The NBA explains Steve Ballmer’s jumbotron corruption scandal

Last September, Steve Ballmer insisted in an ESPN interview that the Clippers weren’t involved in a shady-looking $28 million endorsement deal for his star player, Kawhi Leonard, that involved no actual endorsing. Now, the former Microsoft CEO has been suspended by the NBA for a year, while the league says his team will forfeit five future draft picks and pay a $30 million fine, among other penalties.

A year later, an NBA-commissioned 35-page report by Wachtell, Lipton, Rosen & Katz is basically calling him a liar, saying those claims were “inaccurate (at best) with respect to Mr. Ballmer” and “clearly false” when it came to Clippers president of business operations Gillian Zucker, who is also suspended for a year. Leonard has accepted the punishment of a $700,000 fine and a ban for his business manager.

Now the Clippers are writing angry letters to the NBA, claiming a biased investigation spurred by “a podcaster’s baseless claims” has cost Ballmer $50 million for lawyers, cost more for his reputation, and upset partners like Daktronics, the company that built a massive 4K scoreboard for the team’s new arena, with its many, many bathrooms.

That unnamed podcast, of course, is Pablo Torre Finds Out, which is cited at the beginning of the document for kicking this whole thing off one year ago today.

The episode made largely unknown fintech startup / green bank / massive fraud Aspiration a household name, and launched a series by the former ESPN reporter and his team. Now the league’s report is filling out the role partners like Daktronics played in getting Leonard money above and beyond the NBA’s mandated salary cap and how it was tied to that massive scoreboard.

In the spring of 2020, and in response to a request-for-proposal process initiated by the Clippers, Daktronics began to compete to obtain a lucrative contract to supply digital scoreboard and signage technology at the Intuit Dome. In May 2020, the Clippers informed Daktronics that it was the team’s preferred provider for this project, but that the team wanted to agree on a “spend back” arrangement whereby Daktronics would provide some amount of business back to the Clippers—which Daktronics told investigators is not uncommon in its industry. Ms. Zucker thereafter suggested to a Daktronics senior executive that this “spend back” could be accomplished through an endorsement agreement between Daktronics and Mr. Leonard.

The report says that an unnamed Clippers executive told Daktronics exactly how much to pay Leonard ($3 million for two years), and eventually told the company in 2021 “that, because the team had decided to increase the amount it would spend on the scoreboard, Daktronics should correspondingly increase the amount it would pay to Mr. Leonard.”

As we mentioned at the time, costs for the eventual Intuit Dome had reportedly ballooned to over $2 billion, including the Daktronics-built “Halo Board,” a double-sided 44,000-square-foot wraparound 4K screen with a price said to be over $100 million. Said the now-suspended executive Zucker when it was announced, “We are excited to partner with Daktronics, an innovator in video displays, to develop a Halo Board that will create one of the most intense live experiences in sports.”

Daktronics, according to the investigators, along with now-incarcerated Aspiration cofounder Joe Sanberg and what remains of the company in bankruptcy proceedings, cooperated with the investigation. However, there are two other Clippers-affiliated companies apparently involved in paying Leonard an extra $18 million, including Lockton Insurance, which refused to cooperate, and Boingo Wireless, which should probably add an anti-snitching policy to its terms of service. According to investigators, Boingo “purported initially to cooperate, but then supplied information that was inconsistent or not credible to investigators and ultimately refused to cooperate further.”

Aspiration, which kicked the whole thing off and had advertised itself as “Wall Street greed’s worst nightmare,” turned into just that for investors including Ballmer, as reported sham endorsement deals by cofounder Joe Sanberg were part of a scheme to create fake revenue. He would eventually be sentenced to 14 years in prison for costing investors $248 million.

While the league’s punishment for Ballmer and the Clippers largely ignores the details of Aspiration’s deal and Ballmer’s $50 million investment, the report now includes a note that at the time, Sanberg explained the curious arrangement to other executives differently, emailing an employee to say that “[the Forum is] going to purchase $7mm of reforestation capacity each year from Aspiration to make the ticket experience carbon neutral and potentially carbon negative. To be clear, the $7mm figure per year is set so what’s variable is how they choose to use it.” That figure matched Leonard’s endorsement payments.

Other explanations were even more clear about the connection to Kawhi Leonard:

When these concerns were conveyed to Mr. Sanberg, he told the Aspiration executives that “the Clippers are asking us to do this with Kawhi Leonard” and that the team would provide additional business back to Aspiration to help offset the financial impact on Aspiration. In an email exchange among Aspiration’s CEO, CFO, and general counsel, one wrote, “[Mr. Sanberg said] that the Clippers are promising to increase the amount they pay us per quarter in line with what we pay this guy [i.e., Mr. Leonard].” Another responded: “Thanks for verifying. . . . We should be fine if it’s cashflow neutral.”

One Clippers executive called its stadium deals with Aspiration “super shady” and full of red flags in text messages to the team’s CFO, and the investigation revealed that while Ballmer and Zucker claimed the $7 million annual arrangement was the result of a study done by a team consultant, the consultant disagreed.

No Clippers witness could provide a credible alternative explanation for the initial appearance of the $7 million annual payment from the team to Aspiration in the Forum Agreement. Mr. Ballmer and Ms. Zucker both claimed that it was based on a study done by a team consultant who had determined that the Forum needed $28 million to offset its carbon emissions and that the team would pay Aspiration for these offsets over four years. But investigators spoke directly with this consultant, who said that the Clippers had given him a $28 million budget with which to address the Forum’s emissions—not the other way around.

After untold hours of podcasts (including Torre’s triumphant two-hour live reaction to the report), repeated blanket Clippers denials, and at least one fraud conviction, the investigation still isn’t over. The investigators are looking into a claim that “the consulting agreement one company signed with the Clippers was in fact a ruse, designed and intended to be a vehicle for the team to provide the company with funds to be paid to Mr. Leonard.”

Ballmer’s lawyers say they are “exploring every legal remedy to address this gross injustice,” but if I were on the investigation I’d just want to know which one is a bigger regret — giving up 10 draft picks and the rights to a future two-time MVP in the Shai Gilgeous-Alexander trade or launching Windows Vista?