Federal Investigation into Clippers' Salary Cap Violations

Federal prosecutors have launched a criminal investigation into whether the Los Angeles Clippers illegally skirted the NBA’s salary cap to compensate Kawhi Leonard, according to a report from The New York Times that cites people briefed on the matter.

The probe, led by the U.S. Attorney’s Office in Brooklyn, is described as being in its earliest stages. At least one subpoena has already gone out, The Times reported, signaling that federal authorities are now moving in on a case that has already rocked the franchise inside league offices.

The U.S. Attorney’s Office declined to comment when contacted by ESPN. The Clippers and the NBA also did not respond to requests for comment.

This federal inquiry arrives on the heels of a bruising, nearly yearlong NBA investigation handled by the law firm Wachtell, Lipton, Rosen & Katz. That probe concluded that the Clippers, already a prior offender on salary-cap circumvention rules, engaged in “a pattern of misconduct and multiple significant rules violations.”

The league’s response was ruthless. The Clippers were stripped of five future first-round draft picks, fined $30 million, and saw owner Steve Ballmer hit with a yearlong suspension. Leonard, the centerpiece of the entire saga, was ordered to pay the NBA $700,000.

Now, the scrutiny has jumped from league discipline to potential criminal exposure.

This is the second time a government body has stepped in to examine the Clippers’ financial dealings with Leonard. On Sept. 2, the same day the NBA released its findings and announced punishments for both the team and the star forward, an executive from scoreboard manufacturer Daktronics told investors on a quarterly earnings call that the company had been contacted by the Securities and Exchange Commission about its dealings with Leonard.

The executive said Daktronics was cooperating with the SEC and declined to elaborate.

At the center of the case is the Clippers’ new arena, Intuit Dome, and a lucrative scoreboard contract tied to it. According to the Sept. 2 report from Wachtell Lipton, league investigators found that the Clippers steered a kickback from a massive scoreboard agreement into an endorsement deal for Leonard. The report said the team not only directed the arrangement but also set the terms of a multiyear endorsement contract worth millions of dollars.

What began as a cap-circumvention scandal inside NBA headquarters has now become something far larger, with federal prosecutors testing where the line between aggressive roster-building and criminal conduct truly lies.