In the sneaker business, the feet of professional athletes are the most valuable billboards in the world. The company that gets its shoes on the best basketball players, football players and soccer players wins, because those athletes’ footwear choices have outsize influence over everyone else’s purchasing decisions.
That fundamental truth about high-tops and cleats – that getting top players in your brand and keeping them there is good business – was the subtext of a critical piece of a corruption and bribery network outlined Tuesday by federal prosecutors, which swiftly resulted in the demise of a Hall of Fame coach’s career.
The University of Louisville announced Wednesday that it had abruptly ended the coaching tenure of Rick Pitino, winner of two national championships and among the most successful coaches in college basketball history. The decision was made a day after the U.S. attorney for the Southern District of New York said in a criminal complaint that two coaches had been part of a scheme to funnel money from the university’s apparel partner, Adidas, to two high school prospects.
The complaint, which accused an Adidas executive and others of wire fraud and money laundering, did not disclose the names of anyone at Louisville. Pitino denied any knowledge or responsibility for the accusations. “These allegations come as a complete shock to me,” he said in a statement. A representative for Adidas said that the company “is committed to compliance and ethical business practices,” and that the executive had been put on administrative leave.
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The plan, prosecutors said, was that the teenage athletes would play for a university that had a sponsorship deal with Adidas and then sign sponsorship deals of their own with the company once they turned pro and potentially earned millions of dollars in the NBA. In other words, investing in athletes at a young age could yield huge returns later.
“It hopefully gets the kids you’ve won wearing your apparel,” said Corey Evans, an analyst at Rivals, a website that exhaustively covers high school players and their college recruitment. “And in the long run, it’s going to matter for the top guys for what college they go to.”
The shoe companies cash in if the player blossoms into an NBA star. “That’s where it counts,” Evans added.
Shoe company involvement in college sports dates to 1977, when Sonny Vaccaro – a longtime basketball hand and then shoe-company executive – signed several coaches he knew, including Jerry Tarkanian of UNLV (and later Fresno State), to contracts with Nike. For a fee, the coaches were sent shoes to have their players wear.
“My theory was if you had coaches with good teams with personalities, you would sell shoes,” said Vaccaro, who is often credited with urging Nike to sign Michael Jordan before he reached the NBA. “I said, Put the shoes on the college kids.”
Vaccaro said that “the world changed” in 1987, when Nike signed its first all-school deal, agreeing to sponsor all the athletic teams at the University of Miami.
“Now all the major schools are all-school deals with one shoe company,” he said. “That gives them control over everything. You do an all-school deal, the president signs off, the athletic director, the coach – you own everything in that school.”
“That shoe company is now your business partner,” he added. “It wasn’t in ‘77. It behooves everybody for the school to win games. That’s the marriage.”
Last month, the Louisville athletic director, Tom Jurich, announced a 10-year, $160 million sponsorship deal with Adidas. On Wednesday, the university announced that he, too, was being removed from his position, “until the board of trustees has an opportunity to evaluate his continued employment.”
Adidas manufacturers shoes in China, India, Cambodia and other countries and sells them around the world. But the actions of Jim Gatto, the Adidas executive named in the criminal complaints, show that high schools and summer-league teams throughout the United States are particularly vital to the sneaker business.
Nike, Adidas and Under Armour are the biggest players on the college basketball scene. In recent years, all three have invested vast sums in so-called grass-roots basketball leagues, which exist outside the high school structure.
The three companies have their own leagues – Nike’s EYBL, Adidas’ Gauntlet, Under Armour Association – each with dozens of teams. The companies shower teams with money, swag and perks. Parents of top prospects are commonly involved with the teams.
During summer break, high school players compete in league tournaments that are honey pots for college coaches and recruiters.
“That’s where kids get seen,” said Tom Konchalski, the longtime New York City-based scout. “If you’re not on the shoe company circuit, it’s hard to get recruited at the highest level. It’s very difficult.”
“You might think it’s unhealthy,” he added, “for the shoe companies to have such influence in the recruiting process – it has sort of replaced high school in spring and summer, and taken power out of the hands of the high school coaches – but that’s the way it goes.”
The companies fiercely compete with one another to have the best 16-year-old prospects playing in their leagues. Two years ago, for instance, Nike auspiciously scheduled an impromptu trip to the Bahamas for the best players in its league at the same time as a celebrated Under Armour tournament in New York City.
The nexus of grass-roots teams, colleges and sneaker companies was a significant portion of the criminal complaints. Prosecutors said an agent was recorded discussing how to get a high school player to commit to Louisville, and said the key was to keep money going to the player’s grass-roots basketball coach, who could in turn pass it on to the player’s family. The coach’s team was sponsored by Adidas.
Though the company name is redacted in the documents, the coach himself added, “all my kids will be Adidas kids.”
The criminal complaints describe rampant under-the-table payments that were commonly inspired by a young athlete’s future earning potential. One player agent, in a recorded conversation, urged that an offer to a player be increased because a rival company was “coming in with a higher number,” and an Adidas official discussed masking payments from apparel companies to high school athletes as though it were business as usual.
In the Louisville case, prosecutors said $100,000 was steered to a teenage player from Adidas. The complaint referred to two unnamed coaches as being involved. It is not known whether Pitino was one of them.