Second Circuit Criminal Law Blog

Circuit Affirms Convictions in College Basketball Corruption Case in Split Decision

In United States v. Gatto, the Second Circuit (Lynch, Chin, and Engelmayer, sitting by designation) issued a decision on January 15, 2021 affirming the wire-fraud convictions of James Gatto, Merl Code, and Christian Dawkins in the high-profile college basketball corruption prosecution that was tried in the Southern District of New York in October 2018.  Judge Lynch wrote a separate opinion concurring in part and dissenting in part, which addressed his disagreement with the majority concerning certain evidentiary rulings.  These evidentiary rulings were a key issue at trial and were the focus of the Court’s decision and Judge Lynch’s opinion. 

The Court unanimously affirmed the convictions based on the “right to control” theory of wire fraud, which has been the subject of recent commentary and petitions for certiorari based on an arguable divergence between the decisions of the Supreme Court and the Second Circuit on the question of what is required for wire fraud conviction.  As the authors argue in a recent article published by Law360, available here, this is an issue that the Supreme Court should take up either in Gatto or another case.


Defendant James Gatto is a former Director of Global Sports Marketing for Basketball at Adidas.  In that role, he was responsible for ensuring the success of sponsorship agreements that Adidas had signed with certain universities.  During the relevant time period, Gatto worked with Defendant Merl Code and non-defendant Thomas Gassnola, who were both Adidas consultants.  Gatto also worked with Defendant Christian Dawkins, an aspiring sports agent.  These individuals worked together to pay the families of three former elite high school basketball prospects—Dennis Smith Jr., Billy Preston, and Brian Bowen Jr. (collectively, “the Recruits”)—in an effort to get the Recruits to enroll at N.C. State, Kansas, and Louisville, respectively.  The Defendants made these payments surreptitiously, using falsified Adidas invoices to make it appear that the payments were going to AAU basketball teams when, in reality, the money was being funneled to the Recruits’ families through the AAU teams.  Defendants employed a variety of tactics to conceal the true nature of the payments that were made to the Recruits’ families.

The Defendants sought to conceal these payments because they violated NCAA rules and, if discovered, would have prevented the Recruits from playing competitively at the collegiate level  and would have also subjected the Universities to penalties.  The NCAA guards against this sort of rules violation by requiring every member institution to certify that its prospective student athletes are amateurs and thus eligible to compete.  As a result, member universities require recruits to sign paperwork attesting that they are aware of and in compliance with NCAA rules, and any recruit’s athletic scholarship is contingent upon certifying to this eligibility.  The Recruits all falsely certified that they were in compliance with NCAA rules even though their families had received payments coordinated by the Defendants.

The Defendants were charged in an August 2018 superseding indictment with wire fraud and conspiracy to commit wire fraud in connection with the payments made to the families of the Recruits.  At trial, the government’s theory was that the Defendants had defrauded the Universities by making (and concealing) the payments to the Recruits families, which resulted in the Recruits falsely certifying to the Universities that they were in compliance with NCAA rules, and thereby led to the students’ receiving athletic scholarships.

The Court’s Decision

The Defendants’ appeals turned on three principle arguments.  First, they argued that the government had presented insufficient evidence to convict on all charges.  Second, the Defendants asserted that the district court had abused its discretion in excluding certain evidence.  Third, the Defendants contended that the district court had erroneously instructed the jury.

Sufficiency of the Evidence

The Defendants raised two principal arguments in connection with their challenge to the sufficiency of the evidence.  First, they contended that there was no scheme to defraud because there was insufficient evidence to establish that the Defendants knew false representations concerning compliance with NCAA rules would be made to the Universities.  Second, the Defendants contended that the government had failed to prove that the Universities’ athletic-based aid was an object of the scheme to defraud, to the extent such a scheme existed.

As to whether the Defendants knew that false representations would be made to the Universities, the Court held that the government presented sufficient circumstantial evidence for the jury to have found that the Defendants knew about the certifications.  The Court identified four considerations in support of this conclusion:

  • The evidence showed that the Defendants were sophisticated actors who were deeply involved in the world of top-tier American basketball, including at the grassroots, collegiate, and professional levels.
  • The evidence showed that the Defendants went to great lengths to conceal the payments at issue from both Adidas and the Universities, suggesting that they knew that what they were doing was wrong.
  • Phone recordings entered into evidence at trial showed the Defendants’ co-conspirators admitting that their conduct violated NCAA rules.
  • The evidence showed that two defendants—Code and Dawkins—knew that one of the Recruits had to sign NCAA paperwork to complete his commitment to one of the Universities, and Dawkins made inculpatory statements, which were captured on a wiretap, regarding the payments being “against NCAA rules.”

With respect to whether the Universities’ athletic-based aid was an object of the alleged scheme, the Court held that there was while also noting that there was sufficient evidence to support conviction under the Circuit’s “right to control” doctrine, which has been followed by the Circuit in many decisions over several decades.

First, the Court distinguished the Supreme Court’s recent decision in Kelly v. United States, 140 S. Ct. 1565 (2020), which had held that a property fraud conviction cannot stand when the loss to the victim is only an incidental byproduct of the scheme.  In Kelly, the well-known “Bridgegate” decision, the Supreme Court had held that the object of the defendants’ scheme had been political retaliation, not the financial costs incurred by the state when the scheme was carried out, which were merely an “incidental byproduct” of the scheme.  By contrast, the Court in Gatto held that the loss of property—funds set aside for financial aid— “was at the heart of Defendants’ scheme” because the Universities would not have awarded aid to ineligible recruits and, without aid from the Universities, the Recruits would have signed to play elsewhere.  

The Court went on to explain that, setting Kelly aside, the government had presented sufficient evidence for the jury to convict under the Circuit’s “right to control” theory of wire fraud.  In short, the Defendants’ concealment of payments “deprived the Universities of information that would have helped them decide whether to award the Recruits athletic-based aid.”  And under Circuit precedent, “[t]his deprivation was enough to support a wire fraud conviction.”

Evidentiary Rulings

As noted in Judge Lynch’s dissenting opinion, discussed further below, the Gatto prosecution required the district court to “walk a fine line with respect to its evidentiary rulings.”  The Defendants’ principal defense was that they did not intend to defraud the Universities by making payments to the Recruits because the Defendants purportedly understood that the Universities welcomed and even encouraged the payments, so long as they could “pretend that they were being deceived” and maintain plausible deniability. 

While such a defense could negate a finding of scienter, the evidence proffered by the Defendants in support could have also led the jury to draw other conclusions that could have benefitted the Defendants even though they were not valid legal defenses.  First, the evidence could have led the jury to conclude that the alleged schemes did not expose the Universities to significant risk and instead offered only substantial financial benefits.  That conclusion could have led the jury to acquit based on an impermissible defense—that the Defendants genuinely believed that the scheme would ultimately benefit the Universities, even if the Universities may not have offered the recruits scholarships had they known about the payments.  Second, the evidence could have led the jury to believe that the NCAA and the universities were “corrupt, exploitative institutions” that deserved whatever happened to them, whereas the Defendants sought to provide compensation to athletes who were otherwise denied fair compensation for their participation in collegiate athletics.  This so-called “Robin Hood” defense would have also been impermissible.  The district court needed to balance the probative value with the risk of prejudice associated with the evidence and argument offered by the Defendants.

In support of their defense, the Defendants sought to present four categories of evidence which the district court excluded and which the Court addressed in its decision.  First, the Defendants sought to present expert testimony concerning the benefits that a successful basketball program bestows on a university.  Second, the Defendants sought to introduce evidence of recruiting violations at one of the Universities.  Third, the Defendants attempted to introduce evidence meant to show that universities took “calculated risks” in awarding athletic scholarships to ineligible athletes.  Fourth, the Defendants sought to introduce recorded phone calls—often involving coaches at the Universities—that purportedly suggested the Universities wanted corporate sponsors to make payments that would help them field competitive teams.

The Court held that the district court did not abuse its discretion in excluding this evidence after concluding that, among other things, the district court had carefully balanced the competing considerations underlying Rule 403 of the Federal Rules of Evidence.  The Second Circuit panel was in agreement as to the district court’s ultimate ruling on each of these categories of evidence, except with respect to certain call recordings involving assistant basketball coaches at Louisville and Kansas.  The Court held that the district court had not abused its discretion in excluding these recordings because (a) they could have confused the jury by requiring jurors to learn about individuals not involved in the case, and (b) the alleged blessing that the assistant coaches gave for Defendants’ conduct would have been a valid defense only if the coaches were unconflicted and acting in good faith on behalf of the Universities.  On the latter point, the Court reasoned that the evidence showed the coaches sought to conceal their conversations and relationships with the Defendants, which suggested that they were not unconflicted and acting in good faith on behalf of the Universities to the extent they requested that Defendants make the payments to the Recruits.

Jury Instructions

The Defendants also argued that the district court had incorrectly instructed the jury on four issues: (1) conscious avoidance; (2) the meaning of “obtain” in 18 U.S.C. § 1343; (3) the “right to control” doctrine; and (4) the requisite intent.  The Court rejected each of these arguments.

As to the conscious avoidance instruction, the Court held that the district court did not err in giving the instruction in light of the Defendants’ argument that they did not know that the Recruits had to certify their eligibility to the Universities.  The Court also held that the instruction was appropriate even though the eligibility certifications were made after the payments were made to the Recruits because the Defendants were involved in several scheme spanning several years and that repeated conduct made it more likely that they remained willfully blind.  Finally, the Court found no inconsistency between two charges asking the jury to consider whether Defendants consciously avoided a fact while also willfully causing a result.  The Court noted that the former charge allowed the jury to impute knowledge of the certification requirement to the Defendants, whereas the willful causation charge permitted the jury to impute to the Defendants the Recruits’ act of making false certifications to the Universities.

The Defendants also made two related arguments that challenged the application of the wire fraud statute to this case.  The first argument was that the wire fraud statute—which prohibits a “scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises”—requires that the property or money be obtained by the defendant from the victim.  The Court disagreed, holding again that wire fraud can be committed merely by “prevent[ing] the victim from making an informed economic decision about the victim’s property.”  The Circuit cited its recent right-to-control decisions in United States v. Johnson, 945 F.3d 606 (2d Cir. 2019) and United States v. Calderon, 944 F.3d 72 (2d Cir. 2019).  The Court also rejected the argument that the victim’s property flow directly to the defendant, reasoning that it would be sufficient if the property had been provided to the defendant’s friend or family. 

The second wire fraud jury instruction challenged the “right to control” instruction.  The instruction tracked prior Second Circuit law, and the Court described this case as “a quintessential example of depriving a victim of its right control its assets.”

Finally, as to the intent instruction, the Defendants argued that the instruction should have made clear that the jury could acquit the Defendants if it found that they believed the men’s basketball coaches at the Universities had instructed them to violate the NCAA rules and had the apparent authority to do so on behalf of the Universities.  This issue was significant because the Defendants could not be found guilty of wire fraud if the jury had found that the Universities gave the Defendants permission to act in the manner at issue.  The Court took no issue with the district court’s apparent authority instruction, concluding that it accurately described the relevant law as set forth in United States v. D’Amato, 39 F.3d 1249 (2d Cir. 1994).  The Court then turned to a discussion of the evidence, noting that there was “no indication that the coaches ever instructed Defendants to conceal the payments” and explaining that the government had presented sufficient evidence for the jury to find that the assistant coaches were conflicted and that the Universities had not condoned the surreptitious payments.  As to the conflict issue, the Court asserted that the Defendants were sophisticated participants in the world of college sports who were generally aware of that coaches received financial incentives tied to their teams’ success, thus rendering the coaches conflicted to the extent they purportedly encouraged the Defendants to make the payments.  And with whether the Universities condoned the payments, the Court observed that the government had presented testimony from University compliance officers regarding the sanctions that the Universities would face if the payments were discovered.

Judge Lynch’s Opinion

Writing separately, Judge Lynch explained that he generally agreed with the Court’s decision except with respect to the admissibility of certain phone recordings.[1]  As to this evidence, Judge Lynch wrote that the district court’s rulings were not harmless as to certain counts.  Accordingly, he would have reversed Gatto’s conviction on one count of wire fraud as to the payments to Preston (Kansas), and he would have also reversed Dawkins’s convictions on two counts related to the payment made to Bowen (Louisville).

In discussing the Rule 403 balancing that the district court had to navigate at trial, Judge Lynch explained that the closer the evidence came to supporting the view that the Defendants believed the specific payments proven by the government were condoned by the particular Universities involved, the more likely such evidence’s probative value outweighed any possible prejudice.  By contrast, Judge Lynch explained that evidence was likely to be more prejudicial than probative to the extent it provided generalized evidence regarding the acceptability of under-the-table payments to collegiate athletes or the corrupt/exploitative nature of college sports.

After discussing in greater detail the probative value of certain evidence that Judge Lynch and the majority agreed had been properly excluded, Judge Lynch went on to explain why he believed two recorded calls involving coaches from the Universities were improperly excluded.  One of those recordings captured a Louisville assistant coach remark that he “[doesn’t] really talk about” his relationship with Defendant Dawkins and that he tried to keep the connection “off the books.”  A second recording captured a conversation between a Kansas assistant coach and Defendant Code, which concerned a different recruit.  On that recording, the Kansas coach indicated that he would talk to Defendant Gatto about funneling money to the recruit’s family through an amateur team.  The coach also discussed speaking with Gatto about having him help a recruit’s brother visit Kansas even though they were not “allowed to pay for it.”

As to these recordings, Judge Lynch primarily took issue with the majority’s assertion that the recordings were probative of a valid defense only if the coaches on the calls were unconflicted and acting in good faith on behalf of Louisville and Kansas, respectively.  In Judge Lynch’s view, the evidence should have been presented to the jury because the recordings could have allowed the jury to infer that the Defendants had a good faith belief that the coaches were unconflicted and acting in good faith, even if they were actually in conflict with the Universities. 

Although the majority concluded that these recordings were indicative of a conflict of interest because the coaches had tried to conceal their contacts with the Defendants, Judge Lynch observed that the coaches’ conduct could also be viewed as suggesting that the Universities wanted plausible deniability regarding the improper payments that they were purportedly condoning.  Viewed in this manner, the coaches’ attempts to conceal the relationships would suggest that they were acting exactly in the way that the Universities wanted them to and not contrary to the Universities’ wishes.


The NCAA prosecutions were well-publicized and attracted much media attention because they essentially criminalized the violation of often-criticized NCAA rules.  One expects that the Circuit’s decision will be studied closely by many observers, including those who follow college athletics and those who follow the development of the criminal law (and those like the authors who follow both).  Perhaps reflecting some skepticism about the wisdom of the prosecution, Judge Lynch commented that “[i]t is not for judges to decide whether it makes sense to use federal law enforcement revenues to pursue the relatively low-level agents of corruption in this system.”  In any event, two of the legal issues presented in the appeal seem especially worthy of comment here.

First, the exclusion of evidence that gave rise to the defense seemed to be, as Judge Lynch stated, “very close.”  To be sure, it would not have been fair to have allowed the defense to “put[] the entire NCAA system on trial for its exploitation of athletes under circumstances that make violations of the sort in which these defendants engaged all but inevitable, or even to appear morally justified in providing some recompense to those whose labor generates the money that enriches others.”  As Judge Lynch explained, the evidence that the defendants sought to offer at trial “paint[ed] a grim picture of widespread corruption and hypocrisy” in the American system of collegiate and amateur athletics.  However, here some of the evidence that was precluded related specifically to the charged offense.  The majority opinion held that it did not matter that one assistant coach said that his relationship with Dawkins needed to be kept “off the books” or that another assistant coach said he was looking “to figure out a way” to get money and housing for a recruit’s family.  The panel rejected the probative value of this evidence, stating that the assistant coaches who spoke to the Defendants were conflicted; as junior employees, their incentives were not aligned with what the Universities wanted or should have wanted to see happen.  However, it is not surprising that the Defendants in this case only had contact with these more junior personnel.  Again, to quote Judge Lynch, “[i]f the government is going to prosecute people at [the Defendants’] level, who are not likely to have direct contact with university presidents, athletic directors, or even head coaches, excluding evidence of what such defendants were told by university officials at their own level cannot be justified.” 

The legal standard for reversal of a conviction based on the exclusion of evidence is a demanding one; the decision is reviewed for an abuse of discretion and then subject to harmless error analysis.  Of the four experienced judges to look at the issue in this case, three of them ruled for the government and the fourth called it a “very close case.”  That said, one hopes that the Court’s close scrutiny of the issue and the thoughtful dissenting opinion will lead district judges in the future to be more willing to allow defendants to offer evidence that is crucial to their case, even when there may also be some prejudice to the government that accompanies the admission of the evidence.

The second aspect of Gatto that merits discussion is the panel’s unanimous application of the right-to-control theory.  The application of this theory is not surprising, as the Second Circuit has recognized this doctrine for many years and the Circuit does not change its prior precedent in a panel decision.  Aware of this, prosecutors have increasingly charged wire fraud cases on this theory, and the Circuit has affirmed those convictions, as in Johnson and Calderon.  In Gatto, it is hard to argue that the panel did not faithfully follow the law of the Circuit. 

However, one of us has written recently in publications and in an amicus brief[2] that the Supreme Court should examine the right-to-control theory in light of Kelly and several other recent Supreme Court decisions.  In Kelly, a unanimous Supreme Court held that “intangible rights of allocation, exclusion, and control . . . do not create a property interest” cognizable under the property fraud statutes.  The right to control one’s property is an intangible right.  Kelly requires that the “object of the fraud” be to cause “loss to the victim.”  The right-to-control theory does not pass this test, as it does not require that the jury conclude that the defendant has tried to cause a loss to the victim.  In the related context of Hobbs Act extortion, the Supreme Court held in Sekhar v. United States, 570 U.S. 729 (2013), that “obtaining property requires not only the deprivation but also the acquisition of property . . . property extorted must be . . . transferable—that is, capable of passing from one person to another.”  Under these doctrines, it should not be sufficient for property fraud for the government to prove only that the objective of the scheme was to deprive the victim of the right to control their property.  The right-to-control theory also is hard to defend under a purely textualist analysis of the wire fraud statute.  The statute is quite explicit that it only applies to schemes aimed at “obtaining money or property.”  It does not say schemes aimed at “obtaining money or property or the right to control property.” 

The Supreme Court should take up this question, either in Gatto or in another case.  The Supreme Court recently remanded the wire fraud case of United States v. Blaszczak based on a potential inconsistency with Kelly (over the meaning of “obtainable” property), thereby giving hope to some in the defense bar that the Court may be starting to scrutinize how wire fraud law has developed in the Second Circuit.  None of this is meant as an endorsement of the conduct of the defendants in this case or the other cases in which the right-to-control theory has been employed.  It is about whether Congress has prohibited the specific conduct at issue.  As Justice Kagan explained in Kelly, even when defendants engage in “deception, corruption, [or] abuse of power . . . the federal fraud statutes at issue do not criminalize all such conduct.”  Congress retains the power to amend the property fraud statutes, or to pass new statutes, if it believes that the conduct here should be subject to the criminal law rather than to only be subject to private NCAA regulations.  This is the better course than to stretch the property fraud statutes to apply to conduct that is outside of its reach.

By Jared S. Buszin and Harry Sandick

[1] Judge Lynch also disagreed with a portion of the Court’s decision regarding the rationale for excluding an NCAA Committee on Infractions decision, which discussed salacious details regarding prior recruiting violations at Louisville.

[2] Brief for Amicus Curiae New York Council of Defense Lawyers in Support of Petitioner, Johnson v. United States, No. 19-1412 (July 24, 2020).