Case On Point
In this month's case, the Court of Appeals affirms defendants' conviction for wire fraud.
United States v. Gatto
(U.S. Ct. of App. 2d Cir. 2021)
Intercollegiate sports are a significant source of funding for major universities. They earn revenues from sponsorships, including by athletic apparel and equipment manufacturers, whose products are worn by the athletes, as well as through television revenues and ticket sales. To maximize their revenues, universities attempt to recruit the most promising athletes, but are prohibited from furnishing them anything other than scholarships to cover tuition, room and board. Both the student-athlete and the university must certify their compliance with these restrictions, and the receipt of prohibited compensation renders the student ineligble to compete and can result in sanctions being imposed by the National Collegiate Athletic Association.
Nevertheless, the competition to recruit outstanding high school athletes is so intense, that university supporters and other interested parties, as well as the players, often try to circumvent the rules. This was the case in United States v. Gatto. Defendant Gatto was employed by Addidas as Director of Global Sports Marketing. He and his co-defendants funnelled funds from the company's marketing budget to families of recruited athletes to induce them to attend universities sponsored by the company. The transfers were masked as contributions to Amateur Athletic Union teams with which the players' families were involved and falsified expense reports were submitted to Addidas management in support of the expenditures. When the expenditures came to light, the recruited athletes were prohibited from competing, and the universities lost the value of the money allocated to their scholarships.
The defendants were charged under federal law with wire fraud, because they used emails and telephones in their scheme and several payments were wired to recipients. Defendants were convicted at trial, and ordered to pay restitution to the defrauded universities. The Court of Appeals affirmed the convictions, noting that defendants had acknowledged the illegality of their actions in wiretapped conversations.
