Compliance lessons from a sports betting scandal

It’s always fascinating when a lesson about corporate compliance programs emerges from the world of professional sports. Case in point: the National Basketball Association in the United States, which recently banned one of its players for betting on his own performance.

The player in question was Jontay Porter, a forward for the Toronto Raptors. On April 17 the NBA announced that it had imposed a lifetime ban on Porter, after an internal investigation found that Porter had bet on NBA games, provided confidential information to other sports bettors, and limited his own performance during games so that certain bets would pay off.

Any one of those offenses is a grievous sin under NBA rules, let alone all three together. Hence Porter’s career in NBA basketball came to a swift end after four seasons.

For corporate compliance officers, however, the lessons are just beginning.

What good data analytics can accomplish

Porter’s misdeeds were uncovered thanks to sophisticated analysis conducted by online sports-betting businesses. Those sportsbooks first noticed in January that several “prop bets” on Porter’s performance — that is, bets on Porter’s individual performance during a game, regardless of whether his team won or lost it — were among the most lucrative bets for any NBA player.

That would be highly unusual for a middle-of-the-road player such as Porter. The sportsbooks started investigating and alerted the NBA to their concerns. The NBA soon pieced together what Porter had been doing.

The compliance lesson in all this is the importance of data analytics to rooting out misconduct. If it weren’t for the sportsbooks’ sophisticated analytics capabilities, none of this might have come to light.

The lesson is deeper than that, however. Porter’s case demonstrates that for data analytics to work well, you need business processes that lend themselves to data analysis. Professional sports fits that standard perfectly. Every player action is tracked and recorded: points scored, fouls drawn, time spent on the court, and so much more. This generates an enormous amount of raw material to analyze.

So compliance officers should step back and ask: What business processes could our organization digitally transform, so that they generate more data for us to analyze?

Due diligence of third parties is one such process. Reports to internal whistleblower hotlines are another. Records of disciplinary action are a third, and there are probably lots more after that. The more you can convert compliance-related processes into quantifiable data, the better your analytics tools can identify strange patterns, outlier events, and other quirks worth a human’s attention. (And just imagine how much more important this point about data will be as artificial intelligence keeps marching into corporate technology.)

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The importance of consequences

The other significant part of the Porter case is the lifetime ban the NBA imposed against him. It reminds us that imposing consequences for misconduct is just as important as rooting out the misconduct in the first place.

Don’t take my word for it; read the Justice Department’s guidelines for evaluating effective compliance programs. The guidelines devote an entire section to “consequence management,” and they mince no words: “Prosecutors should also assess the extent to which the company’s communications convey to its employees that unethical conduct will not be tolerated and will bring swift consequences.”

The NBA had a slam-dunk on that front. Sportsbooks first noticed strange patterns in bets about Porter in January. The investigation was well underway by late March, and the ban against Porter arrived in mid-April. The entire matter took three months from start to finish.

Moreover, that lifetime ban will certainly make an impression on other NBA players, and on professional sports as a whole. Since sports betting became widely legal in the United States in 2018, numerous scandals related to improper betting have erupted. Porter’s case isn’t likely to be the last, but the severe penalty here does tell everyone that the NBA takes the integrity of the game with utmost seriousness.

That’s the issue corporate compliance officers need to figure out within their own organizations, too: How do you demonstrate to all stakeholders in your organization that you take the integrity of your business seriously? What consequences make sense for which types of misconduct, and how do you assure that those consequences are imposed consistently?

Answering those questions requires consultation with the corporate legal and HR teams; and ideally, you then enshrine those answers in written policy for all to see. You also need to follow through by tracking disciplinary enforcement to assure consistent application. (There’s that need for strong data analytics again!)

Compliance officers owe the NBA a debt of thanks, really. Sports might be just a game, but professional sports is big business — and that big business just provided valuable compliance lessons for all the other big businesses out there.

Matt Kelly is an independent compliance consultant and the founder of Radical Compliance, which offers consulting and commentary on corporate compliance, audit, governance, and risk management. Radical Compliance also hosts Matt’s personal blog, where he discusses compliance and governance issues, and the Compliance Jobs Report, covering industry moves and news. Kelly was formerly the editor of Compliance Week. from 2006 to 2015. He was recognized as a "Rising Star of Corporate Governance" by the Millstein Center in 2008 and was listed among Ethisphere’s "Most Influential in Business Ethics" in 2011 (no. 91) and 2013 (no. 77). He resides in Boston, Mass.