The U.S. Department of Justice has opened a criminal investigation into the Los Angeles Clippers over allegations the team circumvented NBA salary cap rules to funnel additional compensation to star player Kawhi Leonard, according to multiple reports published Thursday.
The criminal probe, led by the U.S. Attorney's Office in Brooklyn, is examining the Clippers' efforts to secure "no-show" endorsement deals for Leonard as a way to provide him extra money beyond his official NBA contract, The New York Times reported. The investigation is in its earliest stages, and at least one subpoena has been issued as part of the federal inquiry.
The Justice Department investigation follows the NBA's own year-long probe that concluded last month with severe penalties against the franchise. The league's investigation, conducted by law firm Wachtell, Lipton, Rosen & Katz, "found a pattern of misconduct and multiple significant rules violations by the Clippers organization, a prior offender of the salary cap circumvention rules."
As punishment, the NBA stripped the Clippers of five future first-round draft picks (2029, 2030, 2031, 2032, and 2033), fined the organization $30 million, and suspended owner Steve Ballmer for one year. Leonard was also fined $700,000 for his role in the violations.
According to the NBA's findings, the Clippers directed a kickback from a massive scoreboard contract for their new Intuit Dome arena to Leonard through an endorsement deal with Daktronics, the scoreboard company. League investigators said the team even helped set the terms of the multiyear deal worth millions of dollars.
The federal investigation represents the second government entity now scrutinizing the Clippers' financial dealings with Leonard. On September 2 — the same day the NBA announced its penalties — a Daktronics executive revealed during a quarterly earnings call that the Securities and Exchange Commission had contacted the company about its dealings with Leonard.
The SEC inquiry focuses on Daktronics' role in the scandal, particularly an endorsement deal with Leonard despite the company never having had a celebrity endorser before and no evidence that Leonard performed any services for the company. As a publicly traded company, Daktronics falls under SEC oversight to protect shareholders.
The Justice Department's Brooklyn office has traditionally handled investigations involving professional sports leagues, making it the natural venue for examining potential criminal violations in the Clippers case. However, it remains unclear what federal charges, if any, could emerge from the investigation.
Neither the U.S. Attorney's Office, the Clippers, nor the NBA immediately responded to requests for comment about the federal probe. A spokesman for the Justice Department did not provide details about the scope or timeline of the investigation.
The criminal investigation adds another layer of legal jeopardy for the Clippers organization, which is already reeling from the NBA's unprecedented punishment. The loss of five consecutive first-round picks represents one of the harshest penalties ever imposed on a professional sports franchise for salary cap violations.
For Leonard, the federal probe creates additional scrutiny beyond his $700,000 NBA fine. The two-time NBA champion and Finals MVP signed with the Clippers in 2019 as a free agent, and the alleged salary cap circumvention scheme appears designed to provide him compensation beyond the league's strict salary limits.
