United States v. Gatto

986 F.3d 104 (2nd Cir. 2021)

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Nature of the Case

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Facts

The NCAA is a private organization that oversees collegiate sports in America. It promulgates rules that its member universities must follow, among which is the requirement that all student-athletes must remain amateurs to be eligible to compete for their schools. Student-athletes --and their families -- may not accept payments of any form for the student-athletes' playing or agreeing to play their sport. This rule extends from the time when the student-athletes are still in high school and are being recruited to play at the collegiate level. Colleges are permitted to offer athletic-based aid to a certain number of student-athletes, to cover tuition, room, and board. The schools themselves are permitted to enter into sponsorship agreements with sports apparel brands, which allow them to provide their student-athletes with clothing and footwear that they receive from their corporate sponsors. Under these agreements, student-athletes must wear the brand of the company their school has partnered with when they compete for their school -- that is, at practice and during games. D was Adidas's director of global sports marketing for basketball. Adidas signed deals with N.C. State, Kansas, and Louisville. D and others paid the families of top-tier high school basketball recruits -- including Dennis Smith Jr., Billy Preston, and Brian Bowen Jr. (collectively, the 'Recruits') -- to entice those players to enroll at one of the Universities. This activity violated NCAA rules, and if the NCAA were to discover the payments, the players would not be permitted to play in games and the Universities would be subject to penalties. Ds concealed these payments by falsifying Adidas invoices to make it seem as though the payments were going to youth basketball teams affiliated with the Amateur Athletic Union (AAU). The money was being funneled through AAU teams with which some Ds were affiliated to the families of top basketball prospects. In addition to creating fake expense reports to mask these payments, Ds used phones that were not registered in their names while communicating with the Recruits' families. As per NCAA bylaws, the Universities required all their recruits to sign paperwork attesting that they were aware of and in compliance with the NCAA bylaws. The recruits affirmed, among other things, that they had not used their 'athletics skill (directly or indirectly) for pay in any form in that sport.' To ensure that Smith enrolled at N.C. State, Gassnola gave the Smith family $40,000 in the fall of 2015. He was reimbursed by Adidas via D, who filed false invoices to facilitate the repayment. Shortly after the Smith family received the $40,000 payment, Smith signed forms enrolling at N.C. State indicating that he was compliant with the NCAA eligibility rules. He played one season at N.C. State before being selected as the ninth overall pick in the 2017 NBA Draft. Gassnola heard that the Preston family was accepting money from sports agents and financial advisors, thereby putting Preston's eligibility in jeopardy. Because, according to Gassnola, he thought that he was better equipped to prevent illicit payments from being discovered, Gassnola arranged to pay the Preston family to stop them from taking money from others and preserve Preston's NCAA eligibility. With Gatto's permission, Gassnola paid the Preston family around $50,000. Gassnola paid the money and then, with the help of D, submitted false AAU expense reports to Adidas for reimbursement. In November 2016, Preston signed forms indicating that he was compliant with the NCAA eligibility rules. His ineligibility, however, was discovered, and he never played for Kansas. Bowen committed to play for Louisville in May 2017. Bowen's family agreed to accept $100,000 from Adidas, to be paid in four installments. These payments were to be funneled through an AAU program. Bowen signed forms accepting athletic-based aid and indicating that he was compliant with the NCAA eligibility rules. Around a month later, on July 13, 2017, Bowen's father was paid the first installment of $25,000. Ds were arrested before any other payments were made, and Bowen, whom Louisville decided to withhold from competition, withdrew from Louisville after one semester to play professional basketball. Ds were charged with wire fraud and conspiracy to commit wire fraud. The jury found Ds guilty of wire fraud and conspiracy to commit wire fraud. D got nine months' imprisonment and Code and Dawkins six months' imprisonment each. The district court also ordered Ds to pay restitution to the Universities for their actual losses in awarding athletic scholarships to the Recruits. Ds appealed.