| Reprinted from the Sports Litigation Alert newsletter |
The one-count complaint filed by a former men’s basketball coach against North Carolina State University in the U.S. District Court in North Carolina in August is remarkably short on details. The former coach, Mark Gottfried, alleges that the university breached its contract with him when it stopped making monthly buyout payments to him in 2018. The complaint, Gottfried V. N.C. State, is sparse on factual allegations, even failing to set forth how much money N.C. State still owes Gottfried.[9]
But this seemingly innocuous civil litigation has the potential to be extremely contentious and hugely embarrassing to both parties and to college basketball. Gottfried, after all, was the first coach directly linked to a federal investigation into improper payments made to high school recruits.
The marriage between the parties was consummated in 2011 after N.C. State dispensed with head coach Sidney Lowe, a key player on the Wolfpack’s 1984 national title team who never led his alma mater to the NCAA tournament in five seasons.
N.C. State fell in love with Gottfried, who was a key assistant to Jim Harrick on UCLA’s 1995 championship team and had enjoyed successful head coaching runs at Murray State and Alabama. The marriage had a long honeymoon − four consecutive seasons of at least 22 wins and two trips to the Sweet Sixteen — but it soured in two subsequent losing seasons. N.C. State showed Gottfried the door in 2017 after six years.
The Wolfpack finished 22-14 in 2014-2015, garnering a no. 8 seed in the NCAA tournament where they upset no. 1 seed Villanova before falling to Louisville, a no. 4 seed. Gottfried’s fortunes soured the following season, with the Wolfpack finishing 16-17. Beset by player transfers, the team struggled again in 2016-2017. Athletic Director Debbie Yow summoned Gottfried to her office in February 2017 and the university promptly announced that Gottfried would be leaving after the season with three years left on his contract.
A few weeks later, the parties allegedly entered into a Termination Agreement that required Gottfried to continue to coach through the end of the season and to actively seek another coaching job. (He is currently the head coach at Cal State Northridge.) N.C. State allegedly agreed to make monthly buyout payments until April 2020. The university paid several installments before allegedly halting payments in August 2018. Gottfried’s complaint states the following:
22. On May 24, 2018, over 14 months after entering into the Termination Agreement with Gottfried, and having accepted the benefit of Gottfried’s performance during that time, N.C. State sent Gottfried a purported “Notice of Intent to Discharge for Cause.” The Notice stated that Coach Gottfried had “induced the university to enter into payment arrangements” that were memorialized in the Termination Agreement. The Notice outlined the process for administrative review of the proposed action.
23. N.C. State’s allegations of “inducement” were false. The Termination Agreement was conceived, drafted, reviewed, and approved by N.C. State and its attorneys. Gottfried timely commenced the administrative review process.
The complaint and the circumstances behind the Termination Agreement raise a multitude of questions. First, why did the parties enter into the Termination Agreement in 2017 even though Gottfried’s employment contract already addressed this issue? The university’s reported explanation that it wanted to assure that Gottfried finished the regular season seems hollow.
Second, what did the university mean when it asserted that Gottfried (wrongly) induced it to enter into the Termination Agreement in 2017? And finally, on what legal and factual basis did N.C. State claim in 2018 that Gottfried was discharged “for cause?”
The answers may lie within the FBI and NCAA investigations into corruption in college basketball. It has been alleged that basketball coaches at several major programs used their relationships with athletic apparel companies to make illicit payments to high school recruits.
As of January, the NCAA had delivered Notices of Allegations directly tied to the FBI investigation to at least five schools: N.C. State, Kansas, Oklahoma State, USC and Texas Christian. Other schools reportedly under investigation include Auburn, Louisville, LSU, Arizona and Alabama.[10]
The allegations against N.C. State concern a cash payment of $40,000 to five-star high school baller Dennis Smith, Jr. (Smith, a guard with the New York Knicks, played one season at N.C. State and then declared himself eligible for the NBA draft.) The payment was reportedly made by T.J. Gassnola, who started an AAU program for Adidas in Massachusetts in 2002 and operated it until he was caught up in the FBI’s probe. Gassnola cooperated with the investigation after the FBI announced the arrest of four college basketball assistant coaches and three Adidas-connected individuals for fraud in September 2017.
Gassnola testified in one of the federal college basketball corruption trials that he flew to Raleigh, N.C., in November 2015 and gave the money to Gottfried’s assistant coach, Orlando Early, who was supposed to pass it to Shawn Farmer, a trainer for Smith and intermediary between the family and N.C. State. NCAA Enforcement obtained phone records for the involved parties and noted consistent communication around the time of the transaction between Gassnola and Early. On November 2, 2015, the day Gassnola said he delivered the money to Early’s house, Gassnola had a six-minute phone conversation with Gottfried.[11]
In March 2019, Gottfried became the first head coach to be implicated in the FBI’s investigation. According to a disclosure from federal prosecutors, the attorney for Early said his client stated that Gottfried on two occasions gave him envelopes − containing what Early believed was cash − to deliver to Smith’s trainer to ensure he signed with the Wolfpack.
Smith’s trainer, Shawn Farmer, was supposed to deliver the envelopes to Dennis Smith Sr., the father of the recruit.
These developments raise the possibility that Gottfried represented to the university during termination negotiations that he was not involved in any activities that might run afoul of NCAA rules. It also begs the question of whether N.C. State sensed in 2018 that it might be a target of the FBI and NCAA investigations that might have some merit and, therefore, asserted after-the-fact that it had cause for Gottfried’s termination.
But it doesn’t explain why the university was so motivated to keep Gottfried as head coach until the end of the 2016-2017 season that it renegotiated the termination terms of Gottfried’s contract.
The NCAA’s case against N.C. State will be resolved under the new Independent Accountability Resolution Process (IARP). The IARP calls for a hearing before an independent panel with outside advocates and investigators in the basic roles of defense (N.C. State) and prosecution (NCAA Enforcement). The IARP is an option for those institutions that prefer not to have the NCAA Committee on Infractions decide their case. However, one feature of the IARP is that the defendant waives any right to an appeal — a requirement that N.C. State could challenge in court.
The civil complaint filed on behalf of Gottfried says nothing of these underlying circumstances. For his part, Gottfried asserted in his Initial Response to NCAA Enforcement that he is “a compliance-oriented head coach” and that if Early made the alleged payments, he did so “directly against Gottfried’s direction.”[12]
Yet, Gottfried’s testimony at the NCAA hearing and in his civil action against N.C. State could prove very interesting. How often is it even remotely possible that a college coach might consider invoking the Fifth Amendment privilege?
[9]https://wwwcache.wralsportsfan.com/asset/colleges/ncsu/2020/09/01/19265992/dkt_1_Complaint-DMID1-5o1rwma24.pdf
[10] https://www.si.com/college/2020/01/31/ncaa-college-basketball-investigation-corruption
[11] https://www.si.com/college/2020/04/08/nc-state-ncaa-investigation-dennis-smith
[12] http://dig.abclocal.go.com/wtvd/docs/Gottfried response to NCAA 12.9.19.pdf