Well, I finally had a chance to look at the Gatto indictment more carefully, and I fear that all of you who think it is based purely on payments to families or students, or on alleged violations of NCAA rules, are incorrect. The thrust of the indictment is based on conspiracy to defraud by willfully concealing material information (payments) from the victims (universities) to allow the students to obtain something of value (scholarship) under false pretenses (misrepresenting their eligibility to receive a scholarship). @justanotherfan was correct about it being based on covering up money, but it was not really money laundering as we know that term (but future charges could be brought against the recipients if they did so). Federal jurisdiction lies by virtue of the wire fraud and conspiracy allegations.
The key here is the same as any other fraud indictment, that being the allegation that the defendants (and others acting with them) purposely acted to conceal material information from the victims (the conspiracy charge alleges they acted in concert to do so). This can be simplified: Gatto and others provided money to families and/or students that, if known to the schools, would have resulted in ineligibility and not getting their promised scholarships. They are allleged specifically to have induced the recipients (1) to conceal the money from the schools and (2) to falsely certify their eligibility to receive the scholarships.
That is conspiracy and inducement to obtain something of value under false pretenses.
An analogy here: You all may be familiar with the Stolen Valor scandals--people pretending to be combat veterans, wearing uniforms and medals, and the like. Those people were not commiting crimes despite their public lies, so long as they made no attempt to get anything for it. (I do not address the bar drinks they got.) But let's say I run a home renovating business. I want customers. So, I give a guy a false DD214 discharge paper, and tell him how he can now register at Lowe's to get their military discount of 10% based on his fake 214, saving thousands of dollars on his $40,000 remodel, and we agree he will pay me a commission on those savings. We have now entered into a conspiracy to defraud Lowe's by presenting false information to receive something of value.
Violating the Defense Department rules on who is a veteran is not an element of the crime. It is sufficient to prove simply his status as a nonveteran and that he concealed that from Lowe's both when falsely registering and every time he received something for which by his status he was not eligible.
Similarly, the NCAA's rules are clear that receiving money from someone to attend a school impacts a player's eligibility. A player is not eligible to compete until he receives a confirmation of amateur status from the NCAA, in conjunction with information provided to the school and by the school to the NCAA. The actors here worked hard to make sure that the players did not reveal payments in amounts that would made the schools know that the student was not in fact eligible under NCAA rules and rulings. More importantly, the players falsely asserted their eligibilty to get scholarships. Possibilities of appeals and waivers are irrelevant to the status determination. (It is arguable that the feds could have avoided some questions by having the NCAA do its determinations first, but no prosecutor wants to rely on private adjudications with no known timelines.)
I only address here whether the indictment alleges federal crimes and they do. If any defense is raised about whether a player was automatically not eligible until the NCAA made a determination, the answer is that the universities will no doubt swear up and down that no scholarships would have been given if they knew of the payments. Not "if they knew of NCAA amateur rules being violated."
The existence of the payments was what the universities needed to know in deciding whether to grant a scholarship, which is the definition of a material fact. The bad guys acted to conceal that information, and by doing so helped the students obtain scholarships worth @$40,000 or whatever the amounts would be at each school.
A bigger problem for the indictment is whether the recipients actually have sufficient nexus to the students to render their receipt of money disqualifying. It would be for any parent or guardian (i.e., anyone with financial responsibility to the kid) providing false documents to the school, but if there were any who got money who have nothing to do with a kid's finances, it seems the Newton rule could extend to that kid's part of the case. (I don't think that applies to SDS.)
I will probably need to edit this later, but I need to go to Lowe's to get my discount.
