FCPA Compliance and Ethics Blog

October 10, 2013

Will World Cup 2022 Become World Cup 2023?

SPOILER ALERT – This article reveals that the temperature becomes quite hot in Qatar in the summer months.

That paragon of compliance and ethics, the world’s richest and most influential single-sport ruling body Fédération Internationale de Football Association (FIFA), has been in the news recently because it has only just recently discovered, after an exhaustive multi-year investigation, that temperatures in the country of Qatar can reach between 40-50C during the summer months, and for those of you who don’t read  Celsius temperatures that translates to between 104 to 122 degrees Fahrenheit. I have been in such temperatures and I can assure you that is hot weather. However, although FIFA awarded the 2022 World Cup tournament to Qatar back in 2011, it has only now become aware of the fact that there is hot weather in the summer months in Qatar.

The Wall Street Journal on Qatar’s Bid

I was also interested in the bid process which awarded the rights to host the 2022 World Cup to Qatar. In a January 13, 2011 article in the Wall Street Journal (WSJ), entitled “Qatar’s World Cup Spending Spree”, reporter Matthew Futterman detailed the “spending spree” of a reported one year amount of $43.3 million by Qatar, which led to its winning World Cup bid. Futterman’s article focused on information derived from the internal documents of Qatar’s bidding committee. Futterman reported that there was no evidence that Qatar violated the rules and regulations of FIFA to secure its winning bid. Rather, he reported on how Qatar “worked within FIFA’s broad guidelines” to secure its winning bid.

From the internal bid documents, obtained by the WSJ, Futterman reported that some of the tactics used by Qatar included:

1.      Charitable Donations. Commitments were made to establish, build or continue to fund soccer academies, through a football-training academy, Aspire Academy for Sports Excellence, controlled by the Qatar Royal Family, for the home countries in which FIFA executives who would vote on the 2022 site selection. The WSJ article cited examples in Thailand and Nigeria. In Thailand, Futterman reported that Aspire would “build a football academy” and in Nigeria it would “expand grass-roots training”. These internal documents also revealed that the Aspire Academy would continue to work with three African countries which were home to FIFA executive committee members, who all had a vote on the 2022 site selection.

2.      Use of Marketing Agents. The Qatar bid included the hiring of certain well known celebrities to assist in the effort. In order to “talk up” the Qatar bid to host the 2022 World Cup, the WSJ reported that it hired several international personalities as “Bid Ambassadors” to endorse the Qatar bid. These endorsements were important because they assisted Qatar to “establish its legitimacy within FIFA and connections to executive committee members.” The only Bid Ambassador named in the WSJ article was the former French star Zinedine Zidane. It was reported that Zidane received $3 million for his endorsements of the Qatar bid.

Review under the FCPA and Bribery Act

FIFA is generally recognized as a, non-US, Non-Governmental Organization (NGO) and, therefore, the US Foreign Corrupt Practices Act (FCPA) does not apply to it. But I thought it might be of use to review some of the tactics, as reported in the WSJ, that Qatar used to secure the 2022 World Cup bid, in the context of what might be allowed under the FCPA. Probably most fortunately for both FIFA and the Qatar, was that FIFA’s award was made before the UK Bribery Act became effective. However, it should be noted that the UK Bribery Act would apply to UK companies and citizens involved in the matter because there is no public/private distinction under the Bribery Act and unlike the FCPA, the Bribery Act does not require that a bribe be offered or paid to a foreign governmental official, only that a bribe or offer to bribe be made.

Charitable Donations – The Football Academies

Charitable donations are not banned by the FCPA or the Bribery Act. However any such donations must be made following the requirements of these laws. The FCPA Blog reported that when asked about the guidelines regarding requests for charitable giving, the FCPA then Deputy Chief of the Criminal Division’s Fraud Section at the US Department of Justice (DOJ), Mark Mendelsohn, said that any such request must be evaluated on its own merits. He advocated a “common sense” approach in identifying and clearing Red Flags. This would include determining if a governmental decision maker held a position of authority at the charity to which the donation would be made; whether the donation was consistent with a company’s overall pattern of charitable giving; who made the request for the donation; and how was it made.

Use of Marketing Agents – The Bid Ambassadors

Much has been written on the use of agents under the FCPA. The UK Ministry of Justice (MOJ) Consultative Guidance on the Six Principals for an “adequate procedures” or best practices anti-bribery and anti-corruption program also discuss agents. Recently, Michael Volkov, noted FCPA attorney, spoke on the topic of due diligence on third parties. Volkov believes the key for any compliance based issue is to document the evidence. If you ask questions and get answers, document the process. If you ask questions and do not receive answers, document that process too. But the key is to Document, Document, and Document.

Under the FCPA or Bribery Act, a significant investigation, in the form of background due diligence, must be employed. When a company does business with higher-risk third parties, you need to understand not just the parties involved, but the transactions that follow. This means that a company must also proceed with transactional due diligence. The most important thing to know is, will there be money left on the table? You need to know where that money is going. Under the FCPA if the end user is a Government, you need transaction-level due diligence if you want to be safe. However, the Bribery Act does not make this governmental/non-governmental distinction.

Remember the former French star Zidane and his $3 million payment? The question is what was he, and the other Bid Ambassadors, paid to do? According to the WSJ, they “helped Qatar establish its legitimacy within FIFA and connections to executive committee members”. Such a purpose might well require audit rights to determine where the money paid to the agent went and whether it can it be accounted for in a financial review. But there is one further analysis that being the amount paid to the agent. A commission rate can be a percentage of a successful bid or it can be a flat rate, fixed fee payment. In this situation we do not know what the financial reward to Qatar will be for hosting the 2022 World Cup. Indeed, the reward may not be financial but rather the prestige of hosting the quadrennial championship of the world’s most popular sporting event. So there may be no such measure of the Zidane payment. But if the figures cited in the WSJ article are correct, Zidane received an amount of almost 10% of the Qatar one-year budget. That must have purchased some serious connections. Such a high figure, in an applicable situation, might well lead to significant FCPA and Bribery Act scrutiny.

To say that FIFA was unaware that it gets hot in the summer in Qatar seems disingenuous at best. As reported by Roger Blitz, in a Financial Times (FT) article, entitled “Fifa faces quandry over World Cup in Qatar” Sepp Blatter, FIFA President has gone on record to say that awarding the 2022 World Cup to Qatar was “a mistake”. FIFA’s response to this newly discovered temperature issue would seem to equally demonstrate why it believes that all the other rules do not apply to it. There is talk that FIFA will simply move the 2022 World Cup Tournament from the summer of 2022 to the winter of 2023, no matter who or what it disrupts.

Qatar itself has instituted a $205bn infrastructure building program, including “new power plants and a new metro system. Billions more will be spent on hotels and stadiums.” But this construction effort has also come under criticism. The FT article also noted that The Guardian “reported that Nepalese workers were dying at the rate of one a day because of unsafe conditions on building sites”. Further, a local employment system known as kafala has impacted many laborers who have had their passports confiscated and have had delays in salary payments.

Apparently FIFA took none of these factors about Qatar’s bid into account when the award was made. I wonder what FIFA did base its decision on? But most importantly, I wonder if they will change the Tournament designation from World Cup 2022 to World Cup 2023?

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2013

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