## Facts

- James Gatto (an Adidas basketball marketing executive), Merl Code (an Adidas consultant), and Christian Dawkins (an aspiring sports agent) participated in a recruiting-payment scheme tied to Adidas-sponsored NCAA Division I basketball programs.
- Defendants arranged for tens of thousands of dollars to be paid to families of elite high-school recruits to influence the recruits’ enrollment at North Carolina State, Kansas, and Louisville.
- The payments violated NCAA rules that barred recruits and student-athletes from receiving such compensation and would have affected eligibility.
- Defendants concealed the payments, including by routing funds through false Adidas invoices that portrayed the money as legitimate payments to grassroots basketball entities.
- After enrolling, recruits executed eligibility-related certifications to the universities, allowing them to compete and receive athletic-based financial aid.
- The government prosecuted the conduct as wire fraud and conspiracy to commit wire fraud, alleging defendants used deception to cause universities to award scholarship funds without knowing disqualifying facts.
- Following a jury trial in the Southern District of New York, defendants were convicted on the wire-fraud and conspiracy counts and were sentenced to short prison terms and restitution.

## Issues

1. Whether the evidence was sufficient to prove a scheme to defraud and intent to deprive the universities of “property,” including athletic-based scholarship funds, by concealing economically material information.
2. Whether the district court abused its discretion by excluding substantial portions of defense evidence and expert testimony concerning college-sports economics and recruiting practices under Rules 401 and 403.
3. Whether the jury instructions on wire fraud (including the “right-to-control” theory) and conscious avoidance were legally erroneous or prejudicial.

## Decision

- The Second Circuit affirmed the convictions on all counts.
- The court held the evidence was sufficient for a rational jury to find a scheme to defraud and that the universities’ athletic-based aid was an object of the scheme.
- The court concluded the universities were deprived of property, including scholarship funds that could have been allocated to eligible athletes, through concealment and deceptive means.
- The court upheld the district court’s evidentiary rulings, including exclusion of much of the proposed defense expert testimony as irrelevant or excludable under Rule 403.
- The court found no reversible error in the jury instructions, including instructions addressing the wire-fraud elements, property, and conscious avoidance.
- A separate opinion concurred on sufficiency but dissented in part on the scope of evidentiary exclusions.

## Legal Principles

- Wire fraud under 18 U.S.C. § 1343 and conspiracy under § 1349 may be established where defendants use deception to cause a victim to part with money or property.
- Athletic-based scholarship funds may constitute “property” for wire-fraud purposes where the scheme targets the allocation of those funds.
- Under the Second Circuit’s “right-to-control” doctrine (as applied in this case), depriving a victim of economically material information needed to make discretionary asset-allocation decisions can satisfy the property requirement when accomplished through fraudulent means.
- Intent to defraud may be inferred from secret payments, deliberate concealment (including falsified documentation), and conduct structured to enable false eligibility-related representations.
- District courts have broad discretion to exclude evidence as irrelevant (Rule 401) or where probative value is substantially outweighed by risks such as confusion or distraction from the charged scheme (Rule 403).
- Conscious-avoidance instructions are permissible when the evidence supports an inference that a defendant deliberately avoided confirming key facts tied to knowledge and intent.

## Conclusion

The Second Circuit sustained wire-fraud and conspiracy convictions arising from concealed recruiting payments that rendered athletes ineligible and misled universities into awarding athletic-based financial aid, holding that the evidence supported fraudulent intent and a property-based deprivation under the circuit’s right-to-control approach, and that the challenged evidentiary rulings and jury instructions did not warrant reversal.


United States v. Gatto, 986 F.3d 104 (2d Cir. 2021)