The NBA has started an inquiry into the Los Angeles Clippers following claims that a $28 million promotional agreement linked to prominent athlete Kawhi Leonard was employed to evade limitations on team compensation. This originates from a March 2025 declaration of insolvency by Aspiration, a now-failed ecological firm that secured $50 million in capital from Clippers’ proprietor Steve Ballmer.
Based on a startling account from investigative reporter Pablo Torre, Leonard entered into an agreement with Aspiration, yet seemingly conducted minimal or no marketing activities in return. League authorities are scrutinizing if the arrangement constituted a “non-appearance” agreement crafted to channel funds beyond his sanctioned earnings.
The association has recruited the New York-based legal practice Wachtell, Lipton, Rosen & Katz to manage the scrutiny.
Aspiration has subsequently confronted allegations of deceit, and co-creator Joseph Sanberg has subsequently acknowledged culpability for defrauding numerous financiers. That submission incorporated a catalog of lenders to whom Aspiration still owed finances. Among those listed? KL2 Aspire LLC, a firm that identifies Kawhi Leonard as its director.
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Those filings indicate that Aspiration still owes Leonard $7 million. Nevertheless, Torre’s reporting did not identify a singular occurrence in which Leonard endorsed or even acknowledged Aspiration, as might be anticipated in a promotional agreement. A variety of other notable figures, including Milwaukee Bucks instructor Doc Rivers, did furnish endorsements for the entity.
A document Torre acquired, which Leonard endorsed, revealed that Leonard was scheduled to receive $28 million in funds across four years, spanning from 2022 to 2025, contingent upon his participation with the Clippers. Coverage from the Boston Sports Journal, which Torre later validated, asserted that Aspiration additionally maintained a confidential supplementary arrangement with Leonard valued at an additional $20 million, elevating the aggregate to $48 million, marginally below Ballmer’s purported $50 million commitment to the enterprise.
A former Aspiration staff member in the financial division conveyed on Torre’s podcast, Pablo Torre Finds Out, that the arrangement “was designed to circumvent the restrictions on compensation, humorously.”
Thus, what implication does all of this carry? Let’s examine the NBA’s regulations concerning the avoidance of salary limitations in an attempt to ascertain.
What constitutes avoidance of salary limitations?
In the event that you desire the official interpretation of circumventing the compensation restrictions, it is accessible between pages 339 and 346 of the NBA’s Collective Bargaining Agreement. The pertinent segment for our deliberation can be located in Article XIII, Section 1(b):
“It shall be deemed a breach of Section 1(a) above for a Team (or Team Affiliate) to engage in an agreement or understanding with any sponsor or business associate or external entity under which such sponsor, business associate, or external entity remits or pledges to remit recompense for basketball-related activities (notwithstanding that such recompense is nominally designated as being for non-basketball-related activities) to a player under Contract to the Team. Such an agreement with a sponsor or business associate or external entity may be inferred where: (i) such recompense from the sponsor or business associate or external entity is materially in excess of the reasonable valuation of any activities to be rendered by the player for such sponsor or business associate or external entity; and (ii) the Recompense in the Player Contract between the player and the Team is materially beneath the reasonable valuation of such Contract.”
Therefore, what is the significance of this? Essentially, evading the imposed compensation constraints occurs when a team employs an external party to remunerate a player beyond what is contractually mandated or lawfully sanctioned to accrue under the parameters of the salary threshold. The most straightforward means of accomplishing this would entail a promotional agreement with a corporation in which the team or proprietor maintains some degree of involvement.
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It is exceedingly uncommon for a team to be unequivocally demonstrated to have circumvented the compensation limitations. Nonetheless, there exist a multitude of scenarios that the regulations are intended to safeguard against. The most evident would involve a prominent athlete endeavoring to accrue earnings surpassing the league-mandated ceiling, although supplementary situations exist. One illustration of circumventing the compensation restrictions could encompass a team enlisting a player at a rate below the prevailing market average as a free agent, predicated on the comprehension that they will subsequently remunerate that player more extensively upon accumulating the requisite Bird Rights to facilitate such action. Another instance would entail compensating a player who is underpaid and ineligible for a contractual augmentation under league statutes. These regulations are in effect to preclude teams from attempting to secure a competitive advantage by remitting payments to players exceeding the permissible limits imposed by the compensation restrictions.
Leonard, who initially affiliated with the Clippers in the summer of 2019, formalized a three-year contractual augmentation valued at nearly $150 million in 2024.
Has anyone ever been apprehended for circumventing the limitations?
In 1993, the NBA contended that the Portland Trail Blazers circumvented the compensation limitations due to the atypical structure of a contract extended to center Chris Dudley. That arrangement, a seven-year pact valued at $11 million, incorporated an opt-out provision following the initial season. This held significance given that, at that juncture, a free agent attained comprehensive Bird Rights with a novel team following merely one year, thereby endowing Dudley with the capacity to opt out and transition into a free agent, whereupon the Blazers could have surpassed the compensation restrictions to re-enlist him for heightened remuneration. This contract was ultimately upheld via arbitration, and Dudley did not enact that opt-out clause as he sustained an injury during his inaugural year in Portland. The league’s regulations concerning contractual structures have since undergone substantial tightening. Other players at that time, such as Toni Kukoc and Craig Ehlo, possessed analogous clauses within their contracts.
In 1996, preeminent agent David Falk reportedly devised a scheme to circumvent the compensation restrictions, intended to enable the New York Knicks to present a competitive financial proposal to enlist Michael Jordan as a free agent. The same parent entity, ITT Corporation, held ownership of both the Knicks and Sheraton Hotels. While the Knicks possessed compensation flexibility, at that point, there existed no ceiling on earnings, implying that the Bulls, possessing Jordan’s Bird Rights, were capable of tendering literally any sum of currency to retain his services. Consequently, the strategy entailed Jordan receiving $15 million to endorse Sheraton Hotels. The strategy was never formally presented before the league; however, Jordan ultimately re-enlisted with the Bulls.
The most renowned instance of circumventing the compensation restrictions in league annals, however, involved former top overall selection Joe Smith. While Smith had not evolved into the luminary figure Golden State had anticipated upon employing the premier selection on him in 1995, he was nonetheless regarded as a prominent free agent in 1998. It was, therefore, startling when he formalized a modest, one-year arrangement to affiliate with the Minnesota Timberwolves.
Two years thereafter, Smith’s agent departed his prior firm, and a convoluted legal action permitted the truth to emerge: Smith had endorsed three distinct one-year arrangements with the Timberwolves, which would have enabled Minnesota to accrue his comprehensive Bird Rights following the third season and subsequently extend to him a novel, protracted arrangement thereafter, potentially entitling him to as much as $86 million.
Then-NBA commissioner David Stern imposed a historic penalty for that circumvention. The Timberwolves were levied a fine of $3.5 million. All of Smith’s contracts were invalidated, along with his Bird Rights with Minnesota. Then-proprietor Glen Taylor was prohibited from overseeing the Timberwolves for a duration of one year. Most notably, Stern divested the Timberwolves of their subsequent five first-round selections. The penalty was so severe that he ultimately restored their selections in 2003 and 2005, yet they nonetheless forfeited three in the process.
What is the repercussion for circumventing the limitations currently?
Well, that is contingent upon the specific nature of the infraction committed. Article XIII, Section 1 of the CBA encompasses “General Prohibitions” pertaining to circumvention. Section 2 addresses “Unauthorized Agreements.” The CBA autonomously enumerates plausible penalties for breaches of Section 1 and Section 2 within Section 3. A Section 1 breach would ostensibly incur a more lenient repercussion, potentially encompassing the subsequent measures at the commissioner’s prudence:
- A fine amounting to a maximum of $4.5 million for an initial offense.
- A fine amounting to a maximum of $5.5 million for the second and any subsequent offenses.
- The forfeiture of a solitary first-round draft selection.
- Contracts or transactions that contravened league statutes may be invalidated.
Conversely, a Section 2 breach could potentially incur more substantial repercussions:
- A fine amounting to a maximum of $7.5 million.
- A suspension extending up to one year for any team personnel determined to be intentionally implicated in the breach.
- Contracts or transactions that contravene league statutes may be invalidated.
- The forfeiture of draft selections.
That concluding point is noteworthy. No specific type or quantity of draft selections is delineated, which would ostensibly afford the commissioner considerably greater latitude in determining the repercussion in the event of a Section 2 breach. Consequently, the repercussion the league imposes upon the Clippers, should they indeed be determined to have circumvented the compensation limitations, would ultimately hinge upon the precise essence of the breach uncovered by the scrutiny.
Have there ever been accusations directed at Leonard or the Clippers?
In 2015, the Clippers were fined $250,000 for tendering DeAndre Jordan an unauthorized promotional agreement. Brad Turner of The Los Angeles Times reported at the time that they proposed to him a $200,000 per annum promotional agreement with Lexus. Ballmer had possessed the Clippers for a duration of less than one year at the time of the Jordan negotiation.
Neither Leonard nor the Clippers have ever been unequivocally proven to have circumvented the compensation limitations in regard to their association with one another. Nonetheless, rumors have persisted since Leonard consented to affiliate with the Clippers in 2019.
In the immediate aftermath of Leonard’s decision, The Athletic’s Sam Amick reported that a grievance was submitted to the league office accusing Dennis Robertson, Leonard’s uncle, of soliciting improper benefits during the free agency process. From Amick’s reporting at the time:
“The narratives regarding Robertson’s catalog of desires disseminated to the league office shortly after Leonard reached his verdict, with concerned factions reporting that Leonard’s uncle had implored pursuing teams for considerably more than a maximum contract (Kawhi ultimately formalized a three-year arrangement valued at $103 million with the Clippers). Sources indicate that the league was apprised that Robertson solicited team officials for partial ownership of the team, a private aircraft accessible at all junctures, a residence, and, of paramount significance, a guaranteed quantum of off-court promotional revenues that they could anticipate were Leonard to participate for their team. All of those provisions, to be unambiguous, would transpire substantially beyond the perimeters of the league’s collective bargaining agreement.”
Amick reported that Robertson directed those solicitations toward the Lakers and Raptors. However, the NBA identified no substantiation that the Clippers acceded to these solicitations. Adam Silver addressed the scrutiny directly to The Athletic.
“We did communicate to our teams [at the Board of Governors assembly in New York in late September] that we are examining and continue to scrutinize activities from this summer,” Silver conveyed to The Athletic in 2019 when queried as to whether the Clippers were under scrutiny. “I will additionally state that we [were] endeavoring to delineate a boundary at this board assembly, and to orient everyone toward the [free agency] regulations prospectively. I surmise that [I’ll] merely terminate at that juncture. We are scrutinizing the conduct from the summer. We have and we persist in scrutinizing it, but predominantly, we aspire to modify the modus operandi moving forward.”
Notably, Amick reported that “should any pertinent substantiation of improper benefits surface in the future, the league will re-initiate the scrutiny and pursue the charges once more.” In 2020, the NBA was compelled to scrutinize the Clippers yet again when Johnny Wilkes, a purported acquaintance of both Leonard and Robertson, initiated legal action against the Clippers and team advisor Jerry West, alleging that he was owed $2.5 million for aiding the Clippers in securing Leonard’s services. In 2022, that legal action was dismissed in the Los Angeles Superior Court.
Leonard affiliated with the Clippers in July of 2019. However, the term of the arrangement secured by Torre commenced on April 1, 2022, and was slated to conclude on March 31, 2026. Leonard’s initial contract with the Clippers spanned three years and amounted to $104 million. In 2021, he re-formalized an arrangement encompassing four years and valued at $176 million, and subsequently, in 2024, he extended once more for $149.5 million across three years.
How have the Clippers and the league communicated their positions?
The NBA disseminated a statement on Wednesday afternoon through a spokesperson, articulating, “We are cognizant of this morning’s media report pertaining to the L.A. Clippers and are initiating an inquiry.”
The Clippers, in the interim, penned in a statement to Torre that “Neither Mr. Ballmer nor the Clippers circumvented the compensation limitations or engaged in any impropriety pertaining to Aspiration. Any contradictory assertion is demonstrably erroneous.” Ballmer himself made an appearance on SportsCenter on Thursday evening to elucidate his perspective on the matter. He asserted that while the Clippers introduced Leonard to Aspiration in 2021, subsequent to Leonard’s agreement to a contractual augmentation and the Clippers’ announcement of a $300 million collaboration with Aspiration, they were not implicated in their arrangement.
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“We were resolved. We were resolved with Kawhi, we were resolved with Aspiration. The arrangements were entirely secured,” Ballmer stated. “Subsequently, they did solicit an introduction to Kawhi, and under the prevailing regulations, we are permitted to introduce our sponsors to our athletes. We are simply precluded from participation.”
Mark Cuban, the outspoken former proprietor of the Mavericks, articulated his sentiments on Wednesday, posting on social media that he is “Team Ballmer.”
“As much as I harbor a desire for them to have circumvented the compensation limitations, firstly, Steve is not that deficient in intellect,” Cuban penned. “Should he have endeavored to channel funds to KL, cognizant of the stakes for him personally, and for his team, do you believe he would have permitted the corporation to declare insolvency? Knowing that all creditors would be discernible to the global audience?”
On Thursday, Cuban appeared on Torre’s podcast and asserted that point.
Leonard has abstained from public pronouncements.
