For the past couple years, I have taught a case called Wilkes v. L.A. Clippers. I explain why here. In short, it makes a good companion case to my main vagueness case, Baer v. Chase. Baer was a guy who pitched some ideas that David Chase used in The Sopranos. Wilkes claims he had a role in helping the Clippers land Kawhi Leonard. In both cases, a well-resourced party tells a wannabe helpmate “We’ll take care of you.” Baer v. Chase is the cleaner case, and it has the added advantage that, because it is about the creation of The Sopranos, “We’ll take care of you” is a useful way to illustrate both vagueness and ambiguity. But the students are interested in Wilkes. People follow sports. A lot of students were college athletes. Wilkes takes place in a world they know something about, and they are happy to learn more.

But the story of the Clippers’ courtship of Kawhi Leonard does not end with that case. I’d been hearing bits and pieces about this story, but I learned a lot from Matt Levine’s Money Stuff column here. The basic story is that the NBA came to believe that the Clippers’ owner, Steven Ballmer, who is the NBA’s richest owner was trying to get around the league’s salary cap to lure and retain Kawhi Leonard.

The NBA imposed penalties after commissioning an independent inquiry from Wachtell, Lipton, Rosen & Katz (Wachtell). The Wachtell report can be found here. Here’s my summary of what Wachtell found. Perhaps the most satisfying part of the story is that it was all first uncovered by a podcast, Pablo Toerre Finds Out.

Mr. Torre found out the following:

  • Mr. Leonard entered into a four-year, $28 million endorsement agreement with a now-bankrupt environmental sustainability company, Aspiration Partners (Aspiration);
  • Mr. Leonard never performed any services for Aspiration, and the agreement was never publicly disclosed; and
  • A person claiming to be a former Aspiration employee said that the purpose of the agreement was to circumvent the salary cap.

The NBA then tapped Wachtell to investigate further and Wachtell uncovered three more bogus endorsement agreements. Wachtell found that Mr. Ballmer, along with two additional senior Clippers executives Gillian Zucker and Lawrence Frank were directly culpable for the misconduct, as were Mr. Leonard and his uncle Dennis Robertson.

Mr. Robertson, Wachtell found, began pressuring the Clippers soon after Mr. Leonard signed with them, to help Mr. Leonard generate $10 million/year in endorsement deals. The Clippers complied by reaching out to three companies (Boingo Wireless, Lockton, and Daktronics) with which it had relationships, to enter into endorsement deals with Mr. Leonard through an LLC formed for that purpose and whose members were Mr. Leonard and Mr. Robertson. These deals were odd because:

  • They were entered into during COVID, when nobody was making endorsement deals with NBA players;
  • The companies had no relationship with Mr. Leonard;
  • The deals were extraordinarily generous;
  • The deals were never disclosed; and
  • Mr. Leonard seems to have done almost nothing in connection with these endorsements.

Mr. Leonard was paid $18 million by August 2021 in connection with these deals. Meanwhile, all three companies entered into “consulting” agreements with The Clippers. Ms. Zucker had personal relationships with two of the companies. Again, these agreements were surprising because the companies were not consulting companies, and the companies were paid lump sums in advance for services that a company would ordinarily provide for free in connection with other business.

One of the companies, Daktronics, built a scoreboard for the Clippers’ Stadium, the Intuit Dome. In order to avoid jeopardizing this opportunity, Daktronics agreed to pay Mr. Leonard $8 million over two years. It seems that the Clippers agreed to overpay for the scoreboard in exchange for Daktronics paying an amount equivalent to the overpayment to Mr. Leonard as part of an endorsement deal.

The fourth deal, with Aspiration, is a bit more complex. Pablo Torre valued it at $28 million, but Wachtell arrives at $48 million. Some Aspiration executives were not immediately on board with the deal. They said things like “I have no idea why we’d do this,” “[T]his is not a good investment of our capital . . .” and “It’s $48M over 4 years for Kawhi, who is not a big name.” Ouch. Aspiration’s principal provided a simple answer: the Clippers would pay Aspiration dollar-for-dollar to offset what Aspiration paid Mr. Leonard. The Clippers were to pay Aspiration $7 million/year (an amount equivalent to the annual cash payments to be made to Mr. Leonard) to zero out carbon emissions from the team’s stadium, but there is no evidence that any attempt was made to measure those emissions.

As with the other deals, it seems to have been initiated by the Clippers, and then the parties pretended that Aspiration reached out first. There’s a paper trail. Stinger Bell would like a word. You don’t have to be a Wachtell-level genius to figure out what’s going on here. Mr. Ballmer gave an interview denying that the Clippers were involved. Wachtell finds the statement “at best” inaccurate and outright false with respect to Ms. Zucker’s involvement in setting up the endorsement deal.

As Joe Vardon reports in The Athletic, the NBA hit Mr. Ballmer with a one-year ban from all league functions for his role in encouraging a scheme to get Mr. Leonard corporate endorsement deals as a way of circumventing the league’s salary cap for players. The team was fined $30 million and has to forfeit five first-round draft picks. Mr. Leonard was fined $700,000, his manager was banned for five years, and the two Clippers executives most involved in the wrongdoing received unpaid suspensions of one year and six months respectively. The Clippers vehemently deny any wrongdoing and vow to fight, but their avenues of redress are unclear.

Other than the draft picks, the punishments seems pretty minimal. $30 million is 0.02% of Mr. Ballmer’s $156.1 billion net worth. Median household net worth in the U.S. is $193,000, but to simplify the numbers let’s say that it’s in the ballpark of $156,100. $30 million to Mr. Ballmer is like three cents to someone with that net worth. As to Mr. Leonard, he made tens of millions of dollars on fake endorsement deals. Where does $700,000 come from?

Still, it is satisfying to see somebody holding the world’s 9th richest man accountable for his attempts to circumvent the rules. It’s also fun to see just how clumsy those attempts were. It’s nice when a billionaire tries to deny wrongdoing and a firm like Wachtell stands up and says, “Well, that’s not true. And here’s the evidence that it’s not true.” We need more of that, and not just in sports.