United States v. Gatto
986 F.3d 104
2d Cir.2021Background:
- Defendants (Gatto, Code, Dawkins) worked with Adidas and affiliates to pay families of top high‑school basketball recruits (Smith, Preston, Bowen) in exchange for commitments to attend Adidas‑sponsored universities (N.C. State, Kansas, Louisville).
- Payments were concealed (false Adidas/AAU invoices, burner phones, routing through AAU teams) because NCAA rules bar pay-for-play and recruits must certify amateur eligibility to receive athletic scholarships.
- Some recruits signed NCAA eligibility certifications after payments; one recruit (Preston) was later discovered ineligible; Bowen was withheld and withdrew; Smith played one season then entered the NBA.
- Defendants were indicted for wire fraud and conspiracy (18 U.S.C. § 1343) based on a scheme to defraud the universities of money/property (athletic aid) by withholding material eligibility information and using wires.
- At trial defendants admitted NCAA violations but argued they lacked criminal intent — they intended to help, not harm, the schools — and sought to admit evidence (expert report, recorded calls, COI findings) to show the universities tacitly condoned or benefited from such conduct.
- Jury convicted; district court sentenced defendants to short custodial terms and restitution; Second Circuit affirmed the convictions, rejecting defendants’ sufficiency, evidentiary, and jury‑instruction challenges (with a partial dissent on certain exclusion rulings).
Issues:
| Issue | Government's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency — fraudulent intent / scheme to defraud | Circumstantial evidence (sophistication, steps to conceal, wiretaps, co‑conspirators) shows defendants knew recruits had to misrepresent eligibility and contemplated harm to universities | Defendants intended to help universities attract talent; no intent to deceive universities; widespread industry practice | Affirmed — jury could infer fraudulent intent from concealment, sophistication, and statements; conviction supported under Jackson standard |
| Object of the scheme — was athletic aid "money or property" an object | Withholding eligibility information deprived universities of their right to control scholarship funds and caused tangible economic harm (slots, tuition/room/board) | Any loss to the universities was incidental or not the defendants’ purpose; comparable to regulatory sham in Kelly | Affirmed — athletic aid was an object of the fraud; Kelly distinguished because loss here was central to the scheme |
| Evidentiary exclusions (expert report, recorded calls, COI details) | District court properly excluded evidence under Rules 702 and 403 as more prejudicial than probative (risk of putting NCAA rules or system on trial) | Excluded evidence was highly probative of defendants’ good‑faith belief that universities condoned payments; exclusion impaired defense | Majority: No abuse of discretion; exclusions harmless; Concurrence/Dissent: some coach‑call exclusions were erroneous and not harmless as to certain counts for Gatto and Dawkins |
| Jury instructions (conscious avoidance, meaning of "obtain", right‑to‑control, apparent authority) | Instructions correctly explained willful blindness, that defendant need not personally receive property, right‑to‑control theory, and apparent authority standard | Instructions mislabeled/overbroad on conscious avoidance and "obtain"; should have made clearer that property must flow to defendant or that coaches must be unconflicted agents | Affirmed — instructions accurate as given, compatible, and not reversible error; conscious avoidance and right‑to‑control charges permissible |
Key Cases Cited
- Jackson v. Virginia, 443 U.S. 307 (1979) (standard for reviewing sufficiency of the evidence)
- United States v. Binday, 804 F.3d 558 (2d Cir. 2015) (elements of wire fraud and instruction precedent)
- Kelly v. United States, 140 S. Ct. 1565 (2020) (property‑fraud requires loss to be an object, not merely incidental)
- United States v. Finazzo, 850 F.3d 94 (2d Cir. 2017) (right‑to‑control theory: depriving victim of valuable economic information can be property deprivation)
- United States v. D'Amato, 39 F.3d 1249 (2d Cir. 1994) (apparent authority and inference of corporate knowledge/intent)
- Porcelli v. United States, 404 F.3d 157 (2d Cir. 2005) (no literal receipt of money required to prove property fraud)
- United States v. Guadagna, 183 F.3d 122 (2d Cir. 1999) (circumstantial evidence, including false representations, may show intent)