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College Basketball Scandal Could Have Far-Reaching Implications

October 14, 2017

 

By now readers of this blog may have had their fill of stories of sports scandals, even though the latest one in college basketball is particularly eye-opening.  The U.S. Attorney’s Office for the Southern District of New York recently filed charges of fraud, bribery, and corruption against 10 people, including four NCAA assistant coaches from major universities, in addition to charges against managers, financial advisers, and representatives of Adidas, a major international sportswear company.

 

The early-morning arrests were made by the FBI.  Acting Manhattan U.S. Attorney Joon H. Kim said “the picture of college basketball painted by the charges is not a pretty one – coaches at some of the nation’s top programs taking cash bribes, managers and advisors circling blue-chip prospects like coyotes, and employees of a global sportswear company funneling cash to families of high school recruits.”

 

Dan Wetzel, a columnist at Yahoo, describes the scandal as the “FBI bringing Armageddon to college basketball, and it’s just the tip of the iceberg.”  Louisville fans would certainly agree the apocalypse is here, as the University of Louisville promptly fired coach Rick Pitino, who had led the Cardinals to a national title in 2013.  Pitino, who was inducted into the Basketball Hall of Fame in 2013, had previously led the University of Kentucky to a national title. He is the only basketball coach to win national championships at two colleges.

 

Eleanor Klibanoff, a reporter at the Kentucky Center for Investigative Reporting, writes that the basketball scandal could be costly not only to the University of Louisville but to the city of Louisville as well.  Forbes Magazine ranks Louisville the most valuable college basketball team in the country, generating over $45 million in 2016 – a nearly 20% jump from the previous year,  when Louisville again was the most valuable team.

 

“The impact of the scandal could trickle down to game-day bar tabs, tickets for the publicly funded Yum! Center and downtown parking,” she writes. Part of the team’s value lies in the university’s stake in the Yum! Center, she notes, adding the arena and its $690 million construction debt is financed through a partnership between the city, the university, and a state-level tax incentive. This summer, the city and the university renegotiated the Yum! Center deal to make University of Louisville responsible for a greater share of the arena’s costs.

 

The university now must pay an additional $2.4 million a year, on top of the originally agreed upon $1.3 million to $1.8 million. As part of that increase, the university raised men’s basketball ticket prices by $3 for the upcoming season.  If the University of Louisville generates less revenue from the basketball program, that could make it more difficult for it to meet payments.

 

While the scope of the basketball scandal will surely widen, university administrators must take stock of how their compliance programs interface with compliance activities within the athletic department.  Michael McCann, a legal analyst at Sports Illustrated, says it’s something of a myth that college coaches operate on an island away from the mainland university.  He notes that athletic departments employ compliance officers – many of whom are attorneys – to ensure that teams, coaches, and student athletes adhere to NCAA rules.

 

“That said, it’s obvious that some college coaches do their own thing.  It’s also obvious that some universities accept such coach autonomy as a necessary evil to obtain a winning and lucrative program,” he writes.  Besides, at least until recently, it was difficult to imagine a no-name compliance officer at a university challenging the more- famous coach, let alone confronting legendary coaches such as Rick Pitino.

 

In a blog posting about a year ago, I raised the question whether college compliance programs stop at the door of the athletic department.  Surely, many university presidents are now asking themselves the same question.   The seemingly arcane field of compliance and hotlines has seldom been more appealing to college sports programs.

 

 

 

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