College Athletics Fraud

On June 30, 2019, David Fawn pleaded guilty to conspiracy to commit bank fraud as part of a federal bribery case. Anxious to please the judge prior to his sentencing, he provided investigators with information about theft and resale of football and basketball tickets at the University of Kansas (KU).

Fawn identified two individuals, one of whom was exonerated while the other proved to be central to the case. As a result, Fawn had his sentence reduced from 24 to 18 months. Federal authorities contacted KU officials in late 2009. Under increasing pressure, KU announced in March 2020 that it had retained the services of Fulton LLP to conduct an internal investigation. Assisted by a forensic accounting firm, Fulton found that six employees had conspired to improperly sell or use approximately 20,000 KU athletic tickets mostly to basketball games, including the Final Four tournament from 2015 through 2020. The sales amounted to more than $1 million at face value and could range as high as $3 million at market value. Even worse, the investigators were unable to determine how many of the tickets were sold directly to brokers because the employees disguised these distributions into categories with limited accountability, such as complimentary tickets, according to a May 26, 2020 article "University of Kansas athletic tickets scam losses may reach $3M."The investigators could not examine records prior to 2015 because the athletics department did not retain those records.

The investigation of KU's ticket sales and fundraising operations by federal authorities continued throughout 2020 and 2021. KU's internal investigation, which was released May 26, 2020, implicated the associate athletic director for development, the associate athletic director for the ticket office, the assistant athletic director for development, the assistant athletic director for sales and marketing, the assistant athletic director for ticket operations and the husband of the associate athletic director for the ticket office who had been working for KU as a paid consultant.

WHAT ACTUALLY HAPPENED?

The accused allegedly abused the complimentary ticket policies of the university in three ways:

1- Official policy allowed for certain athletic office employees to receive two complimentary tickets for each athletic event, provided they would not resell them. Instead, the athletic department routinely gave each of these employees more than two tickets for each event and tacitly permitted, if not overtly encouraged, reselling.

2- The development/fundraising arm of the athletic office was permitted to use complimentary tickets to cultivate relationships with prospective donors. However, these officials helped themselves to many more complimentary tickets than they could have reasonably needed for the stated purpose.

3- Athletic department members improperly used or resold complimentary tickets reserved only for charitable organizations. The culprits concealed these thefts by simply charging tickets to such fictitious accounts as RJDD - "Robert Johnson Donor Discretionary" - and not recording the ultimate recipients. (Johnson was the assistant athletic director for development and one of the two persons the informant identified.)

By 2019, a cover-up compounded the original schemes. When the 2018-2019 basketball ticket sale records could not be reconciled, Charlotte Brown told Brandon Sean and Jason June to move documents from the athletic office to the football stadium where she, Ben Kitts and Tom Brown would destroy them over the weekend, and then attribute their absence to construction at the stadium.

In a separate scheme, the husband of the associate athletic director for the ticket office, who was supposedly employed as a consultant to the athletic department, received payments totaling $116,500, all approved by the associate athletic director for development. Apparently, the husband did not provide any services in exchange for these payments. Importantly, no allegations or evidence suggested that any players, coaches or university administrators outside athletics were involved in these crimes. Athletics office employees solely perpetrated these frauds.The athletic director was not involved in the scheme but accepted responsibility for the lax oversight that contributed to its extent and duration.

KU EPILOGUE After the scandal broke at KU, federal and state authorities continued their investigation, which resulted in the following indictments and guilty pleas:

1. Jason June, assistant athletic director for ticket operations, pled guilty to one count of misprision (deliberate concealment of a crime) and was sentenced to two years of probation and $56,000 restitution.
2. Brandon Sean, assistant athletic director for sales and marketing, pled guilty to one count of misprision and was sentenced to two years of probation and $157,840 restitution.Both June and Sean cooperated in the investigation from an early stage and received relatively light sentences.
3. Robert Johnson, assistant athletic director for development, pleaded guilty to one count of conspiracy to commit wire fraud and was sentenced to 46 months and $1.2 million restitution.
4. Charlette Brown, associate athletic director for the ticket office, pleaded guilty to one count of conspiracy to commit bank fraud and was sentenced to 57 months and $2.2 million restitution.
5. Tom Brown, consultant to KU and husband of Charlette Brown, pled guilty to one count of conspiracy to commit wire fraud and was sentenced to 46 months and nearly $1 million restitution.
6. Ben Kitts, associate athletic director for development, pleaded guilty to one count of conspiracy to commit wire fraud. He was sentenced to 57 months and nearly $1.3 million restitution, including about $85,000 to the U.S. Internal Revenue Service and the balance to Kansas athletics.

Questions

1.Identify some of the weaknesses in KU's internal controls that allowed fraud to occur in the athletic department and go undetected for at least five years. Explain your answer.

2. How can frauds like this be prevented?

3. Do you think that the sentences given to the perpetrators were appropriate? or too harsh? or to