In November 2016, according to court documents unsealed this week in New York, one of the nation’s top high school basketball players and his mother signed a series of forms so the player could accept an athletic scholarship from Kansas.

In the forms — similar to those signed by more than 460,000 athletes at NCAA schools each year — both the player and his mother asserted they had no knowledge of any violations of NCAA rules regarding amateurism. Over the years, the NCAA has interpreted amateurism rules to prohibit a long list of benefits for players and families, ranging from duffel bags full of cash and luxury cars to more modest perks, such as gas money and free meals.

When the player’s mom signed those forms, she was lying, according to federal prosecutors, who did not identify her or her son in court documents. Just days before, prosecutors allege, the mother had met with an Adidas consultant in a hotel in New York and accepted $30,000 cash — routed through one of Adidas’ grassroots teams — meant to ensure her son enrolled at Kansas, one of Adidas’ premier endorsed college programs, and if he made it to the NBA, signed an endorsement deal with the apparel company.

In college basketball circles, this allegation, contained in an indictment charging an Adidas executive with wire fraud for arranging the payment, was the latest sign that the ongoing Justice Department probe of the basketball black market is far from over.

To economists and lawyers familiar with both federal law enforcement and college sports, however, this week’s charges brought into sharper focus an aspect of the investigation that has puzzled them for months: The FBI and federal prosecutors in New York are trying to put people in prison for paying college athletes and their families.

“I still can’t figure out why the FBI is involved with this,” said Dan Rascher, a California economist who has consulted for college athletes on lawsuits challenging NCAA rules. “There’s literally no problem at all with people being paid for their skills to provide value to an educational institution. Except if the people we’re talking about are college athletes.”

[New indictment ties Kansas, N.C. State into FBI’s college basketball probe]

By making money from her son’s talent, and lying about it, prosecutors allege, the mother conspired with Adidas officials to defraud Kansas, which could have been exposed to fines and other sanctions if the NCAA learned of the payments. This theory of fraud, which casts schools as victims because players or their parents have secretly taken money, is rare but has been deployed at least twice before by federal prosecutors: in a 1980s case involving a sports agent with ties to the mafia, and a 2000s case involving a convicted cocaine dealer making it rich as an AAU coach.

Six months after the first arrests, however, the FBI and prosecutors in New York have yet to make public any allegations involving mob ties or drug dealers, or even tax evasion, which some legal experts expected would eventually emerge, offering justification for the public money spent.

A spokesman for prosecutors in the Southern District of New York, who are overseeing the investigation, declined to comment.

Colleges as victims?

In the scenario involving the Kansas recruit, according to prosecutors, the fraud occurred when the mother signed that form despite knowing she’d taken money for her son’s talents, in violation of NCAA rules. The mother, according to court documents, is an unindicted co-conspirator of the Adidas executive.

The victim of this fraud conspiracy, according to prosecutors? Kansas, a school with one of the wealthiest basketball programs in the country, whose coach makes $5 million annually to oversee an amateur basketball team that is regularly one of the star attractions in the Big 12 Conference, which has packaged basketball and football television rights to help generate $371 million in annual revenue, and in the NCAA tournament, which generates more than $850 million for the NCAA and member schools each year.

The mother was not charged with a crime but, according to experts familiar with federal investigations, likely will be threatened with the prospect of arrest by prosecutors, if she hasn’t already, as they seek her testimony against the Adidas officials.

[Instead of paying players to go to Miami and Louisville, he kept the money. The FBI let him go.]

The latest charges, which also involve a recruit whose father allegedly took $40,000 from Adidas to secure his son’s commitment to North Carolina State, rest entirely upon the very same NCAA rules that are the subject of a federal antitrust lawsuit in California. Lawyers representing athletes in that case, set for trial in December, are portraying the NCAA and schools as a cartel that colludes to cap the earnings of college athletes at the value of a scholarship, sending hundreds of millions of dollars in excess revenue, collectively, into school coffers and paychecks for coaches and administrators.

The NCAA, on its website, defends amateurism as a “bedrock principle of college athletics.” Amateurism rules, the NCAA states, “ensure the students’ priority remains on obtaining a quality educational experience and that all of student-athletes are competing equitably.”

If the NCAA permitted college athletes to sign endorsement deals with shoe companies, as Olympic organizations do with their athletes, legal experts noted, prosecutors would have been unable to file the wire fraud charges announced this week against Jim Gatto, an Adidas global marketing executive who also faces charges for similar allegations of arranging payments to steer recruits to Miami and Louisville.

“There are no true victims here. It’s a derivative crime based on alleged violations of a private, nonprofit entity’s internal bylaws,” said Don Jackson, an Alabama attorney who has represented athletes in NCAA rules compliance cases. “This would be like someone lying on an application to the 4-H club and getting charged with wire fraud.”

Blurred lines

Jackson is among many who note even the NCAA has struggled to determine when shoe company money flowing into a youth team is against its rules.

Among those who run grassroots basketball teams, the key to procuring shoe company money has long been clear: Get the top high school players. Such as star often can bring his team a shoe company sponsorship, which can run as much as $100,000 or $150,000 per year, to engender the kind of loyalty that will lead the player to choose to play for one of the colleges whose basketball programs are sponsored by the same company and, ultimately, to sign an endorsement deal with the company if he makes it to the NBA. Nike, Adidas and Under Armour are the three dominant spenders in the grassroots market.

In 2009, Jackson represented Renardo Sidney, a Mississippi State player who drew the NCAA’s attention because Reebok had sponsored his grassroots team and hired his father to a consultant’s position. The NCAA ultimately suspended Sidney for a season, ruling, among other violations, that Sidney’s father couldn’t properly account for money that had flowed into a nonprofit foundation he’d created, connected to the Reebok-sponsored team.

This year, however, the NCAA approved Duke freshman star Marvin Bagley III as eligible, even though the circumstances surrounding his father’s relationship with Nike raised eyebrows around grassroots and college basketball. As reported by the Oregonian last month, Bagley’s family was struggling financially a few years ago, shortly before Nike agreed to sponsor Phoenix Phamily, the grassroots team featuring Bagley III as a player and his father, Marvin Bagley Jr., as coach and team director.

[The FBI also probed payments to college athletes in the ’80s. It didn’t end well.]

In a 2016 interview with Sports Illustrated, Bagley Jr. — the father, who did not return a request to comment — said the family was relying on the Nike sponsorship and a fledgling apparel company he had created to “make ends meet.”

Bagley III attended Duke, one of Nike’s premier endorsed college teams, and after one year with the Blue Devils, he declared for the NBA draft, and is expected to be among the first players selected. Bagley III has not yet made his shoe endorsement plans public, but he is widely expected to sign with Nike.

Duke basketball officials declined to comment when asked about Bagley’s eligibility. The NCAA also declined to comment.

There are significant differences between the details publicly known about Nike’s dealings with the Bagleys and the specifics alleged in court documents of Adidas’s dealings with representatives of recruits. Nike signed Bagley’s team to a publicly announced sponsorship. Adidas executive Gatto is accused of arranging cash handoffs to families of recruits through an Adidas consultant who oversaw several grassroots teams, and at N.C State, through an assistant coach who has not been identified.

The economic realities displayed by these deals are basically the same though, economists note. Top high school recruits have more financial value — to shoe companies, agents and financial advisers — than NCAA rules currently allow them to earn.

After the first round of arrests last September, the NCAA created a commission, led by former secretary of state Condoleezza Rice, to propose rules changes to college basketball. Unless the commission recommends Olympic-style rules permitting athletes to sign endorsement deals, economists and legal experts doubt it will have a significant impact in reducing these secret dealings that prosecutors in New York believe are defrauding major colleges.

“When you have a system that generates billions of dollars in revenue, and you have an unpaid labor force, you’re going to breed a black market,” Jackson said. “That’s just a fact.”

Federal prosecutors have filed additional counts against former Adidas executive Jim Gatto in the ongoing college basketball fraud scandal, including payments to the families and guardian of current and former players at Kansas and North Carolina State.

No players nor their families are named specifically. The indictment, filed by the U.S. Attorney’s Office for the Southern District of New York, also doesn’t name any college coaches. The new information “expands the scope of the charged wire fraud conspiracy,” according to the U.S. Attorney’s Office of the Southern District of New York. It’s the most significant development in the case since 10 men were arrested by the FBI on Sept. 26.

The Kansas part of the indictment charges that Gatto and a coach of an Adidas-sponsored AAU team allegedly gave “approximately at least $90,000 to the mother of a top high school basketball player. The payments were made in connection with a commitment by the student athlete to attend the University of Kansas.”

Adidas has an endorsement deal with Kansas. The payouts include a “$30,000 payment” during a meeting with the AAU coach and the parent in a hotel room in New York and another $20,000 payment in a hotel room in Las Vegas.

The large lump payments were sent from Adidas to the AAU coach, to then be given to the player’s parent, under headings such as “Tournament Activation/Fee,” allegedly to conceal the purpose of the money. The federal documents refer to them as “sham invoices.”

A guardian of a different Kansas recruit told Adidas they had received illicit payments in return for a commitment to steer the athlete to a university sponsored by a rival athletic apparel company. The guardian said the player favored Kansas and needed “another $20,000 payment” to “help get the student-athlete ‘out from under’ the deal.”

The indictment then alleged the player made a surprise commitment to Kansas on Aug. 30, 2017. News accounts on that date show Silvio De Sousa, a native of Angola who attended IMG Academy in Florida, committed to Kansas. De Sousa played for the Jayhawks this season as part of their Final Four team, which could place their NCAA tournament run in jeopardy of being vacated if the allegations are proven.

De Sousa, who reclassified from the high school class of 2018 to 2017, was cleared to play by the NCAA this past season on Jan. 13, 2018 – midway through the season. Less than three months after the NCAA certified his academic and amateur status, he was implicated in a federal indictment alleging that his guardian received money in exchange for De Sousa playing for the Jayhawks.

The wording of the federal document raises another potential issue related to Kansas: The complaint states that payments from Adidas to the mother of a Jayhawks player were ongoing “into at least in or around November 2017.” The initial federal complaint was made public in late September 2017, indicating that the family of a Kansas player was allegedly still receiving money after the U.S. attorney’s allegations rocked college basketball.

The indictment does not say anyone at Kansas was aware of the payments to the players.

“Earlier today, we learned that the University of Kansas is named as a victim in a federal indictment,” Joe Monaco, Kansas’ director of strategic communications said in a statement. “The indictment does not suggest any wrongdoing by the university, its coaches or its staff. We will cooperate fully with investigators in this matter. Because this is an active investigation, it is not appropriate for us to comment further at this time.”

The documents also officially pull North Carolina State into the investigation. The feds charge that Gatto was involved in a scheme to pay a former North Carolina State player – star recruit Dennis Smith Jr., according to the timeline of events in the complaint – $40,000 in the fall of 2015 to sign with the Wolfpack. Smith had played for an Adidas-backed AAU program, and NC State is an Adidas-backed athletic program.

The indictment says that at least one unnamed NC State coach knew about the plan and was involved in the alleged payment. According to the complaint, “Coach-4” received $40,000 in October 2015 from an unnamed co-conspirator and “represented that the funds would be delivered” to the father of Smith. In December 2015, Smith signed a financial aid agreement to attend NC State.

The alleged Adidas payment would appear to be separate from the ASM Sports agency’s Dec. 31, 2015, balance ledger that represents as much as $73,000 in payments to Smith, as noted in a Yahoo Sports story from February.

North Carolina State received a grand jury subpoena in January requesting information related to Smith’s recruitment and time at the school. Smith left North Carolina State after one season and was an NBA lottery pick.

The school fired head coach Mark Gottfried after that season, but he resurfaced last month as a surprise choice to be the new coach at Cal State Northridge. At the time, a school spokesman told Yahoo Sports that the hiring of Gottfried – with knowledge that the feds had subpoenaed his school – was not a concern.

North Carolina State issued a statement Tuesday evening acknowledging receipt of the indictment.

“While there are no indictments against former NC State employees, the document includes allegations of a payment in 2015 from an athletics apparel company to an unidentified parent of a student-athlete through a former unidentified NC State coach,” the statement read. “As the indictment stated, the payment was designed to be concealed, including from the NCAA and officials at NC State.

“…In September 2017, the U.S. Attorney’s Office announced a series of complaints against Adidas, several basketball programs and top prospects. In response, NC State’s Office of General Counsel and Athletics’ Compliance staff contacted former basketball coaches asking whether they had any knowledge of or involvement in any activity related to the allegations coming from the U.S. Attorney’s Office. Former staff questioned stated they had neither any knowledge nor involvement.”

The federal complaint released Tuesday repeats prior information involving Louisville and Miami. Although there is some new detail regarding recruitment of players by those schools, there are no new charges. The Miami section of the complaint says that Gatto “confirmed that he had already learned about the request from coaches at the University of Miami for assistance” in securing the commitment of a player and spoke to an unnamed coach about recruiting the player. But the complaint also says that Gatto and others intended to conceal payments to the player’s family from university officials and the NCAA.

The player in question, subsequently identified as Orlando Christian Prep prospect Nassir Little, signed with North Carolina last fall. Miami head coach Jim Larrañaga agreed to a two-year contract extension earlier Tuesday, hours before the latest federal indictment was issued.

United States v. James Gatto et al.

More from Yahoo Sports:
• How tall was André the Giant? We may never know
• Marlins are on an island in bizarre legal fight
• Controversial NFL star says he’s retiring due to ‘stress’
• New federal charges in college basketball scandal

Federal prosecutors have filed additional counts against former Adidas executive Jim Gatto in the ongoing college basketball fraud scandal, including payments to the families and guardian of current and former players at Kansas and North Carolina State.

No players nor their families are named specifically. The indictment, filed by the U.S. Attorney’s Office for the Southern District of New York, also doesn’t name any college coaches. The new information “expands the scope of the charged wire fraud conspiracy,” according to the U.S. Attorney’s Office of the Southern District of New York. It’s the most significant development in the case since 10 men were arrested by the FBI on Sept. 26.

The Kansas part of the indictment charges that Gatto and a coach of an Adidas-sponsored AAU team gave “approximately at least $90,000 to the mother of a top high school basketball player. The payments were made in connection with a commitment by the student athlete to attend the University of Kansas.”

Adidas has an endorsement deal with Kansas. The payouts include a “$30,000 payment” during a meeting with the AAU coach and the parent in a hotel room in New York and another $20,000 payment in a hotel room in Las Vegas.

More

The large lump payments were sent from Adidas to the AAU coach, to then be given to the player’s parent, under headings such as “Tournament Activation/Fee,” allegedly to conceal the purpose of the money. The federal documents refer to them as “sham invoices.”

A guardian of a different Kansas recruit told Adidas they had received illicit payments in return for a commitment to steer the student athlete to a university sponsored by a rival athletic apparel company. The guardian said the player favored Kansas and needed “another $20,000 payment” to “help get the student-athlete ‘out from under’ the deal.”

The indictment then alleged the player made a surprise commitment to Kansas on Aug. 30, 2017. News accounts on that date show Silvio De Sousa, a native of Angola who attended IMG Academy in Florida, committed to Kansas. De Sousa played for the Jayhawks this season as part of their Final Four team, which could place their NCAA tournament run in jeopardy of being vacated if the allegations are proven.

De Sousa, who reclassified from the high school class of 2018 to 2017, was cleared to play by the NCAA this past season on Jan. 13, 2018 – roughly midway through the year. Less than three months after the NCAA certified his academic and amateur status, he was implicated in a federal indictment alleging that his guardian received money in exchange for De Sousa playing for the Jayhawks.

The wording of the federal document raises another potential issue related to Kansas: The complaint states that payments from Adidas to the mother of a Jayhawks player were ongoing “into at least in or around November 2017.” The initial federal complaint was made public in late September 2017, indicating that the family of a Kansas player was allegedly still receiving money after the U.S. attorney’s allegations rocked college basketball.

The indictment does not say anyone at Kansas was aware of the payments to the players.

“Earlier today, we learned that the University of Kansas is named as a victim in a federal indictment,” Joe Monaco, Kansas’ director of strategic communications said in a statement. “The indictment does not suggest any wrongdoing by the university, its coaches or its staff. We will cooperate fully with investigators in this matter. Because this is an active investigation, it is not appropriate for us to comment further at this time.”

The documents also officially pull North Carolina State into the investigation. The feds charge that Gatto was involved in a scheme to pay a former North Carolina State player – star recruit Dennis Smith Jr., according to the timeline of events in the complaint – $40,000 in the fall of 2015 to sign with the Wolfpack. Smith had played for an Adidas-backed AAU program, and N.C. State is an Adidas-backed athletic program.

Story Continues

The indictment says that at least one unnamed N.C. State coach knew about the plan and was involved in the alleged payment. According to the complaint, “Coach-4” received $40,000 in October 2015 from an unnamed co-conspirator and “represented that the funds would be delivered” to the father of Smith. In December 2015, Smith signed a financial aid agreement to attend N.C. State.

The alleged Adidas payment would appear to be separate from the ASM Sports agency’s Dec. 31, 2015, balance ledger that represents as much as $73,000 in payments to Smith, as noted in a Yahoo Sports story from February.

More

North Carolina State received a grand jury subpoena in January requesting information related to Smith’s recruitment and time at the school. Smith left North Carolina State after one season and was an NBA lottery pick.

The school fired head coach Mark Gottfried after that season, but he resurfaced last month as a surprise choice to be the new coach at Cal State Northridge. At the time, a school spokesman told Yahoo Sports that the hiring of Gottfried – with knowledge that the feds had subpoenaed his school – was not a concern.

North Carolina State issued a statement Tuesday evening acknowledging receipt of the indictment.

“While there are no indictments against former NC State employees, the document includes allegations of a payment in 2015 from an athletics apparel company to an unidentified parent of a student-athlete through a former unidentified NC State coach,” the statement read. “As the indictment stated, the payment was designed to be concealed, including from the NCAA and officials at NC State.

“…In September 2017, the U.S. Attorney’s Office announced a series of complaints against Adidas, several basketball programs and top prospects. In response, NC State’s Office of General Counsel and Athletics’ Compliance staff contacted former basketball coaches asking whether they had any knowledge of or involvement in any activity related to the allegations coming from the U.S. Attorney’s Office. Former staff questioned stated they had neither any knowledge nor involvement.”

The federal complaint released Tuesday repeats prior information involving Louisville and Miami. Although there is some new detail regarding recruitment of players by those schools, there are no new charges. The Miami section of the complaint says that Gatto “confirmed that he had already learned about the request from coaches at the University of Miami for assistance” in securing the commitment of a player and spoke to an unnamed coach about recruiting the player. But the complaint also says that Gatto and others intended to conceal payments to the player’s family from university officials and the NCAA.

The player in question, subsequently identified as Orlando Christian Prep prospect Nassir Little, signed with North Carolina last fall. Miami head coach Jim Larranaga agreed to a two-year contract extension earlier Tuesday, hours before the latest federal indictment was issued.

In this Sept. 26, 2017, file photo, acting U.S. Attorney for the Southern District of New York, Joon H. Kim, left, and FBI Assistant Director William Sweeney, Jr., right, hold a news conference to announce the first charges in their investigation into college basketball’s shadow economy. (AP Photo/Bebeto Matthews, File)

Instead of paying players to go to Miami and Louisville, he kept the money. The FBI let him go.

Eric Leak, a former N.C. State football player, agreed to a plea arrangement on Thursday in a Medicaid fraud case at the U.S. District Court for the Middle District of North Carolina, according to court documents.

Leak is charged with paying kickbacks and money laundering while he served as executive director of Nature’s Reflections, a Durham mental health services provider from 2011-14. He faces a maximum of five years in prison for the kickback scheme and 10 years on the money laundering charge, plus fines.

N.C. State asked in November 2011 that Leak dissociate himself from the university for 10 years after the NCAA said Leak had provided improper benefits to basketball players C.J. Leslie and Tracy Smith.

Leslie, who received $410 of impermissible benefits, was suspended for three games in the 2011-12 basketball season.

Leak later told The News & Observer that he had contacted former football standout David Amerson in June 2012. The university then requested that Leak not contact any other N.C. State athlete while also asking the Secretary of State’s office to determine whether Leak was violating the state’s athlete agent act.

This is a developing story. Check back for details.

  A felony assault charge against Markell Johnson has been dismissed, clearing the way for the sophomore guard to return to the NC State basketball team.

  Johnson has been on indefinite suspension since Dec. 16, when it was learned that he and three others had been indicted in connection with an incident in his hometown of Cleveland on Oct. 8.

  According to the Cuyahoga County Clerk of Courts website, a motion was filed on Thursday by Ohio state attorney James Sean Gallagher to dismiss the indictment against Johnson and co-defendants Michael Melton Jr., Johnnie Pullum and Demarious Green.

  A paralegal for Johnson’s lawyer, John T. Paris, confirmed that the charge had been dropped and that the young basketball player was on his way back to North Carolina.

  The dismissal of Johnson’s charges marked the second bit of good news in the last 24 hours for coach Kevin Keatts’ program.

  On Thursday, it was announced that four-star guard Blake Harris has been admitted to the university and will immediately become a member of State’s team. A Chapel Hill native, Harris started the season at Missouri, playing in 14 games before deciding to transfer. He will not become eligible until the second semester of next season.

   Johnson won’t have to wait that long.

  A statement released by athletic department spokesman Fred Demarest indicated that Johnson has been cleared to rejoin the team and is eligible to play for the Wolfpack in tonight’s home game against No. 19 Clemson.

   Johnson is averaging 8.7 points and 6.6 assists this season. State is 3-3 in his absence.

   According to a court document, Johnson, Melton, Pullum and Green were involved in a physical altercation with 37-year-old Michael Blackwell, who told police that he has suffered a broken orbital bone, multiple cuts and a concussion.

  The incident was reported on Nov. 21 and an indictment was handed down two weeks later. Johnson was notified of the charge by mail and turned himself in on Dec. 20. He was released that same day on a $5,000 cash bond.

  A 6-foot-1 point guard, Johnson started the first 10 games for the Wolfpack this season — scoring a career-high 17 points in his final game before being suspended, on Dec.  9 against Missouri-Kansas City.

Related

N.C. State sophomore guard Markell Johnson’s pretrial hearing on his felony assault charges has been continued until Jan. 16 at 9 a.m.

Johnson, Demarious Green, Michael Melton and Johnnie Pullum were indicted on Dec. 5. The four are charged with assaulting Michael Blackwell, 37, in Cleveland in early October.

Under N.C. State’s student-athlete code of conduct, Johnson is suspended from the basketball team until the felony charge is resolved.

Johnson, who was N.C. State’s starting point guard for the season’s first 10 games prior to his Dec. 14 suspension, has missed the team’s last six games, including the Wolfpack’s 96-85 win over Duke on Saturday. N.C. State has gone 3-3 in those games, including 1-2 in ACC play.

He’ll miss the Wolfpack’s (11-5, 1-2 ACC) two games this week; the first against No. 25 Clemson at home on Thursday, and the second on Sunday at No. 8 Virginia.