NBA Launches Investigation Into Clippers Leonard Endorsement Deal

The NBA has announced an investigation into the Los Angeles Clippers (something related to Kawhi Leonard), following accusations of salary cap violations through a $28 million endorsement by the company of Kawhi Leonard, KL2 Aspire. Investigative journalist Pablo Torre created a network of financial connections beginning with Leonard, the Clippers, and a bankruptcy notice for a company called Aspiration Fund Adviser, LLC. On May 16, 2023, it was announced that Aspiration, which ran an eco-friendly investment and banking platform, was bankrupt.

The center of the investigation seems to be KL2 Aspire, with the initials of Kawhi Leonard and his jersey number as the name of the company. According to California business records, Leonard is the manager of the company. Aspiration stated in their filings that they owed KL2 Aspire, LLC $7 million and the Clippers around $30 million, which raises questions about the compensation the team approved. The reported four-year endorsement deal purportedly gave Leonard’s company $7 million a year—again, great timing coincides with his four-year expiration with the Clippers for an extension that began in August of 2021 at $176 million.

The Clippers and Steve Ballmer deny wrongdoing

The Clippers vehemently deny any violations in a statement saying neither Ballmer nor the team circumvented the salary cap. They said the partnership with Aspiration was declared in September of 2021, and it was ultimately terminated sometime during the just-completed 2022–23 season after the company had defaulted on its responsibilities. Owner Steve Ballmer had invested $50 million into the company.

“The claim with respect to salary cap circumvention is ridiculous. Any contrary assertion is provably false. Further, neither the Clippers nor Mr Ballmer was ever aware of any concerns prior to federal investigation of Joseph Sanberg.

Aspiration co-founder Joseph Sanberg has agreed to plead guilty to federal wire fraud, to which prosecutors say he misled investors using false income figures. Court filings indicate Sanberg was wayward enough to engender $248 million as a total fraudulent loss.

League Penalties Could Be Severe

The penalties for the League could be significant based on the thin strands of the investigation, as there’s no evidence that Leonard personally endorsed Aspiration. Torre got a copy of the endorsement contract that lists KL2 Aspire and Aspiration, but it is not clear of the structure of funds. The league put out a statement on the issue through spokesman Mike Bass, “We are aware of this morning’s media report involving the LA Clippers, and we are commencing an investigation into the matter.”

There is precedent, as the league has already investigated the Clippers for alleged circumvention attempts in negotiating with Leonard during free agency in 2019. In this case, however, the formal nature of the endorsement contract would seem to provide a more tangible openness to the circumvention character of the Cap held by the league, so Clipper and league managers and teams should be sweating for Leonard.

If it is found that any actions constitute a violation, the league can penalize teams up to $7.5 million; annul contracts; take future draft picks; and have some resolution within the penalty period. The level of penalty could be significant not just for the Clippers, but for Leonard as well, assuming the league can show the entity structure offered a financial opportunity that lies outside of sanctioned team compensation.

As of this writing neither Leonard nor his representatives had responded to either the investigation or the earlier news by Torre. None of the emails sent to the Leonard camp requesting comment was returned on Wednesday.

The NBA says the investigation continues. For now it appears to depend on whether this becomes a full-fledged salary cap scandal with consequence, or turns into another oddly unique off-court experience with no ending.