Los Angeles Clippers Face Federal Investigation Over Kawhi Leonard Compensation

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

The probe, led by the U.S. Attorney's Office in Brooklyn, is in its early stages, the Times reported, citing people briefed on the matter. At least one subpoena has already been issued as part of the inquiry.

The U.S. Attorney's Office declined to comment when contacted by ESPN. The Clippers and the NBA also did not respond to requests for comment.

This federal case comes on the heels of a sweeping, nearly yearlong NBA investigation into the franchise, conducted by law firm Wachtell, Lipton, Rosen & Katz. That league-commissioned probe concluded that the Clippers engaged in “a pattern of misconduct and multiple significant rules violations,” including salary cap circumvention, and noted that the organization was already a repeat offender in that area.

The NBA responded with one of the harshest penalties ever handed to a team for cap-related violations: the loss of five future first-round draft picks, a $30 million fine, and a one-year suspension for owner Steve Ballmer. Leonard was also hit, ordered to pay the league $700,000.

Now, the matter has spilled beyond the league office and into federal territory.

The Clippers’ financial dealings with Leonard had already drawn attention from another government body. On Sept. 2 — the same day the NBA released its findings and punishments — an executive from Daktronics, a scoreboard manufacturer, told investors on a quarterly earnings call that the Securities and Exchange Commission had contacted the company about its business with Leonard. The executive said Daktronics was cooperating with the SEC and declined to elaborate.

That date was pivotal for another reason. In its Sept. 2 report, Wachtell Lipton detailed how league investigators believe the Clippers funneled money to Leonard through a side arrangement tied to the Intuit Dome, the franchise’s new arena. According to the report, the team steered a kickback from a lucrative scoreboard contract toward Leonard in the form of an endorsement deal and even helped set the terms of a multiyear agreement worth millions of dollars.

If the NBA’s findings painted a picture of a franchise willing to test the boundaries of league rules, the federal investigation now raises a sharper question: where, exactly, did those boundaries cross into potential criminal conduct?