Could 'Wakeyleaks' scandal lead to lawsuit, criminal charges?

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ACC needs to take Wake Forest scandal seriously
3:29 | College Football
ACC needs to take Wake Forest scandal seriously
Wednesday December 14th, 2016

Does Wake Forest University have a legal case against former assistant coach Tommy Elrod and the schools with whom Elrod, while acting as the Demon Deacons’ radio broadcaster, allegedly shared game plans?

If the school’s findings can be verified, Wake Forest would have grounds to pursue a trade secrets lawsuit against both Elrod and any schools with whom Elrod allegedly communicated. Although much less likely at this point, such alleged misconduct and accompanying conspiracy could be construed as criminal racketeering.

Background

As reported Tuesday, the 41-year-old Elrod has been fired after serving as the Demon Deacons’ radio announcer on the IMG Radio Network since 2014. His firing stems from being accused of sharing, or attempting to share, various game preparation materials with other teams over the last two years. Wake Forest reached this conclusion after a comprehensive review of emails, texts and phone records.

Wake Forest officials began to investigate Elrod when team officials found suspicious materials supposedly left behind by Louisville coaches following Wake Forest’s 44–12 loss to the Cardinals on Nov. 12. The materials suggested that Louisville coaches possessed an uncanny awareness of Wake Forest’s game plan and had positioned Cardinals players in anticipation of Wake Forest’s plays with an abnormally high degree of accuracy. Wake Forest, however, found no evidence that other persons associated with its football program participated in any unauthorized disclosures.

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Elrod is intimately familiar with the Demon Deacons football team. As a Wake Forest undergraduate between 1993 and 1997, Elrod was a quarterback on the team. He also served as a graduate assistant for the Demon Deacons between 1999 and 2001, when he worked with fullbacks and tight ends while earning his MBA from the Wake Forest Babcock Graduate School of Management. Elrod’s most substantial stint with the program occurred between 2003 and 2013 as an assistant coach. His roles changed during those years, but, most notably, Elrod served as Wake Forest’s quarterbacks coach and passing game co-coordinator.

Elrod transitioned from coach to broadcaster when his boss, head coach Jim Grobe, stepped down in 2013 and was replaced by Dave Clawson, who had coached at Bowling Green. A new coach usually brings in his own assistant coaches, and so Elrod leaving the Demon Deacons program and pivoting to broadcasting was an unremarkable development.

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Wake Forest might take no legal action and simply rely on discipline imposed by the ACC and NCAA

Wake Forest is upset with at least three groups: Elrod, the opposing coaches who may have benefited from Elrod’s alleged disclosures and those coaches’ schools. Wake Forest, however, might refrain from taking any legal action against them.

First consider how the university assesses the merits of taking legal action against Elrod. The university has already unveiled Elrod’s alleged espionage in a high profile manner. By doing so, Wake Forest has publicly shamed Elrod. It stands to reason that Elrod’s career in football, whether as a coach or broadcaster, has been irreversibly tarnished. He might not get another job in college football for years, if ever. With that in mind, Wake Forest’s leaders might feel as if Elrod has been sufficiently punished.

The university probably also recognizes that Elrod, who is married with two children, likely lacks the financial wherewithal to pay off a significant civil judgment. The university could file a lawsuit against Elrod, spend considerable resources on attorneys in pursuing the lawsuit, win the lawsuit, be awarded a massive damages award from a jury and then never be able to collect on most of the award.

To offset that hurdle, Wake Forest could argue that IMG Radio Network, which Elrod worked for, is vicariously liable for his alleged wrongful acts. IMG Radio Network would be far better positioned to pay a civil judgment than Elrod. Yet if Elrod’s alleged wrongful acts fell outside the scope of his employment, and they seemingly would have, attempting to extend Elrod’s liability to IMG Radio Network would likely fail. Plus, Elrod may have been an independent contractor rather than an employee of IMG Radio Network, and if so, it would be more difficult to link his possible liability to the company. Perhaps making Wake Forest even less likely to pursue a claim against IMG Radio Network, IMG College’s chairman emeritus, Ben Sutton, Jr., is on Wake Forest’s Board of Trustees and has donated millions of dollars to the school.

Also, and more cynically, Wake Forest might worry that a lawsuit against Elrod could embarrass university employees if litigation reveals compromising information about the school. For instance, it could turn out that Wake Forest’s security measures were inadequate to prevent the kinds of subterfuge Elrod allegedly undertook.

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Wake Forest might also be reluctant to sue the allegedly violating schools and coaches because those groups could face conference and NCAA punishments. As SI’s Michael Rosenberg explains, Louisville and its head football coach, Bobby Petrino, are accused of taking advantage of Elrod’s alleged disclosures, but other schools in the Atlantic Coast Conference might also be alleged beneficiaries. The ACC could investigate and punish schools and coaches for cheating, as could the NCAA. Indeed, the NCAA Division I manual contains several bylaws that arguably relate to a school profiting from a stolen playbook. For instance, NCAA Bylaw 2.4 references the “principle of sportsmanship and ethical conduct” and the requirement that games “should adhere to such fundamental values as respect, fairness, civility, honesty and responsibility.” Likewise, NCAA Bylaw 10.1 prohibits many kinds of “unethical conduct.” The NCAA could impose sanctions, including loss of scholarships and post-season bans, on schools that worked with Elrod on obtaining unauthorized information. The NCAA could also suspend any offending coaches.

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Wake Forest’s potential argument that its “trade secrets” have been misappropriated

While Wake Forest might decline any further action, the university could instead contemplate a legal response. If it does, the most relevant area of law for redress would be trade secrets law and specifically the North Carolina Trade Secrets Protection Act. This act, which governs the Winston-Salem, N.C.-based university and its employees, makes it unlawful to “misappropriate”—a term that includes disclosing, acquiring or using—“trade secrets.” The act has a three years statute of limitations, so Wake Forest could wait to bring a case until 2019.

Assuming, for a moment, that Wake Forest’s claims about Elrod are completely accurate, a key legal question would be whether the materials he disclosed constitute trade secrets. Under North Carolina’s law, a trade secret refers to:

Business or technical information, including but not limited to a formula, pattern, program, device, compilation of information, method, technique, or process that:

a. Derives independent actual or potential commercial value from not being generally known or readily ascertainable through independent development or reverse engineering by persons who can obtain economic value from its disclosure or use; and

b. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The law thus makes clear that “trade secrets” refer to valuable and confidential pieces of information that help a business—or person or school—enjoy a competitive advantage over rivals.

Information about football plays and game strategies seem to fall within the legal definition of trade secrets. Consider, for a moment, what it takes to win a football game. To be sure, having more talented players who work harder and play more disciplined than players on the opposing team is instrumental. Yet crafting a playbook that outsmarts opponents is also critical.

During any college football or NFL game, every play reflects a significant analysis of each team’s strengths, weaknesses and patterns. An offensive play instructs players to adhere to a specifically designed formation that, in the specific setting at hand, is most likely to advance the ball. In contrast, a defensive play configures a pattern of player movement that has the objective of halting advancement of the ball. Along those lines, each offensive play call is engineered with anticipation of the defensive team’s accompanying play call. Analysis of scouting reports, game film and old playbooks are all essential steps in this process. Such analysis is work-intensive and rewards those football thinkers who can most adroitly assess a particular football play in a particular situation.

Most coaches normally expend substantial energies to keep their playbooks concealed. Such concealment methods sometimes occur on the field. For example, consider when coaches cover their mouths while communicating calls or when coaches instruct quarterbacks to yell out seemingly random code words as a means of disguising plays and confusing defensive players. Other steps include making practices unavailable to outside observers, including journalists. Coaches also routinely change playbooks in order to offset the risk that a former player, coach or staff member might share information about those plays.

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Yet the danger of what might be termed “football espionage” can’t be completely eliminated. While coaches may change their plays week-to-week, coaches’ philosophies about play calling usually remain constant one season to the next. A person who becomes well versed in a particular coach’s philosophy will also be best equipped to detect and exploit vulnerabilities in that philosophy.

Because playbooks and game preparation materials are both so valued to coaches and so carefully protected from outside discovery, their monetary value is likely considerable. These materials help coaches win games, and winning provides personal economic value to coaches in terms of reaching bonuses contained in their employment contracts and gaining improved bargaining conditions when negotiating new employment contracts. Winning games also supplies considerable value to athletic programs and their universities through increased ticket sales, expanded merchandise purchases and higher broadcasting revenue. There are also indirect benefits for universities with successful football teams, most notably through enhanced alumni engagement—and thus more generous alumni giving—and more competitive admissions.

So if Elrod shared confidential game materials and schools knowingly used those materials, the accompanying “harm” to Wake Forest might be worth millions of dollars.

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Elrod and opposing coaches and teams’ legal defenses

Elrod, along with the coaches and universities implicated by his alleged misappropriation, would have several key defenses if this scandal has a legal aftermath.

The first defense would be to challenge Wake Forest’s conclusions and insist that that Wake Forest is badly mistaken. Keep in mind, the university’s evidence has not been made public or independently verified. As is its right, the university conducted an internal investigation and reached conclusions based on that investigation. An independent set of eyes, however, might regard the alleged evidence differently and reach an alternate and less damning conclusion.

Courts, it should be noted, are often highly scrutinizing of independent investigations. These investigations are limited in design by the fact that they have no subpoena power (so witnesses can’t be forced to speak or share evidence) and witnesses who speak are not under oath and thus aren’t deterred by the risk of perjury charges.

If the accusations against him prove untrue, Elrod would be within his rights to file a defamation lawsuit against Wake Forest. He would seemingly have a compelling case in that the university has made specific, factual-sounding and highly damning accusations again him.

Beyond arguing that the underlying allegations are untrue or exaggerated and filing a defamation lawsuit, Elrod could insist that any information he shared did not constitute trade secrets under the law. Along those lines, Elrod’s employment contract with Wake Forest, as well as his termination agreement (if he signed one) with the school, would offer insight on what kind of information he would be able to share. It’s possible that any such contractual language might not support Wake Forest’s accusations.

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Also, it’s unclear how Elrod would have obtained such valuable game preparation information from a different coaching staff than the one he worked under. As noted above, Elrod was an assistant coach under Grobe, not the current coach, Lawson, who came from a different program (Bowling Green).

Wake Forest says that it has not turned up evidence that others associated with its football program helped Elrod. That suggests Elrod made his impressions from watching Demon Deacons’ games, practices and talking to the team members—the kinds of things any broadcaster covering a team does. Elrod might argue that if such information was so valuable and secretive, why was observation of team practices or talking to team members made available to those who, like Elrod, were from outside the program? Along those lines, Elrod might insist that his subjective impressions from watching practices or from talking to players and coaches are dramatically less valuable than if he had passed on an actual Demon Deacons playbook or some other discrete game preparation item.

Then again, Wake Forest could respond by noting that Elrod, a seasoned football mind, could have easily picked up on the playbook simply by watching practices and taking notes on the plays being used in practice. Further, although Elrod was not a Wake Forest employee while watching any practices, there is an implicit trust that a team broadcaster won’t take what he or she notices in practice and then share it with opposing teams’ coaches.

Elrod’s employment as a broadcaster is also significant in terms of crafting a defense. Elrod could insist that his First Amendment rights, which are broadly construed for journalists and broadcasters, enable him to share his observations about a team’s strategies. The problem with this argument, however, would be if the information Elrod shared fell within the scope of a trade secret, which generally cannot be shared under the law.

Louisville and other universities that allegedly benefited from disclosures by Elrod would be armed with additional legal defenses. Assuming those universities did not pay for, or provide other benefits in exchange for, Elrod offering the confidential information, the universities could maintain that they merely happened upon information that someone else voluntarily shared. Admittedly, this defense is undermined by the obvious ethical problems of using observations from another team’s practices. Nonetheless, the university might insist that whatever information Elrod shared was not particularly valuable and that the school’s coaches would have uncovered the same insights through their own analysis.

 

Remote, but plausible, risk of racketeering charges

This controversy, which is now being dubbed “Wakeyleaks,” could morph into a much more legally problematic matter. This would happen if evidence surfaces that opposing coaches actually paid Elrod for trade secrets and did so in a structured way.

Under the federal Racketeer Influenced and Corrupt Organizations (RICO) Act, racketeering is an expansively defined crime that encompasses different types of fraudulent moneymaking schemes. Although racketeering is often associated with the mafia, it can occur in other contexts—including, allegedly, in FIFA. RICO prevents individuals and businesses from conspiring to commit illegal acts as a means of obtaining illegally derived income.

Here, if Elrod hatched a scheme with schools to knowingly engage in a pay-for-play where he illegally sold plays to opposing coaches, it’s conceivable that a prosecutor could consider it a form of racketeering and issue criminal charges.

To be clear, much more information is needed before racketeering becomes a realistic concern in this controversy. Nonetheless, the scope of a broadcaster potentially sharing his football impressions to another school’s coaches could have a chilling aftermath for college sports in this winter season.

Michael McCann is SI's legal analyst. He is also an attorney and a tenured law professor at the University of New Hampshire School of Law.

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