As expected, the NBA has hired an outside law firm to investigate whether the Los Angeles Clippers circumvented the salary cap with a “no-show” endorsement deal for Kawhi Leonard by one of the team’s sponsors.
The NBA has hired the law firm of Wachtell, Lipton, Rosen & Katz, reports Joe Vardon, Sam Amick and Mike Vorkunov of The Athletic. This is the same law firm that investigated the Donald Sterling situation with the Clippers (which ultimately led to the sale to current owner Steve Ballmer) and investigated reports of a misogynistic workplace under former Phoenix Suns owner Robert Sarver, who was ultimately suspended by the league for a year and sold the team.
This case, if proven to the satisfaction of the other owners (who will vote on any potential punishment), would not lead to as severe an outcome as the sale of the team (circumventing the salary cap is serious for the NBA, but not on the level of racism and misogyny). However, the list of penalties prescribed in the NBA CBA includes fines up to $7.5 million, the forfeiture of draft picks, and potentially the voiding of the player’s contract.
This case resolves around an endorsement deal with a Clippers sponsor unearthed by the Pablo Torre Finds Out podcast. The timeline breaks down like this: In September 2021, Ballmer made a $50 million investment in Aspiration, a “green bank” company claiming it was planting trees to gain carbon emissions credits it could pass on to its clients. Later that month, Leonard signed a four-year, $176 million max contract extension with the Clippers. At the Clippers’ media day at the end of that same month, Ballmer announced a $300 million partnership and sponsorship with Aspiration that was in part an effort to make the then-under-construction Intuit Dome “green.” Not long after, Leonard signed a four-year, $28 million endorsement deal with Aspiration. None of that is out of the ordinary (star players signing separate endorsement contracts with team sponsors, with a clause the sponsorship ends if they are traded/leave the team, are relatively common).
Two things make this story take a turn. The big one is that Leonard did nothing for Aspiration, the endorsement was what several Aspiration employees told Torre was a “no-show” job. Leonard never made any public appearances for the company, did not appear in its marketing, nor did he post anything on social media about Aspiration. He got $28 million for doing nothing (Leonards LLC formed for this endorsement is one of the creditors in Aspiration’s bankruptcy, as are the Clippers). The other twist is that Aspiration turned out to be a fraudulent company, one that is under federal investigation, filed for bankruptcy, and its CEO pled guilty to defrauding investors of $248 million.
Steve Ballmer and the Clippers have vehemently denied the allegations and said they did nothing wrong. Ballmer said in an interview with ESPN that he was “duped” by Aspiration and its CEO, as were many other wealthy investors and celebrities. The Clippers said this in a statement:
“Neither the Clippers nor Steve Ballmer circumvented the salary cap. The notion that Steve invested in Aspiration in order to funnel money to Kawhi Leonard is absurd. Steve invested because Aspiration’s co-founders presented themselves as committed to doing right by their customers while protecting the environment… Neither Steve nor the Clippers had knowledge of any improper activity by Aspiration or its co-founder until after the government initiated its investigation. Aspiration was a team sponsor for the 2021-2022 and 2022-2023 seasons before defaulting on its contract.”
Now it comes down to the Wachtell, Lipton, Rosen & Katz investigation and what they find — with the investigation being run by a law firm and reporting to a lawyer himself in NBA Commissioner Adam Silver, the bar for direct, hard evidence will be high. However, there is a flood of circumstantial evidence, and the Clippers or Leonard explaining away a no-show contract will be difficult.
Ultimately, it is the other owners who will decide the punishment for the Clippers and Ballmer, and they want to see this report. The other owners will not want slap on the wrist punishment (like the Knicks got with for tampering with Jalen Brunson) that will signal it is okay to circumvent the cap, but how hard they want to come down on one of their own in a case where he claims plausible deniablity is another question (those owners can think “there but for the grace of God go I”). A lot will come down to what this investigation finds.
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