Dive Brief:

• Two marketing executives at Adidas — including its director of global sports marketing James "Jim" Gatto — have been caught in an NCAA scandal and are being charged by the U.S. Department of Justice for paying bribes to high school basketball players and their families, reported Adweek.  
• The Adidas marketers are among 10 individuals accused of bribery, solicitation of bribes, wire fraud conspiracy, honest services fraud and conspiracy to commit wire fraud and other charges. The FBI's indictment includes four assistant coaches at NCAA schools and a clothing company founder, Adweek said. Some of that group face possible sentences of up to 200 years.
• The FBI investigated a process where high school prospects would attend schools sponsored by Adidas on scholarships and then sign contracts with the sports company if and when they went pro. In going pro, the players would also retain the sports management and financial services of other individuals named in the indictment. 

Dive Insight:

It's hard to imagine Adidas will come out of this scandal with its brand reputation unscathed. U.S. shares in the company fell 2.6% at the time of the news breaking, Adweek said.

Sports brands often have deals with college programs to wear their gear, but the charges against Adidas are serious, with allegations of funneling money in the low six figures to basketball players in NCAA Division I schools and creating false purchase order and invoice processes to hide the expenditures.

The investigation highlights how competitive the marketing around highly-touted sports prospects can be between major apparel and sneaker makers like Adidas, Nike, Under Armour and others. Adidas' positioning in that race could be considerably lowered with the news. It has otherwise seen strong growth — revenues rose 19% in the second quarter — to become more competitive, thanks in part to its influence over streetwear style.