Nike might have prevailed over lawyer Michael Avenatti’s alleged attempt to extort the company, but the case has shifted the spotlight back to an uncomfortable place for the sneaker industry: corruption and improper payments in youth basketball.
Avenatti claimed to have information about Nike employees funneling money to elite high school basketball players.
If that sounds familiar, it is likely because there’s an ongoing federal probe into similar actions that continues to bring more embarrassment to college hoops.
Photographer: Bloomberg
Already, the investigation has led to multiple arrests and jail sentences for three men — one a former executive at Nike rival Adidas.
The latest revelations will do little to quell broader concerns about how youth basketball operates, and the timing — just as fans celebrate the apex of the season — brings another potential distraction to a National Collegiate Athletic Association (NCAA) with no shortage of them.
Prosecutors issued an 11-page complaint detailing Avenatti’s repeated attempts to get Nike to pay millions to suppress allegedly damaging information.
He claimed to know about Nike employees channeling money to high school players, they said.
However, the complaint is notable for what it does not say: It makes no judgment on the accuracy of the information Avenatti held about the world’s largest athletic brand.
Prosecutors say Avenatti reached out to Nike earlier this month with details from a client, identified simply as the coach of an Amateur Athletic Union (AAU) team in California. The squad had a sponsorship agreement with Nike worth about US$72,000 per year that Nike had recently decided not to renew.
Avenatti told Nike’s lawyers that his client had evidence that one or more Nike employees authorized and funded payment to the families of top high school basketball recruits, and tried to conceal the payments.
The complaint says Avenatti identified three former high school players — who were not named — and made reference to others.
In a statement on Monday, Nike said it alerted federal prosecutors when Avenatti allegedly tried to extort money from the company.
Meanwhile, it is cooperating with a broader government investigation into NCAA basketball.
“Nike will not be extorted or hide information that is relevant to a government investigation,” the Beaverton, Oregon-based company said.
“When Mr Avenatti attempted to extort Nike over this matter, Nike, with the assistance of outside counsel at Boies Schiller Flexner, aided the investigation,” it said.
Originally announced in September 2017, the federal probe shed light on an underground economy for youth basketball talent that had become an open secret of sorts inside the sport.
Money was funneled to top recruits and their families in order to sway their decisions on which school to attended, or which shoe company to sign with as a pro.
That investigation spurred debate about the outsized role that sneaker companies like Nike, Adidas and Under Armour have in shaping youth basketball. Club teams, like those that compete in the AAU, are often sponsored by those companies and frequently play at tournaments organized by Nike or Adidas.
The sneaker giants also pay tens of millions each year to outfit colleges across the country and — further along in the ecosystem — sign pros to million-dollar endorsement deals.
While no Nike employees have been implicated in that investigation, the company’s grassroots youth basketball division was subpoenaed in connection to the probe.
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