Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 2: I think it's extremely important. I think everybody deserves a
Speaker 2: shot and deserves a chance and the opportunity to play sport. Everybody,
Speaker 2: every little kid should have the opportunity to play sport
Speaker 2: because it can really change your life.
Speaker 3: Playing sports has certainly changed Paige Becker's life. The Yukon
Speaker 3: Husky Star has signed deals with Gatorade, StockX Cheg, and
Speaker 3: Kroc since the new NCAA rules that allow college athletes
Speaker 3: to make money off their name, image, and likeness. There
Speaker 3: are plenty of stories about the six figure deals for
Speaker 3: star college athletes with massive social media following, but the
Speaker 3: majority of college students benefiting from the new rules are
Speaker 3: making small, one off agreements without help from expensive lawyers
Speaker 3: or agents, and that's led to exploitation and students getting
Speaker 3: ripped off by disreputable agents, questionable business deals, bad contracts,
Speaker 3: outright scams. Joining me is Nicole Sadik, a reporter with
Speaker 3: Bloomberg Law who's investigated this new era of college sports.
Speaker 3: Tell us what happened to Savannah Shane here when she
Speaker 3: was fresh off a second place team finish at the
Speaker 3: NCAA Gymnastics Championship last year.
Speaker 4: So Savannah Shanehare is a former gymnast at the University
Speaker 4: of Florida and she'd nearly been scammed doing what she
Speaker 4: thought was an nil deal. The long story short is,
Speaker 4: she was asked to participate in a photo shoot where
Speaker 4: she would be modeling a New York brand's clothing. It
Speaker 4: turned out the person who had reached out to her
Speaker 4: was a scammer, and they sent her a fraudulent check.
Speaker 4: And Savannah's story is really just one example of a
Speaker 4: larger issue today with college athletics, which is that nil
Speaker 4: deals or what appeared to be nil deals, can be
Speaker 4: abusive and exploitative.
Speaker 3: That was just an outright scam that happened to but
Speaker 3: there are other kinds of exploitation, like in contracts.
Speaker 4: Absolutely, one of the biggest red flags that I heard
Speaker 4: from some different lawyers that I spoke to is contracts
Speaker 4: where companies are asking students to sign away their intellectual
Speaker 4: property rights. Imagine you are a student athlete and you're
Speaker 4: doing brand promotion on Instagram for you know, let's say
Speaker 4: a shoe brand. You'll post a picture of you wearing
Speaker 4: that shoe, and if you've signed away your intellectual property rights.
Speaker 4: In some cases, that could mean that the company can
Speaker 4: continue to use that photo of you, you know, for
Speaker 4: as long as they want, in perpetuity. And so if
Speaker 4: you were to go pro after college and your market
Speaker 4: value increases, you know, the commission you'd be getting or
Speaker 4: the royalties you'd be getting from that photo wouldn't really
Speaker 4: be equitable to your market value.
Speaker 3: So they ask them to sign away their intellectual property
Speaker 3: rights in perpetuity.
Speaker 4: That has been sometimes the case. Of course, not every
Speaker 4: nil deal has had this. This is sort of, you know,
Speaker 4: the biggest red flag, but it certainly happens.
Speaker 3: You got a hold of a couple of these contracts.
Speaker 3: Tell us about the one where the company would take
Speaker 3: forty percent of the revenue of merchandise sales, a rate
Speaker 3: one lawyer described as obscene.
Speaker 4: It was this Texas merchandise company, and in the contract
Speaker 4: it said that the company would keep at least forty
Speaker 4: percent of the revenue from the merchandise sales. That's a
Speaker 4: huge commission. But what's really interesting about this contract is
Speaker 4: that it had another layer to it, which is that
Speaker 4: it locked in that same percentage for any future deals,
Speaker 4: so that essentially made the relationship between the student and
Speaker 4: the company like an athlete and an agent, which is
Speaker 4: another level.
Speaker 3: So tell us about the one that was pitched to
Speaker 3: basketball players.
Speaker 4: This contract was one page, very short and not really descriptive.
Speaker 4: So it didn't state who would own the student's intellectual
Speaker 4: property rights, and it didn't define, you know, what net
Speaker 4: profits would be. And so this company was going to
Speaker 4: be selling something and the students didn't know how much
Speaker 4: money they would be making.
Speaker 3: And lawyers you spoke to said, some of these contracts
Speaker 3: look like they're just pulled off the internet.
Speaker 4: Yes, that's right. And actually even some people I spoke
Speaker 4: to said that they would ask the students themselves to
Speaker 4: write the contract.
Speaker 3: Okay, that's new. Can you compare the requirements to be
Speaker 3: a so called NIL agent with the requirements to be
Speaker 3: a professional football agent in the NFL.
Speaker 4: The agents for these professional football players they have to
Speaker 4: register with the Players Association, they have to pass a
Speaker 4: legal test, and probably the most interesting to me, or
Speaker 4: for this story at least, is that they have to
Speaker 4: put a cap on their commission at three percent, and
Speaker 4: IL agents don't have that commission cap at all. It
Speaker 4: differs state to state based on state laws. But in
Speaker 4: many cases, the most that an NIL or a so
Speaker 4: called NIL agent has to do is just pay a
Speaker 4: fee to the state, pay an application.
Speaker 3: See so we hear about the big figure contracts, you know,
Speaker 3: six figures. Are most of the students getting much smaller deals?
Speaker 4: Yeah, I mean, these six figure deals get the most
Speaker 4: news coverage, but it is not the best representation of reality.
Speaker 4: Most students are making deals in the hundreds of dollars,
Speaker 4: maybe the thousands of dollars. But you have to think
Speaker 4: about it. There's five hundred thousand college athletes in the NCUBLEA,
Speaker 4: and we're really really just getting that top one percent
Speaker 4: in most news stories.
Speaker 3: Is there anyone on campus that students can go to
Speaker 3: for advice when they get these offers.
Speaker 4: One of the struggles that some athletes told me about
Speaker 4: is that the athletics departments are not allowed to provide
Speaker 4: legal advice to the students. That's actually something the NCUBA says,
Speaker 4: is that universities cannot provide legal advice to students. However,
Speaker 4: some schools have found, you know, sort of workarounds to
Speaker 4: this where their law schools, which are not under the
Speaker 4: nc double A, they offer pro bono legal clinics, so
Speaker 4: students can go to them with their questions and their
Speaker 4: concerns about their NIL deals. But again, you know, not
Speaker 4: every university has a law school. Not every student knows
Speaker 4: to go to these pro bono clinics, so for the
Speaker 4: most part, they're on their own, or they're working with
Speaker 4: you know, their parents, or if they can afford it
Speaker 4: and it makes sense for their deals, they're working with
Speaker 4: a lawyer outside of the university.
Speaker 3: Is there anyone on campus that students can go to
Speaker 3: for advice when they get these offers.
Speaker 4: One of the struggles that some athletes told me about
Speaker 4: is that the athletics departments are not allowed to provide
Speaker 4: legal advice to the students. That's actually something the nc
Speaker 4: DOUBLE says. However, some schools have found, you know, sort
Speaker 4: of workarounds to this, where there are law schools which
Speaker 4: are not under the NCUBA, they offer pro bono legal clinics,
Speaker 4: so students can go to them with their questions and
Speaker 4: their concerns about their NIL deals. But you know, not
Speaker 4: every university has a law school. Not every student knows
Speaker 4: to go to these pro bono clinics, so for the
Speaker 4: most part, they're on their own or they're working with
Speaker 4: their parents or if they can afford it and it
Speaker 4: makes sense for their deals, they're working with a lawyer
Speaker 4: outside of the university.
Speaker 3: You talked to an athletics compliance officer at Virginia Commonwealth University.
Speaker 3: Tell us what she is concerned about.
Speaker 4: Well, she is actually, you know, a licensed attorney, and
Speaker 4: so when she hears about or reads the contract that
Speaker 4: students has signed, she can pretty quickly pick up on
Speaker 4: red flags. And unfortunately, she told me that she's not
Speaker 4: allowed to provide legal advice to students about those contracts.
Speaker 4: And she said to me that she thinks sometimes that
Speaker 4: you know, acting in this conservative manner is you know,
Speaker 4: not helping the students to the best of her ability.
Speaker 4: But unfortunately that's what she has to do to be
Speaker 4: in compliance with nc double A policies.
Speaker 3: I guess you can understand that the NCUBA doesn't want
Speaker 3: to open itself for its people up to lawsuits over
Speaker 3: you know, the advice that they give.
Speaker 4: So I spoke to Tim Buckley, who is the senior
Speaker 4: vice president of External Affairs at the nc double A,
Speaker 4: and he emphasized that the organization is a member based organization,
Speaker 4: which means that some universities act as representatives for the
Speaker 4: rest of the membership of the organization, and that these
Speaker 4: are the ones who are making the policies and making
Speaker 4: the bylaws. And so a lawyer that I to said,
Speaker 4: these universities they have a reason for wanting to prevent
Speaker 4: their staff from providing legal advice, which is, like you said,
Speaker 4: it would open them up to liability. Imagine a student
Speaker 4: asking for advice, getting bad advice and then suing the university.
Speaker 4: So it really would open them up to a lot
Speaker 4: of potential lawsuits.
Speaker 3: Is the NCUBA doing anything about this?
Speaker 4: So Tim Buckley, the vice president of External Affairs at NCAA,
Speaker 4: said that there is working group right now working on
Speaker 4: updating the bylaws and the policies related to NIL and
Speaker 4: they're also pushing Congress to come up with a federal solutions.
Speaker 4: The NCAA can't govern every single entity involved in this space.
Speaker 4: They can only really govern the schools and the athletes,
Speaker 4: and so a federal law could help fill in some
Speaker 4: of those gaps. You know, who's going to govern the
Speaker 4: agents and who's going to govern all those other bodies
Speaker 4: that are involved in these deals.
Speaker 3: So some states prohibit students from signing anil agreements that
Speaker 3: outlast their college careers, which sounds very smart. How many
Speaker 3: states have something like that in I'm not.
Speaker 4: Sure I have an exact number, although Texas is a
Speaker 4: big one that does that. But you know, some people
Speaker 4: in the space say the more restrictive laws, as the
Speaker 4: word says, they restrict what students are allowed to do,
Speaker 4: so they're not in favor of that. Other people say
Speaker 4: that these restrictions are important to protect them. So it's
Speaker 4: kind of this debate and it's still up in the air.
Speaker 3: You spoke to former University of New Mexico track star
Speaker 3: Kendall Spencer, and I thought what he said was really intuitive,
Speaker 3: and he compared this to the concussion cases.
Speaker 4: That's right. When I first started investigating this, I had
Speaker 4: a really hard time actually finding athletes who would speak
Speaker 4: to me. And Kendall Spencer said, a lot of these
Speaker 4: students aren't going to come forward until a few years
Speaker 4: down the line, until you know, after they've graduated college,
Speaker 4: for example, they're no longer obligated to the provisions in
Speaker 4: their contract, and when they finally Sue said that we're
Speaker 4: going to start seeing lawsuits, you know, maybe five or
Speaker 4: ten years from now, and so that's really similar to
Speaker 4: the concussion than when you know, that became really prevalent
Speaker 4: only years after No.
Speaker 3: We're talking about the problems, But how how has this
Speaker 3: changed the lives of college athletes? Is there a demonstrable change?
Speaker 4: I mean, NIL has really been wonderful for a lot
Speaker 4: of college athletes, because you know, college athletes, they spend
Speaker 4: a crazy amount of their time, you know, in the
Speaker 4: gym or on the field or on the court. And
Speaker 4: before NIL was permitted, they weren't allowed to make any
Speaker 4: money off of the thing they spent most of their
Speaker 4: lives doing. And so now that that's opened up for them,
Speaker 4: you know, they can host training camps and make some
Speaker 4: pocket money off of that. They can endorse brands on
Speaker 4: social media and make some money off of that. And
Speaker 4: you know, when you're in college having you know, five
Speaker 4: hundred dollars in the bank out of bad thing at all.
Speaker 4: So it's definitely been really wonderful for a lot of athletes.
Speaker 4: And the story in no ways is trying to say
Speaker 4: the opposite of that.
Speaker 3: And also tell us about how it's you know, increased
Speaker 3: recognition of some sports and female athletes.
Speaker 4: Absolutely, I mean some of the biggest NIL stars are
Speaker 4: female athletes. It's really put them into the spotlight. It's
Speaker 4: also put some non revenue generating sports in the spotlight.
Speaker 4: And what I mean by that is, you know sports
Speaker 4: that are are not like basketball or football, you know
Speaker 4: gymnastics or wrestling for example. You know, those sports have
Speaker 4: really been elevated because these athletes have become so popular
Speaker 4: on social media.
Speaker 3: After working on this story for so long, do you
Speaker 3: think we're going to hear more about the NIL problems
Speaker 3: related to the students as time goes on, or that
Speaker 3: they'll catch on and you know they'll learn more by
Speaker 3: what they're hearing.
Speaker 4: I definitely think sort of both of what you said.
Speaker 4: I think we will continue to hear, unfortunately, stories of
Speaker 4: student athletes being exploited in these NIL deals, But states
Speaker 4: and also the federal government are very in tune to
Speaker 4: these issues, so I think reforms are coming.
Speaker 2: You know.
Speaker 4: The only thing I'll add is that universities, although they
Speaker 4: can't provide legal advice to the student athletes, a lot
Speaker 4: of them have been working really hard to provide educational
Speaker 4: courses to the students, like financial literacy and life skills workshop,
Speaker 4: you know, to educate them on what types of contracts
Speaker 4: you should and shouldn't sign. So, although you know they're
Speaker 4: not acting as lawyers, they are educating them and I
Speaker 4: think that that is an important piece of the puzzle
Speaker 4: as well.
Speaker 3: A great story, Nicole, and really well researched. Thanks so
Speaker 3: much for joining us. That's Bloomberg Law reporter Nicole Sonic.
Speaker 5: This is now the third time this office has charged
Speaker 5: Weinstein with a large scale scheme to rip off investors.
Speaker 3: Ellie Weinstein was serving a twenty four year sentence for
Speaker 3: a two hundred million dollar real estate Ponzi scheme when
Speaker 3: Donald Trump commuted his sentence in the final hours of
Speaker 3: his presidency in January of twenty twenty one. But it
Speaker 3: didn't take Weinstein long after his release from prison to
Speaker 3: begin another scam, according to the US Attorney for New Jersey,
Speaker 3: Philip Sellinger, who says Weinstein was still on supervised release
Speaker 3: when he defrauded investors by making false promises involving humanitarian
Speaker 3: supplies destined for Ukraine, another Ponzi scheme.
Speaker 5: Five defendants, including defendant Eleanu Weinstein, have been charged in
Speaker 5: the District of New Jersey by criminal Complaint with conspiring
Speaker 5: to defraud investors out of tens of millions of dollars
Speaker 5: and conspiracy to obstruct the justice.
Speaker 3: Weinstein is now back in jail after bail was denied,
Speaker 3: and he's charged along with four other men, of defrauding
Speaker 3: more than one hundred and fifty investors out of thirty
Speaker 3: five million dollars by falsely promising to invest their money
Speaker 3: in COVID nineteen masks, scarce baby formula, and first aid
Speaker 3: kits bound for Ukraine. Joining me is Bloomberg Legal reporter
Speaker 3: David Voriakis so tell us about the first scheme.
Speaker 1: Ellie Weinstein was convicted in federal court in New Jersey
Speaker 1: a decade ago for a real estate ponzi scheme that
Speaker 1: primarily preyed on Orthodox Jews in the Lakewood, New Jersey area.
Speaker 1: He pleaded guilty eventually and admitted that he stole about
Speaker 1: two hundred million dollars from his victims. While he was
Speaker 1: out on bail on that case, he was also arrested
Speaker 1: in a separate scheme that involved investing in pre IPO
Speaker 1: shares of Facebook, which turned out to be phony.
Speaker 3: Trump commuted his sentence on the last days of his presidency,
Speaker 3: and there was a campaign for his release and a
Speaker 3: lot of the people were from the Orthodox Jewish community,
Speaker 3: which is the community that he stole from.
Speaker 1: That's correct. He got a group of supporters, including some
Speaker 1: of his victims, a group of congressmen, Harvard Law School
Speaker 1: professor Alan Dershowitz, a couple of former US attorneys, and
Speaker 1: other supporters to campaign for his release. The White House
Speaker 1: announced on Trump's last day in office that he was
Speaker 1: among those who were getting commutations. They put out a
Speaker 1: release citing that he was the father of seven children
Speaker 1: and a loving husband, and that he had maintained an
Speaker 1: exemplary prison history, and that he would have the strong
Speaker 1: support from his community and members of his faith. He
Speaker 1: served nearly eight years in prison when.
Speaker 3: He was released, So now tell us about the scheme
Speaker 3: that he's accused of now when it allegedly started.
Speaker 1: Prosecutors say that his latest crimes began not long after
Speaker 1: he got out of prison. He used several other conspirators
Speaker 1: to convince people to invest in COVID nineteen mass scarce
Speaker 1: baby formula, and first aid kits bound for Ukraine. They
Speaker 1: say that this time around, there were one hundred investors
Speaker 1: who put up thirty five million dollars. I believe they
Speaker 1: were friends and family of Weinstein and the other conspirators
Speaker 1: in the case, and the government cracked the case, as
Speaker 1: I understand it, because a couple of the conspirators who
Speaker 1: were not charged with crimes secretly recorded him, and he
Speaker 1: made a number of admissions on those tapes, including he
Speaker 1: said I finagled and ponzied and lied to people to
Speaker 1: cover and he told one conspirator that he hit his
Speaker 1: true identity behind the alias of Mike Koenig because he said,
Speaker 1: no one would ever give you a penny if they
Speaker 1: knew who I was, because I have a bad reputation.
Speaker 3: So the US attorney said that these were brazen and
Speaker 3: sophisticated crimes that involved multiple conspirators and drew right from
Speaker 3: Weinstein's playbook of fraud. So was it the same kind
Speaker 3: of things he was doing as he was convicted of
Speaker 3: and a Ponzi scheme too.
Speaker 1: That's what they've alleged that he used an alias and
Speaker 1: he hid behind other people because he didn't want the
Speaker 1: world to know that he was committing these kinds of crimes. Again,
Speaker 1: he convinced people to put up money, and then he
Speaker 1: used the money from later investors to pay earlier investors.
Speaker 3: So allegedly repeating the sins of the past. And what
Speaker 3: about the money he was supposed to pay in restitution.
Speaker 1: He had a restitution order totaling about two hundred and
Speaker 1: thirty million dollars and he had only paid a little
Speaker 1: more than a million dollars of that. He also has
Speaker 1: a series of civil judgments that are not covered by
Speaker 1: his criminal restitution order.
Speaker 3: You mentioned that there were secret recordings in which Weinstein
Speaker 3: made admissions. Does that mean that the FBI has flipped
Speaker 3: one or more people.
Speaker 1: There's clearly people around Weinstein who are cooperating with the
Speaker 1: FBI in this investigation.
Speaker 3: One of the people you talked to said that Weinstein's
Speaker 3: conduct is unique.
Speaker 1: Well, the special Agent in charge of the New Jersey
Speaker 1: office said, it's a very rare day that we announced
Speaker 1: we've arrested a man who's already been arrested, convicted, sentenced
Speaker 1: to prison, and then received a presidential commutation.
Speaker 3: I take it it's the commutation part that makes this different,
Speaker 3: because people come in and out of prison unfortunately all
Speaker 3: the time.
Speaker 1: Right because presumably when his sentence was commuted, this was
Speaker 1: on the promise that he would never do this kind
Speaker 1: of criminal activity again.
Speaker 3: And according to these new allegations. He started this new
Speaker 3: scheme shortly after he was released. So prosecutors have charged
Speaker 3: him and the four others with wire fraud, conspiracy, and
Speaker 3: conspiracy to obstruct justice, and the Securities and Exchange Commission
Speaker 3: has also filed a lawsuit.
Speaker 1: Right they sued essentially the same cast of characters, saying
Speaker 1: that he committed securities fraud. Presumably that civil regulatory action
Speaker 1: would take a back seat to the criminal prosecution while
Speaker 1: it's ongoing.
Speaker 3: And tell us how the SEC's enforcement director knows Weinstein.
Speaker 1: Gavier Greywall worked on the first Einstein prosecution. He was
Speaker 1: one of three prosecutors, and so he knows Weinstein quite well.
Speaker 1: He knows the facts of his criminal history well.
Speaker 3: And tell us what happened as far as bail.
Speaker 1: Weinstein made an initial appearance in federal court in Trenton
Speaker 1: last week and he was denied bail. He's being held
Speaker 1: without bail until his lawyers can make a bail package,
Speaker 1: and then it's up to a judge to determine whether
Speaker 1: the conditions of bail are adequate to ensure his future appearance.
Speaker 3: Did Weinstein go to trial for the first Ponzi scheme?
Speaker 1: He pleaded guilty. There was extensive pre trial motions, but
Speaker 1: he ended up not going before a jury.
Speaker 3: And does this look like it might be a similar
Speaker 3: situation with the amount of evidence they have already against him,
Speaker 3: secretly recorded tapes and perhaps a witness who flipped.
Speaker 1: Well, like any criminal defendant, he has the right to
Speaker 1: go to trial and confront his accusers. That's his constitutional right.
Speaker 1: He may decide that he's going to attack the evidence
Speaker 1: and attack the underlying recordings. We'll just have to see
Speaker 1: how it plays out and.
Speaker 3: How much time is Weinstein facing here.
Speaker 1: Weinstein faces twenty years in prison on the most serious count,
Speaker 1: but prosecutors have said that the investigation is ongoing, so
Speaker 1: there could be additional charges coming. He's been arrested on
Speaker 1: an FBI complaint and they may go to a grand
Speaker 1: jury and try to get an indictment.
Speaker 3: I know you'll continue to follow this case. Thanks so
Speaker 3: much for being on the show, David. That's Bloomberg Legal
Speaker 3: reporter David Voriakis, and that's it for this edition of
Speaker 3: The Bloomberg Law Show. Remember you can always get the
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Speaker 3: pm Wall Street Time. I'm June Grosso and you're listening
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