NBA Shocker: Feds Launch Probe into Clippers' Kawhi Leonard Dealings

A federal criminal investigation has been initiated into the LA Clippers, focusing on allegations that the organization circumvented the NBA's salary cap to compensate player Kawhi Leonard. The New York Times first reported this development, citing sources familiar with the matter. This probe, which is in its initial stages, is being led by the U.S. Attorney's Office for the Eastern District of New York, based in Brooklyn. As part of this inquiry, at least one subpoena has already been issued by federal prosecutors.

This federal investigation follows an extensive nearly yearlong inquiry conducted by the NBA itself, carried out by the law firm Wachtell, Lipton, Rosen & Katz. The NBA's investigation concluded that there was "a pattern of misconduct and multiple significant rules violations by the Clippers organization," noting that the team was a "prior offender of the salary cap circumvention rules." The league subsequently imposed severe penalties on the Clippers, which included the forfeiture of five first-round draft picks, a substantial $30 million fine, and a yearlong suspension for owner Steve Ballmer. Furthermore, Kawhi Leonard himself was mandated to pay the NBA $700,000 as part of his punishment.

The September 2 report from Wachtell Lipton detailed specific allegations, stating that league investigators found the Clippers orchestrated a kickback to Leonard. This alleged kickback originated from a massive scoreboard contract for the team's new arena, Intuit Dome, and was structured as an endorsement deal, with the Clippers even setting the terms of a multiyear agreement worth millions of dollars.

Adding another layer to the scrutiny, the federal investigation marks the second instance of a government entity examining the Clippers' financial dealings with Leonard. On the same day the NBA announced its findings and punishments, an executive from scoreboard company Daktronics publicly disclosed on a quarterly earnings call that the company had been contacted by the U.S. Securities and Exchange Commission (SEC) regarding its transactions with Leonard. The executive confirmed Daktronics was cooperating with the SEC and declined further comment.

The Eastern District of New York has a notable history of involvement in high-profile NBA investigations spanning nearly two decades. In 2007, working in collaboration with the FBI, the office successfully prosecuted former NBA referee Tim Donaghy, who confessed to betting on games he officiated and subsequently pleaded guilty to conspiracy to commit wire fraud and conspiracy to transmit gambling information. The Eastern District has also previously indicted individuals such as then-Portland Trail Blazers coach Chauncey Billups, then-Miami Heat guard Terry Rozier, and former NBA guard and assistant coach Damon Jones, as part of broader investigations into illegal sports betting and rigged poker games with alleged Mafia ties. More recently, this year, the same office has indicted former NBA players Malik Beasley and Ed Davis in connection with an alleged sports betting scheme.