A former director of men’s basketball at the University of Kentucky has been charged by a grand jury of defrauding more than $1.2 million from professional athletes who used his companies for various financial services.
Leon A. Smith, 44, of Lexington was indicted last week on federal charges of money laundering, aggravated identity theft and “devising a scheme to defraud and obtain money and property from clients by means of false pretenses.”
One of Smith’s clients was former UK basketball player Josh Harrellson, who claims in a Fayette County civil lawsuit that Smith defrauded him of about $180,000.
Smith was director of men’s basketball operations at UK, his alma mater, from about 2001 to 2006 under Coach Tubby Smith and was an assistant athletic director from 2006 to 2009. The Louisville native lettered three seasons as a wide receiver for the UK football team from 1993 to 1995.
Through companies called LSMG LLC, Legacy Pro Management Group LLC and Legacy Athlete Management LLC, Smith provided various services to professional athletes, the indictment says. Those services included assistance with moving, real estate purchases or rentals, bill payments, and referral to other professionals for legal needs and financial planning.
Smith received compensation for his services, which was generally a percentage of the client’s earnings, according to the 14-count indictment.
In each instance, the client entrusted Smith with financial-account data, birth dates, Social Security numbers and other personal information that allowed Smith to conduct authorized financial transactions on the client’s behalf.
Smith then devised a scheme to defraud the clients, the indictment says. That included abusing his access to clients’ financial accounts and using the money for unauthorized purposes, the indictment says.
Smith received payments that had been issued to clients, including payroll checks and federal income tax refund checks, and he deposited those items into accounts opened in the name of Legacy, and then “used the funds for unauthorized purposes,” the indictment says.
Smith also used personal and financial data of clients to open unauthorized financial accounts in their names, including credit card accounts and lines of credit, the indictment says.
Smith concealed the unauthorized transactions by changing passwords to financial accounts belonging to Legacy clients, restricting access to new passwords, and fabricating expense reports that used fictitious expenses to explain low balances in the financial accounts, the indictment says.
Between September 2011 and Jan. 29, 2015, Smith misappropriated $1,298,506 in money belonging to clients, the indictment says.
The clients are not named in the indictment. One part of the indictment lists wire transfers of thousands of dollars belonging to clients who are identified only by the initials “J.L.” and “D.M.” and “S.M.” and “J.D.H.” (Harrellson’s full name is Josh Douglas Harrellson.)
One $40,000 royalty check from the National Basketball Players Association made payable to J.D.H. was deposited into a Central Bank account opened in the name of LSMG LLC, the indictment says.
Another count in the indictment alleges that Smith forged signatures and unique Internal Revenue Service check identification numbers, and that he knew that such means of identification belong to another person.
In his suit filed in late April, Harrellson says Smith agreed to “invest, tend to and manage money” that Harrellson earned by playing professional basketball.
The suits says Harrellson learned in January 2015 that he was a victim of “fraud, deceit, embezzlement and theft at the hands of the defendant Leon Smith.”
The suit says Smith “fraudulently and tortiously promised, agreed and offered to invest (Harrellson’s) money in ventures which would be fruitful for both parties.” The suit alleges that Smith “never had any such intent.”
Harrellson, now a Michigan resident who is playing professional basketball in Japan, seeks a trial by jury as well as compensatory and punitive damages against Smith.
Harrellson could not be reached for comment Monday, but he “is just eager for justice to prevail and for him to be made whole again,” his attorney, Conrad Cessna of Lexington, told the Herald-Leader.
If convicted in the federal criminal case, Smith could face up to 20 years in prison, a $250,000 fine and three years of supervised release. The government also seeks restitution or forfeiture of substitute property.
Smith’s companies were dissolved in September 2015, according to the Kentucky Secretary of State’s website.
Guy Ramsey, director of strategic communications for UK, said Monday, “We will not be commenting on this ongoing legal matter.”
Smith is scheduled to be arraigned May 15 in Lexington before U.S. District Court Judge Joseph M. Hood.