Mises Wire

NCAA Violations Are Now Federal Crimes?

Recent federal criminal charges of conspiracy and wire fraud brought against four assistant college basketball coaches and executives from Adidas seem to be popular in the mainstream media, judging from the numerous articles I have seen about the story. For that matter, even some libertarians, noting their belief that college sports are “corrupt,” are cheering on federal authorities.

I am not one of the cheerleaders for this latest intrusion of federal criminal law into what essentially is peaceful, private activity, National Collegiate Athletic Association rules aside. While most journalists seem to see this as an example of federal authorities riding in on their white horses to save college basketball from the scourge of “corruption,” I see this as the government destroying lives for no good reason and protecting the sources of the real corruption at the same time. Far from “cleaning up” major college sports, this is a classic bait-and-switch operation in which federal authorities are conspiring to redirect resources from those that should have it (if we actually hold to the belief that individuals should be compensated for their contribution of added wealth to the economy), all the while claiming they are “protecting” the very people being robbed.

As Gary North recently pointed out, the NCAA is a cartel — a multi-billion-dollar cartel, I would add — that claims to be protecting the “holy” principle of “amateur athletics.” All the while, it’s ensuring that the main factor of production for collegiate sports – the labor of individual collegiate athletes – receives minimal or even no compensation at all. The current compensation scheme – athletic “scholarships” for athletes – is tantamount to a rule that states that Kevin Durant, the 2017 Most Valuable Player for the National Basketball Association, can receive compensation only equal to that of the lowest-paid player in the NBA, while NBA coaches and executives run off with the majority of the funds generated by professional basketball.

The latest federal escapade centers around four (and probably even more than that) collegiate assistant coaches that received payments from Adidas to steer highly-recruited male basketball players to programs that are tied to the shoe company. For example, my alma mater, Tennessee, is a “Nike program,” and its uniforms, shoes, and other apparel carry the Nike “Swoosh” logo. In return for allowing their athletes to market Nike products, Nike pays a large sum of money to UT.

Matt Norlander of CBS Sports explains about the so-called bribes that Adidas paid to the assistant coaches that were indicted and arrested:

The FBI revealed Tuesday morning it has been running a two-year investigation into nefarious, illegal schemes of fraud and corruption throughout college basketball. Ten people connected to two separate -- but related -- schemes have been charged and arrested. Four of them are current college basketball assistant coaches, all of whom have been indefinitely suspended, some of them without pay. 

The FBI’s probe amounts to one of the biggest stories in college sports history because it involves the federal government intervening in the world of college recruiting, which has long been tainted by those willing to break rules at all costs in an effort to get the best high school players.

Norlander continues:

  • The corruption:The aforementioned money men linked up with assistants to funnel players to schools with specific ties to shoe companies. Cash was exchanged when money managers and advisers (among others) wound up “secretly funneling cash to the families of high school recruits,” Kim said Tuesday afternoon. Sometimes that money was delivered in cloaked ways, like through a youth grassroots basketball program. 
  • There are three separate, official complaints tied to the two schemes. The first scheme was to get assistant coaches to lure players to specific college programs. The second scheme was to get money to the families of those players. The goal was for the player to have an allegiance to the shoe company (Adidas) after he left college. 

So far, we are looking at what, frankly, are garden-variety (with the added twist of shoe company money) NCAA violations in which players or their families receive monetary or in-kind compensation that goes beyond the standard athletic scholarship of meals, books, tuition, fees, and board. Furthermore, the prospect of making these actions into federal crimes truly brings a new and, frankly, perilous dimension to federal criminal law. First, here is the so-called justification that the feds are using to magically turn NCAA violations into crimes:

An Auburn alum, (Chuck) Person (one of the arrested coaches) spent 27 seasons as a player, coach and executive in the NBA before joining Bruce Pearl’s staff in 2014, accused of handling a total of $141,500, suspended without pay by Auburn. From (the federal) complaint: “In addition, Chuck Connors Person, arranged for Witness to make payments directly to the families of the players Person was steering to Witness. These payments defrauded University by depriving it of the financial aid University continued to award to the relevant student athletes under false pretenses.” (Italics mine)

This is as twisted a claim of “fraud” as one will see. Let me connect the “logical” chain that the feds have used, and then critique it.

First, and most important, universities such as Auburn receive federal dollars, mostly through research grants and especially student loans, so it comes under federal regulations and is considered a federal government agency. Thus, the FBI and federal prosecutors can apply the malleable federal criminal codes to any behavior by anyone employed or associated with Auburn. For example, more than 10 years ago, federal prosecutors in Memphis convicted University of Alabama booster Logan Young for allegedly paying high school coaches to steer a Memphis high school player, Albert Means, to play for Alabama. (Candice Jackson and I strongly criticized the feds in this piece.)

Second, by using the ubiquitous federal “fraud” claims, federal prosecutors are saying that since Person (and other coaches) broke NCAA rules in their recruiting of said players, the awarding of scholarships to these athletes constituted a fraud upon the university, which is essentially a federal agency. Thus, the coaches “defrauded” the U.S. Government, and because they had contact with others during the process, the “conspiracy” and “wire fraud” statutes kick in, thus allowing federal prosecutors to charge these individuals with numerous crimes for the same act.

The bottom line is that should this federal action proceed unimpeded — and so far I have seen no voices raised that even are remotely critical for this new power grab — this means that every single NCAA recruiting or other athletic violation can be morphed into a federal crime. Every single one. That the NCAA rule book rivals the Federal Register in size and anyone familiar with college sports knows it almost is impossible not to violate at least one rule while participating in collegiate athletics is not even brought up for discussion. Instead, we see lawyers, journalists, and others in position of influence lining up behind the feds to cheer them on as they smash into the lives of coaches and athletes like crazed bulls into a room displayed with Waterford Crystal.

At this point, I bring up the point of harm. As Paul Rosenzweig wrote more than a decade ago, federal criminal law has gone well past any principle of dealing with real harm and, instead, is based upon an almost arbitrary view of rule-breaking. He writes:

These acts were wrongs in and of themselves (malum in se), such as murder, rape, and robbery. In recent times the reach of the criminal law has been expanded so that it now addresses conduct that is wrongful not because of its intrinsic nature but because it is a prohibited wrong (malum prohibitum)—that is, a wrong created by a legislative body to serve some perceived public good. These essentially regulatory crimes have come to be known as “public welfare” offenses. 

In this case, however, the feds have gone one step further; those charged allegedly have broken rules of a private organization and the crimes are the usual “derivative crimes” that federal prosecutors use to indict defendants when they cannot prove what would be underlying criminal conduct. (We call them “derivative crimes” because they are derived from other actions, some of which might violate state statutes and others that might be construed as legal, such as withdrawing money from banks in amounts under $10,000 in order to avoid federal reporting requirements.)

Understand that shoe companies pay professional athletes such as Durant, LeBron James, and Stephan Curry millions of dollars to wear their shoes and apparel, and the companies pay high-profile college athletic departments millions of dollars to do the same thing with their collegiate athletes. Furthermore, keep in mind that Chuck Person was recruiting certain athletes to Auburn not because it was an “Adidas school” and Adidas was paying him, but rather because he believed that this athlete could make a significant difference between Auburn winning and losing basketball games. Had Adidas not paid him a penny, Person still would have recruited the player.

Sportswriter Dan Wezel, who generally seems supportive of the current federal criminal probe, at least recognizes that the authorities are stretching the law and that there seem to be no real victims of crime, at least when one understands the historical view of harm. He writes:

That such an underground economy exists is no secret in college athletics. It is a tale generations old. If nothing else though, the specifics picked up on FBI audio and video recordings must be confronted by the NCAA as it deals with a scandal that is already enormous (involving eight major schools) and seemingly growing by the hour.

As long as the NCAA clings to rigid amateurism and tries stop the tides of capitalism by undervaluing talent, it is ignoring the reality of how business gets done and leaving itself open to this kind of scandal. Like raging floodwaters, the market will go wherever it chooses, NCAA rules or not.

The FBI and the U.S Attorney are hot on this case, but it really isn’t much of a case. They can drum up crimes by labeling things bribes (rather than consulting fees) and stretching anti-corruption laws to find statutes that sort of fit, but there are few, if any, victims here. (Italics mine)

It’s just the NCAA system being exposed.

Note that I am not saying that breaking NCAA rules is a good thing. (Actually, I don’t care if the NCAA has its precious, self-serving rules broken, but that is another story.) What I am saying, however, is that there is no way this is a federal criminal case. The historical definition of fraud clearly is not operative here, and it also is clear that federal authorities are stretching the fraud statutes in order to gain indictments, not seek justice for individuals who have been defrauded.

In 2006, the infamous Mike Nifong, who brought false rape and kidnapping charges against three Duke University lacrosse players, used federal funds to help pursue the case, even though he later admitted he had no credible basis upon which to bring those charges. Nifong unequivocally engaged in fraudulent use of government money and broke a number of laws in the process of going after the defendants, yet no federal prosecutor showed an interest in pursuing fraud charges. Moreover, Nifong’s actions unmistakably harmed innocent individuals, and his actions forced other individuals — and Duke University — to spend millions of dollars they never would have spent had Nifong pursued justice instead of spinning a web of lies. But the feds ignored a real crime because it was not politically palatable to prosecute Nifong.

With the current case, no one has been defrauded. Certain families were made better off, but no one coerced them to take the money. Furthermore, none of the athletes that were paid could be forced to sign with Adidas following their brief collegiate careers. Adidas, instead, was trying to influence athletes it hoped would become household names in the future.

There is no doubt these actions violated NCAA rules. However, breaking the rules of a private organization is not the same as inflicting harm that rises to the level of criminality. Unfortunately, people are going to spend time in federal prison for their non-crimes while journalists and others beat their chests and claim justice was done.

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