Friday, October 12, 2018
The University of Kansas has seemingly increased its financial partnership with Adidas at the same time the apparel company finds itself at the center of a federal trial alleging crooked basketball recruiting practices.
For the past year, Kansas Athletics officials have said a multimillion-dollar deal to extend Adidas’ contract to be KU’s official athletic apparel provider remains unsigned. However, the chief financial officer for the KU athletic department has disclosed to Kansas Athletics’ board of directors that KU already is receiving increased royalty payments from Adidas based on the pending deal.
“We had $1.5 million in extra Adidas royalties based on the new pending agreement that we are working up a long form as we speak,” Pat Kaufman told the Kansas Athletics Inc. board last month as part of a report about the 2018 fiscal year, which ended June 30.
As the federal corruption trial has unfolded the past two weeks in New York, the Journal-World began seeking more details about any interim deal KU may have with Adidas. On Thursday, the Journal-World sought answers to a variety of questions related to the $1.5 million in extra Adidas royalties the school has received. The Journal-World also filed a Kansas Open Records Act request for any written agreements related to the $1.5 million in extra Adidas royalties.
A university spokesman declined to answer any questions about KU’s relationship with Adidas.
“It is not appropriate for the university to comment on these topics while legal proceedings are ongoing,” Joe Monaco, a spokesman in the Chancellor’s office said.
Monaco said the university was processing the records request, but based on his response it was unclear whether any records related to how KU came to receive the extra $1.5 million in Adidas money exist.
The federal trial is providing new specifics about how both current and former Adidas executives are linked to the allegations of basketball recruiting corruption. Defendants James Gatto and Merl Code both formerly worked for Adidas. On the opening day of the trial, their attorneys said they didn’t intend to deny that they directed payments to college basketball recruits to steer those recruits to attend schools that have partnerships with Adidas. Nor do they intend to deny that they broke NCAA rules in the process. Instead, they will argue that universities benefited from their actions, and in some cases were willing partners, and thus were not victims of any crime.
Thomas “T.J.” Gassnola, trial documents show, has been paid hundreds of thousands of dollars by Adidas for his work as a coach of an AAU basketball team and for grassroots player development. Gassnola already has pleaded guilty to one count of conspiracy to commit wire fraud connected to the recruiting scheme. This week he testified under oath that he paid the family or guardians of KU recruits Billy Preston and Silvio De Sousa to attend KU. Such payments are assumed to be illegal under NCAA rules and could subject KU to penalties, including forfeiture of last year’s Final Four appearance, conference championship and others depending on how the NCAA views the matter.
Among the questions posed to both Kansas Athletics Inc. and Chancellor Douglas Girod’s office are:
Just days before the Gatto indictment was unsealed in September 2017, KU and Adidas announced they had reached agreement on a deal that would keep the company as KU’s official apparel provider for more than a decade and would provide about $190 million in cash, product and services to Kansas Athletics.
Following the unsealing of the indictment, KU Athletics said it had not signed the deal with Adidas, and it declined to release copies of the agreement, saying it was not required to release the documents since they were still in draft form.
At the time, though, Kansas Athletics spokesman Jim Marchiony said the delay in executing the agreement was not related to the allegations against Gatto, but rather was part of the normal due diligence in putting an agreement together. This week, KU declined to comment on the status of the negotiations with Adidas.
KU previously has declined to comment about whether it has any concerns about entering into a partnership with Adidas given the allegations. The Journal-World renewed that question on Thursday, asking whether the information that has come out at trial has created concern that Adidas was lacking institutional control over many of its employees involved in AAU and college basketball. KU declined to respond.
In addition to Gatto, Code and Gassnola, the trial has highlighted allegations against Adidas grassroots executive Chris Rivers. A Feb. 17, 2015, email written by Rivers was entered into evidence this week, according to a report from Matt Norlander of CBS Sports. The email, which was sent to Gassnola and others, referenced a confidential “Black Opp’s” (short for black, or covert, operation) run by Adidas.
The trial also has highlighted past deeds by Gassnola that call into question why Adidas felt he could be trusted to operate within the rules of college basketball recruiting. Among the details are that Gassnola, an AAU coach, was barred by the NCAA in parts of 2012 from being a part of NCAA sanctioned events because he had a relationship with a professional sports agent.
Much of Gassnola’s past has been part of the public record and available to Adidas for more than a decade. The Boston Globe in 2006 did a substantial story on Gassnola, his criminal history and his battles with the NCAA. The article reported Gassnola had “become a pariah among many youth coaches for his history of breaking laws, rules and promises.”
According to the article, Gassnola has been convicted of larceny on three occasions, as well as assault, and he acknowledged in an interview that he previously had been involved in bookmaking. Through his employment by Adidas he had access to the KU basketball program that an ordinary member of the public would not have.
As part of its deal with KU, Adidas gets tickets for six “premium” seats for each men’s home basketball game, plus can purchase up to 10 additional seats for each game, according to a copy of the agreement. In court this week, Gassnola testified that he and Gatto were “ambassadors” at KU’s Late Night in the Phog event in 2016. He also testified that he had a conversation with KU men's basketball coach Bill Self about recruiting targets and assured him “we are here to help.” Gassnola also testified he met with KU assistant coach Kurtis Townsend. Gassnola testified that before De Sousa became a player for KU that Townsend asked Gassnola to reach out to De Sousa’s guardian for the stated reason of helping De Sousa’s guardian obtain Adidas gear for the Angolan national basketball team. Gassnola said he never made Self or Townsend aware of any of the payments he made to KU recruits.
The money involved in a new deal with Adidas is significant for KU Athletics as its finances have struggled to break even in recent years. At the September board meeting, Kaufman acknowledged that KU Athletics had to dip into operational reserve funds for $2.7 million to cover expenses that came in above department revenues.
A previous review by the Journal-World found that between fiscal years 2006 and 2017, the revenues of the nonprofit Kansas Athletics Inc. increased by 68 percent but its expenses increased by 93 percent.