Los Angeles Clippers Under Federal Investigation for Salary Cap Violations

Federal prosecutors have opened a criminal investigation into whether the Los Angeles Clippers illegally skirted the NBA’s salary cap to compensate Kawhi Leonard, according to a report from The New York Times.

The probe, led by the U.S. Attorney's Office in Brooklyn, is in its earliest stages but pushes the Clippers’ scandal beyond the league office and into the federal system. It is a striking escalation for a franchise already hit with some of the harshest penalties in NBA history.

Officials from the U.S. Attorney's Office did not respond to a request for comment. The Clippers and the NBA also declined to comment.

The federal inquiry follows the NBA’s own nearly yearlong investigation, handled by the law firm Wachtell, Lipton, Rosen & Katz. In a Sept. 2 report, league investigators said they uncovered “a pattern of misconduct and multiple significant rules violations” by the Clippers, describing the team as a repeat offender of salary-cap circumvention rules.

The league’s response was brutal. The Clippers lost five future first-round draft picks, were fined $30 million, and saw owner Steve Ballmer suspended for a year. Leonard was ordered to pay the NBA $700,000.

Now federal prosecutors are digging into the same terrain. According to The New York Times, at least one subpoena has already been issued as part of the criminal investigation.

This is not the first time a government entity has stepped into the case. On Sept. 2, the same day the NBA announced its findings and punishments for the Clippers and Leonard, Daktronics — a major scoreboard manufacturer — disclosed on a quarterly earnings call that it had been contacted by the Securities and Exchange Commission regarding its dealings with Leonard. The company said it was cooperating and declined to elaborate.

At the heart of the controversy is a blockbuster scoreboard contract tied to the Clippers’ new arena, Intuit Dome. According to the Wachtell Lipton report, the Clippers steered a kickback from that massive deal to Leonard in the form of an endorsement arrangement, and even helped set the terms of a multiyear agreement worth millions of dollars.

What began as a salary-cap case inside the NBA has now spilled into the realm of federal prosecutors and securities regulators, leaving the Clippers’ handling of their franchise star under a far harsher spotlight.