For a financial services executive in sports, Jeffrey David seemed to have it made. From 2011 to 2018, the 44-year-old served as chief revenue officer of the Sacramento Kings. As CRO, David was the corporate officer responsible for generating revenue for the Kings. To that end, David negotiated the sale of lucrative sponsorship deals, including a 20-year, $110 million contract between the Kings and Golden 1 Credit Union for the naming rights to the Kings’ new arena. David, in other words, was responsible for creating streams of revenue for the Kings.
By all accounts, David succeeded in generating money. What he then did with that money proved far more problematic.
Between 2012 to 2016, David misappropriated $13.4 million. He did so by siphoning off portions of payments intended for the Kings. Those payments arose as part of sponsorship, partnership, advertising and marketing deals between the Kings and at least five companies located in California and other states. These companies had agreed to pay the Kings for use of their names and logos in various products, services and advertisements associated with the Kings. The companies thought they were paying the Kings but were instead paying David, who had created a shell company for receipt of illicit monies. David then used his enriched shell company to purchase multi-million-dollar homes beachfront property and other luxury items. One such purchase was an $8 million beachfront property on Hermosa Beach. Another was for a private jet that cost between $2.5 and $3 million.
These facts are known since earlier this week David appeared before U.S. District Court Judge William Shubb in his Sacramento courtroom and pleaded guilty to wire fraud and aggravated identity threat. The plea agreement, which contained a detailed admission of facts, resolves a federal prosecution. U.S. Attorney McGregor Scott of the Eastern District of California had prosecuted David for 11 charges, including multiple counts for money laundering. David’s plea deal calls for the government to drop nine of those charges.
Judge Shubb will sentence David on April 15 and will be guided by a federal presentence investigation report to be issued by the U.S. Probation Service. David faces up to 22 years in prison but will likely receive a much shorter prison sentence. The shorter sentence will reflect a customary range of six-and-a-half to eight years for these types of offenses, some reduction for David accepting responsibility and David’s lack of a prior criminal record. In addition to incarceration, David will be ordered to pay restitution to his victims, pay fines and forfeit ownership of ill-gotten properties and bank accounts with fraudulent funds. A statement by Kings Chief Operating Officer Matina Kolokotronis indicates that the FBI took actions to ensure that “all assets owed to the Kings have been recovered in full.”
David agreeing to a plea deal isn’t surprising since, per Justice Department data, approximately 90% of defendants in federal prosecutions plead guilty rather than go to trial. Federal defendants who instead take their chances in a trial usually regret it: data suggests that federal prosecutors secure trial convictions between 85% and 95% of the time. Criminal defense attorneys sometimes remark that if a person is charged with a federal crime, it’s usually game over. A person federally charged is often best served working with his or her attorney on designing a favorable plea deal that can be proposed to prosecutors in hopes that they accept.
As detailed below, David agreeing to a plea deal also reflects the strength of the implicating evidence. David unwisely saved incriminating files on his work computer. Those files were contained in a folder that another Kings employee noticed and reported.
Elements of David’s scheme, the accompanying crimes and getting caught
David used a combination of illegal tactics to defraud the Kings. The naming rights arena agreement between the Kings and Golden 1 is particularly illustrative. David negotiated large parts of this agreement and was thus intimately familiar with its details and methods of payment. He knew that Golden 1 agreed to annually pay the Kings between $5 million and $6 million and that the annual bill would be payable on July 1 of every year of the contract.
Unbeknownst to the Kings and without the team’s authorization, David subsequently re-negotiated the Golden 1 agreement to include a significant amendment. Under it, Golden 1 agreed to pay $9 million up front and then lower payments for the following years. David also restructured the deal so that the Golden 1 would gain access to additional parking spaces, game tickets and corporate suites. David could not authorize these changes on his own, so he illegally forged the signature of the team’s president.
David not only altered the terms of the sponsorship agreement through falsification and duplicity, but he also altered how Golden 1 would transmit payment. David instructed Golden 1 to wire the $9 million initial payment to a company called “Sacramento Sports Partners.” In reality, this limited liability company was a sham entity that David had created to trick Kings’ sponsors and other business partners into believing that they were making legitimate payments. To help convince Golden 1 and other duped companies of the legitimacy of Sacramento Sports Partners, David drafted invoices on official Kings letterhead in which Sacramento Sports Partners was identified as the appropriate recipient of payment.
These transgressions constituted a number of criminal acts. Wire fraud was one. Wire fraud refers to using wire communications—such as bank transactions as well as phone calls, emails and texts—to convey fraudulent pretenses or false promises in order to swindle a victim of its assets, money or property. Here, David duped at least five companies into shelling out million dollars to an entity that they believed was legit but was in reality a facade. David then wired the money from the shell company into banks to finance his real estate transactions and personal expenditures.
David also engaged in aggravated identity theft, a federal crime that refers to knowingly possessing and using without legal authority a “means of identification” of another person. Here, David forged the signatures of Kings executives so that he could trick sponsors and others into believing that David acted on good authority. David also deceitfully used Kings’ stationary to further his identity theft.
David got away with the scheme for six years. It’s possible he would have continued to defraud the Kings, but he was dismissed from his job in June 2018. A month later, the Miami Heat hired David as CRO.
His time with the Heat would be very brief.
As detailed by The Sacramento Bee, David unwittingly left a digital trail with the Kings. Specifically, he failed to delete an incriminating folder on his work computer. The folder, titled “Turbo Tax,” was noticed by an employee who had gained possession of the computer David had used. The folder contained evidence of criminal acts, including details about David’s sham company and its unlawful transactions. The Kings immediately conducted an internal review, which revealed damning emails sent by David and other disturbing materials. The team reported its findings to the authorities and the FBI then investigated. Sam Stanton and Darrell Smith of The Sacramento Beebroke news of the FBI investigation in August 2018, which led to the Heat suspending David and then firing him.
Plea deal spares the Kings and NBA of any fallout from a trial
The obvious villain in this story is David, who has admitted to partaking in numerous criminal acts. He repeatedly stole from the Kings and deceived the team’s trusted sponsors. While the Kings indicate that their assets have been recovered in full, David’s swindling was no doubt disruptive to team officials.
From that same light, the Kings are a victim of David. He redirected millions of dollars intended for the team to his own account and also stole the identity of team officials in order to make it easier to con executives of sponsoring companies. Along those lines, David’s crimes may have caused lasting damage to relationships between the Kings and their sponsors.
What is less certain is how David could get away with his crimes for so many years. Had he deleted the “Turbo Tax” folder on his work computer, it’s not clear when—or if—evidence of his transgressions would have surfaced. While the Kings swiftly and thoroughly probed David’s wrongdoing upon learning of it, it appears that Kings’ internal audits and other financial review mechanisms failed to uncover David’s wrongdoing for a half of a decade. This seems especially correct given that David managed to land a new job with the Heat last July. Before hiring David, the Heat presumably conducted an employment background check and spoke with Kings officials about him. It seems that David’s former employer said nothing that would have given the Heat pause for concern.
Likewise, co-workers of David at the Kings apparently didn’t know that, through his sham company, he had purchased multiple multimillion-dollar homes. If those co-workers knew about his luxury-style spending, that knowledge didn’t seem to pique their interest as to how an employee who likely earned several hundred thousand dollars a year could afford such massive purchases. David’s ability to redirect millions of dollars without detection is no doubt troubling for the Kings. Similarly, David’s ability to dupe executives of Golden 1 and other companies has likely led to self-reflection and review of verification procedures.
The Kings and, by extension, the NBA may be fortunate that David didn’t take his chances in a trial. As noted above, it would have been an unusual strategy for David to go to trial in a federal case. However, federal defendants sometimes go to trial. We saw this happen in the first of three college basketball corruption cases (where the defendants—James Gatto, Christian Dawkins and Merl Code—went to trial and, unfortunately for them, were convicted). Had David rolled the dice in hopes of persuading jurors, the trial would have focused not only on David’s misdeeds, but also on how he could have escaped detection for so long. To that end, Kings officials would have likely been called to testify. They would have been asked to explain how David could pull off what amounts to a sizable, multi-year heist.
Also, David has a longer employment history with the Kings than his recent tenure as CRO. He served as Kings’ vice president of corporate partnerships from 2006 to 2010. When combining his two positions, David spent a decade with the team. This suggests that the Kings found him to be very effective at his work. It also signals that David was well-known to, and presumably liked by, co-workers. Why the team didn’t realize the mismanaging of funds until 2018 is unclear, but if David was charming or superficially proficient, the team may have been too trusting.
The NBA would also have had reason to view a trial as potentially problematic. While the NBA is not responsible for individual teams’ managing of business affairs, David is hardly an unfamiliar figure to league officials. David joined the NBA in 2010 as an executive in its global marketing partnerships group. He served in this capacity in between his two positions with the Kings. A press release by the Heat in announcing the hiring of David outlined David’s responsibilities with the NBA: “During a two-year stint at the NBA, David worked in global business where he developed comprehensive marketing programs for the NBA, WNBA, NBA Development League and USA Basketball.”
Towards the end of David’s employment with the NBA, then-NBA commissioner David Stern helped to arrange for David to return to the Kings. At the time, the Kings were owned by the Maloof family and were exploring a potential sale and relocation to Seattle. According to the Heat’s press release, Stern went so far as to “appoint” David as Kings’ CRO in 2012, despite the fact that David would work for the Kings rather than the NBA. David then went on to assist in the sale of the Kings to Vivek Ranadivé, who kept the team in Sacramento. Had David gone to trial, it stands to reason that witnesses from the NBA would have been asked to testify about their impressions of David and why a former commissioner apparently placed such high confidence in him.
Even without a trial, one organization that will take keen interest in David’s wrongdoing is the National Basketball Players’ Association. The NBPA has a vested stake in teams’ finances given that they are used to fund players’ salaries. While David’s wrongdoing did not interfere with the Kings’ ability to pay players, the NBPA will have concerns that a team could fall victim to an employee’s fraudulent acts.
Michael McCann is SI’s legal analyst. He is also Associate Dean of the University of New Hampshire School of Law and editor and co-author of The Oxford Handbook of American Sports Law and Court Justice: The Inside Story of My Battle Against the NCAA.