NBA Referee Bets on Basketball?

Hoop Schemes: Disgraced NBA Ref Says the League Wants $1 Million, Fixed Games
Brian Baxter
The American Lawyer
June 12, 2008

Did Wachtell, Lipton, Rosen & Katz bill $1 million worth of hours on an internal National Basketball Association investigation that the firm has yet to make public? That’s what a letter filed in federal district court Tuesday by the lawyer for former league referee Timothy Donaghy suggests.

The league probably didn’t think that Donaghy would be the biggest story to emerge during the NBA Finals. The 13-year NBA referee resigned in July 2007 after being caught up in an FBI sting into gambling and organized crime resulting in his arrest. Soon after, Donaghy began cooperating with federal prosecutors. In August 2007, he pled guilty to two felony fraud charges. He revealed that he had gambled thousands of dollars on games he refereed in order to influence their outcome and pay down his debts.

After Donaghy’s guilty plea, NBA Commissioner David Stern, a former Proskauer Rose partner, hired Wachtell Lipton litigator Lawrence Pedowitz to conduct an internal investigation of the league’s gambling policies and its referees.

Little more was heard about the investigation until Tuesday when Donaghy’s lawyer, John Lauro of Lauro Law Firm in Tampa, Fla., filed two letters with U.S. District Court Judge Carol Amon. Donaghy is scheduled for sentencing on July in Amon’s court.

The first letter relates to Donaghy’s cooperation and includes explosive claims Donaghy allegedly relayed to federal investigators about the NBA purportedly rigging the outcomes of playoff games by manipulating referees. The second letter requests that the NBA release the results of the internal Wachtell-led investigation. Both documents portray the disgraced former referee as a dutiful government cooperator and the victim of a restitution request by the league “that appears to be a transparent effort to intimidate [him].”

The results of Pedowitz’s investigation are not yet public, and the former federal prosecutor did not immediately respond to a request for comment. But Lauro’s letter to Judge Amon says that the league notified him June 5 that it was seeking “$1 million (to the penny)” in restitution from Donaghy for a “purported ‘internal investigation’ conducted by outside counsel.”

Sources who requested anonymity tell The Am Law Daily that the $1 million might not be for fees stemming from Wachtell’s representation alone; the figure might also include attorney fees for several other referees involved in the NBA’s investigation. The sources say the league might be seeking to recoup those costs as well. By asking for compensation over a report that remains under wraps, Lauro, a former federal prosecutor himself, is attempting to justify the league’s bill. A subpoena attached to the second letter requests the NBA turn over the results of its internal investigation.

But it was the first letter, with its claims that “league officials would tell referees that they should withhold calling technical fouls on certain star players because doing so hurt ticket sales and television ratings,” which proved most scandalous.

League officials have responded acerbically to previous assertions by Donaghy, with one telling The New York Times in May that Donaghy’s “unfounded allegations” were the “desperate act of a convicted felon.” But the league’s reaction Tuesday was more muted, with NBA general counsel Richard Buchanan, a Covington & Burling alum, saying in a statement that “the only criminal activity uncovered is Mr. Donaghy’s.”

Representing the government are Assistant U.S. Attorneys Jeffrey Goldberg and John Buretta. According to his plea agreement, Donaghy must pay a $500,000 fine and $30,000 restitution to the government. Lauro is seeking probation for Donaghy, who could face up to 25 years in prison.

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