The NBA’s investigation into the Los Angeles Clippers possibly circumventing the salary cap via a no-show endorsement deal with Kawhi Leonard has officially become a basketball controversy.
The Clippers and the Toronto Raptors announced this week their trade involving Leonard is on hold pending the outcome of the league probe. The possibility that Leonard’s contract will be voided and that he will be suspended are two variables that dramatically impact the trade’s value and could lead to a reworked trade package.
Last month, the Clippers agreed in principle to trade Leonard to the Raptors for Brandon Ingram, Gradey Dick, unprotected first-round picks in 2031 and 2033, a 2027 first-round pick swap, and two second-round picks. Leonard, 35, previously played for the Raptors in 2018-19; the team won the NBA title that year, and Leonard was named Finals MVP.
Leonard, however, is a central figure in an alleged plot by the Clippers to pay him millions beyond his player contract—a direct violation of the CBA.
Last year, journalist and podcaster Pablo Torre, of the Pablo Torre Finds Out podcast, broke the news that Leonard and then-Clippers sponsor Aspiration signed a four-year endorsement deal in 2022 that didn’t obligate Leonard to perform services and would have ended if the forward had been traded.
The Clippers have denied the allegations and stressed several reasons to question them.
Aspiration, which was renamed Catona, filed for Chapter 11 bankruptcy protection last year and its co-founder, Joseph Sanberg, was recently sentenced to 14 years in prison for wire fraud. Clippers owner Steve Ballmer has said he lost $60 million to Aspiration and contends he was a victim of Sanberg, whom the U.S. Department of Justice has called a “con man” who used lies and exaggerations to “prey on investors and lenders.”
Sanberg has also cooperated with the NBA’s investigation, a point Ballmer portrays as problematic as it relates to his team. Not only is Sanberg’s credibility highly questionable, but he arguably had an incentive to make himself seem useful to the NBA.
Before Sanberg was sentenced to prison, attorney David Anders, whom the NBA retained to investigate the Clippers, wrote a letter to the presiding judge describing Sanberg as sharing “information that was relevant to our investigation” and helping them “develop a more complete understanding of key events.”
The Clippers and Ballmer Could Be Punished
Much of the attention on the scandal has focused on potential consequences for the Clippers and Ballmer.
If NBA commissioner Adam Silver determines the Clippers violated the CBA, he could strip away Los Angeles draft picks, suspend Ballmer and impose various fines on both. Circumventing the cap undermines fair play and provides a team with an unfair advantage since it gives that team an advantage over teams that follow the rules.
In 2000, Silver’s predecessor as commissioner, David Stern, ordered the forfeiture of five first-round picks from the Minnesota Timberwolves and imposed a $3.5 million fine for a salary cap scheme. The Timberwolves agreed to pay forward Joe Smith less in initial one-year contracts so they could sign other players those seasons in exchange for promising to later sign Smith to a long-term, lucrative deal after they acquired “Larry Bird rights,” which let a team go over the cap to keep a player. Stern also voided Smith’s 1999-2000 contract with the Timberwolves and by also voiding Smith’s previous Timberwolves contract (1998-99), effectively stripped Smith of his Larry Bird rights.
If Silver reaches similar conclusions about the Clippers, he could impose a hefty penalty. However, the commissioner could determine a lesser penalty, or even no penalty, is appropriate if he concludes the evidence is uncertain and unreliable.
The Clippers insist they have “fully cooperated” with the investigation, including by “participating in dozens of interviews” and “providing tens of thousands of documents.” Silver, who like several of his deputies is an accomplished attorney, has also said while the NBA is not a court of law, it values due process and fairness and that the “mere appearance of impropriety” isn’t enough.
To that point, Silver said last fall the investigation must be consistent with “any process that requires fundamental fairness” and one that reaches decisions based on “the totality of evidence.”
Leonard Also Could Face League Punishment
Article XIII of the CBA states that the commissioner can void any player contract, or any renegotiation, extension or amendment of a player contract, as one type of penalty for salary cap circumvention. Leonard is set to be paid $50.3 million in 2026-27 in the third year of a three-year, $149.5 million deal. The obvious risk to the Raptors would be if, after trading for Leonard, his contract for 2026-27 is voided. The team could conceivably sign him to another deal, but the risk of contract forfeiture alone is a reason to delay consummating the trade.
In the scenario of contract voidance, Leonard could borrow a page from the Smith playbook, as Smith challenged Stern voiding his contracts. However, an arbitrator upheld Stern’s decision. Then-NBA deputy commissioner Russ Granik said the arbitrator “recognized the importance of enforcing the provisions relating to secret agreements” and demonstrated “that if you enter into secret agreements, the consequences of getting caught can be fairly significant.”
Leonard could also be suspended by the league, meaning regardless of his contract status, he would be ineligible to play.
Both the uniform player contract and CBA contain language that permits Silver to punish Leonard if the commissioner concludes Leonard acted wrongly. For instance, if the NBA concludes the Clippers knowingly circumvented the cap through its dealings with Aspiration, the NBA might also conclude Leonard—who stood to benefit financially—was aware of the plot and thus “in on it.”
The uniform player contract requires that an NBA player “conduct himself on and off the court according to the highest standards of honesty, citizenship and sportsmanship.” It also forbids a player from doing “anything that is materially detrimental or materially prejudicial to the best interests of the team or the league.”
The league could also punish Leonard if it determines he wasn’t fully cooperative, including in the candor and forthcoming nature of his statements and in evidence he’s shared or not shared. Article VI of the CBA obligates players to “cooperate with investigations of alleged player misconduct conducted by the NBA.”
Further, the league constitution contains far-reaching language that is potentially on point. Through Article 35, Silver can suspend for a definite or indefinite period a player who, in Silver’s opinion, made statements that are detrimental to the best interests of basketball or to the NBA or partook in conduct that “does not conform to standards of morality or fair play” or is “prejudicial or detrimental” to the NBA.
Leonard would have the right to contest a punishment. A suspension of 13 or more games can be appealed to a neutral grievance arbitrator, while a suspension of 12 or fewer games can be appealed to Silver or a designee of the commissioner’s choosing. Leonard could not only argue he is innocent, but even if he is at fault, that the punishment is excessive given past player suspensions. Leonard might also assert he too is a victim of Sanberg as the bankruptcy records indicated that Aspiration owed KL2 Aspire, Leonard’s limited liability company, $7 million.
The Waiting Game Is the Smart Game
In short, the Raptors are wise to wait to see whether the NBA finds the Clippers at fault and, in doing so, terminates Leonard’s contract or suspends him. The league has discretion on when it concludes its investigation and when it announces what, if any, actions will be taken.
If Leonard becomes available for a shorter period to Toronto than the whole season, the team could demand a reworked deal—such as sending back fewer draft picks to LA.
So the Clippers and Raptors might have to hold on for a bit. So, too, will their fans.
