How a midlevel school became The University of Adidas at Louisville

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ON THE MORNING of Sept. 26, more than two dozen Adidas employees gathered inside a gym at the University of Louisville. They had flown in from as far away as Europe -- marketers and athletic performance specialists, top designers from Adidas' secretive Brooklyn Creator Farm. They were participating in a weeklong workshop to imagine gear, products and advertising built around Louisville's most valuable commodity: the men's basketball team.

The exercise was meant to simulate the vision behind a $160 million partnership between Adidas and Louisville, which had been announced the previous month. One of the largest all-school sponsorship agreements in Adidas' history, it was much more than a shoe deal. In internal strategy documents, Louisville vowed to "write the next chapter for college athletics, for streetwear and fashion." Adidas, a $7.9 billion corporation, would have access not only to the university's amateur athletes but also to the business, law and music schools to help create and market new products.

As the participants prepared for Day 2, Julianne Waldron, Louisville's associate athletic director of marketing and an architect of the deal, received a call.

"Julianne, there's a story that just broke. You need to read it," said a public relations official. "It has to do with Adidas."

"They're with me right now," she replied, confused.

The story involved a different blockbuster deal between Adidas and Louisville -- one that had played out in the shadows but was now being revealed by the U.S. Department of Justice, in New York City. That morning, the FBI had announced a sweeping corruption investigation into college basketball. In one of the most explosive allegations, Adidas employees -- colleagues of the same people who were gathered in the gym -- had paid a $100,000 bribe to a blue-chip recruit's family.

Nothing has been the same in Louisville since. While other schools have avoided taking drastic action in response to the ongoing probe, Louisville has blown up its athletic department. The morning after the FBI's announcement, Dr. Gregory Postel, the interim president, removed not only Hall of Fame basketball coach Rick Pitino but also athletic director Tom Jurich, one of the state's most powerful people. Over the past 20 years, Jurich had built a sports empire on top of a midlevel commuter school near the Ohio River, transforming the campus and infusing a genteel Southern city that lacked a professional team with the excitement of big-time sports. Jurich was so successful generating money that "I wished I could turn them upside down and shake out their pocket change for the academic side," says Thomas B. Byers, a professor emeritus in the English department.

Perhaps more than any other place in America, Louisville came to embody the contradictions of college athletics -- a multibillion-dollar industry built on amateur athletes. The Adidas partnership was supposed to be a crowning achievement that validated the university as a national power. The agreement represented an undeniable windfall, with potential opportunities for the entire university, but to some it also exploited the athletes it purported to benefit while encouraging the criminal behavior later alleged by the FBI. Ultimately, the scandal -- on top of two earlier ones involving Louisville basketball, the financial engine of the athletic department -- cost Jurich his job. And it did so while underscoring the moral compromises and questionable priorities at the heart of his success, according to interviews by Outside the Lines with more than three dozen current and former Louisville administrators, athletic department staffers, government officials, state regulators, faculty and local media, as well as independent audits and documents obtained under Kentucky's Open Records Act.

According to the FBI timeline, Adidas and Jurich were nailing down the sponsorship agreement while company representatives were allegedly working to bring 6-foot-7 small forward Brian Bowen to the university. Whether those two deals -- one announced at a news conference, the other negotiated illicitly in the presence of an undercover agent -- were somehow related is one of the major unanswered questions of the spiraling scandal. Jurich, who conceived of the partnership with the shoe company during Adidas-sponsored retreats in Santa Barbara, California, and Banff, Alberta, says he knew nothing about the Bowen deal, but he acknowledged that Adidas, which was to pay Louisville cash incentives for Final Four appearances and NCAA championships, had a financial interest in Louisville's success.

"We all agree with that," Jurich says. "But I didn't think they would have to do it at this cost."

An Adidas spokeswoman said the company is conducting an investigation of its college basketball programs, and due to the FBI investigation, "we cannot provide more details."

When the Adidas contract was announced, it marked the ultimate realization of Jurich's dream to build a national power. Now, to many, it symbolizes something entirely different: the corruption of a public university.

"It's a hustle. I mean, that's what it is," says professor Ricky Jones, chairman of Louisville's Pan-African studies department. "It's about making money. It's about, you know, folks from shoe companies and all the people in their orbit setting up a system that is pimping kids out."

After the FBI bombshell, Louisville and Adidas quietly shut down the workshop one day early. Waldron, who'd spent 18 months on the partnership, was crushed. Early in her career, she had been deputy director of radio during the Clinton presidency, only to see her work life taken over by the White House sex scandal.

"This is worse," she says.

ON A BRIGHT Saturday afternoon in November, Jurich sits inside the Palm Pavilion Beachside Bar & Grill in Clearwater Beach, Florida, having lunch with his wife, Terrilynn, and two of their close friends. Back in Louisville, it's 45 degrees; the football team is set to take on Virginia at Papa John's Cardinal Stadium. In Clearwater, Jurich is planning to watch the game at his condo down the street. He wears shorts and a white Louisville baseball T-shirt, one of four times he arrives for interviews wearing Cardinals gear. "That's my school," he says. "I poured every ounce of myself into that place for 20 years."

Jurich is a man of average height, but even at 61, he carries himself with a pugnacious, intimidating intensity. Charming and warm one minute, he is sometimes defensive and suspicious. As athletic director, Jurich rarely texted or used email, fearful it could be used against him. "Why have more fodder for people?" he says. "You know how I communicated with people? I picked up the phone, and I went to their face." Since the university began digging into his records, he says, "That's the question I get most: 'How do you conduct business?' Well, I think we conducted it pretty damn good."

When Jurich came to Louisville from Colorado State in 1997, boosters took him and Terrilynn through campus. "She won't tell you this, but she started crying," Jurich says. Terrilynn had grown up in Wyoming, Jurich in Southern California. At Colorado State, where Jurich had been athletic director, the football stadium looked out on the Rockies. In Louisville, the Juriches found an industrial wasteland. The defining landmarks were a pair of silos, which stood between the campus and Interstate 65.

"What did you get us into?" Terrilynn asked.

Louisville had won NCAA titles in men's basketball under Denny Crum in 1980 and 1986, but most other sports were underfunded and neglected. Jurich says he spoke with Lamar Daniel, a former investigator in the U.S. Office for Civil Rights, who told him Louisville was facing a potential lawsuit over its failure to comply with Title IX. "He said, 'This is the worst school in the United States,'" Jurich says. Louisville's athletics budget then was $16.5 million. Jurich embarked on an ambitious growth strategy that would solve Louisville's Title IX problems and build up nonrevenue sports such as swimming and soccer while ensuring that the basketball and football teams were successful enough to support the enterprise.

The strategy required prodigious cash; by this year, Louisville's athletics budget was up to $104.5 million. "He treated his donors like investors," says Jurich's friend Larry Benz, a member of the Louisville Athletic Association, which oversees the department. Jurich built $280 million in arenas, playing fields and athletic offices by convincing rich people of the facilities' vital importance. "I can give $5 million to stem cell research and it's gonna help stem cell research," says Dr. Mark Lynn, an optometry-chain owner whose name adorns the soccer complex. "I give $5 million to a soccer stadium and it's gonna help everything." Lynn says sports bring the school visibility.

Jurich's record included three Final Four appearances and a national championship in men's basketball, a Sugar Bowl victory, a Heisman Trophy winner, two title-game appearances in women's basketball and four appearances in the College World Series. Louisville won 67 conference titles and produced 287 All-Americans. The athlete graduation rate shot up 30 points, to 86 percent. Waldron, the sports marketing director, calls Jurich "probably the finest leader I ever worked for," pointing out that he promoted women inside and outside the department. "He's a feminist, really," she says.

Learning that Jurich had been fired was "like a death," she says.

MUCH OF THE athletic department's finances was shrouded in secrecy, hidden from the Louisville Athletic Association and the board of trustees. Two former trustees told Outside the Lines that they were unaware of large real estate transactions involving the athletic department and the Louisville Foundation, the school's endowment, which raises money for education and research.

Dawn Heinecken, a professor who sits on the athletic association board, says the board learned about the Adidas deal "after it was announced publicly. That was the first I heard about it."

James Ramsey, who was president of both the university and the foundation, resigned last year amid allegations that he mismanaged endowment funds. Ramsey and Jurich had a close working relationship: Ramsey, in secret, approved additional compensation that earned Jurich an average of $2.77 million annually over the past seven years and approved several real estate transactions that benefited the athletic department. The Louisville Courier-Journal reported that Jurich's perks included tax "gross-ups" -- meaning the university paid some of his taxes -- membership in three country clubs and premium seats at the Kentucky Derby.

"I don't think Tom Jurich gets this, and I don't think Jim Ramsey got it," says state Rep. Jim Wayne, whose district includes parts of Louisville. "The University of Louisville is a state facility ... and it is not their kingdom. They are not the kings, and the princes, and the nobility in the kingdom. They're temporary stewards of these programs. And instead of seeing this as something that they should be responsible for and hold high ethical standards as they execute their jobs, they're doing just the opposite."

Out of 125 FBS schools required to report financial data to the U.S. Department of Education, Louisville is the only one that derives more than half of its men's sports revenue from basketball, says Jonathan Jensen, a sports marketing professor at the University of North Carolina at Chapel Hill. Much of that revenue comes from a $238 million taxpayer-funded arena, the KFC Yum Center, which opened downtown in 2010 and has become a heavy burden on taxpayers. The lease was negotiated by Jurich and the arena authority. Under the terms, taxpayer contributions make up 75 percent of the arena's operating income while Louisville gets to keep most of the revenue -- an arrangement that "blew our mind," says state auditor Mike Harmon, whose office examined the arena's finances. "It was like, 'This is ridiculous.' It's like co-signing the loan for a friend's home and then having to pay three-fourths of the mortgage."

Denis Frankenberger, a local businessman who has dissected the lease in minute detail, calls it "the biggest taxpayer scandal in the history of Louisville."

In the arena's first year, men's basketball revenue jumped 58 percent, from $25.9 million to $40.9 million, a trend that continued as the program became the richest in the country. Under the lease, Louisville keeps 88 percent of premium seat licensing, 97 percent of suite sales, all program revenue and half of concessions.

"Why is it I'm accountable for everything and all we've done is been successful? But these other people get a free pass? If I was a humanities professor, do you think I'd sit there and say, 'Man, I can't get it done, poor me'? I'd never say that. I'd go find a way to get it done." Ex-Louisville athletic director Tom Jurich

As Louisville was growing richer, the arena was failing -- partly due to the lopsided lease, partly due to tax estimates based on "flawed data," Harmon says. By early this year, the arena required a bailout to keep it from defaulting on more than $300 million in bond debt. Jurich's athletic department agreed to pay an additional $2.4 million a year. The public, meanwhile, was saddled with another 25 years of arena-related taxes totaling hundreds of millions of dollars. In the end, the arena will cost more than $1 billion, with taxpayers funding most of it. Despite the bailout, some experts fear the FBI probe's effect on the arena's primary tenant could be catastrophic.

"We took all the risk" on the arena, Jurich insists, pointing out that the athletic budget is heavily dependent on arena funds. When told that the city and taxpayers primarily support the arena, Jurich says he wanted to build it on campus, but city officials persuaded him to move it downtown. "Nobody twisted their arm," he says. "They brought this offer to us. I didn't go to them and say I got to have this, this and this and this."

Told of Jurich's comments, Wayne, the state representative, responds: "That's pure hogwash. They didn't take any risk. When you're getting over 90 percent of all the suite revenue and 90 percent of that revenue goes to the University of Louisville's athletic facilities, and their funds, where's the risk?"

F. Chris Gorman, a former Kentucky attorney general, says: "I think that the tragedy here is this is probably the only community that uses public money to fund a Division I athletic program. That's what led to all this corruption: They had all this money -- money from the foundation, money from the arena, money from the students. You add all that up, and then they have a budget to compete with the Ohio States of the world. But they haven't done it in an honest way. They've done it by fleecing the taxpayers and by taking money from the foundation, men and women that worked all their lives and thought they were giving money to education."

Jurich bristles at such implications, saying the transactions were aboveboard and brought enormous benefits to the university and the city. He says he can't understand why people now blame him for raising hundreds of millions of dollars to build a world-class athletic program.

"Wasn't that what I was hired to do?" he says.

JURICH'S BUILDING SPREE transformed the Louisville campus and parts of the city. Bars and restaurants opened in the riverfront neighborhood around the KFC Yum Center. Cardinal Park, which houses the track, soccer and softball stadiums, as well as a community playground and public athletic facilities, became the "front lawn" of the university for visitors and students on South Floyd Street. Louisville, which belonged to Conference USA when Jurich became athletic director, joined the ACC in 2014, bringing in $47.7 million in the first two years. Matt Jones, a frequent Jurich critic who broadcasts out of Lexington for Kentucky Sports Radio, says Jurich and Pitino changed the attitude of the university. "They made that campus appealing," Jones says. "They injected self-confidence in a place that really needed it. They told everybody, 'You don't have to be second fiddle to Kentucky.'"

Jurich and his supporters predicted that the rising tide that accompanied Louisville's migration to the ACC would lift up the academic boat. Yet the university, which is ranked 165th in U.S. News & World Report among national universities, continued to languish. Between 2008 and 2017, Kentucky cut state funding for higher education by 26.4 percent. The disparity between the athletic department's soaring budget and the realities of a shrinking university demoralized faculty; some referred to the chasm as East and West Berlin. Susan Jarosi, an associate professor of women's and gender studies and art history who played soccer at the University of Virginia, says the new sports facilities were less inspiring than soul-crushing: "It sucks, it just sucks, to come off another year, and you're walking around, you're driving around, and there's this massive construction, summer after summer. It's like, 'Where is this money coming from?'"

Jurich pulled in far more than the $1.4 million base salary that ranked him among the highest-paid ADs in the nation. Including other compensation, he earned $5.3 million in 2016, which, as The Courier-Journal points out, was more than the budgets of the biology, English, history and math departments. Jurich and his wife have vacation homes in Clearwater Beach and in Steamboat Springs, Colorado. Their son Mark, a former pro baseball player, was paid an average of $133,545 to work as senior associate athletic director for development. To circumvent Louisville's nepotism policy, most of that salary was paid by the Louisville Foundation. Earlier this year, before the Adidas deal was announced, Jurich's daughter Haley, who has experience in sports marketing, was hired by the company to serve as a liaison between Adidas and Louisville. (She was initially placed on administrative leave after the FBI scandal and is planning to move to company headquarters in Portland, Oregon.) Pitino was to make $7.7 million this season in total pay. He is suing the Louisville Athletic Association for more than $35 million, as well as Adidas, which terminated a personal services contract that was believed to pay him well over $1 million annually.

Jarosi, who has taught at Louisville for 10 years, recently saw her annual salary increase from $60,000 to $66,000. She was grateful for the raise but says she's appalled by the disparity between academic salaries and "the alternate universe" of the athletic department: "Just the idea that someone at Louisville is a multi-multimillionaire for seven years of service, that just makes me ... I don't know what. It's horrifying!"

Told about the frustrations expressed by several professors, Jurich wonders why some academic departments can't rebuild themselves in the same way he built up the athletic department. "They couldn't have gone out and raised money?" he says. "Why is it I'm accountable for everything and all we've done is been successful? But these other people get a free pass? If I was a humanities professor, do you think I'd sit there and say, 'Man, I can't get it done, poor me'? I'd never say that. I'd go find a way to get it done. You know what? Those schools have alumni too. Those schools have very rich graduates too. Nobody handed me anything when I walked into this place. Nobody. It was quite the contrary."

The athletic department's unfettered growth was undented by the scandals that occurred under Jurich's watch. Jurich refused to fire Pitino despite a string of public embarrassments, including Pitino's affair with a woman who was later sent to prison for trying to extort him, and "Strippergate," in which a Pitino assistant coach, over a period of four years, brought in dancers and prostitutes to entertain recruits at a university dorm. Louisville is appealing NCAA sanctions for Strippergate and if denied will be stripped of 123 wins, including its 2013 national title. In 2013, Jurich retained a former assistant football coach, even after the NCAA had sanctioned the coach for receiving and handing out thousands of dollars while at the University of Miami. In 2014, with Louisville about to join the ACC, Jurich brought back Bobby Petrino as football coach after he had been fired by Arkansas for lying about his own affair with a 25-year-old assistant.

"I looked at each situation the best way I possibly could," Jurich says.

Jurich sought to neutralize the scandals and shape the athletic department's image by controlling the local media, according to interviews with more than half a dozen journalists and media executives -- many of whom requested anonymity out of fear of reprisals from Louisville, even with Jurich gone. They described consistent and aggressive efforts to influence coverage, including abusive calls to radio talk-show hosts and executives by Jurich and his surrogates; threats to get advertising pulled from stations; and attempts to influence hiring and firing. Jurich denies he sought to influence advertisers or pressure the media. Nearly all of the media members identified Bob Gunnell, a public relations specialist, as Jurich's main surrogate and attack dog. The Louisville athletic department has a sports information group that employs 11 people, but contracts obtained by Outside the Lines show Jurich paid Gunnell's outside PR firm, Boxcar, up to $130,000 per year dating to 2014. Shortly after Jurich was fired, Gunnell cut ties with the university. He now represents Jurich personally.

This year Jones, the well-connected host of Kentucky Sports Radio, told his audience he had heard Jurich's job was in jeopardy. Jones later said on Periscope that Boxcar pressured his bosses to retract the report and issue an on-air apology. Jones, facing a suspension, initially refused and says he agreed to apologize only because he was scheduled to broadcast from an event the next day and some listeners were traveling long distances to attend. But he extracted a promise: When he was proved right, he could go on the air and say his bosses had ordered him to lie.

When Jurich was fired, Jones did just that, telling his listeners: "My bosses forced me to go on the air and lie to people."

Gunnell says his role was to assist the university's sports information office and review media rights proposals. "I wasn't Tom's attack dog," he says. Gunnell says he does not believe that he pressured Jones' bosses to issue a retraction.

"It's about making money. It's about, you know, folks from shoe companies and all the people in their orbit setting up a system that is pimping kids out." Ricky Jones, chairman of Louisville's Pan-African studies department

ADIDAS DIDN'T SEEM to care much about Louisville's scandals.

On June 15, the NCAA announced that it had suspended Pitino for five conference games over Strippergate and ordered Louisville to forfeit dozens of games, including the 2013 NCAA title. On Aug. 25, at Louisville, Jurich and Adidas held a joint news conference to announce the new $160 million sponsorship agreement.

"We're part of the Adidas family, and I certainly hope they know they are part of the Cardinal family," Jurich said then.

When Jurich signed Louisville's first all-school deal with Adidas, in 1998, he was happy just to get a discount on gear. At that point, it was about appearances. But as Louisville became more successful, the value went up. In 2014, the two sides signed a five-year, $39 million extension. Within two years, Jurich was thinking bigger. At an Adidas-sponsored retreat for athletic directors in May 2016 in Santa Barbara, Jurich says he told Jim Murphy, Adidas' sports marketing director for NCAA matters: "If we're going to be with you, I want a long-term deal. And I want it to be one of the biggest deals in the country."

He had a lot of leverage. In 2013, in addition to winning the national championship in men's basketball, Louisville beat No. 3 Florida in the Sugar Bowl and made the finals in baseball and women's hoops. Jurich commissioned a $185,000 documentary, Year of the Cardinal, which aired on ESPNU.

The Adidas deal quadrupled the company's commitment to Louisville in cash and gear and was a huge bet on Jurich's vision. The average annual compensation of the 10-year contract was exceeded only by Under Armour's deal with UCLA ($18.7 million) and Nike's deals with Ohio State ($16.8 million) and Texas ($16.7 million) -- universities with at least twice Louisville's enrollment.

Waldron says she was oblivious to the recruiting negotiations that allegedly were taking place simultaneously between representatives of Louisville and Adidas.

The talks began in May 2017, according to the FBI. To lure Brian Bowen, an unsigned five-star recruit from Saginaw, Michigan, an unidentified Louisville assistant allegedly conspired with Jim Gatto, Adidas' director of global sports marketing for basketball; Merl Code Jr., who came to Adidas after running Nike's powerful grassroots program; sports agent Christian Dawkins; and financial planner J. Munish Sood to funnel $100,000 to Bowen's family.

During a July conversation recorded by the FBI, Code explained the plan to pay off Bowen as "one of those instances where we needed to step up and help one of our flagship schools ... secure a five-star-caliber kid. Obviously, that helps, you know, our potential business."

For the next four months, under FBI surveillance, the men engineered the payment to Bowen's father while plotting how to route money to another Louisville recruit. Brad Augustine, an Adidas-sponsored AAU program director, predicted in one meeting that Pitino would be instrumental because "no one swings a bigger d--- at Adidas than" him. Neither Pitino nor any other head coach or university is named in the FBI affidavit, but ABC News has identified Pitino as the one referred to as "Coach-2."

After Bowen committed to Louisville, Pitino told Terry Meiners of News Radio 840: "We got lucky on this one. ... We spent zero dollars recruiting a five-star athlete who I loved when I saw him play. In my 40 years of coaching, this is the luckiest I've been."

The Adidas spokeswoman says the firm put Gatto on administrative leave and ended "any consulting relationships related to the allegations," an apparent reference to Code.

When it all came crashing down, Jurich was in Washington, D.C., at the ACC meetings. He received a call from Kenny Klein, Louisville's senior associate athletic director for sports information. Jurich says he has never heard of Gatto or Code and that he had dealt exclusively with Murphy and Chris McGuire, Adidas' senior director of sports marketing, who signed the sponsorship agreement. When he made it back to Louisville, Jurich says, he confronted Pitino and then-assistant coach David Padgett, who later replaced Pitino. Both denied that they were aware of the payment to Bowen.

The next day, Jurich was summoned to the office of Postel, the interim president, who he says asked him to resign. Jurich refused. Postel then handed him a letter informing him that he'd been placed on administrative leave, pending a decision by the board of trustees. The meeting lasted roughly 90 seconds, Jurich says.

Postel initially said he wanted to review the Adidas contract. Louisville spokesman John Karman III says the university has since decided to "move forward with the contract as planned next year."

BEFORE HE WAS fired, Jurich's colleagues had been planning a surprise gala to celebrate his 20th anniversary as athletic director. The party was to take place on Oct. 12 at the PNC Club, a 20,000-square-foot suite at Papa John's Cardinal Stadium on South Floyd Street, the Vegas Strip of glittering athletic facilities that Jurich built.

That party, of course, was canceled. Jurich says he was told he was forbidden even to return to his office, which for weeks remained on lockdown, like a crime scene. Karman says that is standard university procedure toward dismissed employees, who can return later to retrieve items.

On Oct. 18, Jurich was fired by a 10-3 vote of the trustees. His termination letter, delivered by Postel, was a two-page screed. Jurich had created "a culture of tolerance," Postel wrote, entered into secret transactions "for your own financial or other benefit" and engaged in "willful misconduct demonstrated through ineffective management, divisive leadership, unprofessional conduct, and a lack of collegiality best characterized as intimidation and bullying that extends from student government to the University's senior leadership. This has caused substantial damage to the University."

Jurich, in the aftermath, seems like a man who feels bewildered and betrayed, as if he were fired for doing his job too well.

"I've given this school 20 years of dignity," Jurich says. "I would hope I would get a little bit in return, and I certainly haven't yet."