Kawhi Leonard Circumvention Scandal Has Leaguewide Ramifications For NBA

The NBA has opened an investigation into whether the Los Angeles Clippers circumvented the salary cap by investing in a now-bankrupt environmental company that later signed star forward Kawhi Leonard to a $28 million endorsement contract. The rest of the league should be paying close attention to the fallout.

Investigative reporter Pablo Torre first broke the news that Clippers owner Steve Ballmer invested $50 million into Aspiration, which later signed Leonard to an exorbitant endorsement deal. While it’s legal under NBA rules for teams to introduce players to sponsors, the reported details of Leonard’s endorsement deal are peculiar at best.

According to Torre, “multiple former employees independently characterized Leonard’s arrangement as a ‘no-show job.'” Neither the employees nor Torre could find any evidence of Leonard ever promoting Aspiration. Torre also reported that Dennis Wong, a Clippers minority owner (and Ballmer’s college roommate) invested $1.99 million into Aspiration in December 2022. Leonard received his quarterly $1.75 million payment nine days later, while Aspiration laid off 20 percent of its employees on the same day.

NBA Commissioner Adam Silver recently made it clear that circumstantial evidence alone won’t necessarily merit a punishment.

“In the case of the league, we and our investigators look at the totality of the evidence,” Silver said. “I think whether mere appearance, just by the way those words read, as a matter of fundamental fairness, I would be reluctant to act if there was a mere appearance of impropriety. I think the goal of a full investigation is to find out if there really was impropriety.”

The results of the investigation—and whether Silver decides to punish the Clippers—may have leaguewide ramifications.

Why Salary-Cap Circumvention Is Such A Big Deal

The NBA’s latest collective bargaining agreement introduced harsh penalties for teams that go far over the luxury-tax threshold. Ballmer is by far the richest owner in the NBA, which gave the Clippers a clear competitive advantage under previous CBAs, but even his wealth is no match for the new second apron.

“I think people are going to be very thoughtful about how they continue [to] build their rosters to win,” Ballmer told reporters in July 2024 after losing star forward Paul George to the Philadelphia 76ers in free agency. “I think people are going to be over the second apron, but when you’re over the second apron, you better feel like you got a clear shot [to win]. You stay up there two years, you better really feel like you got a clear shot. That was kind of what the players’ association and the league was intending to do. Trying to level out the level of competitiveness.

“Guys like me who’ve been very willing to pay the luxury tax—it’s not about the luxury tax anymore. It’s about the penalties in terms of how you get better. I’m not willing to sacrifice getting better. Still willing to pay the money. But it’s more than money now.”

Since teams have to be more strategic about how they allocate their salary-cap dollars, they also have more incentive than ever before to find additional ways to compensate players. That’s what makes salary-cap circumvention such a no-no from the league’s standpoint. If teams are violating the CBA and arranging side deals for players, they might be willing to sign below-market contracts, which in turn would put those teams at a major competitive advantage relative to the rest of the league.

The Rest Of The NBA Is Watching Closely

Jake Fischer of The Stein Line reported that “there is an undeniable sense” around the league—including from “ownership-level sources, longtime agents, salary-cap strategies, coaches and more”—that “regard the Clippers as guilty until they are proven innocent.” Before Silver spoke publicly about the investigation, he spoke to “many people from various NBA outposts who were openly outraged and likewise convinced that the Clippers are poised to receive some type of penalty.”

“I’ve spoken to multiple team strategists, for example, who told me, with chests puffed, that if the Clippers aren’t docked multiple first-round picks — if Leonard’s contract isn’t voided while his salary obligations remain on the Clippers’ books — they will feel emboldened to seek out their own version of shell companies to provided additional compensation to their players,” Fischer added.

If the NBA’s investigation finds clear evidence of circumvention between Leonard and the Clippers, Silver could fine Ballmer up to $7.5 million—relative peanuts given his estimated $154.6 billion net worth—strip the Clippers of multiple first-round picks and void Leonard’s contract. If the league finds that the Clippers only arranged a deal between Aspiration and Leonard that was meant to circumvent the salary cap, the penalties may be limited to a $5.5 million fine, one stripped first-round pick and the voiding of Leonard’s contract. Ballmer’s multiple investments into the company may be the swing factor.

The NBA is a star-driven league, and there are only three ways to get one: the draft, free agency and trades. Free agency is the only one that’s fully in each team’s control, but the CBA limits how much money teams can offer any given player. If a star free agent is weighing multiple identical offers (aside from state income tax), one team sweetening the deal by offering a side hustle that requires no actual work could be the difference-maker.

That’s the backdrop looming over the investigation into the Clippers. If Silver doesn’t drop the hammer on them, what’s stopping other teams from setting up similar deals for their stars?

Torre only discovered Leonard’s deal with Aspiration while sorting through the publicly available documentation from Aspiration’s bankruptcy filing. As long as a sponsor or business partner doesn’t go bankrupt, another team owner could invest into that company and then effectively redirect that money to their star player via an endorsement deal without the NBA ever finding out.

If nothing else, the Leonard circumvention scandal perhaps underscores the need for the NBA to have more oversight into players’ endorsement deals. The NCAA set up an independent College Sports Commission to oversee all name, image and likeness deals worth more than $600 as part of the House v. NCAA settlement. Does the NBA need to follow suit to ensure that players aren’t being paid extra from sponsors that aren’t requiring them to actually endorse their products?

Either way, the results of the NBA’s investigation into the Clippers and the scope of Silver’s punishment figures to have leaguewide ripple effects.

Unless otherwise noted, all stats via NBA.com, PBPStats, Cleaning the Glass or Basketball Reference. All salary information via Spotrac and salary-cap information via RealGM. All odds via FanDuel Sportsbook.

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