Adidas stated it had received "no complaints or criticism" about Gassnola and that it had "taken note of a great deal of praise by the parents of players directed to both the club and its officials."
In 2012, the NCAA suspended the New England Playaz and three other AAU teams from participating in summer events due to ties with ASM Sports, the sports agency of Andy Miller. According to a story by CBS Sports, Gassnola was interviewed by the NCAA prior to the suspension. Gassnola's name also appeared in the excerpt of the balance sheet of ASM Sports that was published by Yahoo Sports in February. The entry, which referenced TJ Grazznola [sic], showed a loan receivable of $17,300 owed by Gassnola to ASM Sports.
Nearly seven years after Play Their Hearts Out was published and 11 years after The Globe's article, the US Attorney's Office for the Southern District of New York commenced a criminal case with sneaker money and grassroots basketball right in the middle.
According to the New York Times, sources have identified Gassnola as CC-3 (co-conspirator 3), referenced in the superseding indictment. The charging document states:
At all relevant times, CC-3 was a consultant for Company-1 and its high school and college basketball programs. In that capacity, CC-3 worked directly with amateur and college basketball coaches and players and facilitated payments to players and their families as part of the scheme described herein.
Among other things, the superseding indictment specifically alleges that payments funneled from Adidas to the parent of a University of Kansas recruit (referred to as "Parent 3") were made "indirectly through an AAU team under CC-3's control" through sham invoices, and that CC-3 made the cash payments to Parent 3. Gatto and CC-3 are both alleged to have described the payments in the invoices as being for AAU team expenses.
CC-3 is also alleged to have paid a coach at North Carolina State ("Coach 4") with the understanding that the money would be paid to the parent of an NC State recruit ("Parent 1") to retain his commitment. Gatto allegedly caused Adidas to reimburse CC-3 for the payment to Coach 4 by approving payments to CC-3 pursuant to sham invoices.
Despite the allegations of having participated with Gatto in the illicit payments and their concealment, CC-3 is only referenced in the superseding indictment as an unidentified co-conspirator, not a defendant charged in the case.
In response to an e-mail, Adidas would not confirm or comment on the alleged consulting arrangement with Gassnola, but issued the following statement:
Adidas is committed to ethical and fair business practices and to full compliance with applicable laws, rules and regulations. We have cooperated fully with the authorities in the course of their investigation in this case and will continue to do so as this case proceeds.
According to ESPN and ABC News, Nike's grassroots basketball division, the Elite Youth Basketball League (EYBL), was served with a subpoena in September 2017 as part of the investigation. Neither Nike nor the EYBL has been named in the case, but Code is reportedly a former Nike employee.
In response to the criminal charges, the NCAA established a Commission on College Basketball (CCB), with one of the principal focus areas being the influence of apparel companies. The CCB includes former Stanford and California Coach Mike Montgomery, who coincidentally is quoted in Dohrmann's book. After being briefed by a Cal assistant about the exploitation of Demetrius Walker, the protagonist prospect, Montomery said "that kid is the poster child for what is wrong with the system."
In its Report and Recommendations to the CCB, the Pac-12 Conference Men's Basketball Task Force, which also includes Montgomery, stated "unless all the shoe and apparel companies were to significantly change their operations, their rivalry and those bad actors who seek to profit from it inappropriately will be difficult to eliminate."
In the Big East Conference's recommendations to the CCB, it states "[a]pparel companies (together with agents and travel team operators) cannot be eliminated from the lives of elite players and should be accepted as a fact of life within the men's college basketball recruiting and transfer environments." In support of its proposed summer recruiting model, the Big East Conference suggested that Nike, Under Armour and Adidas "should be included in the effort using incentives and parameters to be determined."
In Play Their Hearts Out, Dohrmann comments on past efforts to have shoe companies help change the culture of youth basketball.
Allowing the shoe companies to help . . . remake youth basketball was like asking the beef industry to promote vegetarianism. There was no incentive for them to change, and so they would not. The wheels of the grassroots machine, as long as they were greased by shoe-company dollars, would continue to churn unabated.
The CCB's recommendations will be announced tomorrow morning.