Today it was announced that four NCAA coaches, members of Adidas corporate leadership, agents, and financial advisors were charged with bribery, fraud and conspiracy. If that sounds bad, it’s because it’s very bad. Essentially, cash was paid to steer players toward certain financial advisers, shoe companies and agents. It’s something that some people have always thought was going on, but it’s never been charged at this level. Multiple colleges will be effected. Adidas saw it’s stock dip as James Gatto, director of global sports marketing, was charged. That’s just the beginning.
First the obvious. Any school associated with the case is going to be in trouble. It could be through NCAA fines. It could be through penalties, tournament restrictions or scholarship limits. This could hurt the athletic departments bottom line because teams will lose tournament money and could potentially lose sponsors as well. That’s just the first level.
Adidas could be in even more trouble. Their director of global sports marketing was involved. That goes all the way to the top. Shoe companies’ — all of them — strategy is simple. Get a player while they are young, usually on AAU. Steer them to a high school that is funded by the specific brand — read: Nike, Under Armour, or Adidas — and hope that the high school steers the player to a school that has a relationship with that brand. Once they leave that school, they sign an endorsement deal with whatever brand they’ve been using for more than 10 years. Get them young. By the way, there are concrete examples of brand loyalty among players. Adidas simply got caught in the process of moving massive amounts of money around. Again, this is not good.
Here’s an unintended consequence of this case: the money is most likely going to freeze up. Grassroots funding from Nike, Adidas, and Under Armour will be under intense scrutiny. That’s too much of a headache for corporate or a compliance group to deal with. It’s much easier to pull back on the cash before something bad/illegal happens. That means AAU programs aren’t going to see as much funding. It means high schools that were basically Nike, Adidas, or Under Armour training grounds could see a pullback by their former partners. The repercussions of this case go all the way down the business food chain. Adidas will come out of this with a settlement and maybe some type of fine. Colleges involved will have a few lean years under sanctions. People involved may even go to jail for some time. High Schools and AAU teams could theoretically lose everything.
Again, a lot of people already thought this was happening. This isn’t exactly shocking news. Many probably thought it wasn’t illegal in the eyes of the law. That isn’t the case. The sports world always has someone trying to get in the middle and make that extra buck. This time those people got caught.