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Tuesday, September 25, 2007
Athletics Directors are Demanding an Answer to New York's Fishing Investigation of Illegal Kickbacks

Two months ago, it was splashed all over the front page headlines that the New York Attorney General's office had issued subpoenas and records requests to 41 Division I college athletic programs, questioning whether athletics personnel got kickbacks or promises of cash or other perks for steering students to a particular lender. Earlier this year, Florida-based student loan provider University Financial Services (UFS) was found to have offered kickbacks to the athletics director at Division II Dowling in New York. This prompted the NY AG's office to investigate all of the larger athletics programs across the country that have an advertising/sponsorship relationship with UFS.

USA Today's Steve Wieberg reported yesterday that the targets of the investigation have not heard anything from the AG's office. The athletics directors are demanding answers (and rightfully so):
"There was a big media splash. It was a big push by the attorney general. And then, you get nothing else," says Central Florida athletics director Keith Tribble, who insists his department has done nothing wrong and wants public confirmation of that. "We would like to have some closure to it, to (have them) say basically there's nothing to this."

At Louisville, "There's no doubt we're sitting on an island," AD Tom Jurich says. "… I'm not speaking for 41 schools, but I would imagine everyone would like some clarification on this."
It's not surprising that nothing showed up from this investigation. It was highly questionable right from the start. First, the basis for investigating all of these programs across the country is simply that the athletics director at Dowling in New York was receiving illegal kickbacks from a student loan provider that also served as a sponsor for the Dowling athletics program. That one instance does not provide any reasonable basis whatsoever to believe that the athletics director at any of these programs is or has been receiving unlawful kickbacks. Second, even if a correlation did exist, what legitimate purpose is served by issuing these subpoenas? If the athletics director of one of these programs was in fact receiving unlawful kickbacks, is it reasonable to think that he would actually produce a "smoking gun" document evidencing an unlawful kickback arrangement?


Prof Karcher:

I'm a bit out of the loop here, but could the AD's request some kind of determination from the AG's office. I'm thinking something similar to a DOL opinion letter or IRS private letter ruling.

I would think these athletic programs deserve to have their names cleared if they indeed have nothing to hide. And I completely agree...what AD in their right mind would supply the smoking gun?

Blogger Jimmy H -- 9/25/2007 9:00 AM  

You may be right about this being a fishing expedition, but I think the possiblity of getting incriminating documents is more likely than you think. When a subpoena comes into a university, the general counsel's office (if not outside counsel) would oversee the production, rather than the athletic department. These lawyers would almost certainly turn over an non-privileged incriminating documents.

Anonymous Anonymous -- 9/25/2007 9:43 AM  


Good point. But the issue from my standpoint is not really whether it's the AD or the general counsel who is producing the documents. The issue is one of practicality. In other words, what is the reasonable likelihood that an incriminating document actually exists to evidence unlawful kickbacks being paid to department personnel? If the parties had that understanding, do you think they would put it in writing?

But more to the point, even if you argue that it is reasonably possible that the parties could put such an arrangement in writing, the fact that it happened at Dowling in and of itself does not seem to warrant such an overly broad investigation.

Blogger Rick Karcher -- 9/25/2007 10:12 AM  

Well, slow day at work today, so lots of time for me to read the Blog and research topics to satisfy my hunger for knowledge...anyways...

Prof. Karcher,

I agree with you that the AG's office did not seem to have too much meat on it's bones before starting such a broad investigation, but:

Three schools did have contracts with lenders and have now entered into settlement agreements (Trinity College, Fairfield University and Sacred Heart University).

26 schools have committed to NY AG Cuomo’s "Code of Conduct". 10 of these schools have agreed to reimburse students over $3 million for the cost of revenue sharing agreements.

Granted, wether the athletic programs were specifically involved here is a completely different question. Perhaps it would have been more prudent of AG Coumo to direct the subpoena's to the each school as a whole instead of focusing on some schools athletic departments.

the fact that 13 schools have alreday admitted to this revenue sharing and agreed to settlements is pretty incredible. These schools (at least the three mentioned at the top) actually had written agreements, and I would assume that the other ten that offered settlements did so because there was some evidence of involvement.

Blogger Jimmy H -- 9/25/2007 10:40 AM  


Thanks for the link. I see some important distinctions though. Kickbacks in the form of cash or other perks given to one individual in a position of authority and influence such as an AD in return for that individual referring students to one particular lender (as was the case at Dowling) does not have the same level of culpability as an institution receiving a discount on software in return for putting a lender on a list along with many other lenders for the borrower to choose from. Legally, there may not be a difference between the two (or maybe there is), but I think the Dowling situation is a unique and remote circumstance that doesn't provide a basis for the investigation of the 41 athletic programs. I don't see the Trinity, Fairfield and Sacred Heart settlements as grounds for the investigation either.

Blogger Rick Karcher -- 9/25/2007 11:13 AM  

Oh I completely Agree. There are some important distinctions. Clearly we have more of a fiduciary problem in the case at Dowling. A person with influence receiving kickbacks v. An institution putting a name on a list in return for discounts on financial software does not come close to the same level of breach of fiduciary duties (at least not in my opinion).

Blogger Jimmy H -- 9/25/2007 12:51 PM  

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