The Clippers’ Anti-Compliance Playbook

(Editor’s note: This is the first in a series examining the LA Clippers matter as a case study in corporate compliance and governance failure.)

If it carried the DOJ’s letterhead and the organization in question were a multinational tech company, the independent investigation of the NBA’s LA Clippers would look a lot like an FCPA enforcement action — facilitation payments, recidivism, a paper tiger compliance, non-cooperation, obstruction during an investigation, a mandated compliance monitor.

Its true context doesn’t make the Wachtell, Lipton, Rosen & Katz report released Sept. 2 any less of an indictment of the LA Clippers’ organizational dysfunction. Indeed, the resulting punishment the league handed out, including fines, suspensions and loss of draft picks, gives corporate leaders of all stripes a lesson on what not to do. Team owner Steve Ballmer, barred from participating in the league for a year, has denied the allegations, but it’s Ballmer’s reported conduct that may be the most egregious of all.

A compliance officer’s nightmare

The NBA commissioned the Watchell report in 2025 after investigative reporting by the sports podcast “Pablo Torre Finds Out” accused the Clippers and owner Ballmer, also the former CEO of Microsoft, of circumventing the league’s salary cap rules through dealings with a now-defunct sustainability company and other third parties to funnel money to star player Kawhi Leonard, whom the team has since sought to trade to the Toronto Raptors.

Over the course of 36 pages, the firm lays out evidence of a cascading series of cultural, compliance and governance blunders:

• The NBA had previously punished the Clippers for similar conduct involving then-free agent DeAndre Jordan, fining the team $250,000 in 2015. Ballmer publicly committed at the time to greater diligence in complying with the collective-bargaining agreement (CBA), saying “any circumvention was inadvertent.”
• League officials questioned the Clippers in 2019 about improper requests made by people in Leonard’s orbit during his free agency. That inquiry was left open pending further evidence.
• Multiple senior executives — Ballmer, president of basketball operations Lawrence Frank and president of business operations Gillian Zucker — were aware of or actively involved in the scheme, along with Leonard and his uncle and business manager, Dennis Robertson.
• In response to the 2019 Leonard episode, the NBA issued new rules requiring teams to report improper solicitations and delivered targeted training on the circumvention rules to Clippers leadership, including Ballmer, Zucker and Frank. The conduct at the center of the Wachtell report began within months of that training.
• Team management took deliberate steps to make conduct it knew violated the rules seem legitimate, drafting emails to appear responsive to partner requests when the team was in truth initiating them.
• Team officials never reported the repeated impermissible solicitations made on Leonard’s behalf by Robertson, as required by the league’s post-2019 rule, which it put in place in response to the team’s actions during Leonard’s free agency. (In other words, according to the report, the team violated a rule that was written because of the team.)
• In June 2020, within a week of each other and while the NBA season was suspended due to the Covid-19 pandemic, Zucker introduced Robertson to executives at three companies then in active business discussions with the team: Boingo Wireless, Daktronics and Lockton Insurance. Investigators found no documentary support for the team’s claims that the three companies had requested to be introduced to Leonard.
• Within roughly two months, Leonard had signed multi-year endorsement deals with all three companies, worth $18 million in total. The agreements imposed minimal performance obligations on Leonard, were never publicly announced and were signed by companies that had never before — and have never since — entered into an endorsement deal of remotely that size. Leonard’s only documented activation across all three was a single visit to a military base and signing some memorabilia.
• The team induced the three companies to sign Leonard by offering them business in return. Each entered into a consulting agreement with the Clippers around the time of the endorsement deals; two received $10 million payments up front, before Leonard was paid a dollar. Zucker had personal relationships at two of the three companies, including one at which her husband chaired the board.
• In a separate arrangement, Zucker initiated and structured a four-year, $48 million endorsement deal between Leonard and Aspiration, the Clippers’ sustainability partner and jersey-patch sponsor. When Aspiration co-founder Joe Sanberg — since convicted of federal fraud — threatened to kill the Leonard deal unless the Clippers signed a $7 million-per-year sustainability contract for another Ballmer-owned venue, Ballmer personally approved that contract. Investigators found the $7 million figure was explicitly set to match Aspiration’s annual cash payment to Leonard.
• Beyond the endorsement architecture, the Clippers directly paid hundreds of personal expenses on behalf of Leonard, his family and Robertson — travel, accommodations, gifts, tickets — without properly deducting the amounts from Leonard’s pay as required. Frank was responsible for authorizing these payments.

Keeping a star performer happy

Because of the salary cap under the collective-bargaining agreement the league has with its players union, the Clippers could not pay Leonard what he evidently believed he was worth, and as his uncle, Robertson, sought deals meant to close that gap, he found a willing partner in the Clippers, according to the Wachtell report.

The team had already been fined once for circumventing the CBA — the 2015 DeAndre Jordan fine — and Ballmer at the time had publicly committed to greater diligence. The NBA had also, in response to Robertson’s improper demands during Leonard’s 2019 free agency, adopted a new rule requiring teams to report exactly that kind of solicitation. And despite all of that, in order to keep Leonard (and his 20-plus-points-per-game scoring average) happy, Clippers management induced companies that wanted to do business with the team to make what amounted to facilitation payments to Leonard, the Wachtell report found.

How different is this from, say, a bank revamping risk registers to accommodate a star trader’s book, or a law firm routing a rainmaking partner’s expense reports around an established review process, or a media company covering up sexual harassment allegations? JPMorgan Chase, Wells Fargo, Barings Bank, Société Générale and CBS all have the answers to those questions.

In black-and-white, the team’s actions are perhaps clumsier and quicker-moving than one might see in a corporate setting, but the shape of this is instantly recognizable to anyone who has watched an organization contort itself around a top performer or charismatic executive. 

Robertson explicitly told Ballmer that Zucker was making introductions for “bull**** deals” and that he had “to get paid.” Ballmer’s documented response, per Frank’s contemporaneous notes, was that he and his executives were “collective workers” to try to help Leonard achieve his financial goals.

That is a business owner self-appointing as the star’s agent rather than the institution’s steward, and if this were any other company, say, one with a compliance function, what would be the compliance officer’s response here? Once senior leadership positions itself as working on behalf of the star performer in circumvention of rules it’s already broken and to the eventual detriment of the organization itself, would a reasonable compliance officer (or any other whistleblower) believe there’s anywhere effective they could go?

Tone at the top

A charismatic CEO promising transformation for an organization reeling from scandal only to unleash a potentially more destructive one — that may be Steve Ballmer’s legacy with the LA Clippers.

When Ballmer bought the Clippers in 2014, the team was a punchline, both for the ineptitude of its basketball-playing but also for the conduct of its previous owner, Donald Sterling. 

In April 2014, the NBA fined Sterling $2.5 million, banned him for life and recommended he be forced to sell the team after a recording was leaked in which Sterling made anti-Black statements. Sterling later in an interview with CNN’s Anderson Cooper, while defending himself against racism allegations, deepened his critique of NBA legend Magic Johnson, who won five championships with the LA Lakers. At the time of his ouster, Sterling was the longest-tenured owner in the NBA, having bought the San Diego Clippers in 1981 and moved them to Los Angeles in 1984 over the objections of the league itself. 

Ballmer outbid other suitors to buy the Clippers for $2 billion, a purchase that promised to help remove the Sterling stink, and Ballmer set out to do what Sterling never could quite manage, which was change the Clippers into a winning franchise, to move them out of the shadow of the Lakers and their 12 NBA titles in Los Angeles.

“I love basketball,” Ballmer said at the time. “And I intend to do everything in my power to ensure that the Clippers continue to win — and win big — in Los Angeles. LA is one of the world’s great cities — a city that embraces inclusiveness, in exactly the same way that the NBA and I embrace inclusiveness. I am confident that the Clippers will in the coming years become an even bigger part of the community.”

In that endeavor, he’s at least partially succeeded, though the team’s basketball fortunes were trending upward as Sterling’s tenure was ending. Under Ballmer’s ownership, the Clippers have won an average of 60% of their games; under Sterling, just 37%. And they’ve had more winning seasons in just over a decade of Ballmer’s ownership than in all of Sterling’s. 

By the summer of 2019, Ballmer’s project was lacking a superstar; their cross-town rival Lakers had secured one already by signing LeBron James. Though they’d gotten to the playoffs in three of the previous four seasons, the Clippers made a mega-trade to acquire Paul George, which was reported at the time as having been Leonard’s tipping point as the free agent considered where he’d land after his contract with the Toronto Raptors expired.

Leonard was fresh off a championship in Toronto, where he won the NBA Finals MVP award, and the Clippers were aggressive suitors. Leonard signed a four-year, $142 million contract, the maximum possible under the CBA, but Wachtell’s report paints a picture of pursuit that did not stop when the ink was dry. The Clippers organization, with Ballmer’s participation, spent the next several years building an off-books compensation engine designed to fill the space between what the league’s negotiated CBA would allow the team to pay Leonard and what Leonard and Robertson believed the player’s talent was worth.

Ballmer’s participation was not incidental, according to the law firm’s report. Personally, Wachtell found, Ballmer:

• Approved the Clippers’ sustainability services contract with Aspiration for The Forum, a separate Ballmer-owned Inglewood arena, in April 2022, while aware that Aspiration co-founder Joe Sanberg had explicitly conditioned Leonard’s $48 million endorsement deal on that contract getting signed.
• Made a $50 million personal investment in Aspiration in September 2021, part of a package of deals with the Clippers finalized weeks before Zucker began engineering the Leonard endorsement agreement with said company.
• Received Robertson’s direct demands for off-court income opportunities for Leonard and, according to Frank’s contemporaneous notes, instead of reporting the solicitation to the league as stipulated in the rule the NBA enacted as a result of previous conduct by Ballmer’s own team, described himself and his executives as jointly responsible for helping the player — who not even a year before had signed a max deal — meet his financial goals.
• Sat through targeted NBA training on the circumvention rules in December 2019 alongside Zucker and Frank, and articulated those rules accurately in interviews and on television years later, all while the conduct at the center of the report was underway.
• Failed, in Wachtell’s phrasing, “to create conditions under which his organization abided by the NBA’s circumvention rules — an especially egregious lapse because the Clippers are a prior offender of those rules and were previously and specifically investigated by the NBA with respect to Mr. Leonard.”

If true, these characterizations do not describe minor oversight failures for which a relative slap on the wrists is adequate. What they indicate is that the only thing that really changed between Donald Sterling’s ownership of the Clippers and Steve Ballmer’s is that the team won more games and the owner wasn’t caught on tape saying racial slurs. Instead, the owner seemingly was caught in black-and-white shepherding his organization into a staggering governance failure. 

The Clippers have rejected the report’s findings, calling the investigation biased, and their counsel has said the team will challenge the NBA’s penalties.

Coming soon: The NBA’s penalty measured against traditional regulatory tools, the Aspiration greenwashing angle and more practical takeaways for CCOs.