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NBA Penalizes L.A. Clippers, Steve Ballmer, Lawrence Frank, and Gillian Zucker for Salary Cap Circumvention Pertaining to Kawhi Leonard

A 35 page report issued by the law firm Wachtell, Lipton, Rosen & Katz concluded that the L.A. Clippers circumvented the salary cap to sign Kawhi Leonard:

The investigation finds that the Clippers organization violated the circumvention
rules in numerous independent ways by (i) affirmatively initiating off-court income
opportunities between Mr. Leonard and four different companies doing business with the
team: Aspiration, Boingo Wireless ("Boingo"), Daktronics, and Lockton Insurance
("Lockton"), (ii) facilitating the consummation of endorsement agreements between each
of these companies and Mr. Leonard, including in some cases by participating in the development and communication of deal terms, (iii) inducing the companies to enter into
these agreements by offering and providing them with business from the Clippers,
(iv) paying expenses on behalf of Mr. Leonard and his representatives not authorized by
League rules, and (v) failing to report improper solicitations for off-court income
opportunities made by Mr. Leonard’s uncle and business manager, Dennis Robertson.
The pattern of conduct reflected here—involving four separate arrangements sharing
many common characteristics—further demonstrates the clear violations of NBA rules
set forth in this report.

The Clippers' most senior executives—President of Business Operations Gillian
Zucker and President of Basketball Operations Lawrence Frank—are primarily and
directly culpable for this misconduct. In addition, Steve Ballmer, owner of the Clippers
and its affiliates, knowingly sought to help Mr. Leonard obtain off-court income
opportunities and, in at least one instance, engaged in a significant act of team
facilitation. Mr. Ballmer also failed to create conditions under which his organization
abided by the NBA’s circumvention rules—an especially egregious lapse because the
Clippers are a prior offender of those rules and were previously and specifically
investigated by the NBA with respect to Mr. Leonard. 

The NBA issued an official press detailing the penalties for the salary cap circumvention documented in the report:

Based on this misconduct, the NBA has imposed the following penalties:

• The Clippers shall forfeit five first-round draft picks, one in each of the 2029, 2030, 2031, 2032, and 2033 NBA Drafts.
• The Clippers are fined $30 million.
• Clippers owner Steve Ballmer is suspended from all league and team activities for one year for knowingly seeking to help Mr. Leonard obtain off-court income opportunities, for approving a business deal that he knew was a precondition for Aspiration to enter into an endorsement agreement with Mr. Leonard, and for his failure to create conditions under which his organization abided by the NBA’s circumvention rules.
• Clippers President of Business Operations Gillian Zucker is suspended without pay for one year for being primarily and directly culpable for the impermissible endorsement arrangements and for providing false and misleading statements to investigators.
• Clippers President of Basketball Operations Lawrence Frank is suspended without pay for six months for his involvement with the impermissible endorsement arrangements and for approving impermissible expenses incurred by Mr. Leonard and his family.
• The Clippers organization and personnel are subject to a compliance and monitoring program overseen by the league office for a period of five years.
• In connection with his violations, Mr. Leonard is required to pay the league $700,000.
• Mr. Robertson is banned from conducting business or otherwise engaging with NBA teams and their affiliates on behalf of or with respect to any player, employee, or other league or team personnel for a period of five years.

The NBA and the NBPA have entered into an agreement confirming these penalties are final and binding on all parties. Wachtell Lipton continues to receive information relevant to the investigation, and the league will consider further action as appropriate.

These penalties constitute the harshest punishment directed at one organization in NBA history. Under the Collective Bargaining Agreement, the maximum penalty for salary cap circumvention is $7.5 million. It appears that the NBA applied that penalty regarding each of the four companies with whom the Clippers conspired to circumvent the salary cap, thus resulting in a $30 million total fine for the Clippers. 

It is important to understand that the NBA has no authority to impose any penalties on the companies directly, and it is limited--if not by law and the terms of the CBA, then by the reality of maintaining a good working relationship with the NBA Players Association--regarding the penalties that it can impose on Leonard. When the NBA punished the Minnesota Timberwolves for circumventing the salary cap to sign Joe Smith, the league voided Smith's contract, and vacated Smith's Larry Bird Rights. By comparison, in this situation Kawhi Leonard received a mere slap on the wrist: a $700,000 fine relating to improper benefits provided directly to Leonard by the Clippers (as opposed to money funneled to Leonard from outside corporations).

One could make a good argument that Leonard should have to repay every dollar that he received above and beyond his legitimate player salary and legitimate endorsement deals, but no enforcement mechanism exists legally or within the NBA's rules to accomplish this. Shareholders and stakeholders in the various companies involved in the salary cap circumvention could possibly have a cause of action against the leaders of those companies if the shareholders and stakeholders can prove that those leaders took actions that caused the value of those companies to decline in a foreseeable and preventable manner. In other words, if the companies lost money or their stock values declined as a result of funneling money to Kawhi Leonard then the shareholders and stakeholders could sue for a breach of fiduciary duty. Perhaps shareholders and stakeholders could also argue that even if the companies did not directly lose money in these deals the companies ran the risk of reputational damage and other negative consequences as a result of participating in circumvention of the NBA's salary cap rules.

The audacity of the conduct of the Clippers' owner and top executives makes one wonder if those people are bolder and more reckless than other NBA owners and top executives, or if what they did is commonplace in the NBA but that other teams are better at covering their tracks. The Clippers publicly responded to the report and the NBA's penalties by stating "We vehemently reject the NBA's findings, which are the result of a heavily biased investigation seeking to justify a predetermined narrative rather than facts and evidence. What the league told us privately differs from what it announced today publicly, and they have not held themselves close to the standard Commissioner Silver set at the start of the investigation to ensure its fairness and accuracy. For the past year, we cooperated fully and in good faith and we will now fight just as hard to demonstrate our innocence. We intend to vigorously challenge these findings and penalties through every avenue available to us and look forward to an ethical and impartial arbitration process." However, it is unclear what recourse is available to the Clippers to overturn the penalties issued by the NBA other than filing a lawsuit.

The past year or so has not been good for the NBA legally or from a reputational standpoint. In addition to the Clippers' significant circumvention of the NBA's salary cap rules, a wide-ranging, two-pronged federal investigation into illegal gambling implicated Hall of Fame player/then-Portland coach Chauncey Billups, retired player Damon Jones, and current player Terry Rozier. In 2024, the NBA banned for life player Jontay Porter for conduct connected to the prop bet manipulation allegations that also involve Jones and Rozier. Porter pleaded guilty to one count of conspiracy to commit wire fraud. Jones subsequently pleaded guilty to two counts of conspiracy to commit wire fraud. The cases involving Billups, Rozier, and alleged mafia-connected co-conspirators are ongoing. Much like one wonders if the Clippers were unusually bold and reckless or if the team's misconduct is part of a broader salary cap circumvention trend among the league's teams, one wonders if Porter, Jones, and the others were unusually bold and reckless with their criminal conduct (alleged criminal conduct for Billups and Rozier, pending the outcomes of their cases) or if there is a widespread problem of illegal gambling activity within the NBA; that would seem to be a matter worthy of close investigation: the Clippers' actions affected the league's competitive balance, but criminal activity connected with the mafia has a much broader societal impact in addition to affecting the league's credibility and integrity.

The NBA's punishment of the Clippers will likely be viewed in some quarters as vindication for Pablo Torre, whose debut podcast focused on speculation from anonymous accusers that the Clippers had violated the NBA's salary cap rules. Torre's podcast created a media storm. In Analyzing the Media Storm Surrounding the L.A. Clippers, I wrote, "I deliberately left the words 'accusation' and 'scandal' out of this article's title because I don't know if the L.A. Clippers violated the NBA's salary cap rules. You don't know, either, even though you may think that you do. The only things that we know are (1) there is a media storm surrounding the L.A. Clippers, and (2) the NBA is investigating the Clippers for a possible violation of the league's salary cap rules." While the law firm's investigation was still in process, Torre won a Pulitzer Prize for his series of podcasts that speculated about the Clippers allegedly circumventing the NBA's salary cap rule--and I asserted that regardless of the outcome of the investigation, it was premature to award a Pulitzer Prize to Pablo Torre before verifying the veracity of his allegations and speculations.

During the investigative process, many commentators complained about how long the investigation lasted, and some speculated that the NBA was engaging in a coverup. Mike Wilbon asserted that the NBA would never penalize Balmer because Balmer is too wealthy and too important to the league. The report explains that investigators conducted 73 interviews of 60 different people while also reviewing 200,000 pages of documents. The investigation was prolonged because the Clippers did not respond on a timely basis to some of the questions. There is a big difference in substance and quality between putting together a podcast--for which there are no standards of evidence or investigation protocols--compared with drafting a report with findings of fact and conclusions based on careful evaluation of evidence. What matters is the findings of fact and evidence-based conclusions of the law firm's report, not what is said and speculated about on a podcast or in other media outlets.

The outcome of the investigation does not invalidate my previous assertions: from September 2025 until the NBA released the law firm's report on September 2, 2026, it had not been proven that the Clippers violated any NBA rules, and thus it was premature to award one of the journalism field's most prestigious honors to Torre and his team. It is worth noting that the law firm's report states that its conclusions are not based on "public allegations or theories of misconduct by the Clippers or Mr. Leonard that were not ultimately substantiated by the investigative record."

Labels: Dennis Robertson, Gillian Zucker, Kawhi Leonard, L.A. Clippers, Lawrence Frank, Pablo Torre, Steve Ballmer

posted by David Friedman @ 10:43 PM

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