Ethics CasesSport

Cases · NBA · 2019–2026

Paying Around the Cap: The Clippers, Kawhi Leonard and the NBA's Circumvention Rules

An NBA-commissioned investigation by the law firm Wachtell, Lipton, Rosen & Katz found that the LA Clippers initiated and facilitated endorsement deals between star Kawhi Leonard and four companies doing business with the team, induced them with team business, and paid personal expenses for Leonard and his representatives. On September 2, 2026, the NBA fined the Clippers a record $30 million, took five first-round draft picks, suspended owner Steve Ballmer for a year and suspended two top executives. Leonard was required to pay $700,000. The Clippers first called the investigation 'heavily biased,' then accepted the penalties and apologized. The case asks how leagues should enforce salary rules that exist to keep competition fair, and who should bear the punishment.

By Tanner Simkins, editor

Timeline

  1. The NBA fines the Clippers $250,000 for trying to facilitate an endorsement deal between a free agent and a team sponsor.
  2. The NBA questions the Clippers about reports that Leonard's representative sought impermissible benefits from teams; the inquiry stays open.
  3. Podcaster Pablo Torre reports evidence about Leonard's endorsement deal with Clippers sponsor Aspiration.
  4. The NBA announces findings and penalties: five first-round picks forfeited, a $30 million fine and a one-year suspension for Ballmer.
  5. Ballmer says the Clippers will comply with the penalties and apologizes.
  6. Commissioner Adam Silver says the discipline 'is final.'

The ethical issues

  • Circumventing a collectively bargained salary cap through third-party payments.
  • Owner accountability for an organization's culture of compliance.
  • Whether penalties should fall on fans and future players through lost draft picks.
  • Honesty and cooperation with investigators.
  • Due process for teams when penalties are imposed by the league office.

Stakeholders

StakeholderInterests & obligations
LA Clippers and Steve BallmerCompeting for titles and protecting their reputation.
Kawhi Leonard and his representativesMaximizing earnings on and off the court.
Other NBA teamsA level playing field under the salary cap.
National Basketball Players AssociationProtecting the bargained system that allocates revenue to players.
NBA league officeCredible enforcement of its rules.
Clippers fansA competitive team and an organization they can be proud of.

The case

Background

The NBA’s salary cap limits how much each team can pay its players, and it rests on a bargain between the league and the players’ union over how basketball revenue is shared. A team that pays a star more than the rules allow gains an edge over rivals who follow them. In September 2026, the NBA found that the LA Clippers had done exactly that by steering money to Kawhi Leonard through companies that did business with the team. The league’s penalties included what CNBC described as the largest fine in NBA history.[8] The case asks how leagues should enforce salary rules that exist to keep competition fair, and who should bear the punishment.

The rules and governance

Article XIII of the 2023 collective bargaining agreement (CBA) between the NBA and the National Basketball Players Association forbids any agreement or transaction “designed to serve the purpose of defeating or circumventing” the CBA’s provisions, including the salary cap.[3] It specifically makes it a violation for a team to arrange for “any sponsor or business partner or third party” to pay a player “compensation for basketball services (even if such compensation is ostensibly designated as being for non-basketball services).”[3] Section 2 bans undisclosed agreements between a team and a player, or anyone acting for him, involving compensation or “an investment or business opportunity,” and it allows violations to be proven “by direct or circumstantial evidence.”[3]

The CBA sets out penalties that the commissioner may impose after a finding by the System Arbitrator, including fines of up to $7.5 million, forfeiture of draft picks and suspension of team personnel for up to a year.[3] In this case, the NBA said it and the players’ union had “entered into an agreement confirming these penalties are final and binding on all parties.”[1]

How the case emerged

The Clippers were not first-time offenders. In 2015, the NBA fined them $250,000 for trying to facilitate an endorsement deal between free agent DeAndre Jordan and a new team sponsor. In 2019, the league questioned the Clippers about reports that his uncle and business manager had sought impermissible benefits from teams courting him; that inquiry stayed open.[6]

In September 2025, podcaster Pablo Torre reported evidence about Leonard’s endorsement agreement with Aspiration, a company that sponsored the Clippers.[6] The NBA hired Wachtell, Lipton, Rosen & Katz to investigate.[1] The Clippers said they cooperated fully, and a letter released by the team said Ballmer spent nearly $50 million funding the investigation.[5]

The findings

The investigators’ summary report concluded that the Clippers broke the rules by “affirmatively initiating off-court income opportunities” between Leonard and four companies doing business with the team (Aspiration, Boingo Wireless, Daktronics and Lockton Insurance), facilitating the agreements, “inducing the companies to enter into these agreements by offering them business from the team,” paying personal expenses for Leonard and his representatives, and failing to report improper solicitations made through Leonard’s uncle.[1][2] The Los Angeles Times reported that Leonard received $66 million in endorsement pay from the four companies, that Ballmer invested $60 million in Aspiration and that the three other companies received $22 million from the Clippers in consulting fees.[5]

According to the report, as quoted by Yahoo Sports, Aspiration’s own executives initially opposed the deal. One wrote, “this is not a good investment of our capital,” describing it as “$48M over 4 years for Kawhi, who is not a big name.” They were told that “the Clippers are asking us to do this” and that the team would increase its payments to Aspiration “in line with what we pay this guy.”[6] The report found that the other three deals were signed during the COVID-19 pandemic, were larger than any endorsement the companies had ever signed, were never publicly announced and required little of Leonard, whose only confirmed activities were one visit to a military base and signing some memorabilia.[6]

The investigators also assessed credibility. They found that business president Gillian Zucker “made several statements that proved inconsistent with contemporaneous documents” and “placed responsibility on subordinates,” while basketball president Lawrence Frank “took responsibility for the actions of subordinates,” and recommended that cooperation be taken into account.[6]

The penalties

The NBA ordered the Clippers to forfeit first-round picks in 2029, 2030, 2031, 2032 and 2033 and fined the team $30 million, which CNBC described as the largest fine in NBA history.[1][8] Ballmer was suspended from all league and team activities for one year “for knowingly seeking to help Mr. Leonard obtain off-court income opportunities, for approving a business deal that he knew was a precondition for Aspiration to enter into an endorsement agreement with Mr. Leonard, and for his failure to create conditions under which his organization abided by the NBA’s circumvention rules.”[1] Zucker was suspended without pay for a year, including for “providing false and misleading statements to investigators,” and Frank for six months. The team was placed under five years of league compliance monitoring. Leonard was required to pay $700,000, and his uncle was banned from dealing with NBA teams for five years.[1]

Commissioner Adam Silver said: “I am deeply disappointed by the flagrant violations of our rules and by the Clippers’ institutional and leadership failures that led to this misconduct.”[1]

Aftermath

The Clippers initially said they “vehemently reject the NBA’s findings,” calling them “the result of a heavily biased investigation seeking to justify a predetermined narrative.”[5] The Los Angeles Times reported, citing a league source, that there was no arbitration or appeal process available to the team.[5] Leonard said he had “no knowledge of any intent on anyone’s part to circumvent the salary cap.”[8]

On September 13, Ballmer reversed course. “I want to apologize to our fans, employees, and my fellow NBA team owners for the distraction and distress this matter has caused, for which I accept responsibility as principal owner,” he said, adding that the team had paid the fine and that “while there are still disagreements concerning the findings in the report, this is not where I want to focus. Team owners should support, not distract.”[4][7] Silver said the discipline “is final” and acknowledged that “we’re unfortunately punishing the fans of that team as well.”[9] Leonard was later traded to the Toronto Raptors.[9]

The core dilemma

Salary caps only work if everyone follows them, and circumvention is hard to detect because it hides inside ordinary business deals. Severe penalties deter, but they also fall on fans and future players who did nothing wrong. The dilemma is how to hold an organization and its leaders accountable without punishing innocent stakeholders, and how to ensure the process is fair.

Competing values

  • Fair competition vs. market freedom: players may earn endorsements, but not disguised salary.
  • Deterrence vs. collateral harm: lost draft picks punish fans for years.
  • Leadership accountability vs. individual culpability: Ballmer was punished for the culture of his organization as well as his own acts.
  • Finality vs. due process: the league’s decision was final, without an independent appeal for the team.

Strongest arguments

For the penalties: The evidence showed a pattern across four companies, by a prior offender.[1][6] The CBA protects a bargain with players, and circumvention undermines it for every team.[1][3] Honesty mattered: an executive who misled investigators received a heavier penalty than one who cooperated.[1][6]

Against or questioning the penalties: The Clippers argued the investigation was biased and that the league’s public account differed from what it told them privately.[5] The team had no independent appeal.[5] Silver acknowledged that fans bear part of the punishment.[9] Leonard, who received the money, was fined but not suspended.[1][7]

Applying the frameworks

Justice & fairness (Rawls)

From behind a veil of ignorance, not knowing which team you would own or support, you would choose a system where all teams play under the same pay limits. Rawls’s justice as fairness supports strict enforcement, while also requiring fair procedures for those accused.

Kantian (duty)

Kant asks whether a maxim could be universalized. If every team routed salary through sponsors, the cap would become meaningless. Kant would also condemn deception, both in disguising payments and in misleading investigators.

Virtue ethics

Virtue ethics focuses on character. Ballmer’s eventual apology and acceptance of responsibility reflect accountability, but the report found failures of integrity and honesty within the organization. The contrast between Frank’s candor and Zucker’s statements shows how virtues and vices shaped the outcome.[6]

Walk it through: the Simple Decision Model

  1. Spot the issue: Whether a team used third-party deals to pay a player beyond the cap.
  2. Gather facts: Contracts, emails, payments and witness credibility.
  3. Test options: Fines only; draft-pick forfeiture; suspensions; voiding contracts.
  4. Check codes and law: CBA Article XIII and the NBA constitution.
  5. Decide and document: Publish findings and reasons, as the league did.
  6. Communicate and follow up: Monitor compliance and review sponsorship rules.

What’s settled and what’s contested

  • Settled: The NBA found violations and imposed penalties that the Clippers accepted and paid; the NBA and players’ union agreed the penalties were final.[1][4]
  • Contested: the fairness of the investigation; whether penalties should fall on fans; whether Leonard should have been punished more.[5][9]

Why this case matters

Salary caps are central to competitive balance in many leagues. The Clippers case shows how hidden payments can undermine a bargained system, why compliance depends on leadership and why leagues must balance deterrence with fairness to those who did nothing wrong.

Key terms

Rules vs. spirit of the game
Rules are the written minimum; the spirit is the fairness and respect the rules exist to protect. Rules set the floor; spirit sets the ceiling.
Institutional accountability
Structures that make a sport organization explain its decisions and face consequences: clear authority, transparency, appeals, independent oversight and enforcement.
Moral hazard
When someone takes more risk because others will bear the cost.
Trust
The public’s belief that what they are watching is real. Integrity failures are ultimately failures of trust.
Due process
Fair procedures before a sanction: notice, a chance to respond, an impartial decision-maker and a right of appeal.
Conflict of interest
A situation where a person’s private interest could improperly influence a decision they make in an official role.

Definitions from the Ethics Cases glossary.

Discussion questions

  1. Why does a salary cap matter for fairness, and who benefits from it?
  2. Should an owner be suspended for violations carried out mainly by staff?
  3. Is forfeiting future draft picks fair to fans and to players who were not involved?
  4. Leonard was fined but not suspended. Was that the right balance?
  5. Should teams have an independent appeal process for league discipline?

Sources

  1. NBA announces penalties and findings arising from investigation of LA Clippers and Kawhi Leonard — NBA
  2. Summary Report of Independent Investigators Concerning the LA Clippers and Kawhi Leonard — Wachtell, Lipton, Rosen & Katz
  3. NBA/NBPA Collective Bargaining Agreement (2023), Article XIII: Circumvention — NBA
  4. Statement from Clippers Governor Steve Ballmer — NBA
  5. NBA hammers Clippers, Steve Ballmer and Kawhi Leonard following investigation — Los Angeles Times
  6. NBA punishes Clippers, Steve Ballmer: 5 key findings from the league's Kawhi Leonard investigation — Yahoo Sports
  7. Ballmer to accept NBA's punishment, has 'sincere regrets' — ESPN
  8. LA Clippers owner Steve Ballmer apologizes over team sanctions — CNBC
  9. Adam Silver ready to move on after the Clippers-Kawhi Leonard scandal: 'Discipline is final' — Yahoo Sports