Kawhi Leonard contract drama, explained: Clippers, Steve Ballmer accused of $28 million NBA salary cap evasion

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The Los Angeles Clippers have allegedly engaged in salary cap circumvention with star forward Kawhi Leonard, according to a bombshell Wednesday report from investigative journalist Pablo Torre. The story stems from a March 2025 bankruptcy filing of Aspiration, a sustainability company that received $50 million in funding from Clippers owner Steve Ballmer.

Aspiration has since dealt with accusations of fraud, and co-founder Joseph Sanberg has since pleaded guilty to defrauding multiple investors. That filing included a list of creditors to whom Aspiration still owed money. Among them? KL2 Aspire LLC, a corporation that lists Kawhi Leonard as its manager.

Those filings show that Aspiration still owes Leonard $7 million. Yet Torre did not find a single instance in which Leonard endorsed or even mentioned Aspiration, as one would expect in an endorsement arrangement. A number of other celebrities, including former Clippers coach Doc Rivers, did provide endorsements for the company. A document Torre obtained, which Leonard signed, showed that Leonard was to be paid $28 million in cash over the course of four years between 2022 and 2025. One former Aspiration employee in the finance department said on Torre’s podcast, Pablo Torre Finds Out, that the deal “was to circumvent the salary cap, lol.”

So, what does all of this mean? Let’s dig into the NBA’s rules on salary cap circumvention in an attempt to find out.

What is salary cap circumvention?

If you’d like the legal definition of cap circumvention, it can be found between pages 339 and 346 of the NBA’s Collective Bargaining Agreement. The relevant section for our purposes can be found in Section 1(b):

“It shall constitute a violation of Section 1(a) above for a Team (or Team Affiliate) to enter into an agreement or understanding with any sponsor or business partner or third party under which such sponsor, business partner, or third party pays or agrees to pay compensation for basketball services (even if such compensation is ostensibly designated as being for non-basketball services) to a player under Contract to the Team. Such an agreement with a sponsor or business partner or third party may be inferred where: (i) such compensation from the sponsor or business partner or third party is substantially in excess of the fair market value of any services to be rendered by the player for such sponsor or business partner or third party; and (ii) the Compensation in the Player Contract between the player and the Team is substantially below the fair market value of such Contract.”

So what does this mean? Essentially, salary cap circumvention is when a team uses a third party to pay a player more than he is contractually owed or legally allowed to earn under the terms of salary cap. The simplest way to do this would be through an endorsement contract with a company that the team or owner is in some way involved in.

It is exceedingly rare that a team is actually proven to have circumvented the salary cap. However, there are a number of scenarios that the rules are meant to protect against. The most obvious and applicable in this instance would be a superstar using his leverage as a free agent to attempt to earn more than his league-mandated maximum salary, but there are others. One example of cap circumvention could be a team signing a player to a below-market contract as a free agent with the understanding that they will later pay that player more when they have accumulated the requisite Bird Rights to do so. Another would be paying a player who is underpaid and ineligible for a contract extension under league rules. These rules exist to prevent teams from attempting to gain a competitive advantage by paying players more than the salary cap allows.

Has anyone ever been caught circumventing the cap?

In 1993, the NBA argued that the Portland Trail Blazers circumvented the salary cap due to the unusual structure of a contract they gave to center Chris Dudley. That deal, a seven-year, $11 million pact, included an opt-out after the first season. That was significant because at that time, a free agent gained full Bird Rights with a new team after only one year, so Dudley would have had the ability to opt out and become a free agent, at which point the Blazers could have gone above the salary cap to re-sign him for more money. This contract was ultimately upheld in arbitration, and Dudley did not exercise that opt out as he got hurt in his first year in Portland. The league’s rules on contract structures have since gotten significantly stricter. Other players at the time, such as Toni Kukoc and Craig Ehlo, had similar clauses in their contracts.

In 1996, superagent David Falk reportedly hatched a cap circumvention scheme meant to allow the New York Knicks to make a competitive financial offer to sign Michael Jordan as a free agent. Both the Knicks and Sheraton Hotels were owned by the same parents company, ITT Corporation. While the Knicks had cap space, at that point, there was no maximum salary, meaning the Bulls, with Jordan’s Bird Rights, were capable of offering literally any amount of money to retain him. Therefore, the plan was for Jordan to be paid $15 million to endorse Sheraton Hotels. The plan was never officially brought before the league, however, as Jordan ultimately re-signed with the Bulls.

The most well-known case of cap circumvention in league history, though, involved former No. 1 overall pick Joe Smith. While Smith had not turned into the superstar Golden State had hoped when using the top pick on him in 1995, he was still viewed as a top free agent in 1998. It was surprising, therefore, when he signed a cheap, one-year deal to join the Minnesota Timberwolves.

Two years later, Smith’s agent left his former firm and a messy lawsuit allowed the truth to come to light: Smith had signed three separate one-year deals with the Timberwolves, which would have allowed Minnesota to gain his full Bird Rights after the third season and then give him a new, long-term deal after that which could have paid him as much as $86 million.

Then-NBA commissioner David Stern issued a historic punishment for that circumvention. The Timberwolves were fined $3.5 million. All of Smith’s contracts were voided, and with them his Bird Rights with Minnesota. Then-owner Glen Taylor was barred from operating the Timberwolves for a year. But most notably, Stern stripped the Timberwolves of their next five first-round picks. The penalty was so severe that he ultimately returned their picks in 2003 and 2005, but they still lost three in the process.

What is the penalty for cap circumvention today?

Fortunately for the Clippers if they are indeed found to have circumvented the salary cap, the punishments for doing so aren’t nearly as extreme as they once were. As detailed by the Collective Bargaining Agreement, the commissioner is authorized to issue the following penalties for cap circumvention:

• A fine of up to $4.5 million for a first offense.
• A fine of up to $5.5 million for the second and any subsequent offenses.
• The forfeiture of one first-round draft pick.
• Contracts or transactions that violated league rules can be voided.

Therefore, at least based on the CBA as it is written, the Clippers would not be subject to the same multi-year penalty that crippled the Timberwolves 25 years ago unless they committed multiple violations. For now, Torre has only reported the possible violation involving Leonard.

How have the Clippers or the league responded?

The NBA has not yet issued a statement on Torre’s reporting, and neither has Leonard. However, in a statement to Torre, the Clippers wrote that “Neither Mr. Ballmer nor the Clippers circumvented the salary cap or engaged in any misconduct related to Aspiration. Any contrary assertion is provably false.” For now, it is not clear if the NBA will investigate the situation based on Torre’s reporting.

This news was originally published on this post .

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