Popular Science: What is avoiding the salary cap? What are the cases of evading the salary cap and the corresponding penalties?

Translator's note: The original text was published in CBS Sports. The data in the article were as of the time of the original text (September 3 local time). The dates and times involved were local time

According to a major report by investigative reporter Pablo Torre on Wednesday, the Clippers were accused of evading the salary cap with star forward Kawhi Leonard. The report stems from a bankruptcy filing filed by Aspiration in March 2025, a now-bank sustainable company that has received $50 million in investment from Clippers boss Steve Ballmer.

Aspiration has since faced fraud charges, and its co-founder Joseph Thunberg has admitted to fraudulent investors. The application documents contain a list of creditors whose Aspiration still defaults on payments. Among them is KL2 Aspire LLC, a company that lists Kawhi Leonard as its manager.

These documents show that Aspiration still owes Leonard $7 million. However, Torre's report did not find any instances of Leonard endorsement for Aspiration, even mentioning the company, which is inconsistent with expectations of the endorsement agreement. Some other celebrities, including Bucks head coach Doug Rivers (former vice president and head coach of basketball operations at the Clippers), did offer endorsements to the company. A document signed by Leonard by Torre shows that as long as he plays for the Clippers, he will receive $28 million in cash in the four years from 2022 to 2025. A former Aspiration Finance employee smiled on Torre's podcast "Discovery of Pablo Torre" and said the deal was "to evade the salary cap." The NBA said Wednesday afternoon that it was investigating the allegations.

So, what does all this mean? Let's dig into the NBA's rules on avoiding the salary cap and try to find out.

What is evasion of the salary cap?

If you want to understand the definition of evasion of the salary cap, you can find it between pages 339 and 346 of the NBA Labor and Capital Agreement. The part related to this discussion can be found in Article 13, paragraph 1 (b):

"The team (or team affiliates) enter into an agreement or understanding with any sponsor, business partner or third party that the sponsor, business partner or third party shall pay or agree to pay the basketball service remuneration for the player who has a contract with the team (even if these remunerations are ostensibly designated as non-basketball services) constitute a breach of the above-mentioned paragraph (a). In the following circumstances In the case, it can be inferred that there is such an agreement with the sponsor, business partner or third party: (i) the compensation paid by the sponsor, business partner or third party is substantially greater than the fair market value of any service provided by the player to the sponsor, business partner or third party; and (ii) the compensation in the player contract signed with the team is substantially less than the fair market value of the contract. ”

So what does this mean? Essentially, avoiding the salary cap means that the team uses a third party to pay players more than the scope of their contract or the salary cap. The easiest way is to sign an endorsement contract by a company that has some kind of connection with the team or boss.

teams have been proven to be extremely rare. However, these rules are designed to guard against a variety of situations. The most obvious thing is that superstars are trying to earn a maximum salary that exceeds the league's prescribed, but there are other situations. Another example of evading the salary cap is when a team signs a free agent on a contract below the market price and reaches an understanding that they will pay more to the player when they accumulate the necessary bird rights. Another example is paying a player who is underpaid and is not eligible for an early contract renewal under the league rules. These rules exist to prevent teams from trying to gain a competitive advantage by paying more than the salary cap allowed.

Leonard initially signed with the Clippers in the summer of 2019 and signed a three-year, nearly $150 million early contract renewal in 2024.

Former Trail Blazers boss Paul Allen

Has anyone ever been caught for evading the salary cap?

In 1993, the league believed that the Trail Blazers avoided the salary cap because of the abnormal contract structure they gave center Chris Dudley. The seven-year, $11 million contract included the option to jump out of the contract after the first season. This is important because at the time, a free agent could have obtained full bird rights on a new team in just one year, so Dudley could have jumped out of his contract to become a free agent, and the Trail Blazers could have exceeded the salary cap and renewed his contract with more money. The contract was ultimately ruled valid in arbitration, and Dudley did not exercise a bounce option because he was injured in the first year of the Trail Blazers. Since then, the alliance’s regulations on the contract structure have become much stricter. Other players at the time, such as Tony Kukoc and Craig Ello, had similar terms in their contracts. In 1996, super agent David Falke reportedly planned a salary cap evasion plan to allow the Knicks to provide a competitive financial offer for free agent Michael Jordan.尼克斯和喜来登酒店的母公司均为ITT。 Although the Knicks had cap space, there was no maximum salary limit at the time, which meant that the Bulls, who had Jordan's bird rights, could offer a contract with no limit to keep him. Therefore, the plan is to get Jordan $15 million to endorse the Sheraton Hotel. However, the plan was never formally submitted to the league, as Jordan eventually renewed his contract with the Bulls.

However, the most famous salary cap avoidance case in league history involves former No. 1 pick Joe Smith. Although Smith didn't become the superstar the Warriors expected when they picked him with the No. 1 pick in 1995, he was still regarded as a top free agent in 1998. So it was surprising when he signed a cheap one-year contract to join the Timberwolves. Two years later, Smith's agent left his previous company and a chaotic lawsuit revealed the truth: Smith signed three separate one-year contracts with the Timberwolves, which would allow the Timberwolves to acquire his full bird rights after the third season, and then after that, a new long-term contract that would pay him up to $86 million.

The then NBA president David Stern made a historic punishment for this evasion. The Timberwolves were fined $3.5 million. All Smith's contracts were voided, and his bird rights in the Timberwolves were voided. The then-boss Glenn Taylor was banned from operating the Timberwolves for a year. But most notably, Stern stripped the Timberwolves of five future first-round picks. The punishment was so severe that he eventually returned their two draft picks in 2003 and 2005, but they still lost three in the process.

What are the punishments for avoiding the salary cap today?

This depends on the type of violation committed. Article 13, paragraph 1 of the Labor and Capital Agreement covers the "general prohibition clause" regarding circumvention. The second paragraph covers “unauthorized agreements.” The Labor Agreement lists possible penalties for violations of paragraph 1 and paragraph 2, respectively, in paragraph 3. Violations of paragraph 1 appear to be subject to lighter penalties, which may include the following measures at the discretion of the President:

(1) The fine for the first violation is up to $4.5 million.

(2) The fine for the second and subsequent violations is up to US$5.5 million.

(3) Confiscated a first-round draft pick.

(4) Contracts or transactions that violate alliance rules may be invalidated.

However, violations of paragraph 2 may lead to more severe penalties:

(1) fines up to $7.5 million.

(2) Any team member found intentionally involved in a violation will be suspended for up to one year.

(3) Contracts or transactions that violate alliance rules may be invalidated.

(4) The draft pick is confiscated.

The last point is very important. The clause does not specify the type or number of draft picks, which seems to give the president greater discretion when judging the penalty for the second paragraph violation. So if the Clippers are indeed found to circumvent the salary cap, the punishment the league imposed on them will ultimately depend on the exact nature of the violation found in the investigation.

Have Leonard or the Clippers had any charges before?

In 2015, the Clippers were fined $250,000 for providing an unauthorized endorsement contract to DeAndre Jordan. Los Angeles Times reporter Brad Turner reported at the time that the Clippers provided Jordan with a Lexus endorsement contract of $200,000 a year. Ballmer has had the Clippers for less than a year while negotiating with Jordan Jr. There has never been a proven behavior between Leonard and the Clippers to evade the salary cap. However, since Leonard agreed to sign the Clippers in 2019, rumors have been endless.

Shortly after Leonard made his decision, The Athletic reporter Sam Amike reported that the league office received a complaint accusing Leonard's uncle Dennis Robertson of undue benefits during the free agent signing process.

Leonard's uncle and business partner Dennis Robertson

Amick said in the report at the time: "Short after Leonard made the decision, the story about Robertson's wish list reached the league office, and the relevant parties reported that Leonard's uncle had asked for more than a maximum salary contract from the team that pursued him (Kayey eventually signed a three-year, $103 million contract with the Clippers. ). The league was told that Robertson asked team officials for some team ownership, a private jet that is ready to use, a house, and—last but not least—if Leonard plays for their team, he can get guaranteed off-court endorsement revenue. It should be clear that all these programs are far beyond the scope of the league's labor agreement. "Amick reported that Robertson made these requests to the Lakers and the Raptors. However, the NBA found no evidence that the Clippers met these requirements. Adam Xiao talked about the investigation in an interview with The Athletic.

" (at the Council meeting in New York in late September) We did tell our teams that we are investigating and will continue to investigate this summer," Xiao Hua said in 2019 when asked whether the Clippers were under investigation. "In addition, we were trying to set new rules at this Council meeting to keep everyone focused on the future (free agent market) rules. I think I'm going to say that. We are looking at the offseason behavior. We have and will Continue to look at it, but first we hope to change the way business works in the future."

It is worth noting that Amik reported: "If any relevant evidence of illegitimate interests appears in the future, the league will re-open the investigation and pursue these allegations again." In 2020, the NBA was forced to investigate the Clippers again, when Johnny Wilkes, who claimed to be a friend of Leonard and Robertson, sued Clippers and team adviser Jerry West, claiming that he was owed $2.5 million for helping the Clippers successfully sign Leonard's service. In 2022, the lawsuit was dismissed in the Los Angeles Superior Court.

Leonard signed with the Clippers in July 2019. However, the terms of the agreement obtained by Torre began on April 1, 2022 and will end on March 31, 2026. Leonard's initial contract with the Clippers is worth $104 million. In 2021, he renewed his contract early on with a four-year, $176 million contract, and then he renewed his contract early on with a three-year, $149.5 million contract again in 2024.

Author: Sam Quinn

Translator: GWayNe

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