New federal charges in college basketball scandal allege payments to steer players to Kansas, NC State

Federal prosecutors have filed additional counts against former Adidas executive Jim Gatto in the ongoing college basketball fraud scandal, including payments to the families and guardian of current and former players at Kansas and North Carolina State.

No players nor their families are named specifically. The indictment, filed by the U.S. Attorney’s Office for the Southern District of New York, also doesn’t name any college coaches. The new information “expands the scope of the charged wire fraud conspiracy,” according to the U.S. Attorney’s Office of the Southern District of New York. It’s the most significant development in the case since 10 men were arrested by the FBI on Sept. 26.

The Kansas part of the indictment charges that Gatto and a coach of an Adidas-sponsored AAU team allegedly gave “approximately at least $90,000 to the mother of a top high school basketball player. The payments were made in connection with a commitment by the student athlete to attend the University of Kansas.”

Adidas has an endorsement deal with Kansas. The payouts include a “$30,000 payment” during a meeting with the AAU coach and the parent in a hotel room in New York and another $20,000 payment in a hotel room in Las Vegas.

The large lump payments were sent from Adidas to the AAU coach, to then be given to the player’s parent, under headings such as “Tournament Activation/Fee,” allegedly to conceal the purpose of the money. The federal documents refer to them as “sham invoices.”

A guardian of a different Kansas recruit told Adidas they had received illicit payments in return for a commitment to steer the athlete to a university sponsored by a rival athletic apparel company. The guardian said the player favored Kansas and needed “another $20,000 payment” to “help get the student-athlete ‘out from under’ the deal.”

The indictment then alleged the player made a surprise commitment to Kansas on Aug. 30, 2017. News accounts on that date show Silvio De Sousa, a native of Angola who attended IMG Academy in Florida, committed to Kansas. De Sousa played for the Jayhawks this season as part of their Final Four team, which could place their NCAA tournament run in jeopardy of being vacated if the allegations are proven.

De Sousa, who reclassified from the high school class of 2018 to 2017, was cleared to play by the NCAA this past season on Jan. 13, 2018 – midway through the season. Less than three months after the NCAA certified his academic and amateur status, he was implicated in a federal indictment alleging that his guardian received money in exchange for De Sousa playing for the Jayhawks.

The wording of the federal document raises another potential issue related to Kansas: The complaint states that payments from Adidas to the mother of a Jayhawks player were ongoing “into at least in or around November 2017.” The initial federal complaint was made public in late September 2017, indicating that the family of a Kansas player was allegedly still receiving money after the U.S. attorney’s allegations rocked college basketball.

The indictment does not say anyone at Kansas was aware of the payments to the players.

“Earlier today, we learned that the University of Kansas is named as a victim in a federal indictment,” Joe Monaco, Kansas’ director of strategic communications said in a statement. “The indictment does not suggest any wrongdoing by the university, its coaches or its staff. We will cooperate fully with investigators in this matter. Because this is an active investigation, it is not appropriate for us to comment further at this time.”

The documents also officially pull North Carolina State into the investigation. The feds charge that Gatto was involved in a scheme to pay a former North Carolina State player – star recruit Dennis Smith Jr., according to the timeline of events in the complaint – $40,000 in the fall of 2015 to sign with the Wolfpack. Smith had played for an Adidas-backed AAU program, and NC State is an Adidas-backed athletic program.

The indictment says that at least one unnamed NC State coach knew about the plan and was involved in the alleged payment. According to the complaint, “Coach-4” received $40,000 in October 2015 from an unnamed co-conspirator and “represented that the funds would be delivered” to the father of Smith. In December 2015, Smith signed a financial aid agreement to attend NC State.

The alleged Adidas payment would appear to be separate from the ASM Sports agency’s Dec. 31, 2015, balance ledger that represents as much as $73,000 in payments to Smith, as noted in a Yahoo Sports story from February.

North Carolina State received a grand jury subpoena in January requesting information related to Smith’s recruitment and time at the school. Smith left North Carolina State after one season and was an NBA lottery pick.

The school fired head coach Mark Gottfried after that season, but he resurfaced last month as a surprise choice to be the new coach at Cal State Northridge. At the time, a school spokesman told Yahoo Sports that the hiring of Gottfried – with knowledge that the feds had subpoenaed his school – was not a concern.

North Carolina State issued a statement Tuesday evening acknowledging receipt of the indictment.

“While there are no indictments against former NC State employees, the document includes allegations of a payment in 2015 from an athletics apparel company to an unidentified parent of a student-athlete through a former unidentified NC State coach,” the statement read. “As the indictment stated, the payment was designed to be concealed, including from the NCAA and officials at NC State.

“…In September 2017, the U.S. Attorney’s Office announced a series of complaints against Adidas, several basketball programs and top prospects. In response, NC State’s Office of General Counsel and Athletics’ Compliance staff contacted former basketball coaches asking whether they had any knowledge of or involvement in any activity related to the allegations coming from the U.S. Attorney’s Office. Former staff questioned stated they had neither any knowledge nor involvement.”

The federal complaint released Tuesday repeats prior information involving Louisville and Miami. Although there is some new detail regarding recruitment of players by those schools, there are no new charges. The Miami section of the complaint says that Gatto “confirmed that he had already learned about the request from coaches at the University of Miami for assistance” in securing the commitment of a player and spoke to an unnamed coach about recruiting the player. But the complaint also says that Gatto and others intended to conceal payments to the player’s family from university officials and the NCAA.

The player in question, subsequently identified as Orlando Christian Prep prospect Nassir Little, signed with North Carolina last fall. Miami head coach Jim Larrañaga agreed to a two-year contract extension earlier Tuesday, hours before the latest federal indictment was issued.

United States v. James Gatto et al.

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