Clippers under federal investigation for Kawhi Leonard salary cap circumvention, per report

If you thought this whole Kawhi Leonard saga was finally over, think again. A week after the Clippers were hit with one of the stiffest punishment packages in NBA history for “violating the salary cap circumvention rules,” The New York Times is reporting that federal prosecutors have now opened a criminal investigation into the same matter. 

From the Times:

The investigation is in its earliest stages and is being conducted by the U.S. attorney’s office in Brooklyn, which has a long history of investigating the NBA and professional sports, according to two of the people.

The inquiry’s scope, targets and the possible crimes being examined were unclear. But prosecutors have issued at least one subpoena as part of the investigation, according to the two people.

Among the matters likely under scrutiny are a series of secret endorsement deals that Mr. Leonard signed, and whether Steve Ballmer, the team’s owner, and other executives helped facilitate them as a way of compensating him at a level that exceeded the NBA’s salary cap.

Last Wednesday, Daktronics CFO Howard Atkins told investors on the company’s earnings call that Daktronics had not only received inquiries from the NBA regarding their endorsement deal with Leonard, but also from the Securities and Exchange Commission and that the company was fully cooperating into the federal probe, via Matt Sullivan of the Pablo Torre Finds Out podcast. 

“Let me now briefly address a matter that has been in the media concerning the NBA’s investigation of Kawhi Leonard and the Clippers in connection with the league’s collective bargaining agreement that many of you may have heard about. As you might expect, we have received requests for information from the NBA,” Atkins said. “Additionally, the Securities and Exchange Commission is seeking information from us concerning the company and Mr. Leonard. We take these requests seriously and are cooperating. At this point, out of respect for the respective processes, we will not be providing further comment.” 

Leonard, as of Thursday night, remains on the Clippers roster. The Raptors agreed to a trade earlier this offseason to bring Leonard back to Toronto, and it’s expected to be completed now that the NBA investigation is complete, but it’s been on hold since late June. Leonard was not suspended by the NBA and did not have his contract voided.

It might sound strange that the government would become involved in a case like this, but as the Times points out, “for nearly two decades, the U.S. attorney’s office in Brooklyn has brought cases that focused on integrity in professional sports.”

In 2007, the office and the FBI brought a case against an NBA referee who admitted to gambling on games that he officiated. Over the past two years, prosecutors in the office, the Eastern District of New York, have charged eight current and former professional athletes in cases involving illegal gambling. Among the defendants have been the Hall of Fame NBA guard Chauncey Billups and the star Major League Baseball closer Emmanuel Clase, both of whom have pleaded not guilty.

In 2015, Brooklyn federal prosecutors charged dozens of defendants in a case targeting widespread institutional corruption in FIFA, the governing body of global soccer. The case uncovered a scheme in which sports marketing executives paid $150 million in bribes to soccer officials in exchange for the lucrative broadcast rights to tournaments.

It’s important to note that none of this means any criminal charges will necessarily be filed against the Clippers or Ballmer, only that the matter is being investigated. 

Meanwhile, apart from this government probe, Ballmer and the Clippers are “vehemently” rejecting the NBA’s findings from its own investigation, which was conducted by the law firm of Wachtell, Lipton, Rosen & Katz. The league probe found that the Clippers indeed violated the league’s salary cap rules by “affirmatively initiating off-court income opportunities between Mr. Leonard and four different companies.” 

“What the league told us privately differs from what it announced today publicly, and they have not held themselves close to the standard commissioner [Adam] Silver set at the start of this investigation to ensure its fairness and accuracy,” the Clippers said last week. “For the past year, we cooperated fully and in good faith and we will now fight just as hard to demonstrate our innocence. We intend to vigorously challenge these findings and penalties through every avenue available to us and look forward to an ethical and impartial arbitration process.”