The Los Angeles Clippers and their star forward Kawhi Leonard are under NBA investigation for alleged salary cap circumvention. This probe follows a report by investigative journalist Pablo Torre, which emerged from the March 2025 bankruptcy filing of Aspiration, a sustainability company that had received $50 million in funding from Clippers owner Steve Ballmer.
Aspiration faces fraud allegations, with co-founder Joseph Sanberg admitting guilt to defrauding investors. The bankruptcy documents revealed KL2 Aspire LLC, a company managed by Kawhi Leonard, as one of Aspiration`s creditors.
The filings indicate Aspiration still owes Leonard $7 million. Notably, Torre`s investigation found no evidence of Leonard ever endorsing or even mentioning Aspiration, a stark contrast to other celebrities like Doc Rivers who did. A document signed by Leonard, obtained by Torre, outlined a $28 million cash payment to Leonard from Aspiration over four years (2022-2025), contingent on him playing for the Clippers. A former Aspiration finance employee reportedly stated that the deal was intended to “circumvent the salary cap.”
The NBA officially announced Wednesday afternoon that it is launching an investigation into these allegations.
What do these developments signify? Let`s explore the NBA`s rules on salary cap circumvention to understand the implications.
Understanding Salary Cap Circumvention
The NBA`s Collective Bargaining Agreement (CBA), specifically Article XIII, Section 1(b), defines salary cap circumvention. This section outlines practices designed to bypass the league`s financial regulations.
Simply put, salary cap circumvention occurs when a team utilizes a third party to pay a player beyond what their contract or the salary cap legally permits. A common method involves endorsement deals with companies linked to the team or its owner.
While confirmed cases of salary cap circumvention are rare, the rules address various scenarios. These include a superstar seeking more than the maximum salary, teams signing players to undervalued contracts with an implicit promise of future higher pay (leveraging Bird Rights), or compensating underpaid players ineligible for extensions. The core purpose of these regulations is to prevent teams from gaining an unfair competitive edge by exceeding salary cap limits.
Kawhi Leonard initially joined the Clippers in 2019 and signed a three-year, nearly $150 million extension in 2024.
Historical Cases of Salary Cap Circumvention
In 1993, the NBA challenged the Portland Trail Blazers over center Chris Dudley`s contract, a seven-year, $11 million deal with a first-year opt-out. This structure was controversial because it would have allowed Dudley to gain Bird Rights quickly and re-sign for more money above the cap. Although the contract was upheld and Dudley didn`t opt out due to injury, the league has since tightened rules on contract structures. Similar clauses were seen in contracts for players like Toni Kukoc and Craig Ehlo.
In 1996, agent David Falk devised a scheme for the New York Knicks to make a competitive offer for free agent Michael Jordan. Since the Knicks and Sheraton Hotels shared parent company ITT Corporation, the plan involved Jordan receiving $15 million to endorse Sheraton. This would have allowed the Knicks to circumvent the fact that the Bulls, holding Jordan`s Bird Rights, could offer an unlimited salary (there was no max salary then). The plan was never executed as Jordan re-signed with the Bulls.
The most infamous cap circumvention case involved Joe Smith, the 1995 No. 1 overall pick. Despite not reaching superstar status, Smith was a sought-after free agent in 1998, making his decision to sign a cheap, one-year deal with the Minnesota Timberwolves particularly unexpected.
Two years later, a lawsuit following Smith`s agent`s departure exposed the truth: Smith had secretly signed three consecutive one-year deals with the Timberwolves. This arrangement was designed to allow Minnesota to acquire his full Bird Rights, enabling them to then offer him a long-term contract potentially worth up to $86 million.
Then-NBA Commissioner David Stern imposed severe penalties: a $3.5 million fine for the Timberwolves, voided contracts for Smith (losing his Bird Rights), a one-year ban for owner Glen Taylor, and the forfeiture of five first-round draft picks. Although Stern later returned two picks (2003 and 2005), the team still lost three.
Current Penalties for Salary Cap Circumvention
Penalties vary based on the nature of the violation. Article XIII of the CBA distinguishes between `General Prohibitions` (Section 1) and `Unauthorized Agreements` (Section 2), with Section 3 detailing potential punishments. A Section 1 violation typically incurs less severe consequences, at the Commissioner`s discretion, which may include:
- A fine up to $4.5 million for a first offense.
- A fine up to $5.5 million for subsequent offenses.
- Forfeiture of one first-round draft pick.
- Voiding of non-compliant contracts or transactions.
However, Section 2 violations can lead to more substantial penalties:
- A fine up to $7.5 million.
- Suspension of team personnel for up to one year if willfully involved.
- Voiding of non-compliant contracts or transactions.
- Forfeiture of draft picks (unspecified type or amount).
The unspecified nature of draft pick forfeiture in Section 2 grants the commissioner broad discretion in determining punishment. Consequently, any penalties against the Clippers will depend entirely on the specific nature of the violation uncovered by the investigation.
Previous Allegations Against Leonard and the Clippers
In 2015, the Clippers received a $250,000 fine for offering DeAndre Jordan an unauthorized endorsement deal. The Los Angeles Times reported it was a $200,000 annual Lexus endorsement. This occurred less than a year into Steve Ballmer`s ownership.
While neither Leonard nor the Clippers have been proven to have circumvented the cap in their mutual dealings, rumors have circulated since Leonard joined the team in 2019.
Following Leonard`s 2019 decision, The Athletic`s Sam Amick reported a league complaint alleging Leonard`s uncle, Dennis Robertson, sought improper benefits during free agency. Amick`s report detailed:
“Stories regarding Robertson`s demands reached the league office shortly after Leonard`s decision. Concerned parties reported that Leonard`s uncle requested significantly more than a maximum contract (Kawhi signed a three-year, $103 million deal with the Clippers). Sources indicated Robertson asked team officials for part ownership, a constantly available private plane, a house, and guaranteed off-court endorsement money contingent on Leonard playing for their team. These requests, unequivocally, fall outside the NBA`s Collective Bargaining Agreement.”
Amick noted these requests were made to the Lakers and Raptors. However, the NBA found no evidence of the Clippers fulfilling them. Commissioner Adam Silver directly addressed The Athletic regarding the investigation:
“We informed our teams (at the Board of Governors meeting in late September in New York) that we are, and will continue to, investigate activities from this summer,” Silver stated to The Athletic in 2019 when questioned about the Clippers` investigation. “I also want to say that we were trying to establish a new standard at this meeting, and focus everyone on the free agency rules moving forward. I`ll just leave it at that. We are examining the conduct from the summer; we have, and we will continue to, but our primary goal is to change how business is conducted going forward.”
Amick further reported that “if any relevant evidence of improper benefits surfaces in the future, the league will re-open the investigation and pursue the charges yet again.” In 2020, the Clippers faced another investigation when Johnny Wilkes, an alleged associate of Leonard and Robertson, sued the team and consultant Jerry West, claiming $2.5 million was owed for helping secure Leonard. This lawsuit was dismissed in 2022.
Leonard signed with the Clippers in July 2019. However, the specific deal obtained by Torre reportedly spanned from April 1, 2022, to March 31, 2026. Leonard`s initial Clippers contract was for three years and $104 million. He re-signed a four-year, $176 million deal in 2021, followed by a three-year, $149.5 million extension in 2024.
Responses from the Clippers and the NBA
The NBA issued a statement Wednesday afternoon confirming awareness of the media report concerning the LA Clippers and announcing the commencement of an investigation.
The Clippers, in a statement to Torre, denied any wrongdoing, asserting that “Neither Mr. Ballmer nor the Clippers circumvented the salary cap or engaged in any misconduct related to Aspiration. Any contrary assertion is provably false.”
Former Mavericks owner Mark Cuban publicly supported Steve Ballmer, stating on social media, “As much as I wish they circumvented the salary cap, first Steve isn`t that dumb. If he did try to feed KL money, knowing what was at stake for him personally, and his team, do you think he would let the company go bankrupt? Knowing all creditors would be visible to the world?”
Leonard has not yet publicly commented on the allegations.
