Sports

NC State seeks $258,585 from former Adidas executive in federal fraud case

Dennis Smith, unnamed coach at NC State referenced in updated FBI indictment

The FBI on Tuesday announced the filing of a superseding indictment in the college basketball investigation that alleges payments to include additional families of student athletes, including an athlete at NC State that appears to be Dennis Smith Jr.
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The FBI on Tuesday announced the filing of a superseding indictment in the college basketball investigation that alleges payments to include additional families of student athletes, including an athlete at NC State that appears to be Dennis Smith Jr.

N.C. State submitted a “victim impact statement” to a federal court in New York on Wednesday in the sentencing phase of the government’s fraud case against a former Adidas executive and two others.

N.C. State is one of three major universities with multimillion dollar apparel deals with the sneaker company, along with Kansas and Louisville, to seek restitution from James Gatto, the former Adidas executive who was found guilty of felony charges of wire fraud and conspiracy to commit wire fraud in October.

Merl Code, a former Adidas consultant, and Christian Dawkins, a runner for an agent, were also found guilty of the same felony charges during the trial in the U.S. Southern District Court of New York and await sentencing.

In the letter submitted to the court on Wednesday, N.C. State is seeking a total amount of $258,585 from Gatto. The school claims it has spent $234,685 on legal fees and it should also be reimbursed for $23,900, the cost of tuition it provided for Dennis Smith Jr.

The federal court provided evidence during the fraud trial that Gatto had provided a $40,000 payment for former N.C. State assistant Orlando Early to deliver to Smith’s father in 2015 to persuade Smith, one of the top recruits in the country out of Fayetteville, to commit to N.C. State.

Smith enrolled at N.C. State in January 2016 and played one season for the Wolfpack before becoming a first-round pick in the 2017 NBA draft.

The payout of the scholarship, with federal money, is how the federal government framed and successfully argued its fraud case. By paying a recruit, Gatto knew Smith would be ineligible under NCAA rules and thereby ineligible for the scholarship money.

According to the documents submitted by U.S. Attorney Robert S. Khuzami on Wednesday: “By orchestrating the payments – knowing they would be concealed from the University – the defendants purposefully sought to cause the University to issue an athletic scholarship under false pretenses.”

In the letter to Senior U.S. District Judge Lewis A. Kaplan, N.C. State athletic director Debbie Yow wrote: “... (T)his trial and the attendant publicity has unquestionably damaged the reputation of our University.”

Yow went into detail about the steps the athletic department has taken since she was hired in 2010 to improve the school’s compliance with the NCAA. Yow noted that she hired Carrie Doyle, a former NCAA infractions officer, to be the school’s compliance director.

Doyle testified at the trial in October that she had “no knowledge” of Gatto’s payment to Smith during the recruiting process.

There was no “detection technique,” Yow wrote, to to identify Gatto’s pay-for-play scheme with Smith.

“Despite these commitments and the purposeful efforts of dedicated individuals to create and reinforce a culture of compliant athletics teams and programs, regrettably, there is no detection technique to identify an individual who intentionally chooses to violate an NCAA rule and then hides the misconduct from both the University and the NCAA,” Yow wrote.

Kansas is seeking $1.13 million from Gatto for the payment of two former players, their subsequent tuition and legal fees associated with the case. Louisville is seeking $31,922.75 for the tuition and amount expended on Brian Bowen Jr., a former student who was recruited to play basketball but was not eligible to play for the Cardinals.

A spokesman for the N.C. State athletic department referred requests for comment to the university’s communications department, which did not respond to a request for comment on Wednesday night.

N.C. State chancellor Randy Woodson said on Jan. 31 that he was “immensely proud” of the efforts of Yow and Doyle in their cooperation with the federal investigators in the case.

Woodson also said then that the NCAA part of the investigation into the payment of Smith has been delayed by the federal case and Woodson had no timetable for the next step.

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