Adidas shares sank on the German stock exchange Tuesday after the FBI arrested James Gatto, the top marketing executive for the sports apparel company’s basketball division, on corruption charges.
"Today, we became aware that federal investigators arrested an Adidas employee. We are learning more about the situation. We’re unaware of any misconduct and will fully cooperate with authorities to understand more," Adidas said in a statement.
The company’s stock fell more than 2.5% in Frankfurt trading. Adidas’ U.S.-listed shares also fell more than 2.5%.
Gatto was one of the 10 individuals, including NCAA assistant basketball coaches, financial advisors and managers, as part of a federal probe into two separate corruption schemes. Authorities allege that Gallo conspired to funnel thousands of dollars in payments to top high school basketball recruits. In exchange, the recruits purportedly agreed to commit to Adidas-sponsored schools.
U.S. Attorney Joon Kim said Gatto used fake invoices and false entries to hide the alleged payments on the company’s books. Officials declined to identify Adidas by name and said no other executives from the international sportswear brand are suspected of wrongdoing.
Gatto’s arrest comes at a time of major growth for Adidas, which has gobbled up market share from longtime rival Nike through the success of its fashion-forward retro and classic sneakers and apparel.
The German brand surpassed Nike’s Jordan Brand earlier this month as the second-largest footwear brand in the United States, NPD Group reported.