Federal Investigation into Clippers' Salary Cap Violations

Federal prosecutors have opened a criminal investigation into whether the Los Angeles Clippers illegally skirted the NBA’s salary cap in their financial dealings with Kawhi Leonard, according to a report by The New York Times.

The probe, led by the U.S. Attorney's Office in Brooklyn, is in its earliest stages, the Times reported, citing people briefed on the matter. At least one subpoena has already gone out as part of the inquiry.

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

This latest development drags the franchise out of the league’s disciplinary arena and into the federal spotlight. It comes on the heels of the NBA’s own nearly yearlong investigation, conducted by the law firm Wachtell, Lipton, Rosen & Katz, which found what it called “a pattern of misconduct and multiple significant rules violations by the Clippers organization, a prior offender of the salary cap circumvention rules.”

The league’s response was brutal. 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 was ordered to pay the NBA $700,000.

Now, federal authorities are asking their own questions.

The Clippers’ conduct has already drawn attention from another arm of government. On Sept. 2, the same day the NBA announced its findings and penalties for the club and Leonard, an executive from scoreboard manufacturer Daktronics told investors on a quarterly earnings call that the Securities and Exchange Commission had contacted the company about its dealings with Leonard. The executive said Daktronics was cooperating and declined to elaborate.

At the center of both the league’s case and the emerging federal interest is a blockbuster scoreboard contract tied to the Intuit Dome, the Clippers’ new arena. According to the Sept. 2 report from Wachtell Lipton, league investigators concluded that the Clippers steered a kickback from that massive scoreboard deal to Leonard in the form of an endorsement agreement. The report said the team not only arranged the relationship but set the terms of a multiyear deal worth millions of dollars.

If the NBA’s sanctions signaled how seriously the league viewed the case, the arrival of federal prosecutors raises the stakes again—for the franchise, for Ballmer, and for one of the league’s biggest stars.