For decades the debate surrounding the payment of college athletes for their participation in NCAA sports has raged on, a topic that continues to illicit strong responses from proponents who witness universities raking in tens of millions of dollars in revenue on an annual basis from the success of their respective sports teams and the athletes that comprise them. After being swept under the rug for years, gasoline was added to the fire in 2013, when ultra-successful video game company Electronic Arts was forced to shut down the production of one of its more popular titles, EA Sports NCAA Football, over numerous payment-related issues, a move that has impacted the player-payment debate ever since. The decision to cut the thriving game was made following legal issues arising from the use of NCAA player likenesses and demographic information (although the game did not include player names) by the company without payment being made to the athletes for doing so. The NCAA feared that the video game company could potentially move to pay the college players in order to continue rolling out the product, something that would have essentially undercut everything the association has historically stood for. Following this dilemma, a lawsuit brought forward by former NCAA athletes regarding their lack of compensation for being a part of the video game was then settled by EA outside of court. The settlement, which amounted to a $60 million package to be paid over several years, included approximately 300,000 former college football players who attended certain institutions during the years the game was sold and whose likenesses were used in the football video game, as well as EA’s NCAA Basketball title. The checks, which began being sent out in 2016, reportedly range from “less than $100 to nearly $9,300 will go to players whose names and/or images appeared in EA Sports football or basketball games issued from 2003-04 through 2013-14 and who filed timely, valid claims” (Kirshner, 2016)
According to Business Insider, “the 231 NCAA Division I schools with data available generated a total of $9.15 billion in revenue during the 2015 fiscal year”, a figure that does not include sports booster donation money, a large source of funds for teams and athletic departments across the country (Gaines, 2017). This has lead many to wonder where exactly this revenue is going, if its not going to the players who help raise it? Universities and the NCAA alike maintain that the majority of these funds go to scholarship funds, general Division I funds and championship funds that support teams for travel, food, and lodging, maintenance of facilities, and student-athlete services such as drug testing, postgraduate scholarships and injury insurance among other areas. But somehow the numbers still don’t seem to particularly add up. Regardless, those against the payment of athletes view both the financial and athletic scholarships that these individuals receive as payment enough, as the average non-scholarship student in the United States accrues upwards of $28,000 in debt following the receipt of their college education. These scholarships also allow many student-athletes from various backgrounds to attend college in the first place, as in many cases if it were not for sports, a fair percentage of competing athletes would not be afforded the luxury of receiving a college-level education. Additionally, scholarship athletes are often provided with covered meal plans and food stipends that the average college student would be paying for out of their own pocket.
The primary argument for the payment of players, one commonly employed by current and former NCAA athletes alike, is simple: they’re the ones performing and drawing the crowds and subsequent dollars. This is countered by the notion that the athletes are performing voluntarily; they’re not being forced to participate. It seems that for every argument in the case of the payment of college athletes, there is an equally strong counter-argument. This means that no real resolution that mutually appeases both sides is likely on the horizon. This dilemma has however given rise to the trend of athletes and their family members taking illegal payments from third party sources, boosters, and even college coaches themselves in order to finalize commitments to specific universities. Prominent current-NFL players such as Cam Newton, Reggie Bush, and countless others have been marred in illegal pay-for-play scandals in the past, scandals that have even forced them to give up major received during their college tenures. This has brought many on both sides of the argument to question if the efforts made by the NCAA to keep players unpaid are worth it, given the fact that athletes and coaches are resorting to efforts of this extent, which often jeopardize their current and future positions, in order to facilitate pay-outs. The practice of under the table payments to high-profile college recruits is nothing new, and of the hundreds of cases that have made headlines over the last two decades, it is likely that even more go unreported. However, a new trend has been uncovered that has seen merchandise and apparel companies becoming the entities making payments to athletes and coaches during their time in the college realm in order to promote their brand in the future.
The month of September concluded with a bang, as a major bribery scandal was exposed at the NCAA level that sent shockwaves throughout the realms of both sports and finance. According to reports, “10 men were charged in a widespread investigation into corruption in college basketball involving coaches receiving bribes to steer business to top stars and a sneaker maker” (Shain, 2017). Adidas, the immensely popular clothing and apparel company, was named as the organization of interest in this case. It has been discovered that the company funneled bribes to coaches and numerous high school athletes with Division 1 aspirations so that they would in turn attend colleges that were sponsored by Adidas. Prospects and coaches alike received payouts in excess of $100,000 for the commitments of athletes to major universities and the signing of sponsorship contracts following their decisions to turn pro.
The illegal payouts were the first in a line of allegations brought forth by federal investigators two weeks ago, revealing a side of the NCAA recruiting cycle that many fans, students, and universities altogether are generally unfamiliar with. Reporting on the scandal, The New York Times writes that the complaints “depict a thriving black market for teenage athletes, one in which coaches, agents, financial advisers and shoe company employees trade on the trust of players and exploit their inability to be openly compensated because of N.C.A.A. amateurism rules” (Tracy, 2017). Some of the largest, most successful schools in the country in terms of athletics have been cited in the reports, including Arizona, Auburn, Miami, and Southern California. While the names of the individual athletes and the schools involved were not specifically released in the investigatory report, the descriptions in said report were easily matched to schools in question, as for some universities this was not their initial offense. One such university is the University of Louisville, who was already on NCAA probation over a prostitution scandal from several years ago. Louisville was forced to relieve hall of fame coach Rick Pitino of his coaching duties following the bribery claims, claims that emerged just months after signing a 10 year, $160 million sponsorship contract with Adidas.
More firings are likely on the horizon for coaches across the country that knowingly took part in these unethical actions and other similar measures, but those that are likely to be impacted most are the student-athletes themselves, who may face repercussions that could impact their futures in the near term and the long term. Global RADAR will report on future developments from this scandal in the near future.
Additional information on NCAA annual revenue can be found at the following site: https://www.ncaa.org/about/where-does-money-go
Weekly Roundup
Swiss Watchdog Investigating ICO’s
The Swiss Financial Market Supervisory Authority (FINMA), Switzerland’s government body primarily responsible for financial regulation, is currently investigating several different initial coin offerings (ICO’s) over potential violations of money laundering and terror financing laws. An ICO is defined as an unregulated measure of raising funds for a new cryptocurrency undertaking, often through the creation and sale of digital currency to investors. The latest investigation comes in response to the growing presence of cryptocurrency within the country and abroad of late, and is the second examination of current practices in just a two-week span. FINMA has deemed the investigations as necessary measures due in large part to the fact that Swiss government does not have legislation in place governing ICO conduct, although some portions of the ICO structure can be covered by existing financial regulations. FINMA is concerned that ICO’s may hinder the country’s ability to combat money laundering and terror financing primarily, but also fears that banking, securities trading, and investment realms could be negatively impacted as well.
Switzerland is considered a hotbed for ICO activity, as the country “has played host to four out of the six largest ICOs to date”, the majority of which have raised hundreds of millions in bitcoin in a matter of months (Reuters, 2017). This makes the need for regulation all the more essential in order for there to be greater oversight on the emergence of potentially illicit activity. Because there is such a high risk of fraud in this practice, many have lobbied for ICO regulation, and the Crypto Valley Association, a government supported association which aims to build on Switzerland’s standing as a global leader in financial technology, has already begun the process of developing a code of conduct for ICO’s domestically and abroad. FINMA has “has been supporting efforts in developing and implementing blockchain solutions in the Swiss finance industry for several years”, so the move to improve the security of the practice for all parties involved should be welcomed with open arms (Craig, 2017).
Indiana Pair Steals Millions from Amazon
A modern day Bonnie and Clyde couple were apprehended earlier this week after reportedly stealing $1.2 million worth of merchandise from e-commerce conglomerate Amazon. The Indiana-based duo of Erin Finan and Jeanette Finan pleaded guilty to charges of mail fraud and money laundering after it was discovered they “bought hundreds of electronics such as Go Pro cameras, Samsung smartwatches, and Xboxes, then told Amazon the products weren’t working and requested replacements at no charge” (Tribune Media Wire, 2017). It has been reported that the couple created multiple hundreds of fake identities in order to keep their scam going, and once the new products arrived, they were sold to another individual, Danijel Glumac, who would mark up and sell the products to other parties throughout the city of New York. Glumac is believed to have paid the Finan’s between $700,000 and $800,000 for supplying him the products that were eventually sold on the underground market.
Unfortunately for millions of ethical customers found throughout the United States, consumer fraud tactics employed by criminals often leads to a rise in retail prices within companies across the country in order to counteract the increase in purchases seen on black markets. As has been illustrated in this case however, federal authorities are cracking down on this type of activity in all regions of the United States. The Finan’s may face up to 20 years in prison for their roles in the scam (sentencing will be set on November 9th), and were also ordered to pay back the $1.2 million stolen from Amazon.
Slovenian Bank Laundering for Iran?
On October 2nd, Slovenia launched a formal investigation into potential money laundering claims against the country’s largest bank. Early reports indicate that Slovenia’s “biggest state-owned bank, Nova Ljubljanska Banka (NLB), laundered almost €1bn from Iran between 2008 and 2010, breaking international sanctions and potentially contributing to the financing of terrorism” (Iran Focus, 2017). It is believed that approximately 50 daily transactions were made through NLB to tens of thousands of accounts using fake names. At the center of the scandal is Iraj Farrokhzadeh, an Iranian citizen who opened accounts with NLB nearly ten years ago for “Farrokh Ltd., after Swiss authorities shut down his bank account at banks in Switzerland” (Iran Focus, 2017). Farrokhzadeh, who could be found on the International Police Organization’s (Interpol) most wanted list prior to these transgressions, is thought to have transferred money on behalf of the Export Development Bank of Iran (EDBI). The European Council had previously blacklisted EDBI for its links to potential terrorist activity involving the Iranian Defense Ministry.
The Bank of Slovenia did in fact issue a notice of prohibition to NLB following the initiation of the transfers, but NLB took nearly two weeks to implement the order, which provided Farrokhzadeh with enough time to move his business to banks located throughout Russia. Other EU member states and the United States have also found that Iran potentially “used Slovenian laundered money to buy the materials to build nuclear and chemical weapons, pay agents who made these purchases and infiltrate Iranian spies in nuclear, security and defence institutions in the EU and the US” (Iran Focus, 2017). NLB has yet to release a statement on the issues thus far.
Citations
“Couple Admits to Stealing $1.2M from Amazon with Elaborate Scam.” WREG.com.
Tribune Media Wire, 02 Oct. 2017. Web.
Craig, Edward. “Switzerland’s FINMA Eyes Crypto Valley.” Bitcoin News. 03 Oct.
- Web.
Gaines, Cork. “The Difference in How Much Money Schools Make off of College
Sports Is Jarring, and It Is the Biggest Obstacle to Paying Athletes.” Business Insider. Business Insider, 14 Oct. 2016. Web.
Kirshner, Alex. “‘NCAA Football’ Settlement Checks Are Rolling in.” SBNation.com.
SBNation.com, 11 Apr. 2016. Web.
Shain, Andy. “Ex-University of South Carolina Assistant Basketball Coach Arrested in
National Bribe Scheme.” Post and Courier. 27 Sept. 2017. Web.
“Slovenia Investigates Its Own Bank for Money Laundering for the Iranian
Regime.” Welcome to Iran Focus, 2 Oct. 2017. Web.
Tracy, Marc. “N.C.A.A. Coaches and Adidas Executive Face Bribery Charges.” The New
York Times. The New York Times, 26 Sept. 2017. Web.
“UPDATE 1-Swiss Watchdog Investigating a Number of Initial Coin Offerings.” Kitco
News. Reuters, 29 Sept. 2017. Web.
