Kawhi Leonard case: federal investigation into the Clippers

The Kawhi Leonard-Clippers case continues to grow. Following the NBA’s severe punishment for circumventing salary cap rules, the Los Angeles franchise has now come under the scrutiny of U.S. federal authorities.

According to the New York Times, federal prosecutors have opened a criminal investigation into the Los Angeles Clippers to determine whether sponsorship agreements involving Leonard were used to provide the star with compensation outside of his NBA contract.

The investigation is reportedly still in its early stages and is being conducted by the U.S. Attorney’s Office for the Eastern District of New York, based in Brooklyn. According to the NYT, at least one subpoena has already been issued as part of the investigation.

Federal prosecutors have opened a criminal investigation into allegations that the Los Angeles Clippers helped arrange secret endorsement deals for Kawhi Leonard with the goal of circumventing the salary cap

New York Times

This is a significant development, but it does not automatically mean formal charges will follow. People familiar with the matter cited by the American newspaper stressed that it is still too early to determine whether the investigation will result in criminal charges or the presentation of evidence before a grand jury.

Clippers and Kawhi Leonard: what the NBA discovered

The involvement of federal authorities comes just days after the conclusion of an investigation commissioned by the NBA and conducted by law firm Wachtell, Lipton, Rosen & Katz, which lasted nearly a year.

The report found that the Clippers violated the league’s rules against circumventing the salary cap, facilitating outside financial opportunities for Leonard through four companies that had commercial relationships with the franchise: Aspiration, Boingo, Daktronics and Lockton.

According to the league’s investigators, Los Angeles did more than simply put the parties in contact. The Clippers allegedly facilitated the sponsorship agreements in several ways, including providing commercial opportunities to the companies involved and covering certain expenses for Leonard and his entourage that were prohibited under NBA rules.

One of the most serious episodes involved Daktronics and the major contract for the scoreboards at Intuit Dome. According to the report, part of the value of the deal was allegedly directed toward Leonard through a multimillion-dollar, multiyear advertising agreement.

SEC also investigating Leonard case

The story had already extended beyond the NBA. On September 2, a Daktronics executive said during an investor conference call that the company had been contacted by the Securities and Exchange Commission (SEC) specifically in connection with its relationship with Kawhi Leonard.

The company confirmed that it was cooperating with authorities but provided no further details. The federal investigation now becomes another government inquiry into the financial relationships between the Clippers, Kawhi Leonard and companies connected to the franchise.

NBA has already hit the Clippers hard

On the basketball side, the consequences have already been enormous. The NBA stripped the Clippers of five future first-round Draft picks, from 2029 through 2033, and also handed Steve Ballmer a $30 million fine.

The Clippers owner was also suspended for one year, as was Business Operations president Gillian Zucker, while Basketball Operations president Lawrence Frank received a six-month suspension.

Kawhi Leonard was also directly affected by the sanctions and will have to repay $700,000 tied to benefits deemed improper.

That punishment was already severe, but it could now turn out to be only part of the problem. The opening of the federal investigation into the Clippers moves the case onto an entirely different playing field from the NBA’s internal rules.

For the Clippers, the Leonard case has now definitively moved beyond the basketball court. First came the NBA investigation, then the sanctions, the SEC’s involvement and now the launch of a federal criminal investigation.

And above all, at least for now, the story appears to be far from over.