College Basketball Corruption Scandal: Appealed and Affirmed
Photo Source: Phil Roeder, NCAA Basketball, Flicker (Mar. 16, 2016) (CC BY 2.0).
By: Liliana Flores* Posted: 03/27/2021
In 2017, former Adidas employee, James Gatto, former Adidas consultant, Merl Code, and business recruiter, Christian Dawkins, were implicated in a scandal involving various high-profile college basketball recruits. The scandal involved a scheme to get high-profile recruits to matriculate at certain universities through bribes. Generally, the scheme consisted of bribing five-star recruits to attend Adidas-sponsored programs. For example, Brian Bowen’s family was paid $100,000 to entice him to attend Louisville to play basketball. Although this evidence about Bowen’s recruitment was the initial claim in the case against Gatto, Code, and Dawkins, further evidence at trial showed that the corruption was evident throughout college basketball. Gatto, Code, and Dawkins were charged with wire fraud, conspiracy to commit wire fraud, and providing impermissible benefits to top recruits to entice them to attend Adidas-sponsored schools. Prosecutor in the case, Edward B. Diskant, contended that the defendants “conspired to hide [their] actions from the universities involved,” which, as a result, defrauded the universities. The government argued that the defendants defrauded the universities of all the scholarships that the universities had awarded under “false pretenses.” As a result, several high-profile universities were included in the initial indictment as “victim schools.”
In October 2018, the U.S. District Court found the defendants guilty of wire fraud and conspiracy to commit wire fraud. Ultimately, Gatto was sentenced to nine months in prison, and Code and Dawkins were each sentenced to six months for their part in the scheme. U.S. District Judge, Lewis Kaplan explained that the sentences were somewhat lenient because he believed the three had “learned their lesson.” While their sentences were lenient, Gatto received the longest sentence due to his role as the “boss” in the scheme. The defendants remained free, however, until the outcome of the appeal was reached.
The discovery of this scheme exposed the dark side of college basketball recruiting and brought the corruption that exists in college basketball to light. Gatto, Code, and Dawkins were not the only ones implicated in the scandal: four college basketball coaches, clothing executive Rashan Michel, and investment advisor Munish Sood were also involved. Ultimately, the Federal Bureau of Investigation also charged these coaches in relation to the scandal for fraudulently influencing high school recruits to sign with their schools. 
Gatto, Code, and Dawkins appealed their convictions to the Second Circuit Court of Appeals in Manhattan, arguing the “government failed to prove that they intended to defraud the universities.” Instead, the defendants argued that they intended to help the universities. Under the defendants’ reasoning, they intended to help universities by drawing top recruits, to ensure the universities had winning programs. Additionally, the defendants defended their actions by stating they were common occurrences in college basketball programs and in recruiting at large. The Second Circuit disagreed with defendants’ arguments and explained that the defendants could not simply hope everything would work out for the universities as a defense for their actions.
In January 2021, the three-judge appellate panel upheld the convictions of Gatto, Code, and Dawkins. Although the defendants’ claimed that they lacked the fraudulent intent necessary for guilt because they “were convicted of a fraud they did not know about,” the Second Circuit rejected this theory. Defendants further argued that even if there was a scheme, the government failed to prove that the athletics-based aid of the universities was “an object” of the scheme. The court also rejected this argument, ultimately affirming the trial court’s ruling. The Second Circuit found that the defendants’ scheme relied on the universities awarding athletic-based aid to ineligible student-athletes who would likely have attended another university if they were not offered financial aid. “Honest services” fraud also existed because coaches at all universities are required to report any National Collegiate Athletic Association (NCAA) rules violations, and as a result of the scheme, various coaches have betrayed their duties by failing to report rules violations – in some cases even facilitated the rules violations. Thus, the defendants’ actions here, deprived the schools of “honest services.”
Notably, the court carefully removed itself from the debate about the business of college sports. The Second Circuit specifically stated that it would not enter the debate, and instead explained that they were only focusing on the specific actions of the defendants. This was not a surprising decision due to the changes on the near horizon as name, image, and likeness legislation continues to take hold. While Gatto, Code, and Dawkins could petition the Supreme Court for a writ of certiorari, it is unlikely any appeal would survive, due to the selective number of cases the Supreme Court agrees to hear each term. Ultimately, while the courts have now taken a stand against college basketball corruption by upholding the convictions of Gatto, Code, and Dawkins, there is still much to be done to fully cleanse college basketball of widespread corruption. While the NCAA has started to crack down on this corruption, due to the lengthy investigation process, there are still outstanding recruiting infractions cases. To deal with some of these complex NCAA infractions cases, the NCAA recently created the Independent Accountability Resolution Process (IARP). Once the outstanding NCAA infractions cases related to the federal investigation have been concluded by the NCAA, the NCAA will hopefully be on the path to cleansing the corruption evident in college basketball recruiting.
*Staff Writer, Jeffrey S. Moorad Sports Law Journal, J.D. Candidate, May 2022, Villanova University Charles Widger School of Law.
 See generally Marc Tracy, Three Found Guilty in N.C.A.A. Basketball Recruiting Scheme, N.Y. Times (Oct. 24, 2018), https://www.nytimes.com/2018/10/24/sports/ncaa-basketball-adidas-guilty.html (explaining scandal and its implications for the world of college basketball).
 See Michael McCann, NCAA Wire Fraud Recruiting Convictions Upheld as Schools Declared Victims, Sportico (Jan 27, 2021), https://www.sportico.com/law/analysis/2021/ncaa-amateurism-federal-1234621083/ (describing scheme and results).
 See id. (noting recruits would declare for draft after first or second year of college, and signing endorsements with Adidas with help of agents).
 See id. (explaining scheme led to players being paid, Adidas sponsorship programs growing, and coaches at major schools getting top talent).
 See Rob Goldberg, James Gatto, Christian Dawkins, Merl Code Guilty on All Counts in CBB Trial, Bleacher Rep. (Oct. 24, 2018), https://bleacherreport.com/articles/2802621-james-gatto-christian-dawkins-merl-code-guilty-on-all-counts-in-cbb-trial (noting Brian Bowen’s father testified that Arizona, Oklahoma State, Texas, Creighton, and Oregon also offered him money and benefits).
 See id. (explaining charges against defendants at trial).
 See Dan Greene, Closing Arguments Wrap as Jury Deliberation Awaits in Complex College Basketball Trial, Sports Illustrated (Oct. 18, 2018), https://www.si.com/college/2018/10/18/ncaa-corruption-trial-closing-arguments-christian-dawkins-adidas (explaining government’s argument about defendants’ guilt).
 See id. (explaining defendants defrauded schools because they denied universities “ability to make informed decisions regarding their assets”).
 See Emily Caron, Christian Dawkins, Jim Gatto, Merl Code Sentenced in NCAA Basketball Corruption Trial, Sports Illustrated (Mar. 5, 2019), https://www.si.com/college/2019/03/05/ncaa-corruption-trial-sentencing-jim-gatto-christian-dawkins (highlighting “victim schools” included Louisville, Kansas, N.C. State, and Miami); see also Michael McCann, Lenient Sentencing in College Hoops Fraud Convictions Sends a Message, Even Before Appeals, Sports Illustrated (Mar. 5, 2019), https://www.si.com/college/2019/03/06/ncaa-fbi-investigation-corruption-fraud-lenient-sentencing (emphasizing while at first glance these high-level recruits were beneficial for schools, prosecutors painted picture differently by arguing schools were “defrauded by the players who claimed to be NCAA eligible, but had forfeited their eligibility”).
 See Mark Schlabach, Court Upholds Convictions Against James Gatto, Merl Code, Christian Dawkins in NCAA Hoop Scandal, ESPN (Jan. 15, 2021), https://www.espn.com/mens-college-basketball/story/_/id/30717983/federal-appeals-court-upholds-convictions-college-hoop-scandal (explaining pay-for-play scheme that Gatto, Code and Dawkins were involved in and outlining defendants’ charges).
 See Marc Tracy, Defendants Receive Lenient Sentences in College Basketball Corruption Case, N.Y. Times (Mar. 5, 2019), https://www.nytimes.com/2019/03/05/sports/college-basketball-scandal.html (explaining even Code and Dawkins’ lawyers believed the sentence was lenient).
 See Caron, supra note 9 (noting Dawkins and Code were found guilty on two counts of wire fraud and conspiracy to commit wire fraud and Gatto was found guilty on three counts).
 See Dan Wetzel, James Gatto, Merl Code and Christian Dawkins All Sentenced to Prison Time in First Basketball Fraud Trial, Yahoo! Sports (Mar. 5, 2019), https://sports.yahoo.com/james-gatto-merl-code-christian-dawkins-sentenced-prison-time-first-hoops-corruption-scandal-trial-180601581.html (noting Gatto received additional convictions due to his role in the scheme).
 See Christian Berthelsen, Appeals Court Upholds Convictions in NCAA Bribery Case, Bloomberg (Jan. 15, 2021), https://www.bloomberg.com/news/articles/2021-01-15/appeals-court-upholds-convictions-in-ncaa-bribery-case (explaining defendants were convicted and sentenced to prison, but because they appealed, they were allowed to remain free pending the appeal).
 See Timothy Rapp, James Gatto, Christian Dawkins, Merl Code Sentenced to Prison Terms in CBB Trial, Bleacher Report (Mar. 5, 2019), https://bleacherreport.com/articles/2823632-james-gatto-christian-dawkins-merl-code-sentenced-to-jail-terms-in-cbb-trial (noting U.S. Attorney Robert S. Khuzami stated that “convictions expose an underground culture of illicit payments, deception and corruption in the world of college basketball”).
 See McCann, supra note 2 (explaining several of those implicated with this scandal negotiated plea deals before trial).
 See Scooby Axson, Four College Assistant Coaches Charged in Corruption Scandal, Sports Illustrated (Sept. 26, 2017), https://www.si.com/college/2017/09/26/coaches-corruption-fraud-scheme-1 (noting FBI stated that implicated coaches had “lied and used their statute to influence high school recruits to sign with schools.”).
 See Schlabach, supra note 10 (outlining defendants’ argument on appeal).
 See McCann, supra note 2 (clarifying defendants’ justification of their action).
 See id. (noting defendants insisted that the government’s portrayal of their intent was wrong).
 See Associated Press, Appeals Court Upholds Dawkins, Gatto and Code’s Convictions in College Basketball Scandal, Sports Illustrated (Jan. 15, 2021), https://www.si.com/college/2021/01/15/christian-dawkins-james-gatto-convictions-upheld-college-basketball-scandal (noting Second Circuit found that the fact that the actions were a common occurrence in college basketball programs was not an adequate justification and stated that “others are engaging in improper behavior does not make it lawful”).
 See McCann, supra note 2 (highlighting Judge Lewis Kaplan also noted that “the perceived unreasonableness or unfairness of the NCAA’s amateurism rules” was not on trial in this case).
 See Schlabach, supra note 1 (explaining Second Circuit considering decision on appeal).
 See McCann, supra note 2 (noting trial court found that defendants “were sophisticated actors who were involved in all aspects of top-tier basketball in America”).
 See United States v. Gatto, 986 F.3d 104, 115 (2d Cir. 2021) (discussing loss of property, which were funds universities held for financial aid, were “at the heart of the Defendants’ scheme”).
 For further discussion of the lower court’s ruling, see supra notes 7-11 and accompanying text.
 See Gatto, 986 F.3d at 116 (noting if ineligibility of these student athletes was discovered, defendants’ scheme would have failed because student athletes would not have been permitted to play in NCAA).
 See McCann, supra note 2 (explaining Judge Chin noted college coaches are supposed “to be stewards of NCAA rules and report any suspected violations”).
 See Michael McCann, What to Expect From the Second College Basketball Corruption Trial, Sports Illustrated (Apr. 19, 2019), https://www.si.com/college/2019/04/19/ncaa-corruption-recruiting-trial-christian-dawkins (noting “honest services” fraud refers to when employer is deprived of its intangible right to employees providing their ‘honest services”’); see also McCann, supra note 2 (highlighting “honest services fraud” also present in recent “Operation Varsity Blues” college admissions scandal).
 See Gatto, 986 F.3d at 110 (noting although “a successful men’s basketball program is a major source of revenue at certain major universities,” the court maintained that it would “not be drawn into a debate over the extent to which college sports is a business”).
 See Schlabach, supra note 10 (“[O]ur 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.”) (quoting Second Circuit).
 See McCann, supra note 2 (highlighting while name, image and likeness legislation will positively change the atmosphere of college sports, the NCAA rules prohibiting recruiting inducements are still evident).
 See id. (emphasizing three defendants would face long odds if they try to petition to Supreme Court).
 See Gatto, 986 F.3d at 129 (noting “ends, however, do not justify the means, and that others are engaging in improper behavior does not make it lawful”); see also Pat Forge, Three Years Ago, the College Basketball Corruption Scandal Promised a Reckoning. Where Is It?, Sports Illustrated (Oct. 21, 2020), https://www.si.com/college/2020/10/21/college-basketball-scandal-sec-recruiting-daily-cover (emphasizing slow pace of NCAA’s process for addressing situation, stating “if nothing is done, the message is that cheating is O.K.”).
 See Mark Schlabach, Your Guide to College Basketball’s Ongoing NCAA Investigations, ESPN (Nov. 6, 2020), https://www.espn.com/mens-college-basketball/story/_/id/30262819/your-guide-college-basketball-ongoing-ncaa-investigations (noting NCAA has taken time to address major infractions cases because “there are layers of procedural safeguards legislated into the infractions process for the benefit of schools and involved individuals who find themselves in a case”). The NCAA also waited to begin investigating these basketball infractions cases until May 2019 to cooperate with federal authorities. See id. (explaining NCAA did not begin investigating basketball cases until after more than year at request of federal prosecutors).
 See id. (noting IARP is used to handle complex cases dealing with serious infractions); see also David Cobb, Louisville’s NCAA Infractions Case for Violations When Rick Pitino Was Coach to be Handled by IARP, CBS: NCAA BB (Feb. 19, 2021), https://www.cbssports.com/college-basketball/news/louisvilles-ncaa-infractions-case-for-violations-when-rick-pitino-was-coach-to-be-handled-by-iarp/ (noting IARP was created in 2019 after FBI bribery and corruption investigation in response to Commission on College Basketball recommendations).
 See Schlabach, supra 35 (highlighting outstanding infractions cases for Alabama, Arizona, Auburn, Creighton, Kansas, Louisville, Louisiana State University, North Carolina State, Oklahoma State, South Carolina, Texas Christian University, and University of South California).