United States v. Gatto ( 2021 )

19-0783-cr(L)
United States v. Gatto et al.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 2019
(Argued: March 13, 2020 Decided: January 15, 2021)
Docket Nos. 19-0783-cr; 19-0786-cr; 19-0788-cr
UNITED STATES OF AMERICA,
Appellee,
v.
JAMES GATTO, aka Jim, MERL CODE, CHRISTIAN DAWKINS,
Defendants-Appellants.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
Before:
LYNCH AND CHIN, Circuit Judges, and ENGELMAYER, District Judge. ∗
∗
Judge Paul A. Engelmayer, of the United States District Court for the Southern District
of New York, sitting by designation.
Consolidated appeals from judgments of the United States District
Court for the Southern District of New York (Kaplan, J.), convicting defendants-
appellants of wire fraud and conspiracy to commit wire fraud in violation of 18
U.S.C. §§ 1343, 1349. The government alleged that defendants-appellants
engaged in a scheme to defraud universities of athletic-based financial aid when
they made secret cash payments to the families of college basketball recruits,
thereby rendering the recruits ineligible to play for the universities. On appeal,
defendants-appellants contend that there was insufficient evidence to sustain
their wire fraud convictions. Additionally, they challenge several of the district
court's evidentiary rulings as well as portions of its instructions to the jury.
AFFIRMED.
Judge LYNCH CONCURS IN PART and DISSENTS IN PART in a separate
opinion.
EDWARD B. DISKANT, Assistant United States Attorney
(Aline R. Flodr, Eli J. Mark, Noah D.
Solowiejczyk, and Won S. Shin, Assistant United
States Attorneys, on the brief), for Audrey Strauss,
United States Attorney for the Southern District
of New York, New York, New York, for Appellee.
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MICHAEL S. SCHACHTER (Casey E. Donnelly, on the brief),
Willkie Farr & Gallagher LLP, New York, New
York, for Defendant-Appellant James Gatto.
Andrew A. Mathias, Nexsen Pruet, LLC, Greenville,
South Carolina, for Defendant-Appellant Merl
Code.
Steven Haney, Haney Law Group, PLLC, Southfield,
Michigan, for Defendant-Appellant Christian
Dawkins.
CHIN, Circuit Judge:
In this case, defendants-appellants James Gatto, Merl Code, and
Christian Dawkins ("Defendants") were convicted of engaging in a scheme to
defraud three universities by paying tens of thousands of dollars to the families
of high school basketball players to induce them to attend the universities, which
were sponsored by Adidas, the sports apparel company, and covering up the
payments so that the recruits could certify to the universities that they had
complied with rules of the National Collegiate Athletic Association (the
"NCAA") barring student-athletes and recruits from being paid.
At trial, Defendants admitted that they engaged in the scheme and
broke NCAA rules, but argued that what they did was not criminal. On appeal,
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they contend that the government failed to prove that they intended to defraud
the universities -- North Carolina State University ("N.C. State"), the University
of Kansas ("Kansas"), and the University of Louisville ("Louisville") (collectively,
the "Universities") -- and that their intent instead was to help the Universities by
bringing them top recruits to ensure winning basketball programs. They
contend that, "in the real world, . . . universities engage in an all-out arms race to
recruit the best talent, motivated by the tens of millions of dollars that can be
earned each year by a successful men's basketball program," Appellants' Br. at 98
(internal quotation marks omitted), and that they "broke NCAA rules out of a
genuine desire to see the Universities' basketball teams succeed," Appellants' Br.
at 96. They argue that under-the-table payments to student-athletes are
widespread in college sports, and that, indeed, many college coaches are aware
of and endorse the practice. And they argue, as they did in their opening
statements at trial, that "[t]he kids on the court, . . . the ones whose blood, sweat
and tears is making this game a billion dollar industry, they are not allowed to
earn a dime." App'x at 107.
We have no doubt that a successful men's basketball program is a
major source of revenue at certain major universities, but we need not be drawn
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into the debate over the extent to which college sports is a business. 1 Instead, our
task is to determine whether the government proved beyond a reasonable doubt
that Defendants knowingly and intentionally engaged in a scheme, through the
use of wires, to defraud the Universities of property, i.e., financial aid that they
could have given to other students. We conclude that the government did. We
also reject Defendants' arguments that the district court abused its discretion in
its evidentiary rulings and committed reversible error in its instructions to the
jury. Accordingly, we affirm.
BACKGROUND
On appeal from a conviction following a jury trial, the "facts are
drawn from the trial evidence and described in the light most favorable to the
government." United States v. Wilson, 709 F.3d 84, 85 (2d Cir. 2013).
1 We are mindful of the fair concerns raised in this respect by Judge Lynch in his separate
opinion. Nonetheless, as he acknowledges, this case is not the proper vehicle for resolving the
longstanding, controversial debate over whether college athletes should be paid. For a history
of that debate, see generally W. Burlette Carter, The Age of Innocence: The First 25 Years of the
National Collegiate Athletic Association, 1906 to 1931, 8 Vand. J. Ent. & Tech. 211 (2006) (outlining
the origins and early controversies of NCAA amateurism); Christopher M. Parent, Forward
Progress? An Analysis of Whether Student-Athletes Should Be Paid, 3 Va. Sports & Ent. L.J. 226(2004) (discussing the desirability and feasibility of paying student-athletes); see also Alfred
Dennis Mathewson, The Eligibility Paradox, 7 Jeffrey S. Moorad Sports L.J. 83, 86 n.11-12 (2000)
(citing scholarship against and in support of amateurism in the NCAA).
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I. The Landscape
The NCAA is a private organization that oversees collegiate sports
in America. It promulgates rules that its member universities must follow,
among which is the requirement that all student-athletes must remain amateurs
to be eligible to compete for their schools. This means that the student-athletes --
and their families -- may not accept payments of any form for the student-
athletes' playing or agreeing to play their sport. This rule extends from the time
when the student-athletes are still in high school and are being recruited to play
at the collegiate level.
There are, however, exceptions. Colleges are permitted, for
example, to offer athletic-based aid to a certain number of student-athletes, to
cover tuition, room, and board. And the schools themselves are permitted to
enter into sponsorship agreements with sports apparel brands, which allow them
to provide their student-athletes with clothing and footwear that they receive
from their corporate sponsors. Essentially, these sponsorship agreements are
marketing deals. Major sports apparel brands, including Adidas, Nike, and
Under Armour, enter into such contracts to promote their brands. Under these
agreements, student-athletes must wear the brand of the company their school
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has partnered with when they compete for their school -- that is, at practice and
during games.
II. The Scheme
Gatto was Adidas's director of global sports marketing for
basketball. He managed the sports marketing budget, and part of his job
entailed overseeing the relationship that Adidas had with various schools,
including N.C. State, Kansas, and Louisville. This included helping to ensure the
success of the sponsorship agreements Adidas signed with the Universities
pursuant to which Adidas paid the Universities for the right to provide their
NCAA sports teams with Adidas apparel.
Gatto worked with Code and Thomas Joseph Gassnola, both Adidas
consultants. He also worked informally with Dawkins, an aspiring sports agent,
and Munish Sood, a financial advisor. Together, these men paid the families of
top-tier high school basketball recruits -- including Dennis Smith Jr., Billy
Preston, and Brian Bowen Jr. (collectively, the "Recruits") -- to entice those
players to enroll at one of the Universities. This activity violated NCAA rules,
and if the NCAA were to discover the payments, the players would not be
permitted to play in games and the Universities would be subject to penalties.
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As a result, Defendants and those who assisted them concealed these payments
by falsifying Adidas invoices to make it seem as though the payments were
going to youth basketball teams affiliated with the Amateur Athletic Union
("AAU"), a non-profit, multi-sport organization that, among other things,
facilitates youth basketball tournaments. In reality, the money was being
funneled through AAU teams with which some Defendants were affiliated to the
families of top basketball prospects. In addition to creating fake expense reports
to mask these payments, Defendants used phones that were not registered in
their names while communicating with the Recruits' families.
Per the NCAA bylaws, every member institution must certify that its
prospective student-athletes are amateurs and thus eligible to compete.
Consequently, the Universities required all their recruits to sign paperwork
attesting that they were aware of and in compliance with the NCAA bylaws. By
signing the certifications, the recruits affirmed, among other things, that they had
not used their "athletics skill (directly or indirectly) for pay in any form in that
sport." App'x at 780. A recruit's athletic-based aid was contingent upon his
certifying his eligibility. Those in charge of compliance at the Universities
explained that they would have never awarded athletic-based aid to the Recruits
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had they known they were ineligible to compete, and the head coaches' contracts
required the coaches to be stewards of the NCAA rules and report any suspected
violations.
A. N.C. State
Smith verbally committed to play basketball for N.C. State in
September 2015. At the time, he was one of the top recruits in North Carolina,
but, according to Gassnola, there were rumors that he was going to change his
mind about which college he would attend. To ensure that Smith enrolled at
N.C. State, Gassnola gave the Smith family $40,000 in the Fall 2015. He was
reimbursed by Adidas via Gatto, who filed false invoices to facilitate the
repayment. Shortly after the Smith family received the $40,000 payment, Smith
signed forms enrolling at N.C. State indicating that he was compliant with the
NCAA eligibility rules. He played one season at N.C. State before being selected
as the ninth overall pick in the 2017 NBA Draft.
B. Kansas
Preston verbally committed to play for Kansas in Fall 2016. After
Preston committed, however, Gassnola heard that the Preston family was
accepting money from sports agents and financial advisors, thereby putting
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Preston's eligibility in jeopardy. Because, according to Gassnola, he thought that
he was better-equipped to prevent illicit payments from being discovered,
Gassnola arranged to pay the Preston family to stop them from taking money
from others and preserve Preston's NCAA eligibility. With Gatto's permission,
Gassnola paid the Preston family around $50,000. Gassnola paid the money and
then, with the help of Gatto, submitted false AAU expense reports to Adidas for
reimbursement. In November 2016, Preston signed forms indicating that he was
compliant with the NCAA eligibility rules. His ineligibility, however, was
discovered, and he never played for Kansas.
C. Louisville
Bowen committed to play for Louisville in May 2017. Around the
same time, Bowen's family agreed to accept $100,000 from Adidas, to be paid in
four installments. These payments were to be funneled through an AAU
program with which Code was affiliated. On June 1, 2017 and June 9, 2017,
Bowen signed forms accepting athletic-based aid and indicating that he was
compliant with the NCAA eligibility rules. Around a month later, on July 13,
2017, Bowen's father was paid the first installment of $25,000. Defendants were
arrested before any other payments were made, and Bowen, whom Louisville
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decided to withhold from competition, withdrew from Louisville after one
semester to play professional basketball.
III. Procedural History
Defendants were charged in a superseding indictment filed on
August 14, 2018 with wire fraud and conspiracy to commit wire fraud for the
role they played in recruiting Smith, Preston, and Bowen. Trial began on
October 1, 2018. Defendants objected to certain of the district court's evidentiary
rulings as well as to portions of its instructions to the jury. On October 24, 2018,
the jury found Defendants guilty of wire fraud and conspiracy to commit wire
fraud. On January 17, 2019, the district court issued an opinion explaining some
of its evidentiary rulings. Defendants were sentenced in March 2019 -- Gatto
principally to nine months' imprisonment and Code and Dawkins principally to
six months' imprisonment each. The district court also ordered Defendants to
pay restitution to the Universities for their actual losses in awarding athletic
scholarships to the Recruits.
This appeal followed.
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DISCUSSION
On appeal, Defendants raise three principal arguments: (1) there was
insufficient evidence to sustain their wire fraud and conspiracy to commit wire
fraud convictions; (2) the district court abused its discretion in excluding
evidence; and (3) the district court erroneously instructed the jury. We address
these issues in turn.
I. Sufficiency of the Evidence
A. Applicable Law
"We review the sufficiency of the evidence de novo." United States v.
Anderson, 747 F.3d 51, 59 (2d Cir. 2014). A defendant "bears a heavy burden"
when he tries to "overturn a jury verdict on sufficiency grounds," as we draw all
reasonable inferences in the government's favor and defer to the jury when there
are "competing inferences." Id. at 59-60 (internal quotation marks omitted). A
challenge to the sufficiency of the evidence fails if "any rational trier of fact could
have found the essential elements of the crime beyond a reasonable doubt."
Jackson v. Virginia, 443 U.S. 307, 319 (1979).
To convict a defendant of wire fraud, the government must prove
beyond a reasonable doubt: "(1) a scheme to defraud, (2) money or property as
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the object of the scheme, and (3) use of the . . . wires to further the scheme."
United States v. Binday, 804 F.3d 558, 569 (2d Cir. 2015); see also 18 U.S.C. § 1343.
Here, the parties do not dispute the third element. 2
As to the "scheme to defraud" element, there must be "proof that
defendants possessed a fraudulent intent." United States v. Starr, 816 F.2d 94, 98
(2d Cir. 1987). Accordingly, defendants must either intend to harm their victim
or contemplate that their victim may be harmed. Id. ("Although the government
is not required to prove actual injury, it must, at a minimum, prove that
defendants contemplated some actual harm or injury to their victims. Only a
showing of intended harm will satisfy the element of fraudulent intent.").
Although as a general matter "contemplate" can mean either "to think about" or
"to have in view as a purpose," we have clarified that only the latter definition
comports with the "fraudulent intent" requirement for conviction. United States
v. Gabriel, 125 F.3d 89, 97 (2d Cir. 1997). This distinction often "poses no
additional obstacle for the government" because "fraudulent intent may be
inferred from the scheme itself" if "the necessary result of the actor's scheme is to
2 Indeed, Defendants were recorded discussing the scheme over the phone, and they
emailed about creating invoices to facilitate the payments. Moreover, at least two of the
payments were wired to Preston.
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injure others." United States v. D'Amato, 39 F.3d 1249, 1257 (2d Cir. 1994) (internal
quotation marks omitted). Further, "[i]ntent may be proven through
circumstantial evidence, including by showing that [a] defendant made
misrepresentations to the victim(s) with knowledge that the statements were
false." United States v. Guadagna, 183 F.3d 122, 129 (2d Cir. 1999); see also United
States v. MacPherson, 424 F.3d 183, 189-90 (2d Cir. 2005).
As to the "object of the scheme" element, a defendant need not
literally obtain money or property -- in the sense of putting money into his own
pocket -- to violate the wire fraud statute. See Porcelli v. United States, 404 F.3d
157, 162-63 (2d Cir. 2005) (finding it was sufficient to convict defendant of wire
fraud where the tax scheme involved him keeping money he already had by
virtue of his not paying taxes); see also United States v. Males, 459 F.3d 154, 158 (2d
Cir. 2006). And because individuals have the right to control their property,
depriving the victim of "economic information it would consider valuable in
deciding how to use its assets" satisfies the object-of-the-scheme element. United
States v. Finazzo, 850 F.3d 94, 111 (2d Cir. 2017). Still, as the Supreme Court
recently noted, "a property fraud conviction cannot stand when the loss to the
victim is only an incidental byproduct of the scheme." Kelly v. United States, 140
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S. Ct. 1565, 1573 (2020). Loss to the victim "must play more than some bit part in
a scheme: It must be an object of the fraud." Id. (internal quotation marks
omitted).
B. Application
Defendants argue that they "were convicted of a fraud they did not
know about." Appellants' Br. at 42. In other words, they contend that there was
no scheme to defraud because Defendants did not know that false
representations would be made to the Universities. Defendants also argue that
even if there were such a scheme, the government failed to prove that the
Universities' athletic-based aid was an object of that scheme. We disagree in both
respects. 3
1. Scheme to Defraud
Defendants have not shown that the government failed to
present enough evidence for "any rational trier of fact," Jackson, 443 U.S. at 319, to
find, beyond a reasonable doubt, that there was a scheme to defraud, see 18
3 The government contends that Defendants did not argue in their Rule 29 motion before
the district court that they lacked knowledge that any certifications -- much less false
certifications -- would be made, and therefore we should review their challenge for plain error.
We need not resolve this issue, as Defendants' argument fails even under the less exacting de
novo standard.
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U.S.C. § 1343. Although Defendants are correct that the government did not
provide direct evidence that proved Defendants knew the Recruits had to sign
eligibility certifications to earn athletic-based aid, the government did present
enough circumstantial evidence for the jury to have reached that conclusion. See
Guadagna, 183 F.3d at 129 (noting that circumstantial evidence that "show[s] . . .
defendant made misrepresentations to the victim(s) with knowledge that the
statements were false" may prove intent); see also United States v. Quattrone, 441
F.3d 153, 169 (2d Cir. 2016) ("[C]ourts . . . may not reject a jury verdict simply
because it rests even wholly on circumstantial evidence.").
First, Defendants were sophisticated actors who were involved in all
aspects of top-tier basketball in America, including the amateur grassroots
leagues, college basketball programs, and the NBA. Gatto was the head of global
sports marketing for Adidas, one of the top sports apparel companies in the
world, and he was in charge of Adidas's entire basketball marketing budget.
Code worked for Nike, another top apparel company, for fourteen years where
he cultivated relationships with grassroots, high school, and college basketball
programs before he began consulting for Adidas. And Dawkins spent time
working for a sports agency recruiting NBA prospects. The jury was therefore
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presented with evidence of Defendants' proximity to -- and involvement in -- all
things basketball.
Second, Defendants went to great lengths to prevent both Adidas
and the Universities from discovering that they were paying the Recruits'
families. Defendants worked together to disguise their funneling of tens of
thousands of dollars to the Recruits' families to induce the Recruits to enroll at
Adidas-sponsored schools. Indeed, Defendants had to lie to Adidas to get
reimbursed for these secretive payments, as those in charge of the budget at
Adidas knew the payments violated both "NCAA regulation and Adidas policy"
and would not have signed off on them had they known the truth. Supp. App'x
at 311. Their furtive behavior indicates that they knew their actions were wrong.
When coupled with their sophistication, it was reasonable for the jury to infer
they knew the Recruits had to deceive the Universities about their eligibility.
Third, Defendants' co-conspirators admitted on wiretaps that their
conduct violated NCAA rules. Gassnola, who worked directly under Gatto,
explained to the jury that had the Universities learned that Smith's family had
been paid, he "would have been deemed ineligible" and "would never have
played [at N.C. State]." App'x at 283-84. Sood, another co-conspirator, stated
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that he knew that giving money to NCAA athletes was not permitted under
NCAA rules and could have led to those players losing their scholarships. Even
if the co-conspirators' knowledge could not be imputed to Defendants, it is
nevertheless circumstantial evidence the jury was permitted to consider. See
United States v. Gordon, 987 F.2d 902, 906-07 (2d Cir. 1993).
Fourth, Code and Dawkins acknowledged that Bowen had to sign
an NCAA form for his commitment to Louisville to be complete. And Dawkins
was recorded on a wiretap discussing the need to avoid a paper trail "because
some of it is whatever you want to call it, illegal, against NCAA rules, or
whatever." Supp. App'x at 47. Accordingly, these statements, together with
Defendants' sophistication, steps taken to conceal their actions, and co-
conspirators' statements, surely show that Defendants knew that the Recruits
had to sign eligibility forms to compete in the NCAA, and constituted sufficient
evidence for the jury to find that Defendants knew a materially false
representation had to be made for the scheme to succeed. See United States v.
Reifler, 446 F.3d 65, 96 (2d Cir. 2006).
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2. Object of Scheme
Similarly, the jury was also presented with enough evidence for a
rational trier of fact to find that the Universities' athletic-based aid was "an
object" of their scheme. See Kelly, 140 S. Ct. at 1573; see also 18 U.S.C. § 1343. In
Kelly, better known as the "Bridgegate" case, state officials devised a scheme to
punish the mayor of Fort Lee, New Jersey, for declining to endorse the
incumbent New Jersey governor in his reelection bid. Kelly, 140 S. Ct. at 1568. To
do so, politically appointed Port Authority officials closed traffic lanes that led
from Fort Lee to the George Washington Bridge for four days under the guise
that they were conducting a traffic study. Id. The study, however, was a sham;
no official was interested in the data it produced. Id. at 1570. The government
charged the officials with property fraud, arguing that they commandeered the
traffic lanes and deprived the state of property by paying extra wages to
perpetuate the scheme. Id. at 1571-72. The officials who did not plead guilty
went to trial and were convicted, id. at 1571, but the Supreme Court overturned
their convictions, id. at 1574.
The unanimous Kelly Court found that property was not an object of
the scheme. Id. at 1572. It explained that the traffic study was a "sham," intended
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only to cover up the defendants' misconduct and the additional wages were
"implementation costs" that only became necessary because an additional toll
booth operator was needed after the original plan was altered to avoid traffic
accidents. Id. at 1574. Because the officials' only goal was political retaliation --
to create a headache for the Fort Lee mayor -- and the officials were indifferent
about the unintended additional costs of carrying out the plan, they were not
guilty of property fraud. Id. The Kelly Court held that "a property fraud
conviction cannot stand when the loss to the victim is only an incidental
byproduct of the scheme." Id. at 1573.
This case is different from Kelly. 4 Here, the loss of property -- the
Universities' funds set aside for financial aid -- was at the heart of Defendants'
scheme. Their original plan included inducing the Universities to give the
Recruits financial aid by concealing from the Universities the payments made to
the Recruits' families in fear that if they were discovered the Recruits would not
4 In Kelly, the Court explained that "a scheme to alter . . . a regulatory choice is not one to
appropriate . . . property." 140 S. Ct. at 1572. Because the defendants in Kelly made a regulatory
decision regarding lane usage, there was no fraudulent obtainment of property, especially
because any loss to the victim was only incidental to the object of the scheme. Id. at 1573. Here,
Defendants did not make any regulatory decisions in transmitting and concealing payments to
the Recruits' families. Thus, the Court's holding in Kelly that the regulatory decisions were not
punishable under a property fraud theory is inapposite to the case at hand.
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be permitted to compete. Importantly, the scheme depended on the Universities
awarding ineligible student-athletes athletic-based aid; without the aid, the
recruits would have gone elsewhere. And if the Recruits' ineligibility had been
discovered by the schools, the scheme would have failed. After all, the Recruits
would have never been permitted to play in the NCAA for Adidas-sponsored
schools, defeating the purpose of the payments and potentially derailing the
Recruits' professional careers. 5
Defendants have asserted that they intended to "assist the
Universities' recruiting efforts" by luring the best basketball players to Adidas-
sponsored schools to better market their brand. Appellants' Supp. Br. at 6.
Defendants may have had multiple objectives, but property need only be "an
object" of their scheme, Kelly, 140 S. Ct. at 1572 (emphasis added), not the sole or
primary goal. Unlike in Kelly, where there was a sham study and additional
wages were paid only after the original plan was scaled back due to safety
5 Indeed, Bowen and Preston never played for Louisville and Kansas, respectively.
Moreover, each has struggled to find playing time in the NBA. Bowen has only played 29
minutes for the NBA's Indiana Pacers and has spent most of his professional career playing for
the team's minor-league affiliate, the Fort Wayne Mad Ants. Preston has never appeared in an
NBA game and has only played for the minor-league affiliates of the NBA's Cleveland
Cavaliers, New Orleans Pelicans, and Dallas Mavericks.
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concerns, id. at 1574, here, depriving Universities of athletic-based aid was at the
center of the plan.
Finally, the evidence, construed in the government's favor, showed
that Defendants deprived the Universities of information that would have
helped them decide whether to award the Recruits athletic-based aid. This
deprivation was enough to support a wire fraud conviction. See Finazzo, 850 F.3d
at 111. As discussed above, hiding the Recruits' ineligibility was essential to
Defendants' scheme -- had the Universities known the Recruits were ineligible,
they would not have offered them athletic-based aid or roster spots on their
basketball teams. Similarly, it was reasonable for the jury to find that Defendants
knew the Recruits had to misrepresent their eligibility to deceive the Universities
into giving them athletic-based aid. Thus, it is evident that Defendants' scheme
facilitated the withholding of valuable information that would have caused the
Universities not to dispense with their property. See United States v. Lebedev, 932
F.3d 40, 48-49 (2d Cir. 2019). Accordingly, we conclude that the jury rationally
found that Defendants committed wire fraud.
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II. Evidentiary Rulings
We review a district court's evidentiary rulings for abuse of
discretion, United States v. McDermott, 245 F.3d 133, 140 (2d Cir. 2001), and such
rulings will only be overturned if they are "arbitrary and irrational," United States
v. White, 692 F.3d 235, 244 (2d Cir. 2012). "Even if a decision was manifestly
erroneous, we will affirm if the error was harmless." United States v. Litvak, 889
F.3d 56, 67 (2d Cir. 2018) (citations and internal quotation marks omitted). An
"error is harmless if it is highly probable that it did not contribute to the verdict."
United States v. Gomez, 617 F.3d 88, 95 (2d Cir. 2010).
Defendants argue that the district court erroneously excluded expert
testimony and other evidence relevant to their defense. We address these issues
in turn.
A. Expert Testimony
The district court's determination whether to admit expert testimony
is guided by Fed. R. Evid. 702. See Daubert v. Merrell Dow Pharm., Inc., 509 U.S.
579, 589-95 (1993). Generally, an expert may be permitted to testify if he is
qualified, reliable, and helpful. See Fed. R. Evid. 702. Of course, courts must also
determine whether the proffered evidence is relevant, see Fed. R. Evid. 401, 402,
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and, if so, whether its probative value is substantially outweighed by the danger
of unfair prejudice, Fed. R. Evid. 403 ("The court may exclude relevant evidence
if its probative value is substantially outweighed by a danger of one or more of
the following: unfair prejudice, confusing the issues, misleading the jury, undue
delay, wasting time, or needlessly presenting cumulative evidence."). Thus,
although an expert may otherwise be qualified to testify, the district court can
nevertheless exclude his testimony if it finds the testimony would be unfairly
prejudicial. United States v. Dukagjini, 326 F.3d 45, 51-52 (2d Cir. 2003) ("Of
course, expert testimony, like other forms of evidence, 'may be excluded if its
probative value is substantially outweighed by the danger of unfair prejudice.'"
(quoting Fed. R. Evid. 403)). Although "a trial judge is given broad discretion to
weigh these competing interests," this "does not mean immunity from
accountability." United States v. Jamil, 707 F.2d 638, 642 (2d Cir. 1983). On appeal,
we "must look at the evidence in a light most favorable to its proponent,
maximizing its probative value and minimizing its prejudicial effect." Id.Defendants sought to call an expert witness to discuss the myriad of
benefits -- both quantitative and qualitative -- that a successful men's basketball
program bestows upon a university. Defendants argue that this testimony
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would have proven that they intended to help, not harm, the schools when they
paid the Recruits' families to entice the Recruits to attend Adidas-sponsored
schools. But the district court did not permit the expert to testify.
First, it found that the expert's testimony would not have been
helpful because it was based on a study conducted in preparation for litigation
and therefore "would have shed no light on [D]efendants' states of mind at the
time the crimes allegedly were committed." S. App'x at 47-48. Second, the
district court found, "[i]n any case," S. App'x at 48, that the information the expert
would have presented was substantially more prejudicial than probative. It
noted that allowing the expert to testify could have invited improper acquittals
by enticing the jury to base its decision on the perceived unreasonableness or
unfairness of the NCAA's amateurism rules. The district court explained how
permitting the expert to testify would have introduced an improper defense --
that Defendants were not guilty of wire fraud because they believed the
Universities would ultimately benefit from their actions.
We agree with the lower court's ruling, which was neither arbitrary
nor irrational. Even if we assume Defendants' expert's testimony would have
been helpful, it was substantially more prejudicial than probative. No doubt,
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universities stand to profit if their men's basketball programs are successful. It is
even possible, as Defendants' expert would have suggested, that a cost-benefit
analysis would reveal that universities come out net-positive when they commit
recruiting violations. But this does not help Defendants. The law is clear: a
defendant cannot negate the fraud he committed by wishing that everything
works out for his victim in the end. Calderon, 944 F.3d 72, 90 (2d Cir. 2019)
("[T]he fact that the defendant believes (rightly or wrongly) that he will
'ultimately' be able to work things out so that the victim suffers no loss is no
excuse for the real and immediate loss contemplated to result from defendant's
fraudulent conduct.") (quoting United States v. Rossomando, 144 F.3d 197, 201 (2d
Cir. 1998)); see also United States v. Ferguson, 676 F.3d 260, 280 (2d Cir. 2011). That
the Universities might have ultimately benefitted monetarily from having top
tier recruits would not have changed whether Defendants were guilty of wire
fraud, and the evidence might have clouded the issue for the jury. Accordingly,
the district court did not abuse its discretion.
B. Other Evidentiary Challenges
Defendants also challenge several other evidentiary rulings. None
of their arguments have merit.
- 26 -
1. Phone Calls
Defendants sought to admit the contents of several recorded phone
calls. 6 In one of those calls, Code and Dawkins discussed a high school
basketball recruit not involved in this case. In that conversation, which the
district court excluded, the two noted that the recruit's family was asking a
school for money in exchange for their son's commitment to play for that school's
basketball team. Code and Dawkins discussed how it was worthwhile for the
school to meet those demands because it stood to profit substantially from that
player. Although the district court did not clearly explain its reasoning, there are
at least two acceptable reasons for it to have excluded the call. First, assuming,
as Defendants argue, that the information from the call fit within the state of
mind hearsay exception, see Fed. R. Evid. 803(3), it was not unreasonable for the
district court to determine that the call -- which did not concern any of the
recruits in this case and involved conduct that occurred after the payments
alleged in the indictment were made -- was irrelevant. Second, admitting this
phone call could have led the jury down the impermissible road of considering
6 The recordings and transcripts of certain phone calls were sealed, and the parties filed
both sealed and redacted briefs and appendices. These records are unsealed to the extent, and
only to the extent, the phone calls are discussed in this opinion and the separate opinion.
- 27 -
the wisdom of the NCAA's amateurism rules instead of the actions of
Defendants. Accordingly, the district court did not abuse its discretion in
excluding this call.
Defendants also take issue with the district court's exclusion of other
phone calls in which various NCAA coaches purportedly encouraged
Defendants to violate the amateurism rules. Defendants contend that this
evidence proved they were doing "what the Universities wanted and expected
their corporate apparel sponsors to do." Appellants' Br. at 114. 7 They also argue
that the calls would have contradicted the testimony of Gassnola, one of the
government's cooperating witnesses. The district court, however, found the
prejudicial effect of these calls to substantially outweigh their probative value,
and it did not admit them. This was not an abuse of discretion.
First, at least one coach on these calls worked at a school not
involved in this case, and therefore his discussion of practices elsewhere had
little relevance here. Second, to the extent the calls were relevant, allowing such
testimony could have confused the jury, as it would have required the jury to
7 Defendants cite a 2018 report by the Commission on College Basketball, "Report and
Recommendations to Address the Issues Facing Collegiate Basketball," which noted that
"[e]veryone knows what's been going on." App'x at 1531.
- 28 -
learn about individuals not involved in the case. Third, even if we accept that
coaches encouraged NCAA recruiting violations -- there was testimony, for
example, that Pitino, Louisville's coach, needed "[p]lausible deniability," App'x at
640 -- that the coaches asked Defendants to pay the Recruits' families was not a
defense unless, as we discuss further below, the coaches were unconflicted and
acting in good faith on behalf of their Universities, see D'Amato, 39 F.3d at 1257-
58. In addition, a closer examination of the calls Defendants sought to admit
further refutes this argument. When the topic of compensating recruits came up,
for example, one coach said: "I have got to shut my door." D. Ct. Dkt. No. 259 at
28. That this coach did not want to have a conversation about violating NCAA
rules with his door open indicates that his school did not condone such behavior.
Another coach said he kept his relationship with Dawkins "off the book," which
the jury reasonably could have understood to mean off the record. D. Ct. Dkt.
No. 259 at 31. Thus, this evidence is of limited utility to the extent it supposedly
proves that Defendants believed they were doing what the Universities here
wanted, as it cuts against any argument that the coaches were unconflicted and
acting in good faith. See D'Amato, 39 F.3d at 1257-58. Accordingly, the district
court did not abuse its discretion in excluding the evidence.
- 29 -
We also disagree that admitting the phone calls would have called
into question Gassnola's veracity. Gassnola testified that he would not have told
a University that he had paid a recruit's family member because "[t]hey wouldn't
have liked [that] very much." App'x at 293. Defendants argue that the phone
calls in which various coaches solicited this sort of help would have contradicted
this testimony. We are not persuaded. The evidence Defendants sought to
admit -- phone calls that Gassnola was not a part of -- consisted of coaches
speaking guardedly about NCAA violations because they knew what they were
doing was wrong. It is wholly consistent that Gassnola would have refrained
from discussing the payments with University personnel. Flaunting such
violations to the Universities, after all, would have put their compliance
departments in difficult situations. Thus, we are not persuaded that Defendants'
cross-examination of Gassnola was inhibited because the district court excluded
the phone calls, and we conclude that the district court did not abuse its
discretion in excluding the phone calls. 8
8 In his partial dissent, Judge Lynch presents thoughtful and substantial arguments in
favor of reaching evidentiary outcomes different from those reached by the district court with
respect to certain of the phone calls as well as certain of the recruiting violations discussed in
the next section. While his concerns certainly give us pause, we believe that the district court
did not abuse its broad discretion in ruling on these difficult and close evidentiary questions.
- 30 -
2. Recruiting Violations
Defendants also sought to present evidence of Louisville's previous
recruiting infractions "to demonstrate that . . . Louisville had a history of
violating NCAA rules in order to recruit talented athletes, and thus, [Defendants]
had no reason to think they were defrauding Louisville by doing the same."
Appellants' Br. at 117. In particular, Defendants wanted the jury to learn that
Louisville was sanctioned for providing recruits who visited Louisville with
exotic dancers and prostitutes. Importantly, Defendants sought to introduce an
NCAA Committee on Infractions ("COI") decision that found, inter alia, that
Louisville committed recruiting violations by providing impermissible benefits
to prospective players. As the district court noted, the COI decision is
"somebody's opinion of what the facts were." App'x at 153. Accordingly, the
decision itself was not a fact, and it therefore could not be admitted into evidence
by a University compliance officer who was not involved in the investigation.
The district court also excluded the evidence under Rule 403. Again, this was not
an abuse of discretion.
Notably, Defendants stipulated with the government that Louisville
previously violated NCAA rules and was sanctioned because of it. This
- 31 -
permitted Defendants to argue -- as two of them did in summation -- that they
did not think they were defrauding the Universities by committing recruiting
violations because Louisville itself had previously disregarded NCAA rules.
Indeed, this is why they sought to admit the violations in the first place. That the
district court did not allow the intricate details of high school recruits being
provided escorts and prostitutes to distract the jury from the scheme at issue in
the case was not an abuse of discretion.
3. Compliance Witnesses
Defendants also sought to admit evidence to challenge the
Universities' compliance officers' collective testimony that they were diligent
stewards of NCAA rules. In essence, Defendants wanted to demonstrate that the
Universities took "calculated risk[s]" when they awarded athletic-based aid to
ineligible recruits. Appellants' Br. at 122. To a large extent, Defendants reassert
the same reason for why their expert should have been allowed to testify.
Because we have already rejected this argument above, we write only to address
whether the district court abused its discretion in refusing to allow cross-
examination about certain NCAA guidelines. We conclude it did not.
- 32 -
On cross-examination, Defendants were not permitted to question
the compliance officers about specific instances in which student-athletes who
competed for the Universities were temporarily deemed ineligible and then
readmitted to play under the NCAA reinstatement guidelines. According to
Defendants, ineligible student-athletes who did not know that their families
accepted improper benefits may be reinstated to their teams after serving
suspensions. Because these penalties are temporary and unencumbering, as the
argument goes, the Universities were willing to risk getting caught because the
reward outweighed the risk. The district court found that the evidence was
beyond the scope of direct examination, not relevant, and substantially more
prejudicial than probative. We agree.
A trial court "is accorded broad discretion in controlling
the scope and extent of cross-examination." United States v. James, 712 F.3d 79,
103 (2d Cir. 2013) (internal quotation marks omitted). We recognize that it is
"unrealistic to expect that direct examination and cross-examination will be
perfectly congruent," and we have noted that "[t]he latter need only be
reasonably related to the former." United States v. Caracappa, 614 F.3d 30, 43 (2d
Cir. 2010).
- 33 -
Here, on direct examination, the government discussed the NCAA
reinstatement guidelines in reference to the sanctions a university could face. It
did not discuss how a student-athlete who has been deemed ineligible goes
about getting reinstated or the penalties such student-athlete might face. It was
not an abuse of the district court's broad discretion to prevent Defendants from
asking questions about specific instances in which student-athletes not involved
in this case were deemed ineligible and eventually reinstated. Moreover, this
line of questioning would have confused the jury and distracted it from the issue
in the case: whether Defendants withheld valuable information from the
Universities to defraud them of athletic-based aid. Indeed, Defendants' entire
argument that the Universities took calculated risks by signing ineligible
student-athletes because the penalty for doing so was meager is not responsive
to the prosecution's theory that Defendants concealed the Recruits' ineligibility
from the Universities. Thus, to the extent that Universities weighed the
consequences of issuing athletic-based aid to ineligible recruits, Defendants
prevented them from doing so here by misrepresenting that Bowen, Preston, and
Smith were in compliance with NCAA rules. 9
9 Defendants' remaining argument that they were improperly barred from introducing a
portion of the NCAA rulebook is without merit. Even assuming the district court erred by not
- 34 -
III. Jury Instructions
"We review de novo a district court's jury instruction," United States v.
Roy, 783 F.3d 418, 420 (2d Cir. 2015), "and will vacate a conviction for an
erroneous charge unless the error was harmless," United States v. Nouri, 711 F.3d
129, 138 (2d Cir. 2013). If, however, "a defendant fails to make a timely objection,
we review the instruction for plain error." Id. A jury charge is adequate if "taken
as a whole, [it] is correct and sufficiently covers the case so that a jury can
intelligently determine the questions presented to it." Garnett v. Undercover
Officer C0039, 838 F.3d 265, 280 (2d Cir. 2016); see also United States v. Dyer, 922
F.2d 105, 107 (2d Cir. 1990) ("[A] jury charge must be viewed as a whole and in
the context of the entire trial."). "A jury instruction is erroneous if it either fails
adequately to inform the jury of the law or misleads the jury as to the correct
legal standard." United States v. George, 779 F.3d 113, 117 (2d Cir. 2015).
Defendants argue that the district court erroneously instructed the
jury on: (1) conscious avoidance; (2) the meaning of "obtain" in 18 U.S.C. § 1343;
(3) the "right to control"; and (4) the requisite intent. We address these issues in
turn.
admitting the evidence during cross-examination, any such error was harmless, as Defendants'
argument relied on a flawed, selective reading of the rulebook.
- 35 -
A. Conscious Avoidance
The doctrine of conscious avoidance (i.e., "willful blindness")
prevents defendants from avoiding criminal liability by "deliberately shielding
themselves from clear evidence of critical facts that are strongly suggested by the
circumstances" and that, if known, would render them guilty of a crime. Glob.-
Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754, 766 (2011). This doctrine has two
requirements: "(1) The defendant must subjectively believe that there is a high
probability that a fact exists and (2) the defendant must take deliberate actions to
avoid learning of that fact." Id. at 769.
A conscious avoidance jury charge "permits a jury to find that a
defendant had culpable knowledge of a fact when the evidence shows that the
defendant intentionally avoided confirming the fact." United States v. Kozeny, 667
F.3d 122, 132 (2d Cir. 2011). Such a charge may be given when (1) the defendant
claims to lack "some specific aspect of knowledge required for conviction" and
(2) there is enough evidence for "a rational juror [to] reach the conclusion beyond
a reasonable doubt that the defendant was aware of a high probability of the fact
in dispute and consciously avoided confirming that fact." United States v.
Fofanah, 765 F.3d 141, 144-45 (2d Cir. 2014). The instruction "permits a finding of
- 36 -
knowledge even where there is no evidence that the defendant possessed actual
knowledge." United States v. Ferrarini, 219 F.3d 145, 154 (2d Cir. 2000). When a
defendant challenges the factual basis for a jury's finding of conscious avoidance,
he is essentially challenging the sufficiency of the evidence and therefore "bears a
heavy burden." See United States v. Aina-Marshall, 336 F.3d 167, 171 (2d Cir. 2003).
In pertinent part, the district court here explained that the jury "may
find that a defendant acted with the necessary knowledge as to particular facts
on the basis that the defendant consciously avoided learning those facts by
deliberately closing his eyes to what otherwise would have been clear." App'x at
450. The court was clear that because Defendants denied that they knew the
Recruits had to sign eligibility certifications, the jury could find that it was
Defendants' "consci[ous] intention" -- as compared to their "carelessness or
negligence" -- to remain ignorant of facts to "escape the consequences of criminal
law." App'x at 451. Importantly, the court noted that a conscious avoidance
argument "is not a substitute for proof. It is simply another fact you may
consider in deciding what the defendant knew." App'x at 451.
Defendants raise several arguments for why the conscious
avoidance jury instruction was erroneous. None is persuasive. First, Defendants
- 37 -
argue that that the government failed to show that Defendants deliberately
avoided confirming the facts, and therefore the conscious avoidance charge
should not have been given. While it is true that conscious avoidance requires
more than a reckless or negligent disregard of the facts, see Glob.-Tech Appliances,
563 U.S. at 769-70, the government met its burden here. As discussed in detail
above, the jury heard ample evidence demonstrating that Defendants knew the
Recruits had to misrepresent their eligibility for the scheme to succeed.
Moreover, the district court's charge accurately instructed the jury on the law,
and the jury reasonably concluded Defendants consciously avoided learning of
the eligibility forms.
Next, Defendants contend that it was impossible for them to have
consciously avoided learning that the Recruits had to sign eligibility forms for
the scheme to succeed because the forms were completed after the payments
were made. This argument is unavailing. We have previously rejected the
proposition that "a conscious avoidance instruction is only appropriate where the
crime includes knowledge of an existing fact as an element." United States v.
Gurary, 860 F.2d 521, 526 (2d Cir. 1988) (emphasis added). Rather, such a charge
is appropriate when there is "proof of notice of high probability" that future
- 38 -
conduct will occur. Id. at 527. Although the charge may be inappropriate in
certain one-off crimes where at best the jury is left to speculate what the
defendant may have foreseen happening, but see Ferguson, 676 F.3d at 279(conscious avoidance charge was permissible where "parameters of the deal were
developed over a number of months, and there were numerous forward-looking
meetings, emails, and negotiations"), it is a permissible charge when defendants'
repeated conduct makes it all-the-more likely that they remained willfully blind.
Gurary, 860 F.2d at 527. Here, Defendants were involved in at least three
schemes that spanned several years. 10 Accordingly, the charge was appropriate.
Third, Defendants argue that the district court gave two inconsistent
charges, asking the jury to find that Defendants consciously avoided a fact while
also willfully causing a result. There is no inconsistency here. Willful causation
is a form of secondary liability where an actor can be found guilty of a crime if he
purposefully caused another to act criminally. See United States v. Nolan, 136 F.3d
265, 272 (2d Cir. 1998); 18 U.S.C. § 2(b) ("Whoever willfully causes an act to be
done which if directly performed by him or another would be an offense against
10 The indictment also mentioned a similar scheme at the University of Miami, and there
was evidence presented at trial that indicated at least one other recruit's legal guardian was
paid for that recruit to commit to Kansas.
- 39 -
the United States, is punishable as a principal."). The district court's instruction
as to conscious avoidance permitted the jury to impute knowledge onto
Defendants. The willful causation charge, conversely, permitted the jury to
impute a third party's actions onto Defendants. Here, it allowed the jury to
attribute the Recruits' false statements to Defendants, who both persuaded the
Recruits to sign on with the Universities and rendered them ineligible by
violating NCAA rules. These two charges are compatible. In any event, even
assuming the district court committed error, any such error was harmless, as the
jury could have found that Defendants had actual knowledge that false
representations would be made to the Universities. See Ferrarini, 219 F.3d at 154("[A]n erroneously given conscious avoidance instruction constitutes harmless
error if the jury was charged on actual knowledge and there was overwhelming
evidence to support a finding that the defendant instead possessed actual
knowledge of the fact at issue." (internal quotation marks omitted)).
B. "Obtain"
A defendant is guilty of wire fraud if he "devises or intends to
devise any scheme or artifice to defraud, or for obtaining money or property by
means of false or fraudulent pretenses, representations, or promises" and uses
- 40 -
wires to further that scheme. 18 U.S.C. § 1343 (emphasis added). Defendants
argue that a plain reading of the statute makes it clear that the law requires that
property or money be obtained by the defendant from the victim, and the district
court erred by not making this clear to the jury. We are not persuaded.
The district court instructed the jury, in relevant part, that
Defendants had to have made or caused another to make a false statement that
involved a "material fact . . . that would reasonably be expected to influence, or
that is capable of influencing, the decision of the [Universities to award the
Recruits athletic-based aid]." App'x at 441. It made clear that Defendants did not
need to profit from the fraud; they did, however, need to "contemplate[]
depriving the victim . . . of money or property," App'x at 443. Indeed, the court
was explicit: "[A] victim can be deprived of money or property . . . when it is
deprived of the ability to make an informed economic decision about what to do
with its money or property." App'x at 444. This instruction, as noted above,
accurately explains the law. See United States v. Carlo, 507 F.3d 799 (2d Cir. 2007)
("Since a defining feature of most property is the right to control the asset in
question, we have recognized that the property interests protected by the [wire
- 41 -
fraud] statute[] include the interest of a victim in controlling his or her own
assets.").
First, Defendants rely on two canons of statutory interpretation --
that courts are bound by what the text of a statute says and that courts must
apply the ordinary meaning of the words in a statute. They contend that the
words "obtaining" and "defraud" in § 1343 unambiguously mean that a
defendant must personally obtain property from the victim to be convicted of
wire fraud. This interpretation conflicts with our Court's precedent. As noted
above, we have held that the wire fraud statute is violated when the defendant
prevents the victim from making an informed economic decision about the
victim's property, regardless of who ultimately benefits from the victim's
property. See Finazzo, 850 F.3d at 111 (approving a jury instruction that
explained that "the right to control one's assets is injured when a victim is
deprived of potentially valuable economic information it would consider
valuable in deciding how to use its assets") (internal quotation marks omitted);
see also Binday, 804 F.3d at 581 (approving a jury instruction that explained that "a
person can also be deprived of money or property when he is deprived of the
ability to make an informed economic decision about what to do with his money
- 42 -
or property"). Indeed, a defendant "does not need to literally obtain money or
property to violate the [wire or mail fraud] statute[s]." Porcelli, 404 F.3d at 162(internal quotation marks omitted); see also Males, 459 F.3d at 158 (same).
Further, Section 1343 punishes the individual who devises the
scheme. 18 U.S.C. § 1343 ("Whoever, having devised or intending to devise any scheme
or artifice to defraud, or for obtaining money or property by means of false or
fraudulent pretenses, representations, or promises . . . " is guilty of wire fraud.
(emphasis added)). What matters, therefore, is that there was a scheme to
defraud a victim of money or property. By the plain language of the statute, the
identity of the ultimate beneficiary is not dispositive and the plain meaning of
the word "obtain" is sufficiently capacious to encompass schemes by defendants
to obtain money for the benefit of a favored third party. See United States v.
Johnson, 945 F.3d 606, 610-11 (2d Cir. 2019) (affirming a bank executive's wire
fraud conviction when his misrepresentations caused the victim to confer a
benefit on the bank rather than himself). Thus, a victim's loss need not flow
directly to the defendant for the defendant to be guilty of wire fraud. See United
States v. Calderon, 944 F.3d at 88-90 (holding that a wire fraud scheme
contemplated actual harm to the victims when modifications to bills of lading
- 43 -
exposed banks "to risk of default or non-reimbursement" from foreign
correspondent banks and increased the risk the government would not
reimburse the victim banks if a foreign bank defaulted).
Second, Defendants rely on case law. They contend that Supreme
Court precedent and several out-of-circuit cases also require that the defendant
personally obtain the victim's property. Not so. Although, as discussed above,
obtaining the victim's property must be "an object of the fraud," Kelly, 140 S. Ct.
at 1573, there is no precedent mandating that the victim's property flow directly
to the defendant. Nor should there be. Surely a defendant would be guilty of
fraud if he deceived a victim into providing money or property to the
defendant’s relative, friend, or favorite charity, rather than directly to the
defendant himself. Such an act would come within the plain meaning of the
statute: the deception would be for the purpose of obtaining money or property
from the victim for a person of defendant's choosing.
Defendants also misread Carpenter v. United States, 484 U.S. 19(1987), claiming that it stands for the proposition that a defendant must obtain
property from the victim. The language Defendants quote, however, is the Court
reiterating an argument made by one of the parties -- it is not the Court's holding.
- 44 -
Compare Appellants' Br. at 63 ("[A]fter McNally, the requirement that the
defendant 'obtain . . . money or property from the [victim]' is a 'necessary
element' of wire fraud."); with Carpenter, 484 U.S. at 25 ("Petitioners assert that . . .
they did not obtain any 'money or property' from the [victim], which is a
necessary element of the crime under our decision last Term in [McNally].").
Indeed, the Court in Carpenter explains that the property fraud statutes "reach
any scheme to deprive another of money or property by means of false or
fraudulent pretenses, representations, or promises." Carpenter, 484 U.S. at 27(emphasis added). Once again, there is no requirement that the property flow to
the defendant.
Nor are we bound or persuaded by the out-of-circuit precedent that
Defendants cite. We address only the case on which Defendants most heavily
rely. In United States v. Walters, the Seventh Circuit explained that "[l]osses that
occur as byproducts of a deceitful scheme do not satisfy the statutory
requirement" for property fraud. 997 F.2d 1219, 1227 (7th Cir. 1993). We do not
quarrel with this rule, which was recently reaffirmed by the Supreme Court. See
Kelly, 140 S. Ct. at 1573. The facts of Walters, however, are distinguishable.
- 45 -
Norby Walters was an aspiring sports agent who gave NCAA
student-athletes cars and money with the hope that they would retain him as
their agent when they turned professional. Walters, 997 F.2d at 1221. This, of
course, violated the NCAA's amateurism rules. Id. The Seventh Circuit noted
that because "[t]he athletes' pro prospects depended on successful completion of
their collegiate careers," id., it could "assume that Walters knew that the
universities would ask [the] athletes to verify that they were eligible to compete
as amateurs," id. at 1222, and Walters "promised to lie to the universities" about
the payments if asked, id. at 1221.
The Walters Court acknowledged that the case was close:
"Everything . . . turns on matters of degree. Did the schemers foresee that the
mails would be used? Did the mailing advance the success of the scheme?
Which parts of a scheme are 'essential'? Such questions lack obviously right
answers." Id. at 1222. Ultimately, the Court found that Walters did not
"conceive[] a scheme in which mailings played a role." Id. In other words,
Walters did not satisfy a critical element of the mail fraud statute: he did not
intend to mail anything. Id. ("For all Walters cared, the [eligibility] forms could
sit forever in cartons. Movement to someplace else was irrelevant."). Here, the
- 46 -
equivalent element in the wire fraud statute is the use of wires, which
Defendants do not -- and cannot -- dispute. Accordingly, Defendants' reliance on
Walters is misplaced, and, for the reasons noted above, the district court did not
err in its instructions on the meaning of "obtain."
C. Right to Control
Because one has a right to control one's property, "a wire fraud
charge under a right-to-control theory can be predicated on a showing that the
defendant, through the withholding or inaccurate reporting of information that
could impact on economic decisions, deprived some person or entity of
potentially valuable economic information." Lebedev, 932 F.3d at 48 (internal
quotation marks and alterations omitted); see also Finazzo, 850 F.3d at 111
("[M]isrepresentations or non–disclosure of information cannot support a [wire
fraud] conviction under the 'right to control' theory unless those
misrepresentations or non–disclosures can or do result in tangible economic
harm."). In other words, as discussed above, depriving a victim of "potentially
valuable economic information it would consider valuable in deciding how to
use its assets" prevents the victim from exercising its right to control its property
and can therefore support a wire fraud conviction. Finazzo, 850 F.3d at 111.
- 47 -
Defendants' "right to control" argument is essentially a refashioning
of its "obtain" arguments, which we have addressed above. Here, Defendants
argue that "the Universities' ability to make an informed economic decision
about scholarships is not property, because it is not an interest that holds any
independent economic value." Appellants' Br. at 71 (internal quotation marks
omitted). Accordingly, they contend that the district court erred when it
instructed the jury on the right-to-control theory. 11 They challenge the following
portion of the district court's instruction:
[A] victim can be deprived of money or property also
when it is deprived of the ability to make an informed
economic decision about what to do with its money or
property -- in other words, when it is deprived of the
right to control the use of its assets. I instruct you that a
victim's loss of the right to control the use of its assets
constitutes deprivation of money or property if, and
only if, the scheme could have caused or did cause
tangible economic harm to the victim.
App'x at 444.
There is no doubt that the Universities' scholarship money is a
property interest with independent economic value. First, and most obviously,
11 Defendants objected to the "right to control" jury instruction given by the district court
in a pre-trial filing, but they did not renew this objection at the charge conference. We need not
determine whether this affects the standard of review, as Defendants' argument fails either way.
- 48 -
the Universities awarded tuition, room, and board to the Recruits. Without these
awards, the Recruits would have had to pay tens of thousands of dollars to
attend the schools. Second, there are a finite number of athletic-based
scholarships that each University can award. Thus, giving a scholarship to one
student necessarily precludes another student from receiving that same
scholarship. And because the Universities would not have awarded the Recruits
this aid had they known the Recruits were ineligible to compete, withholding
that information is a quintessential example of depriving a victim of its right to
control its assets. Accordingly, the district court's instructions accurately
reflected the law, and it therefore did not err in this respect. See Finazzo, 850 F.3d
at 111.
D. Intent
As discussed above, a defendant must act with fraudulent intent to
be convicted of wire fraud. Thus, if the victim -- or an agent authorized to act on
behalf of the victim -- gives permission to the defendant to act in the manner at
issue, the defendant cannot be found guilty of wire fraud. See United States v.
Bonanno, 430 F.2d 1060, 1064, 1064 n.5 (2d Cir. 1970) (noting that use of others'
credit cards "without permission" constituted evidence of "intent to mislead" in a
- 49 -
mail fraud conviction) (emphasis added). An agent can either have actual
authority to act, which is when the agent receives "explicit permission from the
principal to act on its behalf," Garanti Finansal Kiralama A.S. v. Aqua Marine &
Trading Inc., 697 F.3d 59, 71 (2d Cir. 2012), or apparent authority to act, which is
when an agent has the ability to bind the principal to transactions with third
parties because representations that the principal made to the third party make it
reasonable for the third party to believe the agent has such an ability, United
States v. Int'l Bhd. of Teamsters, 986 F.2d 15, 20 (2d Cir. 1993). "It is the law in this
circuit, as well as generally, that customarily only the representation of the
principal to the third party can create apparent authority, not the representation of
the agent alone." Id. (emphasis added).
Certain corporate agents, however, inherently have apparent
authority to represent their principals, even if the principal does not make a
specific representation to the third party. See D'Amato, 39 F.3d at 1258. For there
to be apparent authority in such a circumstance, two elements must be met: (1)
the principal is making a lawful decision to conceal the relationship with the
agent and (2) the agent is acting in good faith and not profiting from the decision.
Id.- 50 -
Defendants argue that they did not have the requisite fraudulent
intent because their scheme was designed to help the Universities recruit top-tier
players. Indeed, they argue that the men's basketball coaches asked them to
make payments to the Recruits' families. Accordingly, Defendants take issue
with the district court's jury instruction on intent, which they contend should
have made clear that the jury could acquit if it found that Defendants believed
the men's basketball coaches had the apparent authority to instruct them to
violate NCAA rules. Contrary to Defendants' arguments, the district court did
just that.
As an introduction to the concept of agency law, the district court
instructed the jury as follows:
Each of the alleged victims and intended victims of the
crimes charged in the indictment is a university.
Universities, of course, are not human beings. They can
think or act only through their agents -- that is to say,
their officers, their employees, and their other
authorized representatives. So, the knowledge, the
intentions, the statements, and the actions of a
university officer, employee, or other representative --
and that includes basketball coaches -- are considered to
be those of the university to the extent, but only to the
extent, that the officer, employee, or other
representative is, first of all, acting within the scope of
the authority of that officer, agent, or representative
and, second of all, without any purpose to profit
- 51 -
personally or otherwise benefit him or herself in a
manner that is not fully aligned with the interests of the
university.
App'x at 438-39.
Defendants characterize this as an actual authority jury instruction.
We disagree. As the district court noted, the words "actual authority" do not
appear anywhere in this instruction. While this alone is not dispositive, the
context in which the instruction was given is. See Garnett, 838 F.3d at 280 (A jury
charge is adequate if "taken as a whole, [it] is correct and sufficiently covers the
case so that a jury can intelligently determine the questions presented to it").
Here, the district court was introducing the concept of agency law to the jury. Its
instruction accurately explained how the Universities had to act through their
agents, which it made clear included the men's basketball coaches. This was a
crucial explanation that set up the court's apparent authority instruction, which it
gave shortly thereafter. In relevant part, the district court instructed the jury as
follows:
Now, as to certain of the universities, one or more of the
defendants contends that they lacked intent to defraud
because they acted in good faith at the request of one or
more university basketball coaches. An individual who
does not work for a university and who engages in
(otherwise legal) conduct to mislead the university lacks
- 52 -
an intent to defraud the university if three things are
true: First, he or she was acting at the request of an
agent of the alleged victim university; second, the agent
had apparent authority to make that request; and, third,
the agent appeared to be unconflicted and acting in
good faith for the benefit of the victim university and
not to serve his or her own interests in a manner that
was not fully aligned with the interests of the
university.
App'x at 447. The district court went on to explain each of the three prongs in
detail.
Defendants contend that the district court's instruction was
unnecessarily complex and legally incorrect. Again, we disagree. The thrust of
Defendants' argument is that the district court misapplied D'Amato, a case where
a lawyer (D'Amato) was hired by a vice president of a corporation to lobby
D'Amato's brother, a United States senator. D'Amato, 39 F.3d at 1252-53. But the
district court's jury instructions accurately explained the apparent authority rule
from D'Amato. From a legal standpoint, this alone ends the inquiry, as the jury
instruction neither "fail[ed to] adequately . . . inform the jury of the law [n]or
misle[d] the jury as to the correct legal standard." George, 779 F.3d at 117.
Defendants' argument that they were merely following coaches' instructions
when they paid the Recruits' families also misunderstands D'Amato. Even
- 53 -
assuming that the Universities' coaches encouraged Defendants to pay Recruits'
families to steer the Recruits toward their basketball programs -- indeed,
Defendants discussed giving Pitino "[p]lausible deniability," App'x at 640 --
Defendants would have had to have believed that the coaches were acting in
good faith. In other words, if we analogize the head coaches to corporate agents,
D'Amato teaches that Defendants would have had to believe that the coaches'
commands were made in good faith to carry out the principals' (i.e., the
Universities') objectives. See D'Amato, 39 F.3d at 1258 (explaining that a party
may "follow[] the instructions of an appropriate corporate agent who appears to
be unconflicted and acting in good faith"). On this record, the jury could have
reasonably found that this was not the case.
The jury was shown the head coaches' contracts, which required
them to ensure their players were eligible to compete and provided incentives if
their teams had successful seasons. Defendants were sophisticated actors in the
world of college sports, as discussed in detail above, who surely were generally
aware of the coaches' obligations to comply with NCAA rules and likely knew
there were financial incentives tied to their teams' successes. Thus, any
- 54 -
argument that Defendants believed the coaches were acting in good faith by
violating their contracts to secure top talent is unreasonable.
Moreover, there is no indication that the Universities condoned
surreptitiously paying Recruits' families to entice Recruits to play for their
basketball teams. Int'l Bhd. of Teamsters, 986 F.2d at 20 ("It is the law in this
circuit, as well as generally, that customarily only the representation of
the principal to the third party can create apparent authority, not the representation
of the agent alone." (emphasis added)). Instead, there is evidence to the contrary
-- compliance officers from the Universities testified about the harsh NCAA
sanctions their institutions would face if such activity occurred and was
discovered. In any event, there is also no indication that the coaches ever
instructed Defendants to conceal the payments. In D'Amato, the corporate agent
was forthright about the need to create false reports and funnel the payments
through D'Amato's law partner. 39 F.3d at 1254-55. This -- along with the fact
that payments were repeatedly approved by others who worked at the
corporation, id. at 1253-54, 1261 -- made it plausible that D'Amato believed this
was business-as-usual and approved by the corporation. Here, by contrast,
Defendants themselves took these precautions, which shows that they knew
- 55 -
what they were doing was against the Universities' wishes. As Dawkins stated
in a recorded phone call, "I would never tell Rick anything like this because I
don't want to put him in jeopardy." Supp. App'x at 142. These actions belie the
notion that the activity was approved by the Universities.
Because the district court's jury instruction accurately reflected the
law on apparent authority, it did not err.12
CONCLUSION
At trial, Defendants argued that their intent was not to harm but to
help the Universities, and they also sought to offer evidence that they were not
the only individuals who have paid high school basketball recruits to attend
certain universities. The ends, however, do not justify the means, 13 and that
others are engaging in improper behavior does not make it lawful. See Gonnella
12 We are also unpersuaded by Defendants' dual intent argument, as it is commonplace for
individuals to have more than one motive for acting. See United States v. Technodyne LLC, 753
F.3d 368, 385 (2d Cir. 2014) ("It is commonplace that the law recognizes that there may be
multiple motives for human behavior; thus, a specific intent need not be the actor's sole, or even
primary, purpose."). That the district court's jury instruction reflected this notion in no way
foreclosed Defendants' good-faith defense. Such an argument ignores the jury instruction as a
whole, which explained that "good faith on the part of a defendant that you are considering is a
complete defense to the charge of wire fraud." App'x at 446.
13 Long ago, Judge Medina referred to "the false but seductive doctrine that the end
justifies the means," adding that the doctrine "has never taken lodgment in American
jurisprudence; and I hope it never will." United States v. Morgan, 118 F. Supp. 621, 634 (S.D.N.Y.
1953).
- 56 -
v. S.E.C., 954 F.3d 536, 549 (2d Cir. 2020) ("[T]he fact that behavior is common
does not mean it is not fraud."); see also Newton v. Merrill, Lynch, Pierce, Fenner &
Smith, Inc., 135 F.3d 266, 274 (3d Cir. 1998) (en banc) ("Even a universal industry
practice may still be fraudulent.").
Defendants concede that they broke the NCAA rules, but contend
that they did not act criminally. But "the essence of fraud is misrepresentation,
made with the intent to induce another person to take action 'without the
relevant facts necessary to make an informed . . . decision.'" United States v,
Rutigliano, 887 F.3d 98, 109 (2d Cir. 2018) (quoting United States v. Binday, 804
F.3d at 579). Fraud involves "a departure from fundamental honesty, moral
uprightness, or fair play," United States v. Ragosta, 970 F.2d 1085, 1090 (2d Cir.
1992) (quoting United States v. Goldblatt, 813 F.2d 619, 624 (3d Cir. 1987)), and
depriving one of property through "dishonest methods or schemes" or "trick,
deceit, chicane or overreaching," Id. (internal quotation marks omitted). Here, as
the jury could have reasonably found, Defendants deprived the Universities of
property -- athletic-based aid that they could have awarded to students who
were eligible to play -- by breaking NCAA rules and depriving the Universities
of relevant information through fundamentally dishonest means.
- 57 -
For the foregoing reasons, the judgments of the district court are
AFFIRMED.
- 58 -
GERARD E. LYNCH, Circuit Judge, concurring in part and dissenting in part:
I agree with the Court that the evidence was sufficient to support the jury’s
verdict and that the jury was properly instructed as to the governing law. I
believe, however, that the case is much closer as to certain of the district court’s
evidentiary rulings than the majority allows, and that some of the evidence
offered by the defense should have been admitted. Ultimately, I conclude that the
erroneous exclusion of that evidence was not harmless. I therefore join in the
thoughtful and thorough opinion for the Court, except with respect to Parts II.B.1
and II.B.2 of the Discussion section. For the reasons discussed below, I agree that
the convictions of Gatto and Code as to counts one and two should be affirmed.
But given the potential effect that the erroneously excluded evidence may have
had on the verdict as to certain counts, Gatto’s conviction as to count three and
Dawkins’s convictions on counts one and two should be reversed.
I. Overview
The district court in this case had to walk a fine line with respect to its
evidentiary rulings. The defendants’ activities occurred in the context of the
controversial world of big-time college athletics. Many reasonable people believe
that the institution of major college sports has far outgrown its founding
assumptions, which postulate that college sports are pursued as an avocation by
student-athletes who compete for the love of the game and the honor of their
schools. Today, college athletics is a billion-dollar industry, which generates
enormous revenues for universities – and enormous salaries for college coaches,
who in the case of public universities are often the highest-paid public employees
in their states. Those revenues and salaries are made profitable by the fact that
the students who play for the teams receive no compensation (beyond free tuition
for classes they often have little time to complete) for working what many –
including some of the players themselves and some demanding coaches – view
as full-time jobs as athletic performers. The disconnect between the athletes’
financial value to their schools and the refusal to pay them what their market
value would command if they were acknowledged as full-time professional
athletes creates an opportunity for corruption and covert rule-breaking. It is
against this backdrop that the district court had to make its careful evidentiary
decisions balancing the probative value of various proffered pieces of evidence
against the potential of that evidence to prejudice the jury by playing to the
likelihood that at least some jurors might believe that the colleges that the
defendants were accused of defrauding were themselves corrupt and unworthy
of protection.
2
The defendants in this case were accused of defrauding three universities,
by paying cash bounties to the families of outstanding high school basketball
players to secure their enrollment at those universities, in violation of the
universities’ proclaimed policies, so that the universities awarded the athletes
valuable scholarships to which they were not entitled under those policies and
NCAA rules. The bounties were paid from the funds of a prominent
manufacturer of athletic gear and attire, a sponsor of the universities’ athletic
programs, in violation of the proclaimed policies of that company. The
sponsorship gave the company a stake in the competitive success of the
sponsored programs, which would enhance the visibility and allure of the
company’s products, and helped secure the good will of the athletes, in the event
they became successful professional basketball players and were offered
endorsement deals by the company and its competitors. The sums involved were
substantial in relation to the resources of the recruits and their families, but
modest in comparison to the sums earned by professional athletes for their
endorsements.
The defendants, as the majority notes, acknowledged that their actions
violated NCAA rules and the official policies of the universities, that the bounties
3
rendered the athletes ineligible to compete for the universities, and that the
payments were concealed from the highest officials of the universities and the
university compliance officers whose job it was to police the rules and policies in
question. Their principal defense, however, was that they had no intent to
deceive or defraud, because they genuinely believed the cynical proposition that
the universities engaged in massive hypocrisy, and were in fact happy for the
defendants to make their secret payments, as long as the universities were
allowed to pretend that they were being deceived. In other words, defendants
maintained that they believed that the universities wanted to obtain the best
available athletes for their teams (which made more money for the universities
the more successful they were on the basketball court) by any means necessary,
so long as the universities could claim “[p]lausible deniability.” App’x at 640. The
defendants offered evidence that they maintain would have supported their
asserted lack of intent to deceive the universities, but some of that evidence was
excluded by the district court. A principal prong of their appeal relates to those
evidentiary rulings.
As the majority acknowledges, to secure a conviction the government was
required to prove beyond a reasonable doubt that the defendants intended to
4
deceive the universities. The defendants were permitted to argue that they
believed that the universities knew, in general terms, what the defendants were
doing, precisely because that belief, if they genuinely held it, would defeat an
intent to deceive. But what sort of evidence could help the defendants persuade
the jury to entertain a reasonable doubt about whether the defendants genuinely
believed what they claimed they believed? If, for example, the president of one of
the universities had called the defendants in to his or her office, and told them
that the university welcomed their efforts to secure the best basketball players for
its team, by bribing the athletes if necessary, but that the defendants had to keep
those payments secret, surely that would support the conclusion that the
universities were not defrauded; if defendants claimed that they had been told by
their superiors at the company that the university president had conveyed that
message to the head of the company, such statements (whether or not true)
would also support the conclusion that the defendants genuinely believed that
the university was not being deceived, regardless of whether the university’s
compliance officers were in on the secret.
But under the defendants’ theory of how the world works, such
conversations would be extremely unlikely to occur, and indeed, the defendants
5
did not claim that any such conversations had taken place. The hypocritical
façade the defendants claim they believed existed would not permit any but the
most oblique signals of approval, for any explicit authorization of the payments
risked blowing the cover of the whole industry. So the defendants were reduced
to offering what they contended was circumstantial evidence to support their
claimed belief. That evidence took various forms, but two principal examples
consisted of conversations, recorded without their knowledge, between two of
the defendants themselves or between individual defendants and athletic coaches
at the victim universities and other institutions, which they argue explained and
justified their cynical conclusions. In effect, they wanted to argue that anyone
who operated in their milieu would have been led to believe exactly what they
purportedly believed.
The problem for the district court is that this kind of evidence could be
taken by a jury in several ways. On the one hand, such evidence arguably
supported the conclusion it was offered to prove: that a reasonable person in the
defendants’ position would have believed that the universities did not care what
they did, so long as the result was a winning team and so long as any under-the-
table payments were kept secret. But on the other, a jury could also take such
6
evidence as indicating two further possible conclusions, which might inure to the
defendants’ benefit, but which were distinctly not legal defenses.
First, the defendants’ argument is easily confused with a different
argument, that was also part of the defendants’ professed belief system: that their
activities did not really hurt the universities, or even expose them to significant
risk, but instead offered the universities only great financial benefits. Much of the
evidence offered by the defendants suggested that, if the universities cared only
about the financial bottom line of their athletic programs, they should not mind
occasional (or even frequent) violations of the NCAA rules. The proffered
evidence suggested that such breaches were common, were infrequently
detected, and when detected resulted in penalties that were insignificant in
comparison to the financial benefits of maintaining successful teams. But that
argument does not support a valid defense. It is not a defense to fraud, for
example, that the fraudster lies to investors to get them to buy a stock that the
fraudster genuinely believes will “work out well in the end” for the investors, but
that they would not buy if told the truth; such a belief does not justify selling
stock by means of material misrepresentations. See, e.g., United States v. Calderon,
944 F.3d 72, 90-91 (2d Cir. 2019). Thus, given the absence of any direct evidence
7
that the universities knew of and approved the payments, evidence that the
system did not provide adequate incentives for rule compliance more directly
supported the proposition that someone in defendants’ position could have
genuinely believed that he was acting in the university’s financial interest – a
non-defense that might have confused the jurors.
Second, evidence of this sort might persuade a reasonable juror, already
skeptical of the universities’ professed belief in amateurism, to conclude that the
NCAA and the universities were corrupt, exploitative institutions who deserved
whatever happened to them, and that the defendants, by helping the athletes’
families secure some small portion of the compensation they were fairly due for
their valuable labor and for the risks to their health and future careers that they
were taking by playing sports, were the good guys. Such a “Robin Hood”
defense – that the defendants were essentially robbing the rich to help the poor –
is of course also not a legal defense.
How much and what kinds of evidence should be allowed into the trial,
and how to balance the probative and prejudicial aspects of particular pieces of
evidence, is a delicate task that is confided to the sound discretion of the district
court. See United States v. White, 692 F.3d 235, 244 (2d Cir. 2012) (“We review
8
evidentiary rulings . . . for abuse of discretion.”). Like the majority, I am loath to
second-guess the judgments of the experienced district judge, who was much
closer to the lengthy and complex course of this prosecution than are we
appellate judges, on these delicate questions. For the most part, I reach similar
conclusions to those presented by the majority, finding the decisions of the
district court to be reasonable resolutions of the difficult balancing required.
Moreover, where I might think that particular rulings were erroneous, even
taking account of the deferential standard of review, there are further questions
about whether, in light of the full record of the case, any such errors require a
new trial, or were merely harmless. Trials are rarely perfect, and individual
pieces of evidence are not usually so compelling that their presence or absence is
potentially dispositive of the case.
Finally, before turning to the individual rulings contested by the
appellants, let me suggest a framework for thinking about these close questions.
The issue in this case, as the majority opinion clearly and correctly notes, is not
whether we like or despise the system created by the NCAA rules, nor whether
we think that system is rife with the potential for, or with widespread examples
of, cheating of all kinds. It is whether these defendants deceived these particular
9
victims about the particular athletes to whose families the payments at issue in
this case were made. To my mind, then, the closer the evidence comes to
supporting the view that the defendants believed that the specific payments
proven in this case were secretly condoned by the particular university involved,
the more likely that the probative force of the evidence outweighed the potential
prejudice identified above. In contrast, the closer the evidence comes to being
generalized evidence that “everybody does it,” or that the system itself is corrupt
or exploitative in some larger sense, the more likely it is that the prejudice of
suggesting that the jury should reject the entire enterprise will outweigh the more
tangential value it might have in supporting defendants’ professed belief that
they were not really deceiving the people from whom they were, concededly,
hiding what they were doing.
Though I agree with the majority that we should affirm many of the
district court’s evidentiary rulings because the prejudicial effect of suggesting
non-defense defenses is too great, I write about some of them to point out that the
evidence is not irrelevant. It has probative value – but the district court made a
reasonable decision to keep it out on grounds that its prejudicial effect
outweighed its probative value. As to other rulings, however, the district court’s
10
decision to exclude relevant evidence due to its prejudicial effect was not
reasonable. Ultimately, I conclude that the erroneous rulings were not harmless,
at least as to certain defendants and certain counts.
II. Evidence Properly Excluded
A. The Expert Report
The defendants’ expert report is an example of a generalized piece of
evidence that the district court was well within its discretion to find substantially
more prejudicial than probative, because it tends to signal that universities
benefit from this sort of fraud and provides limited probative value as to the
defendants’ intent to deceive. The majority assumes that the report would have
been helpful to the defense before holding that the district court did not abuse its
discretion in ruling that the report was substantially more prejudicial than
probative. When reviewing the district court, we “must look at the evidence in a
light most favorable to its proponent, maximizing its probative value and
minimizing its prejudicial effect.” United States v. Jamil, 707 F.2d 638, 642 (2d Cir.
1983), quoting United States v. Brady, 595 F.2d 359, 361 (6th Cir. 1979). An
evidentiary ruling should not be overturned unless it was “arbitrary and
irrational.” White, 692 F.3d 235, 244 (2d Cir. 2012) (internal quotation marks
11
omitted). Under that standard of review, I too would affirm the district court’s
exclusion of the report.
The report provided some support to the defendants’ assertion that they
did not intend to deceive the universities. The expert report opined that the value
of an athlete to a university generally outweighs the penalties associated with
recruiting the athlete in violation of the rules, assuming that the university is
caught breaking the rules at all. The jurors were aware of the various sanctions
that the NCAA can impose for rule-breaking; such evidence was part of the
government’s argument that the defendants’ conduct harmed the universities by
exposing them to the risk of financial loss. The expert report could have provided
the jury with the other side of the equation: the myriad of benefits that a
university may receive from recruiting and retaining athletes and creating
successful sports programs.
With that information, the jury could have inferred that the defendants and
the universities, as participants in the system, knew of these benefits and of the
limited costs of being caught violating the ostensible rules of the system. The jury
might then have concluded that the defendants believed that the universities
knew that activities like theirs were very likely occurring within their programs,
12
and deliberately closed their eyes to such activities because the benefits of those
actions were very likely to result in a net positive outcome for the schools. The
defendants’ case rested on why they acted the way they did, and this evidence
would have been probative as to their intent precisely because it could have
helped explain how the world of NCAA recruiting works.
But the evidence could have also been extremely prejudicial. The defense
admitted that the report showed that the benefits of breaking NCAA recruitment
rules generally outweigh the risks, but the report did not address the specific
practices of any of the universities involved in this case. The district court aptly
noted that highlighting the benefits that universities reap from recruits “would
have been likely to turn the jury’s focus to the wisdom or fairness of the NCAA
rules that were violated.” S. App’x at 48. In turn, that focus may have influenced
the jury to put the NCAA rules on trial, and if they believed the rules were
unreasonable, there would be a substantial risk the jurors would overlook the
defendants’ fraud, even if the evidence demonstrated that the particular
universities involved were trying to run clean programs.
The report also could have pushed the jury towards a finding of “no harm,
no foul.” As the district court noted, the expert report explains the benefits a
13
university could gain after an athlete receives a scholarship to attend the school,
“that is after the immediate deprivation of property . . . [takes] place.” S. App’x at
51. Under the law, it makes no difference whether a victim of fraud ultimately
benefits from the immediate loss caused by the fraudulent conduct. See Calderon,
944 F.3d at 90 (describing a “no ultimate harm” jury instruction). In other words,
if the expert report had been admitted, the jury might have looked to the benefits
a university may receive from recruits to excuse the defendants’ fraudulent
conduct, even though the fact that a victim ultimately profited as a result of the
fraud is not a valid excuse for deliberate deceptive conduct.
The district court had to balance these competing concerns. While the
report provided some probative value supporting a valid defense, it was
prejudicial because it could have shifted focus to the reasonableness of the
NCAA rules or to whether the universities ultimately benefitted in the long run.
After balancing these issues, the district court found that the report’s prejudicial
value substantially outweighed its probative value. While the opposite decision
might also have been acceptable, I cannot find the district court’s decision
“arbitrary and irrational.” White, 692 F.3d at 244 (internal quotation marks
omitted). A proper use for the report is specific: to support that the defendants
14
held a belief that the universities in this case knew what they were doing. Its
improper uses are general: to suggest that the entire system is unfair and
universities generally benefit from rules violations even when they are caught.
The report’s general nature – addressing the system of high-level college athletics
as a whole – reduces its probative value as to the particular conduct involved in
this case and enhances, rather than diminishes, its prejudicial effect. Thus, the
district court was well within its discretion to find that the risk of prejudice in
admitting the expert report substantially outweighed its probative value.
B. Details of Louisville’s Prior Infractions
The district court also precluded the defense from presenting evidence of
Louisville’s previous recruiting infractions detailed in an NCAA Committee on
Infractions (“COI”) decision. The COI found that Louisville provided prospective
recruits with exotic dancers and prostitutes during visits to the school. The
defendants sought to introduce the COI ruling as proof of their lack of intent to
deceive, because Louisville’s history of rule-breaking may have persuaded the
jury that the school tolerated such conduct. Instead, the court allowed the
defendants to introduce a stipulation indicating that Louisville “committed Level
I-Aggravated violations,” which are violations that “seriously undermine[] or
15
threaten[] the integrity of the NCAA Collegiate Model.” App’x at 1167. The
stipulation confirmed that Louisville was sanctioned for the violation. In the
court’s view, the stipulation allowed the defendants to make their argument –
that they genuinely did not believe they were defrauding Louisville because the
school had previously violated the same rules that the defendants violated –
without showing the jury the specific details in the COI decision.
The defendants argue that precluding them for introducing the specific
violation outlined in the COI ruling prevented them from showing that
Louisville’s prior violations were far more serious than the payments at issue in
this case. The defendants wanted to show the jury that Louisville committed
extreme violations and did not suffer much from those violations. That the
defendants knew of these more extreme violations made it more likely that they
believed that Louisville condoned their payments to the families of recruits.
But that the details in the COI report are more salacious than those in this
case does not necessarily make those violations more extreme from the
standpoint of the NCAA. Moreover, rewarding teen-aged recruits with sexual
favors is sufficiently repulsive that the jurors might recoil viscerally from such
practices, perceive the violation as morally worse than providing financial support
16
for the athletes’ hard-pressed families, and judge the universities harshly and the
defendants minor violators in comparison. Reasonable minds can differ about
whether this kind of prejudicial effect is so overwhelming as to justify excluding
the evidence, but the district court’s ruling was entirely reasonable and far from
“arbitrary and irrational.” White, 692 F.3d at 244 (internal quotation marks
omitted). The defendants were able to argue that Louisville committed Level I-
Aggravated violations without focusing the jury on the sordid details of the
actual report, which may have influenced the jury in ways that were not relevant
to the trial.1
C. NCAA Reinstatement Guidelines
I would also affirm the district court’s decision to exclude evidence that
could have rebutted the testimony of the compliance officers of the victim
universities. The compliance officers testified that they would not have allowed
1
The district court also excluded the COI report because the decision was merely
“somebody’s opinion of what the facts were.” App’x at 153. The COI decision, however,
was relevant only insofar as it was probative as to the defendants’ intent; whether the
COI’s findings were correct or not does not affect the defendants’ perception of those
findings. If defendants knew about the report, the fact that it may have been incorrect in
whole or in part does not matter as to what makes its findings relevant. Although the
district court was within its discretion to exclude the evidence under Rule 403, the
court’s conclusion that the “decision itself was not a fact,” Majority Op. at 31, does not
affect its admissibility.
17
awarding a scholarship to an ineligible athlete. The government wanted to show
the jury that the universities typically followed the NCAA rules, and the
defendants sought to introduce evidence that, in reality, the schools took
calculated risks and awarded scholarships to elite recruits who they knew would
be ineligible for competition for some portion of the season as a result.
The district court excluded the NCAA’s “Student-Athlete Reinstatement
Guidelines” and the defendants’ attempts to cross-examine the compliance
officers as to those guidelines. The guidelines provide for forfeiture of 30% of the
regular season as the maximum penalty for an athlete who has violated
recruiting rules. Thus, the maximum penalty would allow a rule-breaker to be
reinstated after missing only early-season games. And that is the maximum
punishment; the NCAA may give a shorter punishment to an athlete whose
culpability was mitigated in some way. The defendants argue that these
guidelines show that a school risks very little in recruiting an ineligible athlete.
The lack of any real punishment made it more likely that the universities
approved of the defendants’ actions because they would benefit more from the
presence of the athlete than they would be hurt by the penalty if the payments
were discovered.
18
The district court excluded the guidelines and limited cross-examination in
part because it found that the evidence was not relevant. The district court was
correct to the extent that evidence that a financially motivated university might
rationally take a calculated risk to violate the rules in pursuit of the rewards of a
successful program would not show that a particular university was not,
objectively, deceived and defrauded, because a school cannot take a calculated
risk in recruiting an ineligible athlete unless it is privy to that risk. But the
evidence would have been relevant to the defendants’ state of mind, that is, as to
whether they genuinely believed that the universities approved of the
defendants’ conduct, because the fact that there was little financial risk involved
in breaking the rules made it more likely that the university would approve of
rule-breaking. So the guidelines had some relevance to a valid defense.
Nevertheless, it was again within the district court’s discretion to exclude
the guidelines and limit the defendants’ cross-examination because the risk that
the evidence would lead the jury to consider an invalid defense substantially
outweighed its limited probative value. The guidelines do not show that the
compliance officers who testified were lying when they testified to their own
efforts to enforce the NCAA rules, nor do they show that the defendants had any
19
reason to believe that these particular universities wanted them to violate those
rules. Instead, the guidelines could be taken to suggest that the NCAA system is
a kind of sham, because universities aren’t really on the hook for violations
committed by people like defendants: the student-athlete may suffer in the short
term, but the universities don’t. Such evidence may support the general idea that
the NCAA and the universities are the real bad guys here, but that argument
diverts the jury from the legitimate defense that the defendants thought their
activities were condoned by the victim universities.
III. Phone Calls Involving Defendants and Coaches
The district court also excluded several phone calls that the defendants
argue would have helped them prove that they did not intend to defraud the
universities in this case. These conversations present the most difficult issues in
this appeal. The defendants challenge the district court’s rulings as to only a few
of those calls. Though the majority gives short shrift to the defendants’
arguments, the calls present close questions as to whether the district court erred
in excluding them. As to certain of the calls, indeed, I conclude that the evidence
should have been admitted.
A. The Call Between Code and Dawkins
20
First, the district court excluded a phone call between defendants Merl
Code and Christian Dawkins, in which they discussed their understanding that
the family of a recruit was asking Kansas for money before committing to play
basketball at the school. During the call, Code and Dawkins agree that paying the
athlete “has to be worth it for the school . . . for the money they’ll make off [of the
athlete].” App’x at 1707. Although the athlete being discussed was not implicated
in the scheme charged in the indictment, the defendants contend that the call was
relevant because it demonstrated that they believed the universities were happy
to violate the rules if they received valuable players for their teams.
The majority characterizes the call as irrelevant, because it did not concern
any of the recruits in the case and occurred after the defendants made the
payments at issue. But the conversation clearly reflected how Code and Dawkins
viewed the world of NCAA recruiting, and it strikes me as a strained assumption
that these views had somehow developed in the few weeks between the time that
the defendants made the last of the payments and the date of this conversation.
The defense here is that the defendants believed that they were not deceiving the
universities, and the phone call had some probative value as to that belief.
But we are back to the balancing act that the district court was obligated to
21
apply throughout this trial. The call may have had some probative value as to the
defendants’ general states of mind, but that probative value is limited and partial.
To the extent the call could be taken to suggest what the defendants believed the
universities wanted, any reflection of that belief is inferential: the defendants’
belief in the great financial value to Kansas of the presence of a particular recruit
might lead one to infer that they thought the universities wanted their apparel
company to make whatever payments were necessary to induce certain athletes
to commit to the universities.
A more direct inference, however, is that the defendants believed simply
that what they were doing would benefit Kansas in the long run. The defendants
do not state that they thought that Kansas officials were aware of or approved of
the payments being demanded by the recruit being discussed, let alone that they
thought the university was aware of or would approve of the payments made to
the Kansas recruit whose family they themselves paid. In fact, they do not
reference the payments at issue in this case at all during this conversation.
While I find the issue closer than the majority does, in the end, it was
reasonable for the district court to conclude that a conversation showing that the
defendants believed that universities generally benefit from rule-breaking is too
22
distant from the issue at the heart of this case – whether the defendants genuinely
believed that these specific victim schools knew and condoned what they were
doing – and too proximate to the invalid defense that they were deceiving Kansas
officials for their own good. Evidence of such a belief may confuse the jury about
what is and what is not a proper defense, and generates precisely the kind of
prejudice the district court was trying to avoid.
B. Calls Between Defendants and Coaches
The district court also excluded certain calls between a defendant and a
representative of a school. The defendants argue that these calls corroborated
their claim “that the basketball coaches at the Universities specifically asked them
to break NCAA rules” and helped refute testimony from a witness who testified
that Kansas basketball coaches “wouldn’t have liked it very much” if they had
been told of the payments to the recruits’ families. Appellants’ Br. at 116. The
district court excluded the calls as irrelevant and prejudicial, and the majority
lumps them together and upholds the district court’s decision.
I agree that one call was properly excluded because it involves a coach
from a school that is not involved in this case – and indeed, defendants
themselves do not challenge the exclusion of this call on appeal. In that call, the
23
coach tells Dawkins that he “can get [Dawkins] what [he] need[s]” to secure a
recruit. App’x at 1687. The call may have fueled defendants’ good faith belief in
the cynical proposition that “all the universities do it; they just don’t want to be
told about it.” But, as the majority says, the risk of prejudice associated with
admitting a call about miscellaneous cheating at another school to tar the victims
in this case, or to intimate that the alleged victims in this case held the views that
the defendants claim they attributed to universities, is a bridge too far. It would
divert the focus of the trial from whether the victims here were defrauded to
whether the jury should believe that college athletics is rife with corruption.
But two of the excluded calls involved coaches from the universities in this
case, and the majority glosses over the probative value of those calls. In one,
Dawkins and a Louisville assistant coach discussed a recent business dinner the
coach had attended where one of his associates “was trying to pick [his] brain on
[Dawkins].” Id. at 1717. The coach told the associate that he “[doesn’t] really talk
about” his and Dawkins’s relationship; he keeps that connection “off the
book[s].” Id. In another call, a Kansas assistant coach called Code to discuss a
different recruit who is not implicated in the conduct charged in this case. In that
call, the coach described the recruit’s family “ask[ing] about some stuff.” Id. at
24
1713. The coach told the family “we’ll talk about that if you decide [to come to
Kansas].” Id. The coach then told Code “I’ve got to just try to work and figure out
a way. Because if that’s what it takes to get him[,] . . . we’re going to have to do it
some way.” Id. The coach stated that he would “talk with Jimmy [Gatto]” about
funneling money to the family through an amateur team. Id. at 1714. Code says
he will “talk to Jim today too.” Id. The coach then described how he might also
ask Gatto to help pay for the recruit’s brother to visit Kansas despite
acknowledging “not [being] allowed to pay for it.” Id. at 1715.
The majority gives two reasons why these calls should be excluded. First,
the calls would “confuse[] the jury, as it would have required the jury to learn
about individuals not involved in the case.” Majority Op. at 28-29. Alternatively,
the majority would hold that the calls were irrelevant because they could not
support a valid defense unless the coaches were “unconflicted and acting in good
faith.” Id. at 29. Neither reason is persuasive.
As to the first reason, I would have more confidence in the jury. The
government was concerned that the calls involved people that the jury had not
heard about. But the calls were not overly complicated; they involved two
defendants and two coaches from victim schools discussing top basketball
25
recruits. If the calls would have “required the jury to learn about individuals not
involved in the case,” Majority Op. at 28-29, surely the number of such
individuals was not so large as to justify excluding otherwise relevant evidence
because the calls mentioned a few individuals who were not a part of the charged
conduct.
As to the second reason, the majority makes inferences best left for the jury
to decide. The majority notes that the calls are probative of a valid defense only if
the coaches on the calls were “unconflicted and acting in good faith” on behalf of
their university, United States v. D’Amato, 39 F.3d 1249, 1258 (2d Cir. 1994), but
that is not technically correct. Rather, the calls support a valid defense if the
defendants have a good faith belief that the coaches “appear[] to be unconflicted
and acting in good faith” regardless of whether the coaches are actually in
conflict with their schools. Id. at 1257-58. These calls could very well have helped
the jury infer such a good faith belief. The first call could have supported the
inference that Dawkins genuinely believed that, while Louisville did not want the
defendants’ malfeasance advertised to the public, the school tacitly condoned the
rule-breaking, so long as it was kept “off the book[s].” App’x at 1717. The second
made it more likely that Code and Gatto believed Kansas officials expected to get
26
recruits in ways that violate the NCAA rules because the call is itself an example
of a Kansas official doing just that.2
The government argues that conversations with assistant coaches
inherently lack probative value, because the coaches themselves were lower level
employees who had their own reasons to circumvent the universities’ policies –
they wanted to keep their jobs by fielding winning teams, giving them a motive
to violate NCAA recruiting rules themselves or to wink at violations by others,
whether or not the highest officials of the universities sincerely demanded that
the coaches operate within the rules. But to give blanket credence to this
argument seems to me overly simplistic. If the coaches believed that they needed
to win to retain their jobs, their financial incentive aligned with that of the
universities in fielding a winning team, and the pressure on them to win or be
fired emanated from the officials who publicly professed a commitment to
compliance. The assistant coaches cannot simply be written off as minor
functionaries. Wherever they ranked on an organization chart, they were
2
The district court also excluded the calls because they occurred after a majority of the
alleged payments were made and were therefore not relevant to the defendants’ state of mind
at the time those payments were made. But the timing is very close, and the conversations
provide insight into the minds of these defendants. Given the proximity in time, that the calls
occurred a few weeks after the payments at issue does not mean that they are irrelevant to the
defendants’ state of mind at the time the payments were made.
27
essentially the contact persons for the defendants, who were their counterparts at
the apparel company. If they were implicated in the defendants’ activities, even
as they insisted on hiding their approval, a jury could reasonably have inferred
that the defendants held a good faith belief that the attitudes of these coaches
reflected the view of the universities involved. Whether the assistant coaches
were too low in the hierarchy for a reasonable person in Code’s or Dawkins’s
position to infer that they spoke for the university is a judgment for the jury to
make, and the jury was not allowed to hear the calls to decide what inferences to
draw.
The evidence from which the majority infers that these coaches were not
unconflicted and were acting in bad faith should have been left to the jury. The
majority cites a conversation between Code and Dawkins in which they reference
their understanding that Head Coach Rick Pitino of Louisville wanted “plausible
deniability” about recruiting infractions. Id. at 640. But that Pitino wanted
plausible deniability does not necessarily mean that he knew Louisville would
not tolerate cheating. It could equally well mean that he was speaking for the
university itself, which (the defendants’ theory held) wanted to get winning
players but also wanted precisely such deniability. Id.
28
The majority also cites the coaches’ conduct on two of the excluded calls as
indicative of conflict. In one call, the coach closed his door while talking on the
phone. In another, the coach made statements about keeping his relationship
with Dawkins off the books. But while these actions could be construed, as the
majority interprets them, as “cut[ting] against any argument that the coaches
were unconflicted and acting in good faith,” Majority Op. at 29, they could also
have indicated that the universities wanted deniability as to impropriety that
they condoned. It all depends on from whom the coaches wanted to keep things
secret. A reasonable jury could infer that the coaches were afraid not that the
universities would disapprove of their condoning the defendants’ conduct, but
that the coaches knew – as defendants argued – that the universities could not
tolerate having it known that they were condoning it. This is a subtle but
important distinction. A coach would not be conflicted if he was doing exactly
what the university wanted: winking at the defendants’ off-the-books payments
to players’ families, but preserving the façade that he was not involved and did
not know what was going on.
Aside from these calls’ probative value as to the defendants’ intent, the
defendants argue that it would have also called into question the testimony of a
29
cooperating witness – another company representative, Thomas Joseph Gassnola
– who testified that he would not have told Kansas officials that he paid a
recruit’s family because “[the university] wouldn’t have liked it very much.”
App’x at 293. The majority does not believe that these calls would contradict
Gassnola’s testimony because, in their view, the calls showed that the coaches
“knew what they were doing was wrong.” Majority Op. at 30. But “wrong” is a
treacherous word in this context. Of course, the payments were “wrong” insofar
as they violated NCAA rules, and anyone, from the defendants to the coaches to
the university presidents, who tacitly or overtly condoned such payments would
not want that information to become publicly known. But that the coaches – and
the defendants – knew that what they were doing violated NCAA rules, does not
mean that they knew that high-level university policy-makers were genuinely
disapproving of the payments. Kings who would like “meddlesome priest[s]”
disposed of3 generally would not be happy to have those who take the hint report
3
The remark attributed to King Henry II of England, in reference to Archbishop Thomas
Becket derives from various chronicles and is formulated in different ways in the historical
sources and in literary works derived from them. The most famous formulation, “Will no one
rid me of this meddlesome priest?” comes from Edward Anhalt’s screenplay for the 1964 film
Becket, based on a play by Jean Anouilh, which uses a slightly different version of the remark.
Whatever degree of plausible deniability the King may have thought he had did not keep him
from later regretting, and doing penance for, the resulting murder of Becket, and has not saved
him from the verdict of history as to his responsibility for the act.
30
back overtly about what they had done.
It would not be necessary for a jury to conclude that, or even to entertain
reasonable doubt as to whether, the highest university officials were in fact as
hypocritical as the defendants professed to believe they were. The excluded calls
reflect conversations that the defendants had with university representatives at
their own level of contact that could lead a reasonable person in defendants’
position to believe that those officials were speaking for their employers in
condoning the rule-breaking. The defense’s argument was that the defendants
really did believe that this was the case. Even if it heard the excluded calls, the jury
could have rejected that defense and found that the defendants and the coaches
with whom they dealt were guided by their own self-interest. But it could also
have inferred that, under all the circumstances, there was reasonable doubt about
whether the defendants believed that the universities simply preferred not to be
told what was happening. These are issues that go to the heart of the defense, and
the jury should have been permitted to draw its own conclusions from this
evidence, which reflected actual discussions between defendants and
representatives of the “victimized” schools. Thus, the district court’s conclusion
that these two calls were irrelevant was erroneous.
31
But was the probative value of these two calls high enough to make the
district court’s decision under Rule 403 arbitrary and irrational? In the first call,
the coach implied that his relationship with Dawkins was something that he
needed to hide by keeping it “off the book[s].” App’x at 1717. On the call, the
coach referred to Louisville’s success in recruiting “five-stars” that year and
opined that this was the “[b]est class in Coach Pitino’s history.” Id. at 1719.
Dawkins then replies “[o]n the heels of a . . . whore scandal,” referencing the
misconduct reported in the COI findings. Id. The call did not directly implicate
the assistant coach (or Louisville) in Dawkins’s rule-breaking. The coach did not
say, for example, that he kept his relationship with Dawkins off the books
because Dawkins was assisting his team to recruit players in ways that broke
NCAA rules – though of course the jury could have certainly inferred as much
from the call. The call’s probative value is also reduced by the fact that the coach
in question was only a young assistant, far removed from the policy-making
apparatus of the university.
Still, the conversation cannot be considered mere evidence of generalized
corruption in college athletics. It involves statements made to one of the
defendants by a basketball coach who was a key point of contact for that
32
defendant with Louisville. If the government is going to prosecute people at
Dawkins’s 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.
In the second call, an assistant coach from Kansas directly discussed rule-
breaking with Code, though the recruit at issue was not implicated in the conduct
charged in this case. The coach said that he needed “to figure out a way” to get
money and housing for a recruit’s family, and admitted that he would have to
route the money through a third party to avoid detection by the NCAA. Id. at
1713. The coach then mentioned that he would talk with Jimmy Gatto – another
defendant in this case – about how to get the money to the family. Surely a
conversation in which a coach from a victim university discusses with one
defendant soliciting help from another defendant to break the NCAA rules
would be extremely relevant to whether those defendants believe that the
university the coach represents condones such rule-breaking.
On the one hand, the defendants’ case hinged on showing that they
believed they were not deceiving the universities, but they had few opportunities
33
to make their case to the jury. On the other hand, the government was able to
prove intent from “the scheme itself” if “the necessary result of the . . . scheme
[was] to injure others.” D’Amato, 39 F.3d at 1257 (internal quotation marks
omitted). Thus, the probative value of these calls, when considering that the
central defense was to challenge scienter, was high. Though these are close and
difficult judgments to make, I respectfully conclude that the district court’s
evidentiary rulings failed to appreciate the substantial probative value of these
calls. In fact, the district court concluded – and the majority agrees – that the calls
had little to no relevance to a valid defense in the first instance. In so doing, the
district court “obviated the need for [a Rule 403] balancing and cast doubt as to
the balancing made” by “shifting the . . . balancing test considerably in the
Government’s favor.” White, 692 F.3d at 247. Thus, I would conclude that
excluding the calls exceeded the wide bounds of the district court’s discretion to
exclude evidence under Rule 403.
IV. Harmless Error
That conclusion does not end our inquiry, however. We will not overturn a
conviction if the error was harmless. A harmless evidentiary exclusion is one in
which “we can conclude with fair assurance . . . did not substantially influence
34
the jury.” United States v. Oluwanisola, 605 F.3d 124, 133 (2d Cir. 2010) (internal
quotation marks omitted). Thus, we will still affirm if it is “highly probable that
the error did not affect the verdict.” United States v. Stewart, 907 F.3d 677, 688 (2d
Cir. 2018) (internal quotation marks omitted).
As a preliminary matter, the excluded calls would not logically affect
Code’s convictions for wire fraud against Louisville and conspiracy to commit
wire fraud. The erroneously excluded call between Code and the assistant coach
from Kansas is harmless as to Code because it is not likely that the call would
influence the jury’s conclusion on Code’s intent to deceive Louisville. There is no
evidence that Code knew of the call between Dawkins and the Louisville coach,
so there is no reason to believe that the other excluded call would have
substantially influenced the jury’s verdict on that count. Finally, the errors would
not affect Code’s conviction for conspiracy because his conviction for wire fraud
coupled with the government’s ample proof of the existence of a conspiracy
supports his conviction on the conspiracy count. See Calderon, 944 F.3d at 92.
Whether the errors affected Gatto’s or Dawkins’s convictions is a closer
question. Gatto was convicted of three counts: wire fraud as to Louisville and
Kansas and conspiracy to commit wire fraud. Dawkins, like Code, was charged
35
and convicted for wire fraud as to Louisville and conspiracy to commit wire
fraud. The erroneously excluded call between Dawkins and the Louisville coach
was directly relevant to his understanding of the expectations of that university,
and the call between Code and the Kansas coach may have influenced the jury’s
verdict as to Gatto because the call was probative of Gatto’s intent to deceive
Kansas.
When assessing whether improperly excluded evidence was harmless
error, we consider, inter alia, the importance of the evidence to the defense,
whether the evidence is cumulative, and the strength of the government’s case on
the factual issue. Oluwanisola, 605 F.3d at 134. “[T]he strength of the
government’s case is the most critical factor in assessing whether the error was
harmless.” United States v. McCallum, 584 F.3d 471, 478 (2d Cir. 2009).
The government’s evidence on fraudulent intent was not anemic. The jury
was allowed to infer “fraudulent intent . . . from the scheme itself.” D’Amato, 39
F.3d at 1257. The government supported that inference by presenting evidence
tending to indicate that Louisville, Kansas, and North Carolina followed NCAA
rules. Compliance officers from each university testified that they enforced – and
trained their staff and players to comply with – NCAA rules because the NCAA
36
would penalize the universities or their coaches for any violations. Gassnola
testified that Kansas’s coaches “wouldn’t have liked it” if he let them know that
the defendants were paying money to the families of recruits, presumably to
support the inference that the defendants knew that the schools did not approve
of their conduct. App’x at 293. The government used its closing argument to
stress that the defendants endeavored to conceal their actions at every turn: they
used burner phones, made payments using cash and multiple bank accounts, and
discussed the need to be careful when talking around others. In sum, the
government’s case centered on circumstantial evidence that could indicate to a
jury that the defendants’ arguments that they did not intend to deceive the
universities were unpersuasive. The jury agreed with the government after
deliberating for less than three days.
But the government’s evidence could have also supported the defendants’
theory that they wanted to hide their payments from the NCAA, while being
careful to give the universities plausible deniability by not discussing their
actions openly with certain university officials. That the schools had compliance
officers to enforce NCAA rules, and that a university “wouldn’t have liked it” if
it knew that the defendants were paying money to a recruit’s family, does not
37
directly negate that theory because the defendants’ job was to keep the rule-
breaking under wraps from all parties, including the universities themselves.
That does not mean, however, that the universities were deceived if they were in
fact indifferent to whether rules were broken, so long as the violations were
sufficiently hidden from the university’s leadership, the NCAA, and the public.
And crucially, the jury did not need to agree that what the defendants believed
was happening was, in fact, happening. The defense simply needed to create
reasonable doubt as to the defendants’ belief about what the universities knew
about their scheme.
I cannot find, with high probability, that the district court’s exclusion of the
call between Code and the assistant coach from Kansas did not affect Gatto’s
conviction for wire fraud as to Kansas. Stewart, 907 F.3d at 688. In the call, the
coach admitted that he knew that paying for a recruit’s brother to visit the school
violated the NCAA rules, yet he planned to ask “Jimmy” for help in routing
funds to the family through an amateur team, all in the hopes of getting the
recruit to eventually commit to Kansas because “it’s [his] job” to do so. App’x at
1715. Had the jury heard this call, it may have believed that the coach did call
Gatto to ask him to provide the money. In turn, that would make it more likely
38
that Gatto genuinely did not intend to defraud Kansas by his actions at issue in
this case. Of course, just because a coach at the school asked Gatto to break the
NCAA rules in one instance does not mean that the university condoned or
approved of such rule breaking in others, but it does make it more likely that
Gatto believed that he was not defrauding Kansas. Given that Gatto exercised his
right not to testify at trial, the call would have been critical to understanding
what was in Gatto’s mind near the time that these payments were made. By
excluding the call, the district court may have substantially affected the jury’s
decision to find Gatto guilty of wire fraud as to Kansas.
The error, however, was harmless as to Gatto’s convictions for wire fraud
against Louisville and conspiracy to commit wire fraud. As the defense admitted
in closing, the jury heard evidence that Gatto called Coach Pitino after Code
asked Gatto to route money to a Louisville recruit. The defense argued that the
only reason Gatto would call Coach Pitino immediately after receiving this
request would be to ask him if that is what he (and Louisville) wanted, but the
jury rejected that theory. The excluded call between Code and the Kansas coach
would not have provided the jury with anything more to help them find that
Gatto did not intend to deceive Louisville, and there is no reason to believe that
39
Gatto knew of the excluded call between Dawkins and Louisville. Because
Gatto’s conviction for wire fraud as to Louisville was not affected by the
excluded calls, that conviction stands. Given Gatto’s substantive conviction, the
jury’s verdict convicting him of conspiracy to commit wire fraud also stands.
The district court’s exclusion of the call between Dawkins and the assistant
coach from Louisville was not harmless as to Dawkins’s convictions, however.
The government argues that there was “overwhelming evidence” that Dawkins
knew that Louisville did not approve of the payments because he admitted that
they “could not be disclosed to the Universities (or coaches).” Appellee’s Br. at
75. The call discussing Pitino’s “plausible deniability, App’x at 640, and
Dawkins’s admission that he “would never tell Rick [Pitino] anything . . . because
I don’t want to put him in jeopardy,” Supp. App’x at 142, could support an
inference that Dawkins knew that Coach Pitino and Louisville did not want him
to make the payments at issue in this case. But if the excluded call showing a
coach from Louisville describing his relationship with Dawkins as “off the
books” was shown to the jury, App’x at 1718, that might have changed the jury’s
perspective on Dawkins’s argument that he was trying to give Pitino and
40
Louisville plausible deniability in the event of an NCAA investigation, despite
their knowing full well what was occurring. Because Dawkins too exercised his
right not to testify, this call was a crucial piece of evidence that could have helped
support the defense’s theory about intent when little other evidence was
available.
In excluding the call, the district court may have substantially affected the
jury’s decision to find Dawkins guilty of wire fraud as to Louisville, and the error
also necessarily affected Dawkins’s conviction on the conspiracy count. To
support a conviction for conspiracy to commit wire fraud, the government has
the burden of proving “that the defendant acted with specific intent to obtain
money or property by means of a fraudulent scheme.” United States v. Carlo, 507
F.3d 799, 801 (2d Cir. 2007). Thus, to find Dawkins guilty of conspiracy, the jury
must have found that he intended to defraud a victim university. Given that the
district court’s error may have influenced the jury’s decision as to Dawkins’s
intent to deceive Louisville, and given that there was no evidence that Dawkins
intended to defraud any other victim university, I cannot conclude with
confidence that his conviction for conspiracy was not substantially affected by
the evidentiary exclusion. By excluding the calls, the district court erroneously
41
deprived Gatto and Dawkins of a fair opportunity to convince the jury that they
did not intend to deceive the victim universities. Thus, I would overturn Gatto’s
conviction on count three and Dawkins’s convictions on counts one and two.
* * *
I fear I have belabored the evidentiary issues in this case at undue length.
For the most part, I agree with the majority’s bottom line: the nature of the
prosecution confronted the able district judge with a series of delicate and
difficult evidentiary problems, to which the judge for the most part made
reasonable, if not indisputable, responses. In many cases, it is easy to police a line
between evidence that supports a defendant’s good faith and evidence that
merely attacks the reputation or probity of the victims. In this case, however, the
vices with which defendants sought to tar the alleged victims were not
extraneous to the alleged fraud. This was not a case in which the defendants
sought to prove that their victims had done bad things that had little or nothing
to do with the scheme of which defendants were accused, but which might make
a jury feel that the defendants were unworthy of the law’s protection.
Here, the defendants’ argument was that the things the government said
42
they stole from the universities – the scholarship money provided to the athletes
and the university’s ability to comply with NCAA rules and avoid penalties –
were things that they reasonably believed the universities were in fact happy
enough to give up in the pursuit of greater financial benefit. The defendants
claimed to believe that by not openly acknowledging the rules violations they
committed, they were deceiving no one, because the universities in fact knew that
such violations happened regularly. The universities did not know of the specific
payments made by these particular defendants not because the defendants pulled
the wool over the victims’ eyes, but because the alleged victims desired not to
know too much, in order to preserve a hypocritical pretense of compliance while
pursuing the financial and reputational benefits of maintaining successful athletic
programs without paying the athletes whose skills and hard work generate the
profits that go to the adult coaches and schools.
Such a cynical theory may be a caricature of how college sports are in fact
conducted. No doubt many university officials and athletic coaches genuinely
attempt to comply with rules derived from a model of amateurism that some
others desecrate, and that is difficult to maintain in a world where winning
games and making money can come to be seen as the highest goals. To whatever
43
extent the defendants’ professed beliefs correspond to reality, evidence to that
effect would be difficult to come by; the essence of the defense is that the
universities pretended to want to run clean programs, and that this pretense
required those who funneled payments to hard-pressed families of student
athletes to operate in secret, as if they were deceiving universities that themselves
were trying to hide what makes their programs successful. And in the absence of
evidence directly supporting their claims, defendants fell back on evidence that
provides only limited, indirect support for their specific theory, and that does so
by painting a grim picture of widespread corruption and hypocrisy without quite
engaging the government’s evidence suggesting that at least these particular
victims were genuinely defrauded.
The district court was ultimately right to try to prevent the defendants
from putting 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.
Whatever value such a trial might have in the court of public opinion, and
however such a “defense” might affect the wise judgment of prosecutors as to
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what cases are worth the expenditure of significant law enforcement resources,
the legal issues in a case like this are far narrower.
By the same token, a venture into the underside of college athletic
recruiting opens up significant questions about the motivations and beliefs of the
participants. We should be particularly careful not to sweep too broadly in
declaring out of bounds evidence that does indeed support the defendants’
claims about what they believed. The cynicism of their claimed beliefs does not
do them much credit, but on this record one is left with a queasy feeling that the
deeper cynicism may be in the system within which they operate.
People like the defendants operate at the seamiest margin of amateur
sports. They (and the athletes and their families who succumb to their offers) are
violating the rules by which the universities, cynically or sincerely, have agreed
to be bound – rules of which the athletes are well aware, and with which they are
required to represent that they have complied. And such violations are not
victimless. Only a few athletes have the talent to skip the college game and
succeed at the highest professional level. A few more are realistic candidates for
such success, if they are properly trained and groomed by the opportunity to
compete in college programs. Most who compete in college have an opportunity
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to earn a degree that will stand them in good stead even if they do not play
professional sports – but only if they can pay for their education with their labor
on behalf of the school’s teams. But all are vulnerable to losing those
scholarships, and having their vocational training disrupted, if they are publicly
known to have violated the rules. Whether or not those who bribe aspiring
athletes to sign onto a particular college’s basketball program have defrauded the
universities, they expose the youthful athletes to a high degree of risk.
It 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. Our only responsibility is to decide whether the defendants have
been tried and convicted on the charges brought against them in accordance with
the law, including the applicable rules of evidence. The questions in this case are
very close, and the experienced trial judge and my colleagues on this panel have
honorably applied the governing rules. Our disagreements are narrow, and
involve only a few of the many close evidentiary calls forced on the judge by the
nature of the charges. Nevertheless, for the reasons set forth above, I respectfully
dissent from those portions of the majority opinion that uphold those rulings that
I find erroneous and prejudicial, and from the judgment of the court insofar as it
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affirms Gatto’s conviction on count three and Dawkins’s convictions on counts
one and two.
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