Two former Adidas employees and an aspiring sports agent who were charged with fraud related to secret payments funneled to a college basketball recruit were found guilty in federal court in Manhattan on Wednesday, in a case that exposed the strong influence of sneaker companies in the sport.
James Gatto, Adidas’s former head of global basketball marketing; Merl Code Jr., another former Adidas employee; and an aspiring agent named Christian Dawkins were found guilty on charges of wire fraud and conspiracy to commit wire fraud, after a three-week trial.
The allegations, first revealed in September 2017, laid bare what many had long assumed about college basketball at its highest levels: that its top players — who for a decade have been required to wait at least a year after high school before entering the N.B.A., and who are prohibited by N.C.A.A. rules from accepting payment beyond scholarships and related costs — were getting payments under-the-table via a murky underworld of agents, “runners” and other interested third parties.
In this case — which stemmed from a cooperating witness who also led to two other indictments concerning college basketball, with trials set for the coming months – federal prosecutors said that the defendants had funneled money from Adidas to prospects who wound up at four teams sponsored by the sneaker giant: Louisville, Kansas, Miami and North Carolina State.
These schools, prosecutors asserted, were the victims in the case, since they were playing ineligible athletes, risking N.C.A.A. penalties.
In one instance, Dawkins, Code and Gatto worked to funnel $100,000 in four installments to the father of Brian Bowen II after Bowen, a top prospect, committed to Louisville in the spring of 2017.
Munish Sood, a money manager who was initially charged before reaching an agreement with the government, testified that he was in on the scheme. Bowen’s father, Brian Bowen Sr., confirmed much of the allegations in his own testimony, though he said that his son never knew about the deal, nor the thousands of dollars he received from other sources related to where his son plied his ample talents.
Brian Bowen II was removed from practices at Louisville when the charges came out. He transferred to South Carolina but was not permitted to play, and then entered the N.B.A draft before withdrawing to play for a professional team in Australia.
The three men charged in the case had pleaded not guilty, and none of them took the stand. Their primary defense was that their behavior may have violated N.C.A.A. bylaws but was not a federal crime.
“N.C.A.A. rules were broken,” said one of Gatto’s attorneys, Michael Schachter, in his opening argument. “Jim and Adidas helped out financially a few families whose sons are among the most talented athletes in America. That happened.”
However, he added, “the N.C.A.A.’s rules are not the laws of this country. The N.C.A.A. is not the U.S. Congress.”
It is unclear what effect the outcome will have on college basketball. Prompted by the charges last year, the N.C.A.A. convened a commission to reform the sport, chaired by the former secretary of state Condoleezza Rice, whose proposals were implemented a couple of months ago. The scandal is also thought likely to lead to the end of the N.B.A.’s “one-and-done” rule, which currently bars players from entering the draft immediately after high school and instead forces them to spend a year at a college.
At Louisville, the charges ended the careers of the Hall of Fame head coach, Rick Pitino, and the athletic director, Tom Jurich.
But while documents in the case have implied that dozens of top current or former college basketball players or their families were illicitly paid, there have been no further criminal charges. The colleges have generally said they were unaware of the defendants’ activity, although in some instances employees such as assistant coaches have been accused of wrongdoing. There are likely to be eventual N.C.A.A. investigations.
Most of all, the college basketball economics that appeared to prompt the scheme remains in place: multimillion-dollar apparel sponsorships, mainly by Nike, Adidas and Under Armour; huge financial incentives to win big; and amateurism rules that bar paying players.