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Convicted Adidas executive ordered to pay about $100,000 to NC State in Dennis Smith case

The recruitment of NC State’s Dennis Smith Jr.

Fayetteville's Dennis Smith Jr. was one of the most sought after recruits in America and committed to NC State in 2015. He was he highest-rated recruit to commit to the Wolfpack and coach Mark Gottfried.
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Fayetteville's Dennis Smith Jr. was one of the most sought after recruits in America and committed to NC State in 2015. He was he highest-rated recruit to commit to the Wolfpack and coach Mark Gottfried.

Convicted former Adidas executive James Gatto has agreed to pay N.C. State restitution for his role in funneling payments to basketball player Dennis Smith Jr. prior to his enrollment with the school in 2015.

According to documents filed with the U.S. District Court for New York’s Southern District on Monday, Gatto will pay N.C. State and Kansas a total of $342,436.75 to cover their legal fees plus the school’s scholarship funds for the players involved in the scheme.

The restitution agreement comes after Gatto and two other men were found guilty on federal felony charges of wire fraud and conspiracy to commit wire fraud in October.

The men orchestrated a scheme to pay recruits who wound up signing with Adidas-sponsored schools. Such payments would make the players ineligible to play under NCAA rules.

The federal court heard testimony during the fraud trial that Gatto had provided a $40,000 payment for former N.C. State assistant Orlando Early to deliver to Smith’s father in 2015 to persuade Smith, one of the top recruits in the country out of Fayetteville, to commit to N.C. State.

Smith enrolled at N.C. State in January 2016 and played one season for the Wolfpack before becoming a first-round pick in the 2017 NBA draft.

A McClatchy examination of top high school players found that many suit up for a college team sponsored by the same shoe company – Nike, adidas, Under Armour – that backed their AAU program.

The federal government based its case on the fact that the universities were defrauded by signing players they did not know had received the illicit payments, compromising their eligibility.

Later Monday, a university spokesman confirmed the settlement but offered no further comment.

In February, N.C. State requested restitution as part of its victim impact statement filed with the court. The school sought $258,585 from Gatto, including $234,685 in legal fees and $23,900 for Smith’s tuition.

U.S. Attorney Robert S. Khuzami wrote a letter to U.S. District Judge Lewis Kaplan on Monday saying the parties had agreed for Gatto to pay N.C. State $79,026.75 in legal fees plus the tuition amount.

According to the documents submitted to the court in February, Khuzami said, “By orchestrating the payments – knowing they would be concealed from the University – the defendants purposefully sought to cause the University to issue an athletic scholarship under false pretenses.”

In the letter to Kaplan, N.C. State athletic director Debbie Yow wrote: “... (T)his trial and the attendant publicity has unquestionably damaged the reputation of our University.”

Yow wrote how she hired Carrie Doyle, a former NCAA enforcement officer, to lead N.C. State’s compliance efforts in 2010.

Doyle testified at the trial in October that she had “no knowledge” of Gatto’s payment to Smith during the recruiting process.

There was no “detection technique,” Yow wrote, to identify Gatto’s pay-for-play scheme with Smith.

The FBI announced the filing of a superseding indictment in its college basketball investigation that expands the scope to include additional families of student athletes, including an athlete at N.C. State that appears to be Dennis Smith Jr.,

The FBI on Tuesday announced the filing of a superseding indictment in the college basketball investigation that alleges payments to include additional families of student athletes, including an athlete at NC State that appears to be Dennis Smith Jr.

“Despite these commitments and the purposeful efforts of dedicated individuals to create and reinforce a culture of compliant athletics teams and programs, regrettably, there is no detection technique to identify an individual who intentionally chooses to violate an NCAA rule and then hides the misconduct from both the University and the NCAA,” Yow wrote.

N.C. State could still face NCAA sanctions for the case. The NCAA is waiting for the federal cases to play out in court before proceeding with its investigation into the schools.

“We are petitioning the court to provide us with all of the findings that come out of those hearings and the material that’s used in those trials,” NCAA president Mark Emmert said Thursday at the Final Four. “That’s not automatically given to us. SDNY doesn’t — or the FBI doesn’t back up to Indianapolis and drop all those documents off. We have to ask for permission to get them. We need the Court to grant that permission.”

Monday’s restitution agreement calls for Gatto to pay Kansas the revised amount of $161,574 for legal fees plus tuition cost for the involved players. Kansas sought $1.13 million from Gatto for the payment of two former players, their subsequent tuition and legal fees associated with the case.

According to new charges filed April 10, 2018 against Adidas executive James Gatto, a mother and guardian of the two unnamed KU players are said to have benefited from illicit payments, which were made without knowledge of the university.

Staff writer Joe Giglio contributed to this report

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An Illinois native, Steve Wiseman has covered Duke athletics since 2010 for the Durham Herald-Sun and Raleigh News & Observer. Prior to his arrival in Durham, he worked for newspapers in Columbia and Spartanburg, S.C., Biloxi, Miss., and Charlotte covering beats including the NFL’s Carolina Panthers and New Orleans Saints, University of South Carolina athletics and the S.C. General Assembly.


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