News 3rd June 2016

Huge FIFA pay deals for banned trio may violate Swiss law

An internal investigation by FIFA’s law firm has found that Joseph S. Blatter, Jérôme Valcke and Markus Kattner had awarded themselves CHF79 million (€71.4 million) over the last five years in contracts that may violate Swiss law. The news came on the same day that the Swiss Office of the Attorney General (OAG) confirmed it had carried out further raids on FIFA’s Zurich headquarters a day earlier.

‘As part of the ongoing criminal investigations in the FIFA affair, the Office of the Attorney General of Switzerland (OAG) carried out a search of FIFA’s headquarters on 2 June 2016 with the aim of confirming existing findings and obtaining further information’, read a statement emailed from the OAG. ‘Documents and electronic data were seized and will now be examined to determine their relevance to the ongoing proceedings. The investigations still relate only to the persons named in earlier statements issued by the OAG and further persons unknown. As proceedings are ongoing, no further information can be given at present.’

In a statement, FIFA said that its lawyers, Quinn Emanuel, had uncovered the information, which has been shared with the OAG and will be shared with the US Department of Justice (DoJ), as part of its ongoing investigation. It also provides further detail as to why FIFA terminated its Kattner’s employment contract on 23 May and may explain why Valcke’s contract was terminated before his Ethics Committee hearing.

Contracts & severance

An extraordinary chart (PDF below) illustrates how multiple contracts were used by the trio to enrich themselves. Quinn Emanuel also found that contracts were routinely extended giving generous full payment severance terms on dates in which the trio could find themselves out of a job – such as the 2011 Presidential election. If Blatter had lost that election, Valcke and Kattner would have received up to CHF17.5 million (€15.8 million) and CHF9.8 million (€8.8 million) respectively.

Two further clauses (see PDF below) allowed Valcke and Kattner to receive payment for the full value of their contracts (i.e. up to a maximum of 8.5 years) even if they were terminated for just cause; plus FIFA would have to cover their legal fees and fines, even if they were found guilty. The statement did not outline whether this had taken place in the case of Valcke, who was banned in February this year, before Gianni Infantino was confirmed as FIFA’s new President. However, it did say that such provisions ‘appear to violate mandatory Swiss law’.

World Cup bonuses

Quinn Emanuel also uncovered that the trio had received CHF23 million (€20.8 million) in ‘special bonuses’ for the 2010 FIFA World Cup South Africa, which were awarded four months after completion of the tournament. No contract was in place to stipulate such bonuses. Almost exactly a year ago, FIFA admitted paying former FIFA Vice-President Jack Warner US$10 million in connection to the tournament. At the time, FIFA claimed that senior management were not involved, however a letter (PDF below) sent to Valcke in 2008 appears to contradict that position.

The law firm also found that October 2011, Valcke and Kattner were awarded a combined CHF14 million (€12.6 million) in bonuses connected to the 2014 FIFA World Cup Brazil and in June 2014, they were ‘made eligible’ for a combined CHF15.5 million (€14 million) in bonuses connected to the 2018 FIFA World Cup Russia.

Role of FIFA committees

FIFA said that the findings called into question the role of the Compensation Sub-Committee, which operates under the Audit & Compliance Committee, created in 2013. The body is chaired by the head of the Audit & Compliance Committee and includes the Chairperson of the Finance Committee and ‘one independent member’.

Quinn Emanuel found that in 2013, the Compensation Sub-Committee had approved ‘substantial payments’ to Valcke and Kattner made in October 2011 for the 2014 FIFA World Cup, and in June 2014, approved the previously-mentioned CHF15.5 million package for Russia 2018.

The Chairman of the Audit & Compliance Committee was Domenico Scala, who resigned last month, supposedly in protest against changes he argued eroded the independence of FIFA’s ethics bodies. Quinn Emanuel’s findings may have also played a part in his decision to step down. Issa Hayatou, who was appointed as FIFA’s Acting President in October 2015, was also part of the Compensation Sub-Committee, having been appointed to replace Julio Grondona as Chairman of the Finance Committee in September 2014. The third ‘independent member’ was Jean-Pierre Pedrazzini, who was described by FIFA as an ‘an experienced partner with a renowned executive search firm’.

The lawyers also found that on 30 May 2015, the Compensation Sub-Committee granted Kattner an additional four-year extension to his contract until the end of 2023, including the termination and severance clauses mentioned above. This was after the US DoJ published its first indictment against FIFA officials on 27 May 2015 and the subsequent arrests at the Baur-au-Lac hotel. The contract guaranteed Kattner CHF9 million (€8.2 million) in the event of his dismissal.

Conclusion

Perhaps the most shocking aspect of today’s revelations is that FIFA granted Kattner a massive contract increase, including a severance clause which ensured that should he ever be dismissed and that FIFA would pay any legal fees and fines, as well as paying him in full until 2023. It did this three days after senior FIFA officials were arrested following a 47-count indictment issued by the US DoJ.

Extraordinarily, Blatter’s lawyers claim they are looking forward to proving that such payments were fair and above board.

As well as further implicating three senior FIFA officials in criminal corruption charges, Quinn Emanuel’s discoveries also put a further three people into the crosshairs: Domenico Scala, Issa Hayatou and Jean-Pierre Pedrazzini. Interestingly, their pay agreements have not yet been examined by Quinn Emanuel, so the rabbit hole could yet get deeper.

 

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