Things have been looking pretty rosy for adidas of late since the German sportswear giant topped Nike's Jordan brand as the second-most popular sneaker company based on sales in the U.S. However, as of Tuesday, the company has found itself at the center of an alleged bribery scheme designed to match agents, advisers, and sportswear sponsors to players before they became NBA stars.
Among the individuals arrested on Tuesday in connection with the probe, which is being spearheaded by the FBI: adidas’ head of sports marketing Jim Gatto, who allegedly had a hand in paying high school players to attend schools whose teams are sponsored by adidas, and then signing with adidas upon entering into the National Basketball Association.
It appears that Gatto was not acting on his own accord in furtherance of the scheme, as he was assisted by at least one fellow adidas employee, Merl Code, who joined the company from Nike, where he was the head of the Oregon giant's Elite Youth Basketball League. This is noteworthy, as it could stand to place adidas squarely within the mix, as opposed to representing an example of an employee (Gatto) acting not as an agent of the company but as an independent entity - something adidas will almost certainly try to argue.
The payments were brokered by three men: Christian Dawkins, a business manager; Munish Sood, a financial adviser; and Jonathan Brand Augustine, who runs an Adidas-sponsored AAU basketball team.
As noted by the Wall Street Journal, “Prosecutors from the U.S. Attorney’s Office [in Manhattan] in connection with the U.S. Department of Justice unsealed three separate criminal complaints on Tuesday, alleging schemes in which agents, financial advisers and apparel executives bribed college coaches to direct players to them.”
The publication further notes that Gato “worked with another sports-marketing executive to funnel hundreds of thousands of dollars from Mr. Gatto’s employer to high-school basketball players and/or their families in exchange for the players’ commitment to play for [National Collegiate Athletic Association] schools sponsored by the company.”
In at least one instance, Gatto allegedly attempted to pay one player and his family $100,000 to get him to attend an adidas-sponsored school. Note: According to court documents, an unnamed "rival sportswear company" had also offered the same player a "substantial sum of money," suggesting that this probe - which is still ongoing - may expand to include other companies.
On Tuesday, adidas released a statement saying, “Today, we became aware that federal investigators arrested an didas employee. We are learning more about the situation. We’re unaware of any misconduct and will fully cooperate with authorities to understand more.”
Mr. Gato joins a handful of other individuals, including coaches, as well as managers, financial advisers and other representatives of adidas, who are facing charges of bribery, conspiracy and fraud for allegedly steering players to advisers who had paid bribes to the coaches. The coaches named in the federal complaints include Lamont Evans of Oklahoma State, Chuck Person of Auburn, Tony Bland of University of Southern California and Emanuel Richardson, who has previously been an assistant coach at schools including Xavier in New York City and Marist College in Poughkeepsie.
The charges stem from a two-year investigation into bribery, corruption and fraud in college athletics and the criminal influence of money on coaches and student-athletes. According to a spokesman for the FBI, there were numerous instances of bribes paid to the coaches so they would use their "enormous influence" to steer student-athletes toward certain agents once the players reached the NBA.
The FBI says it has uncovered "several instances in which coaches have exercised that influence by steering players and their families to retain particular advisors not because of the merits of those advisors but because the coaches were being bribed."
UPDATED (SEPTEMBER 26, 2017): Per adidas, Gatto has been "put on administrative leave" and the sportswear giant has hired outside counsel to investigate.