The FBI has charged the director of global sports marketing at Adidas of participating in a bribery scheme in which college basketball players were paid to attend universities affiliated with the brand and then later signed with Adidas if they turned pro. The charges, outlined in a federal criminal complaint, provide a glimpse into the underbelly of college athletics and the role sports brands play in steering athletes to certain schools.
Adidas' Jim Gatto, who was arrested, is among 10 people facing federal criminal charges. Also implicated are four assistant basketball coaches, as well as financial advisors and managers, according to the Department of Justice. Media reports have reported that the coaches are from Auburn University, University of Arizona, Oklahoma State University, University of Southern California and University of Louisville.
"Today, we became aware that federal investigators arrested an Adidas employee. We are learning more about the situation. We're unaware of any misconduct and will fully cooperate with authorities to understand more," said an Adidas spokeswoman in a statement. Gatto has been with Adidas for 24 years, according to his LinkedIn page.
The complaint states that Gatto worked in concert with a group that included Christian Dawkins, identified as an employee of a sports management company in New Jersey until May, and Munish Sood, an investment advisor. They're accused of funneling one payment of $100,000 to the family of a high school basketball player in exchange for the player committing to an unnamed university. In return, the player agreed to retain the services of Dawkins and Sood, while agreeing to sign with Adidas once the player turned pro, according to the complaint. A separate charge described a similar scheme involving a $150,000 payment to another player.
The complaint describes Gatto's role at Adidas as overseeing "significant components" of its high school and college basketball programs. Sponsorship deals with major universities can provide apparel brands with big time marketing exposure, and they're willing to pay for it.
Under Armour, for instance, inked a 15-year, $280 million deal last year to outfit UCLA athletes, according to the Baltimore Sun. But in hoops, Nike still rules. The brand had uniform deals with 41 schools in last year's NCAA basketball tournament, compared with 14 for Adidas and 10 for Under Armour, according to the Sun.
The criminal charges are a blemish for Adidas, which has made strides to improve its brand in the U.S. after years of lost market share. In August, the brand overtook Jordan as the second-largest label in U.S. sport footwear, according to market research firm NPD Group Inc. The brand commanded 16 percent of the dollar share of the running shoe market in August, second only to Nike. Overall Adidas sport footwear sales grew more than half in August, NPD found.
"This is an achievement I never thought I would see in my lifetime," wrote Matt Powell, sports analyst at NPD, in a post about Adidas' sales increases earlier this month.
Through work with agencies such as 72andSunny and Johannes Leonardo, Adidas has positioned itself as a brand for creators, a message that extends beyond sportswear to the fashion community, thanks to the popularity of its Originals collection and collaborations with Kanye West.
Adidas stock closed down 2.35 percent in trading in Germany on Tuesday.