fraudulent company

NBA commissioner Adam Silver on Wednesday pulled back the reins as allegations swirled about the Clippers circumventing the salary cap by orchestrating an endorsement deal for star forward Kawhi Leonard.

Silver, speaking to the media after a previously scheduled meeting of all 30 team owners in New York, said an NBA investigation would need to uncover clear evidence that the Clippers violated rules for owner Steve Ballmer to be punished.

“The burden is on the league if we are going to discipline a team, an owner, a player or any constituent members of the league,” Silver said. “I think, as with any process that requires a fundamental sense of fairness, the burden should be on the party that is, in essence, bringing those charges. …

“I think as a matter of fundamental fairness, I would be reluctant to act if there was sort of a mere appearance of impropriety.”

The Clippers and Ballmer are under league investigation after it was alleged last week on the podcast of Pablo Torre that Leonard was paid $28 million for a do-nothing endorsement role by Aspiration, a sustainability firm that had agreed to a $330-million sponsorship deal with the Clippers and had offered $1 billion for naming rights to the arena that instead became the Intuit Dome.

Aspiration turned out to be a fraudulent company, and co-founder Joseph Sanberg has agreed to plead guilty to defrauding multiple investors and lenders.

Silver said he would hesitate to take action against the Clippers if even a shred of doubt about the situation remains following the investigation, which will be conducted by a law firm experienced in probing wrongdoing by sports franchises, Wachtell, Lipton, Rosen and Katz.

“Bringing in a firm that specializes in internal investigations adds a level of expertise and creates separation between the league and the investigation of a team,” said Michael McCann, a sports law expert and a visiting professor at Harvard. “The investigators have a background in prosecutorial work, insight into what documents to request and questions to ask.”

McCann and other legal experts said the investigation would center on whether Ballmer’s $50-million investment into Aspiration was a quid pro quo for the firm to turn around and give Leonard $28 million in cash and $20 million in Aspiration stock to essentially do nothing.

Ballmer is embarrassed by the allegations and about his apparent infatuation with Aspiration — which entered into a $330-million sponsorship arrangement with the Clippers and was nearly awarded naming rights to what became the Intuit Dome, only to be revealed as a fraudulent company run by scam artists.

McCann said the investigation would need to uncover concrete evidence that Ballmer or someone else representing the Clippers directed Aspiration to make the deal with Leonard. The only evidence presented on Torre’s podcast was hearsay — an audio clip of an anonymous former Aspiration employee saying that someone else in the company told them the endorsement deal “was to circumvent the salary cap, LOL. There was lots of LOL when things were shared.”

LOL typically is used in written communication, so if the allegation was made in an email or text, the next step for investigators would be to interview the person who wrote it and determine whether Ballmer was involved.

The investigation presumably will examine all of this. Silver tends to be methodical when conducting a probe and is expected to act on what can be proved, not on the perception of wrongdoing. But he also is charged with protecting and growing franchise values. Anything that could damage the integrity of the league would be a huge concern to him and team owners.

“Silver has quite a few very interesting relationships to protect and to nurture: other owners, his corporate sponsors, the media networks that are distributing the content,” said David Carter, a USC professor of sports business and principal of the Sports Business Group. “Everybody attached to the league is interested in getting to the bottom of this. So he has to balance different stakeholder interests and he is very good at doing that.

“So I have a feeling he will — working with the law firm — get to the bottom of it and then decide to what extent if any punishment is warranted. He’ll do that with the intent of making sure he’s protecting the interests of the other owners.”

Leonard joined the Clippers in July 2019 on a three-year, $103-million contract after leading the Toronto Raptors to the NBA title. The 6-foot-7 forward from Moreno Valley signed a four-year, $176.3-million extension in 2021, when Aspiration made its sponsorship deal with the Clippers and Ballmer invested and became a minority owner in the company.

After signing a three-year, $153-million extension a year ago, Leonard will have been paid or is under contract for $375 million in career salary over 14 years with three teams.

The NBA looked into allegations that the Clippers paid Leonard or his representative and uncle, Dennis Robertson, a side deal when he first joined the team in 2019. No wrongdoing was found, although this week the Toronto Star reported that Robertson made demands of the Raptors in 2019 “that line up almost perfectly with what Leonard reportedly got from Aspiration.”

The Star reported that Robertson demanded $10 million a year in sponsorship income but that Leonard didn’t want to do anything for the money. The Raptors rejected the demand, and Leonard signed with the Clippers.

Should the Clippers be found guilty of circumventing the salary cap, they could be forced to forfeit draft picks and be fined heavily. Ballmer and other team executives could be suspended, and perhaps Leonard’s contract could be voided.

Silver will proceed carefully.

“The goal of a full investigation is to find out if there really was impropriety,” he said. “In a public-facing sport, the public at times reaches conclusions that later turn out to be completely false. I’d want anyone else in the situation Mr. Ballmer is in now, or Kawhi Leonard for that matter, to be treated the same way I would want to be treated if people were making allegations against me.”

More details are emerging about a company that allegedly paid Los Angeles Clippers star Kawhi Leonard millions to circumvent the NBA’s salary cap, including that the team came close in 2021 to granting naming rights for its Inglewood arena to Aspiration Partners.

Clippers owner Steve Ballmer nearly granted naming rights to the company, but ended up choosing financial services firm Intuit to grace the $2-billion venue, a source familiar with the matter said. Intuit, which has a $186-billion net worth and developed TurboTax, Credit Karma and QuickBooks, ended up paying a reported $500 million over 23 years for the naming rights.

Four years later, Aspiration, a sustainability firm that also generated and sold carbon credits, is out of business. Co-founder Joseph Sanberg has agreed to plead guilty to defrauding multiple investors and lenders. Listed among creditors in Aspiration’s bankruptcy documents is Leonard, raising questions about whether his $28-million endorsement deal with the company skirted NBA salary cap rules.

One of the investors Sanberg defrauded was Ballmer, listed by Fortune magazine as the sixth-richest person in the world, with a net worth of $157 billion. The Clippers owner invested $50 million in Aspiration, which in turn entered into a $330-million sponsorship agreement with the team.

This week, the Athletic reported allegations that Aspiration agreed to pay Leonard $28 million for a job with no responsibilities, in an effort to circumvent the NBA salary cap. Ballmer was interviewed Thursday night by ESPN’s Ramona Shelburne and denied involvement in Leonard’s deal with Aspiration, but the NBA has launched an investigation.

Ballmer said he was “conned” by the company and that the Clippers did not circumvent NBA salary cap rules, which the team was accused of doing in a podcast report by Pablo Torre of the Athletic.

A plane flies over the Intuit Dome in Inglewood.

(Wally Skalij / Los Angeles Times)

Ballmer told Shelburne that Aspiration offered more than Intuit for dome naming rights, and a Clippers spokesman confirmed that account. However, Ballmer insisted that the Clippers did not violate NBA rules against skirting the salary cap, and the team had agreed to a contract extension with Leonard and the sponsorship deal with Aspiration before the player and the company met.

“We were done with Kawhi, we were done with Aspiration,” Ballmer said. “The deals were all locked and loaded. Then, they did request to be introduced to Kawhi, and under the rules, we can introduce our sponsors to our athletes. We just can’t be involved.”

The Clippers signed Leonard to a four-year, $176-million contract in August 2021 even though he was recovering from a partially torn ACL in his right knee that kept him sidelined the entire 2021-22 season. Ballmer said the sponsorship deal with Aspiration was completed in September 2021 and that the Clippers introduced Leonard to Aspiration two months later.

“As part of our cooperation with the Department of Justice and Securities and Exchange Commission, we produced texts and emails,” Ballmer said. “It was part of the document production in their investigation. We even found the email that made the first introduction [between Aspiration and Leonard]. It was early in November.

“Where could any of this circumvention happened? It couldn’t have, it didn’t. The introduction got made and they were off to the races on their own. We weren’t involved.”

The Boston Sports Journal reported that Leonard did not appear in promotional material as other endorsers did because Aspiration executives “saw no brand synergy with Leonard and chose not to use his services. They instead preferred to partner with climate-focused influencers.”

Ballmer couldn’t explain why Leonard did no marketing or endorsement work for Aspiration, telling Shelburne that he never spoke with the player about his deal with the company.

“I don’t know why they did what they did and I don’t know how different it is, I really don’t,” he said. “And, frankly, any speculation would be crazy. These were guys who committed fraud. Look, they conned me. I made an investment in these guys thinking it was on the up-and-up and they conned me. At this stage, I have no ability to predict why they did anything they did.”

The salary cap is a dollar amount that limits what teams can spend on player payroll. The purpose of the cap is to ensure parity, preventing the wealthiest teams from outspending smaller markets to acquire the best players.

Circumventing the cap by paying a player outside of his contract is strictly prohibited. Teams that exceed the cap must pay luxury tax penalties that grow increasingly severe. Revenues from the tax penalties are then distributed in part to smaller-market teams and in part to teams that do not exceed the salary cap.

The NBA said it will investigate the allegations laid out by Torre. Ballmer said he welcomes the probe. If allegations were made against a team other than the Clippers, “I’d want the league to investigate, to take it seriously,” he said.

“We know the rules, and if anything is not clear, we remind ourselves what the rules are. And we make it absolutely clear we will abide by those rules.”

The cap was implemented before the 1984-85 season at a mere $3.6 million. Ten years later, it was $15.9 million, and 10 years after that it had risen to $43.9 million. By the 2014-15 season it was $63.1 million.

The biggest spike came before the 2016-2017 season when it jumped to $94 million because of an influx of revenue from a new nine-year, $24-billion media rights deal with ESPN and TNT.

Salary cap rules negotiated between the NBA and the players’ union are spelled out in the Collective Bargaining Agreement. Proven incidents of teams circumventing the cap are few, with a violation by the Minnesota Timberwolves in 2000 serving as the most egregious.

The Timberwolves made a secret agreement with free agent and former No. 1 overall draft pick Joe Smith, signing him to a succession of below-market one-year deals in order to enable the team to go over the cap with a huge contract ahead of the 2001-02 season.

The NBA voided his contract, fined the Timberwolves $3.5 million, and stripped them of five first-round draft picks — two of which were later returned. Also, owner Glen Taylor and general manager Kevin McHale were suspended.

Then-NBA commissioner David Stern told the Minnesota Star Tribune at the time: “What was done here was a fraud of major proportions. There were no fewer than five undisclosed contracts tightly tucked away, in the hope that they would never see the light of day. … The magnitude of this offense was shocking.”

According to Article 13 of the CBA, if the Clippers were found to have circumvented the cap, it would be a first offense punishable by a $4.5-million fine, the loss of one first-round draft pick, and voiding of Leonard’s contract. However, the Clippers don’t have a first-round pick until 2027.