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Fraud in Collegiate Athletics

When Major League Money Meets Little League Controls



January/February 2012

JanFeb-collegiate-fraud A major, multimillion sports ticket fraud at the University of Kansas highlights how CFEs can help convince administrators and boards to reassert control over their athletics departments. The answer could be independent oversight.

On June 30, 2009, David Freeman 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). Freeman fingered two individuals, one of whom was exonerated while the other proved to be central to the case. 

Freeman had his sentence reduced from 24 to 18 months, which his attorney said was an inadequate reward for the information he had provided, according to "Developer source in KU ticket scandal," by Steve Fry, in The Topeka Capital-Journal, April 22, 2010.  

Federal authorities contacted KU officials in late 2009. Under increasing pressure, KU announced in March 2010 that it had retained the services of the Wichita office of Foulston Siefkin LLP to conduct an internal investigation. Assisted by a forensic accounting firm, Foulston Siefkin 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 2005 through 2010. 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 "University of Kansas athletic tickets scam losses may reach $3M," in the Kansas City Business Journal, May 26, 2010. (http://tinyurl.com/3nvaf76)

The investigation did not examine years prior to 2005 because the athletics department did not retain those records. The investigation of KU's ticket sales and fundraising operations by federal authorities continued throughout 2010 and 2011.

KU's internal investigation, which was released May 26, 2010, 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.
 

 


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