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Wanna Clean Up College Basketball? Here's an Idea

In its Report and Recommendations, the NCAA's Commission on College Basketball (CCB) doubled down on the "collegiate model", defiantly rejecting the payment of players as part of its proposed solution to cure the ills plaguing college basketball. The CCB noted the "undeniable" big money impact, but dismissed turning college hoops into another professional league, instead opting to "change fundamentally the current culture and rules to address the effect that money has had on college basketball, the NCAA and its member institutions."

A fundamental change in the culture of college hoops will be a daunting task. The CCB conceded as much by concluding "the environment surrounding college basketball is a toxic mix of perverse incentives to cheat." That toxicity may be ratcheted up a notch now that the US Supreme Court has opened the door for states to legalize sports wagering.

Perhaps driven by the big money element, as part of its recommendations, the CCB took a page from the playbook of the SEC--not the athletic conference--but the federal agency that governs our capital markets, the Securities and Exchange Commission. 

Specifically, the CCB recommended that coaches, athletic directors and college presidents be required to annually certify that they have conducted due diligence and that their programs are in compliance with NCAA rules. In a footnote, the CCB acknowledged the recommendation was modeled after an SEC rule, adopted as part of the Sarbanes-Oxley Act of 2002, which requires that senior executives of public companies certify to the accuracy of their annual and quarterly reports.

While an annual "we're clean" certification might seem like useless lip service, requiring head coaches to certify in writing that they have conducted due diligence should at least make it more difficult for them to plead ignorance when confronted about violations occurring within their own programs. Indeed, the CCB report makes four references to a "known or should have known" standard, which should forestall eye-roll inducing lack of knowledge disclaimers aired by fastidious coaches who are paid staggering salaries.

The Sarbanes-Oxley Act also made it illegal for public companies to retaliate against employees who report fraud. While the CCB alluded to the importance of anti-retaliation in its report, it provided no specific direction or guidance, simply stating, "NCAA rules should specifically protect whistleblowers who report and provide evidence of violations."

The shortcoming in this aspirational statement is that it assumes there will be whistleblowers in the first place. One of the most disturbing aspects of the CCB's report was the conclusion that essentially everyone associated with the college basketball environment was aware of illicit under-the-table payments of the type at issue in the pending criminal cases, yet the violations still went unreported. This is a telltale sign there is simply not enough of an incentive for anyone to blow the whistle and report an infraction.

Although the CCB has recommended the NCAA bolster its enforcement resources and increase its financial penalties, these changes are unlikely to curtail cheating to a meaningful degree if violations continue to go unreported.

Recall that the misdeeds alleged in the current corruption scandal were unearthed as a result of an informant who tipped off the FBI, triggering an investigation with wiretap surveillance.

As George Dohrmann has pointed out, the FBI will not be around in the long run.

Going forward, informants seeking leniency will be few and far between. In order to attract probative tips of wrongdoing with useful frequency, there needs to be a worthwhile motivation for those aware of violations to come forward.

If the NCAA wants to reverse the dreaded perception that the rewards of cheating in college basketball greatly outweigh the risks of getting caught, taking another page out of the SEC's playbook would go a long way: a whistleblower reward program.

The SEC adopted its whistleblower reward program as a mandate under the Dodd Frank Act, reform legislation that was passed after the financial crisis of 2008. In short, the program encourages whistleblowers to report securities law violations by compensating them with a portion (between 10% and 30%) of the financial penalties imposed in a successful enforcement proceeding. The program allows tips to be reported anonymously and also prohibits retaliation against those who report (for further details, see the SEC's FAQs).

According to the most recent annual report of the Office of the Whistleblower, the SEC has received over 22,000 tips since the inception of the program, with almost 4,500 tips in 2017 alone. In 2016, Andrew Ceresney, then director of the SEC's Enforcement Division, stated "the SEC whistleblower program has had a transformative impact on the agency, enabling us to bring high quality enforcement cases quicker using fewer resources."

A whistleblower reward program would be a significant compliment to the enforcement fix proposed by the CCB. The NCAA's newly minted and specialized enforcement unit should have the expertise and resources to field and screen whistleblower tips, initiating investigations when warranted.

Similarly, the CCB's recommended increase in financial penalties will enhance the viability of a whistleblower reward program. A potential loss of all post-season revenue for the duration of any post-season ban (which could now run as long as five years) is big money. A chunk of this cash, even if less than the 10% to 30% rate of the SEC reward program, would be quite the carrot to encourage those aware of violations to come forward. Perhaps most importantly, the deterrent ripple effect should have a long reach. Everyone in the college basketball ecosystem, even those on the periphery, would need to be concerned that, at any moment, someone could opt to cash in by dropping the proverbial dime. Coaches, players, apparel company representatives, AAU program staff members and professional agents would all need to be mindful of staying on the straight and narrow.

In other words, an NCAA whistleblower reward program should keep everyone honest. That alone is enough of a reason for the NCAA to consider it, especially now that its investigatory and enforcement functions will be undergoing a major overhaul.

 

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