The NBA's punishment for Kawhi Leonard and the Los Angeles Clippers over salary-cap violations may not be the end of the matter, as the Securities and Exchange Commission (SEC) has initiated an inquiry into the manufacturer of the Clippers' video board and the basketball player.
Daktronics, the South Dakota-based company that constructed the $100 million video board for the Clippers' Intuit Dome, disclosed that the SEC is seeking information concerning the company and Leonard. "As you might expect, we have received requests for information from the NBA," said Daktronics acting CFO Howard Atkins during an investor earnings call. "Additionally, the Securities and Exchange Commission is seeking information from us concerning the company and Mr. Leonard." Atkins confirmed that Daktronics is cooperating with both investigations.
The SEC's involvement stems from allegations that Leonard may have received a substantial sponsorship agreement from Daktronics without performing any promotional work, a situation that could circumvent NBA salary cap rules. Investigative journalist Pablo Torre first reported these allegations in August. The nature of the SEC's specific examination remains unclear, as does the potential for any enforcement action.
This development adds a new layer to a scandal that Leonard appeared ready to leave behind. The NBA concluded its nearly year-long investigation on Wednesday, ruling that the Clippers and Leonard violated league rules. The league stripped Los Angeles of five first-round draft picks, fined owner Steve Ballmer $30 million, and suspended him and several team officials. Leonard himself was fined $700,000.
Leonard has since dismissed his uncle, Dennis Robertson, as his manager and agent. Robertson has been banned by the NBA from all business dealings. Leonard accepted his punishment and is preparing for a fresh start with the Toronto Raptors, pending the completion of his trade.
However, the SEC operates independently of NBA regulations. Daktronics, which primarily engages in business-to-business sales, has never before undertaken a celebrity endorsement deal, making the alleged arrangement with Leonard particularly unconventional. A former employee reportedly stated that no similar sponsorship had occurred in over two decades with the company. These allegations echo a previous controversy involving Aspiration, where Leonard was reportedly paid millions through a sponsorship arrangement that became a focal point of the NBA's initial investigation.
While an SEC investigation does not confirm any violation of federal law, it suggests that Leonard's transition to Toronto may not be entirely free from the lingering effects of the Los Angeles scandal.