FCPA Compliance and Ethics Blog

June 30, 2014

In Due Diligence and World Cup Bids: Follow the Money

Follow the MoneyFor those watching the 2104 World Cup, this year’s tournament has certainly been spectacular, from the US reaching the round of 16, the incredible goals scored by Robbie Van Persie and Tim Cahill, to yesterday’s heartbreak for Mexico, who led until the 88th minute, only to be tied and then loose in stoppage time to the Netherlands, this year’s event has been one for the ages. However one very large shadow hangs over the sport’s governing body, Fédération Internationale de Football Association (Fifa) and allegations of corruption in its award of the 2022 World Cup to Qatar.

There were reports as far back as 2011 that Mohamed bin Hammam, offered bribes to members of the Caribbean Football Union (CFU) at a meeting organized by the Fifa vice-president, Jack Warner. As reported by The Guardian, in a 2011 article, entitled “Fifa in crisis after claims against Jack Warner and Mohamed bin Hammam”, Owen Gibson reported, “nine of Fifa’s 24 executive committee members have been accused of corruption in recent months.” But these 2011 reports have paled in comparison to the reports detailed in the past few months regarding allegations of corruptions concerning the award of the 2022 tournament to Qatar.

Earlier this month, The Sunday Times rocked the sporting world with its article “Plot to Buy the World Cup” by Jonathan Calvert and Heidi Blake. In the article, they reported that a number of football officials took £3m in return for support of the Qatari bid. The BBC, in an article entitled “Qatar World Cup 2022: Investigator nears probe conclusion”, said “The Sunday Times claims to have obtained secret documents that implicate the former AFC president in corrupting members of football’s governing body to win the right to stage the 2022 World Cup. The newspaper alleges the documents, seen by BBC sports editor David Bond, show that Qatari Bin Hammam, 65, was lobbying on his country’s behalf at least a year before the decision to award the country hosting rights. They also allegedly show he had made payments into accounts controlled by the presidents of 30 African football associations and accounts controlled by Trinidadian Jack Warner, a former vice-president of Fifa.”

This initial account has been supplemented by additional reports detailing these allegations. In another article in The Guardian, entitled “Mohamed bin Hammam accused of payments to help Qatar World Cup bid”, Agence France-Presse wrote that “Bin Hammam also paid $1.6m into bank accounts controlled by the Trinidadian Jack Warner, also a former vice-president of Fifa, $450,000 of which was before the vote for the World Cup”, citing the report in The Sunday Times. Both Qatar and bin Hammam have denied any improprieties in the award of the bid to Qatar.

But there were more reports of payments to those voting on the Qatar bid beyond Jack Warner. In a June 16th report in the online publication, República, entitled “ANFA chief admits receiving money from Hammam” it reported that Nepal Football Association (ANFA) President Ganesh Thapa had been promised $800,000 from bin Hammam and had been paid $115,000. It also reported that Thapa’s son received $100,000 from bin Hamman. Thapa was quoted as saying that the money was for a business deal, “It is right that I received $115,000 but it was in connection with the business I have partnered with Hammam.”

There have been other issues raised regarding Qatar’s bid to host the World Cup. One is its treatment of the workers who are building the stadiums for the event and the appalling conditions that the workers building the stadiums to host the event are facing. In an article in the online magazine Slate, entitled “The Qatar World Cup Is a Human Rights Catastrophe. It’s Time to Do Something About It” Jeremy Stahl reported that the Nepali embassy has said 400 citizens of its country had died during construction in Qatar and India has reported that 500 of its citizens have died. The article quoted Sharan Burrow, the general secretary of the International Trade Union Confederation (ITUC), who said in an ESPN documentary “that at current rates, 4,000 people will die to make the 2022 World Cup a reality.” The ITUC itself had reported in March that there had been 1200 deaths in the construction of the facilities for the World Cup.

Another significant issue is the heat. 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. If you have watched any games in this year’s tournament, you have seen European players wilt in 80+ degree, which for a Texan is rather pleasant. But no matter how much conditioned air you can pump into a stadium in Qatar, the fact is that it will be 120+ outside.

Even if the stadiums are air conditioned, how are you going to walk to them in that heat? 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 quandary 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”.

But as my friend Mike Brown might say that when you are performing due diligence, ‘follow the money’. This is not only important in thinking about allegations of corruption in the award of the bid to Qatar but also in the overall context of Fifa and the World Cup. It has been estimated that over one-tenth of the world’s population is watching this year’s World Cup. In the US alone, the interest is so high its game against Portugal had more viewers than Game 5 (the final game) of the recent NBA championship. This could well lead to billions for the television rights in 2022 alone. That means that advertisers and sponsors will be paying a pretty penny to be associated with World Cup 2022. Do you think some of the current sponsors, such as Adidas, Coca-Cola, Sony or Visa will want to be associated with such allegations of corruption or deaths of workers from such appalling working conditions?

There is a chorus growing to move the 2022 World Cup from Qatar to another country. Speaking with its usual grownup voice, the FT editorial board has called for a re-vote on the location of the 2022 World Cup tournament venue, in an article entitled “Blow the whistle on Fifa, please”, they said, “The case for rerunning the bid for the 2022 competition looks unassailable. Final judgment should await a pending report into the Qatar bid by Fifa’s top internal investigator. But a string of controversies – among them the health concerns over staging the competition in Qatar’s furnace-like climate – means a new venue is now needed.” But more than simply re-voting on the 2022 bid, the FT said, “Western governments and lawmakers should therefore bring their influence to bear. The US Congress could consider holding hearings to examine the relations between American multinationals and Fifa. US companies have to abide by stringent anti-corruption laws. Congress would be right to examine the implications of US companies doing business with a major international body that has such weak governance. Such public hearings might make corporate sponsors reconsider their stance.”

What are the lesson for the compliance practitioner? Sometimes you need to step back and look at the big overall picture. If a deal has come into your company that is particularly high reward, it generally means that it was high risk. You may want to do a more in-depth look at all aspects of the deal, from the business partners involved, to your internal gifts, travel and entertainment for your employees involved in securing the contract. Putting a second or even third set of eyes on something might well protect your company if something does not seem right, feel right or look right.

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, 2014

June 25, 2014

Another FIFA Compliance Failure – Referees at the World Cup

Red & Yellow CardsAlthough the organization puts on arguably the greatest sporting event for professional athletes on the planet, the term ‘professionalism’ is probably not one you can associate with the Fédération Internationale de Football Association (FIFA). Unfortunately this lack of professionalism can and does impact this greatest sporting event, the quadrennial World Cup currently going on in Brazil. This is particularly true in the area of referees.

In an article in the Wall Street Journal (WSJ), entitled “The Problem with World Cup Referees”, reporter Joshua Robinson explored that precise topic. There are several problems with FIFA’s approach to referees. The first is a conscious approach, which is designed not to put the most professional referees on the pitch. FIFA does select the most experienced or even the referees who show the best performance. Rather, “While the World Cup’s 32 teams must play their way into the tournament through a grueling two-year qualifying process, FIFA, the sport’s governing body, pulls referees from more than 40 countries out of a sense of fairness to all of its member associations.” In other words, a person who has never even been to a World Cup, who referees local clubs in Tahiti, “is a pulled hamstring away from the biggest stage in the game. And it isn’t just the alternates who lack experience. Among the 24 official referees are several who have never called games involving big-name teams and players.”

Steve Jaive, an ESPN refereeing analyst and a former NBA official, was quoted in the article as saying “I find it hard to believe that they wouldn’t have the best soccer officials there.” Moreover, “some critics believe that World Cup games ought to use referees with experience ejecting superstars like Cristiano Ronaldo.
David Elleray, a retired English Premier League (EPL) referee was quoted as follows “A referee from Brazil, Argentina, Italy, England, week in, week out, they are refereeing high-profile matches.”

To compound this race towards ineptitude, FIFA stubbornly refuses to enter the 21st Century and use the technology available to it to get the calls right. As noted by Robinson, “Perhaps befitting a sport founded in England, soccer is an officiating monarchy. Each game features a single referee whose calls can’t be challenged on the field or—until this World Cup—assisted by goal-line technology. Although two linesmen run along the edge of the pitch raising flags to indicate offside and fouls, the referee is free to ignore those calls.” Anyone who remembers the 2010 World Cup and the absolutely pathetic level of competency by the referees will welcome even this modest advance.

Yet another problem that FIFA stubbornly refuses to address is the pay for referees. The last time FIFA publicly announced the compensation for referees at the World Cup was back in 2006 and then it was listed at $38,000. That is an incredibly small amount of money for such an important role. The entire FIFA referee system has come under greater concern because of match-fixing allegations. In a two part series in the New York Times (NYT); part 1 was entitled “Fixed Soccer Matches Cast Shadow Over World Cupand part 2 was entitled “Inside the Fixing: How a Gang Battered Soccer’s Frail Integrity”, reporters Declan Hill and Jeré Longman wrote about a NYT investigation of match fixing ahead of the last World Cup and provided an unusually detailed look at the ease with which professional gamblers can fix matches. The article reviewed an “internal, confidential report by FIFA, soccer’s world governing body. FIFA’s investigative report and related documents, which were obtained by The New York Times and have not been publicly released, raise serious questions about the vulnerability of the World Cup to match fixing.” The reporters noted that the FIFA “report found that the match-rigging syndicate and its referees infiltrated the upper reaches of global soccer in order to fix exhibition matches and exploit them for betting purposes. It provides extensive details of the clever and brazen ways that fixers apparently manipulated “at least five matches and possibly more” in South Africa ahead of the last World Cup. As many as 15 matches were targets, including a game between the United States and Australia, according to interviews and emails printed in the FIFA report.”

These NYT articles detailed how betting syndicates would target the national football associations that are charged with selecting and supplying the referees in international matches. The articles pointed out how the betting syndicates would find the weakest link in any security or compliance system and then exploit it. In the past World Cup it was both the South African football association that signed contracts allowing the betting syndicates to select the referees for games to actually bribery of referees themselves.

These problems were made more relevant on Monday with an article in The Telegraph, entitled “Football match-fixing: Ghana deal casts cloud over World Cup finals in Brazil”, in which reporters Claire Newell, Holly Watt and Ben Bryant detailed that the “Ghana Football Association calls in police after undercover investigation by The Telegraph and Channel Four’s Dispatches programme finds that the President of Ghana’s FA agreed for the team to play in international matches that others were prepared to rig.”

They wrote, “The president of the country’s football association then met the undercover reporter and investigator, along with Mr Forsythe and Mr Nketiah, and agreed a contract which would see the team play in the rigged matches, in return for payment. The contract stated that it would cost $170,000 (£100,000) for each match organised by the fixers involving the Ghanaian team, and would allow a bogus investment firm to appoint match officials, in breach of Fifa rules. “You [the company] will always have to come to us and say how you want it to go…the result,” said Mr Forsythe. “That’s why we will get the officials that we have greased their palms, so they will do it. If we bring in our own officials to do the match…You’re making your money. You have to give them [the referees] something… they are going to do a lot of work for you, so you have to give them something,” said Mr Nketiah, who is also the chief executive of the Ghanaian football club Berekum Chelsea and sits on the management committee of the Ghana U20 national team.”

In a meeting prior to the 2014 World Cup, when Ghana was playing warm-up matches in the US, Forsythe and Nketiah introduced the undercover team to Kwesi Nyantakyi, the president of the Ghana FA. In a meeting in “Florida, the president agreed to a contract that stated each match would cost the investment company $170,000 and that they could appoint the match officials for each game. A contract was drawn up that specified that “The Company will appoint and pay for the cost of the referees/match officials in consultation with an agreed Fifa Member association(s),” in direct breach of the rules that prohibit third parties from appointing officials, in order to protect their impartiality. During the meeting, the president suggested that the fictional investment company put on two matches after the World Cup to prove that they were able to organise games.”

What are the lessons for the compliance practitioner? I think two jump out from the examples from the world of FIFA. The first is to assess your risk. Clearly the style FIFA is using to manage the quality of its referee corp is less than acceptable. FIFA must provide clear evidence that the best quality of refereeing is on the field, together with the best players in the world. Further, technology should be employed to make sure it is the athletes who decide the outcome of a game, not some blown call. FIFA should ensure that ‘getting it right’ is what officiating is and not idiotic calls that any third-grader could see were incorrect.

But the second problem seems to me to be even greater. The system itself either lends itself to corruption or makes itself more susceptible to corruption. If a company has a sales structure that does not allow for proper oversight or even transparency, then the sales structure should be changed to allow such oversight. The money generated by the sport of soccer worldwide makes clear that professionalism must be brought to the referee ranks. If FIFA pays some paltry sum for men who hold the game literally in their hands, it needs to ensure that they can resist a bribe to fix matches.

As to the 2014 World Cup it has been spectacular, largely in spite of FIFA and not because of it. And, of course,

I believe

I believe that

I believe that we will win.

Go USA

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, 2014

June 4, 2014

Whither FIFA?

Filed under: FIFA — tfoxlaw @ 12:01 am
Tags: ,

World Cup TrophyOn this day in 1942, the Battle of Midway, one of the most decisive US victories against Japan during World War II, began. During the four-day sea-and-air battle, the outnumbered US Pacific Fleet succeeded in destroying four Japanese aircraft carriers while losing only one of its own, the Yorktown, to the previously invincible Japanese navy. It truly was one of the turning points of the war because the destruction of the Japanese carriers prevented Japan from taking the offense again in the Pacific.

One may have seen such a turning point over the weekend with Fédération Internationale de Football Association (FIFA) and allegations of corruption throughout it in several areas. This was when The Sunday Times rocked the sporting world with its article “Plot to Buy the World Cup” by Jonathan Calvert and Heidi Blake. It the article, they reported that a number of football officials took £3m in return for support of the Qatari bid. The BBC, in an article entitled “Qatar World Cup 2022: Investigator nears probe conclusion”, said that “The Sunday Times claims to have obtained secret documents that implicate the former AFC president in corrupting members of football’s governing body to win the right to stage the 2022 World Cup. The newspaper alleges the documents, seen by BBC sports editor David Bond, show that Qatari Bin Hammam, 65, was lobbying on his country’s behalf at least a year before the decision to award the country hosting rights. They also allegedly show he had made payments into accounts controlled by the presidents of 30 African football associations and accounts controlled by Trinidadian Jack Warner, a former vice-president of Fifa.”

While these allegations are certainly sensational, they are not the first time that questions have been raised as to whether improper payments were made to influence the vote awarding the 2022 World Cup Championship to Qatar. Back in 2010, the New York Times (NYT), in an article entitled “FIFA Suspends Officials in Vote-Selling Scandal”, reported that Reynald Temarii, the Tahitian President of FIFA’s Oceanic regional confederation, reportedly said that he wanted “about $2.3 million to finance a sports academy” in New Zealand. Amos Adamu, the Nigerian representative, was alleged to have requested approximately $790,000 to fund the construction of soccer fields in Nigeria. Mr. Adamu reportedly asked for “cash to be paid into his personal account”. FIFA President Sepp Blatter was quoted as saying that the two men’s actions had “created a very negative impact on FIFA and on the bidding process”. On November 17, 2010, the FIFA Executive Committee did take action as both men were suspended by FIFA for their actions; subsequently both men have recently had the appeals of their suspensions denied by the FIFA appeal committee.

The Wall Street Journal (WSJ) separately raised questions about Qatar spending in a 2011 article, entitled “Qatar’s World Cup Spending Spree”, where 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, in the home countries in which FIFA executives who would vote on the 2022 site selection, through a Qatar football training academy, Aspire Academy for Sports Excellence, controlled by the Qatar Royal Family. 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 also continued 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.

There have been other issues raised regarding Qatar’s bid to host the World Cup. One is its treatment of the workers who are building the stadiums for the event. In an article in the online magazine Slate, entitled “The Qatar World Cup Is a Human Rights Catastrophe. It’s Time to Do Something About It.” Jeremy Stahl reported that the Nepali embassy has said 400 citizens of its country had died during construction in Qatar and India has reported that 500 of its citizens have died. The article quoted Sharan Burrow, the general secretary of the International Trade Union Confederation (ITUC), who said in an ESPN documentary “that at current rates, 4,000 people will die to make the 2022 World Cup a reality.” The ITUC itself had reported in March that there had been 1200 deaths in the construction of the facilities for the World Cup. And what about the heat in Qatar, which can easily reach 45 Celsius in the summer? Even if the stadiums are air conditioned, how are you going to walk to them in that heat?

But the Qatar winning bid is not the only thing that FIFA has to worry about these days. In a stunning two-part series in the NYT over the weekend, entitled “Fixed Soccer Matches Cast Shadow Over World Cup”, reporters Declan Hill and Jeré Longman detailed an extensive corruption scheme where referees were bribed to influence the outcome of certain pre-2010 World Cup ‘Friendly’ or exhibition matches in South Africa. It is the role of the host country to designate referees for such friendlies and apparently through corruption a betting syndicate took over this role. The reporters had reviewed an internal FIFA report that found “It provides extensive details of the clever and brazen ways that fixers apparently manipulated “at least five matches and possibly more” in South Africa ahead of the last World Cup. As many as 15 matches were targets, including a game between the United States and Australia, according to interviews and emails printed in the FIFA report.”

All of these allegations make clear the need for vigilance in all levels of international sporting groups. While these allegations remain unsubstantiated at this point, if they are proven true FIFA may truly be at the same turning point about corruption as the American navy was with its fight against the Japanese navy after the Battle of Midway.

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, 2014

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