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Universities Shocked to Find Cash Payments to Student Athletes Going on In Their Establishments

American actor Humphrey Bogart (left) (1899 - 1957) talks to British actor Claude Rains (1889 - 1967) at a cafe table in a still from the film, 'Casablanca,' directed by Michael Curtiz, 1942. (Photo by Warner Bros./Getty Images)
By Joseph Fawbush, Esq. on January 25, 2021 2:17 PM

Every year a new scandal breaks in NCAA Men's College Basketball involving under-the-table payments to student-athletes. It turns out that the students directly responsible for making millions of dollars for their universities somehow think that it is okay for them to get a little compensation for their talent and hard work.

But when top recruits with the University of North Carolina State, the University of Kansas, and the University of Louisville received illicit payments to attend their respective universities, the government swooped in to stop this horrifying practice of paying fair market value for services rendered. The conspirators involved in the scheme were charged with wire fraud and defrauding the universities they were trying to help. The FBI and the Department of Justice arrested 10 assistant coaches and a marketing director at Adidas. A federal jury convicted the conspirators of multiple federal offenses.

The Scheme

A marketing director at Adidas worked with several families involved in AAU basketball to funnel money to top recruits. While universities and sports apparel companies are free to enter marketing deals to provide equipment and clothing to NCAA participants, and universities can get money from them, the NCAA prohibits any student-athlete from getting paid.

Adidas and the conspirators, therefore, sought to hide the payments by funneling money and falsifying expense reports. At trial, the conspirators argued that coaches and universities, rather than being defrauded, often tacitly approved of these acts since it helps them to recruit top talent and get the associated millions of dollars for running a successful basketball program.

On appeal, however, the Second Circuit refused to be drawn into the debate on paying student-athletes. Instead, they wrote that “our task is to determine whether the government proved beyond a reasonable doubt that Defendants knowingly and intentionally engaged in a scheme, through the use of wires, to defraud the Universities of property, i.e., financial aid that they could have given to other students."

How Dare You Help Us Succeed?

The Second Circuit found that, indeed, the government met this burden, as the accused did not even deny at trial that they engaged in the alleged behavior. The recruits signed with their universities under false pretenses, namely that they were not being paid or jeopardizing their eligibility. Rick Pitino, the coach at Louisville at the time of the alleged behavior, maintained that he had no knowledge of the payments, for example. And in federal court, the universities said they would not have signed the players had they known of the payments.

If you'll forgive (even more) editorializing, the Second Circuit decision was neither unexpected nor incorrect. The law is what it is, and the conspirators did hide the payments from the associated universities. As it stands, universities can reap millions from the work of their student-athletes while only offering scholarships and per diem in return. But unless and until that changes, it seems unlikely that under-the-table payments to top recruits will stop anytime soon, whether the universities and coaches are involved or not.

Related Resources

Pay College Athletes? Is California Serious? (FindLaw's Tarnished Twenty)

Kentucky Basketball Fans Are Crazy, 6th Circuit Agrees. Talk Radio Just Isn't Liable for it. (FindLaw's Sixth Circuit

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