REPORT TO THE BOARD OF GOVERNORS OF THE NATIONAL BASKETBALL ASSOCIATION Lawrence B. Pedowitz Wachtell, Lipton, Rosen & Katz October 1, 2008 TABLE OF CONTENTS Page Executive Summary...................................................................................................................ES 1 I. Introduction......................................................................................................................... 1 II. Scope and Process of the Review ....................................................................................... 3 A. Scope of the Review ............................................................................................... 3 B. Review Process....................................................................................................... 5 III. Background......................................................................................................................... 7 A. Donaghy’s Misconduct........................................................................................... 7 B. Donaghy’s Betting on Games that He Officiated ................................................. 15 C. NBA Gambling Rules that Donaghy Violated ..................................................... 21 D. NBA’s 2005 Investigation of Donaghy ................................................................ 25 IV. Findings Regarding NBA Referees’ Gambling and Disclosure of Confidential NBA Information......................................................................................... 26 A. Betting on NBA Games ........................................................................................ 27 1. Referees Other than Donaghy................................................................... 27 2. Scott Foster............................................................................................... 28 B. Violations of NBA Gambling Rules..................................................................... 35 C. Disclosure of Confidential NBA Information....................................................... 38 V. NBA Officiating Program................................................................................................. 41 A. “Old” vs. “New” Refereeing Philosophies ........................................................... 42 B. Performance Standards......................................................................................... 44 C. Supervisory and Monitoring System .................................................................... 46 D. Training and Development................................................................................... 47 E. Referee Self-Assessment Responsibilities............................................................ 51 F. Recent Program Improvements............................................................................. 52 G. Perspectives on the Officiating Program .............................................................. 54 1. Referees’ Perspectives.............................................................................. 54 2. Teams’ Perspectives..................................................................................57 H. Dick Bavetta..........................................................................................................61 VI. Donaghy’s Allegations...................................................................................................... 63 A. Houston Rockets vs. Dallas Mavericks 2005 Playoff Series................................ 64 B. Los Angeles Lakers vs. Sacramento Kings (Game 6 ― May 31, 2002).............. 72 C. Seattle SuperSonics vs. New York Knicks (January 24, 2000)............................ 81 D. Toronto Raptors vs. Golden State Warriors (February 8, 2004)........................... 83 E. Other Allegations.................................................................................................. 85 1. Fraternization ............................................................................................ 85 2. Observers .................................................................................................. 90 3. Nepotism................................................................................................... 93 F. Observations Concerning Donaghy’s Allegations................................................ 95 VII. Recommendations........................................................................................................... 100 A. Gambling and Confidential Information Recommendations.............................. 100 1. Gambling Rules...................................................................................... 101 a) NBA Constitution....................................................................... 101 b) Referee Work Rules.................................................................... 102 c) Public Release of Referee Assignments ..................................... 104 d) Disclosure of Confidential NBA Information by Team Personnel and Other Individuals....................................... 105 2. Gambling and Disclosure of Confidential NBA Information by Players............................................................................ 107 3. Gambling Education............................................................................... 107 -ii- 4. Gambling Enforcement, Detection and Deterrence................................ 109 a) Background Investigations and Reviews.................................... 109 (i) Referee Background Checks........................................... 109 (ii) Referee Outside Employment and Businesses................ 111 b) Compliance Officer..................................................................... 112 c) Gambling Monitors..................................................................... 113 d) Statistical Screening for Gambling and Bias .............................. 113 e) Hotline......................................................................................... 114 B. Additional Officiating Program Recommendations ........................................... 114 Biographical Information............................................................................................................ A 1 -iii- REPORT TO THE BOARD OF GOVERNORS OF THE NATIONAL BASKETBALL ASSOCIATION Lawrence B. Pedowitz Wachtell, Lipton, Rosen & Katz Executive Summary The referees of the National Basketball Association are entrusted with ensuring that games are determined solely by NBA rules and the skill and effort of the teams. To uphold that trust, referees are required to adhere to certain rules, policies and procedures. During the summer of 2007, the League and the public learned that Tim Donaghy, an NBA referee, had breached the duties he owed to the League and violated federal law: he had used confidential NBA information to bet on NBA games and provided confidential NBA information to bookies and gamblers in violation of NBA rules, policies and procedures. As a result of Donaghy’s conduct, Commissioner David Stern and the Audit Committee of the NBA’s Board of Governors engaged me and my colleagues at Wachtell, Lipton, Rosen & Katz to conduct a review of the League’s officiating program and to report our findings to the League and the public. The following is an Executive Summary of our report. A. Scope of Review Our review of the League’s officiating program focused on three areas: 1. We sought to determine if there was any information suggesting that any referees other than Donaghy had bet on or misused confidential information concerning NBA games. We also sought to determine the extent to which any referee had violated NBA rules prohibiting other types of gambling, such as betting on other sports or casino betting. 2. We conducted a general review of the League’s officiating program, including an examination of whether there was information suggesting the existence of potential referee bias and game manipulation. In this regard, we reviewed the allegations contained in Donaghy’s June 10, 2008 court filing outlining information about purported game manipulation by referees and improper relationships among referees and other team and League employees. 3. We conducted a forward-looking risk review of issues related to the integrity of the game. Here, our principal objective was to recommend changes to NBA rules, policies and procedures, monitoring and detection systems, and training to reduce the risk of future gambling incidents and disclosures of confidential information. We further sought to identify ways that the League could enhance a culture of compliance and underscore the importance of protecting the game’s integrity and the League’s reputation. During the course of our review, we conducted approximately 200 interviews, covering members or representatives of the following NBA constituencies: referees, teams (owners, presidents, general managers and coaches), players, coaches, trainers and NBA management. We reviewed thousands of pages of documents that the League supplied at our request, including personnel files, statistical information, internal NBA documents and studies, and video of games. We also spoke to various experts in the areas of gambling, training and education, and employee background checks, among others. B. Factual Findings Our principal factual findings can be summarized as follows: 1. Gambling or Misuse of Confidential Information by Other Referees We have discovered no information suggesting that any NBA referee