The founder and managing director of the National Basketball Players Association's former financial firm has been charged with attempting to defraud the union of $3 million by forging the signature of a dead man, federal prosecutors said Thursday.
Joseph Lombardo, 72, the founder and director of Prim Capital, is accused of forging the signature of late union general counsel Gary Hall on a purported 2011 service agreement that called for the NBPA to pay the firm $3.01 million over five years, prosecutors said.
The mystery surrounding the alleged contract was one of many issues raised in an exhaustive review of former union chief Billy Hunter's leadership and governance published in January by the law firm Paul, Weiss, Rifkind, Wharton & Garrison. The report concluded that Hunter had used poor judgment, failed to properly manage conflicts of interest, put his personal gain ahead of the interests of the union and failed to have his own employment contract properly approved by the board of player representatives.
Hunter, 70, was ousted by a newly elected executive committee of the NBPA in February and remains under the scrutiny of a federal criminal investigation. Before his ouster, Hunter announced that the union was severing ties with Prim Capital and that he was firing his daughter and daughter-in-law from the union staff.
On Thursday, the U.S. Attorney's Office for the Southern District of New York announced that Lombardo has been charged with attempted wire fraud, attempted mail fraud and obstruction of justice for allegedly lying to a grand jury. Carolyn Kaufman, 72, a Prim director, also has been charged with obstruction of justice for allegedly lying to a grand jury, prosecutors said.
During its nine-month review of the NBPA's finances and business practices under Hunter, the Paul-Weiss firm was furnished a copy of a 2005 service agreement between Prim -- where Hunter's son, Todd, is a director -- and the union. Hunter and all other parties interviewed for the report stated that the 2005 document was the only written agreement between the NBPA and Prim, and that the agreement had been extended verbally over the years, the report said.
Two days before the Paul-Weiss report was released, Prim provided an additional document to the law firm's investigators: a letter dated Feb. 24, 2011 detailing an agreement by which Prim would provide financial services to the union for five years at an annual rate of $602,000. The letter caught the attention of Paul-Weiss investigators because its existence had not previously been disclosed; because it was not signed by Hunter, as the 2005 contract had been; and because it contained an unusual provision stating that the agreement "cannot be canceled or revoked while in effect for any reason by the NBPA."
Paul-Weiss stated in its report that the contract required further investigation and promised to follow up with its findings. However, the firm announced in mid-February that it would not comment on any outstanding issues so as not to compromise the ongoing U.S. Attorney's investigation.
That investigation now alleges that Lombardo forged the signature of the union's late general counsel, Hall, on the 2011 Prim contract. Hall died in May 2011. It further alleges that Lombardo and Kaufman provided false information about the contract to the federal grand jury.
According to prosecutors, Hall's signature on the document was not authentic and the contract was created months after his death with a signature stamp created at Lombardo's direction. The signature of another NBPA employee also was forged on the document, prosecutors said. The other NBPA signature on the contract was that of then-director of player programs Purvis Short, the Paul-Weiss firm found.
Prosecutors said Prim furnished the purported 2011 contract to the U.S. Attorney's Office under terms of a subpoena in January, around the same time that it provided the document to Paul-Weiss investigators.
“As alleged, Joseph Lombardo faked the signature of a dead man as part of manufacturing a multi-million dollar contract out of whole cloth that, had it been enforced, would have caused significant losses for basketball players who entrusted him with their savings," U.S. Attorney Preet Bharara said. "And together with his partner in crime, Carolyn Kaufman, he allegedly lied about it to a federal grand jury. Now they will both have to answer to the justice system they allegedly tried to obstruct.”
According to the complaint unsealed in federal court in Manhattan on Thursday, Lombardo was captured in recorded conversations instructing grand jury witnesses to provide false testimony about the document. In one conversation, prosecutors said Lombardo told a witness that if he provided false information to the grand jury, "[w]e're home free." In another recorded conversation, prosecutors said Lombardo told another witness, "It's important that we didn't doctor this document up, OK?"
Kaufman, who along with Hunter's son, Todd, made frequent financial presentations to NBA players, testified that she had not spoken with anyone regarding her grand jury testimony. However, prosecutors said that in a recorded conversation before appearing before the grand jury, Lombardo gave Kaufman specific instructions about how to answer questions and said his "life is in [her] hands."
Lombardo, whose relationship with the NBPA via Prim began before Hunter became executive director, faces up to 60 years in prison and a $250,000 fine, prosecutors said. Kaufman faces a maximum of 20 years in prison and a $250,000 fine, prosecutors said.
“The scheme allegedly attempted by the subjects of this investigation would have caused the union to lose funds that rightfully belonged to the membership of the NBPA," said Adriana Vamvakas, New York district director of the Department of Labor's Office of Labor Racketeering and Fraud Investigations. "We will continue to investigate crimes against unions to protect the members' assets.”