SII Focus 3rd December 2015

FIFA’s planned reforms derailed by new arrests and charges

FIFA’s attempts to trumpet its plans to reform itself were derailed by the arrest of two FIFA Vice Presidents in Zurich this morning, and the announcement of a new 236-page, 92-count criminal indictment against 16 new defendants as part of the ongoing investigation into corruption in football by US authorities. The manner in which the US authorities timed the arrests and the unsealing of the extraordinary ‘superseding indictment’ (available below) to coincide with FIFA’s announcement of its reform process bore similarities with the unsealing of its original 47-count indictment against 14 defendants on 27 May. That indictment was preceded by the arrest of seven FIFA executives in Zurich, just two days ahead of the FIFA Presidential elections. Joseph S. Blatter was re-elected as FIFA President, but on 2 June said he would step down.

Swiss arrests

Following their arrest, Alfredo Hawit, President of the Confederation of North, Central America and Caribbean Association Football (CONCACAF) and Juan Angel Napout, President of the Latin American football confederation (CONMEBOL) were granted a hearing with the Zurich Cantonal Police, and both oppose extradition to the US. All nine Swiss arrests on both 27 May and 3 December have taken place at the Baur au Lac hotel in Zurich (pictured).

New defendants

The other new defendants are listed below. They include the current President of Honduras; the CONCACAF President and Treasurer; the President of the Brazilian football confederation (CBF); a current member of the FIFA Audit and Compliance Committee; a current member of the FIFA Disciplinary Committee; and more.

‘Taken together, the 27 defendants in the superseding indictment are alleged to have engaged in a number of schemes all designed to solicit and receive well over $200 million in bribes and kickbacks to sell lucrative media and marketing rights to international soccer tournaments and matches, among other valuable rights and properties’, read a DoJ statement.  ‘The new charges unsealed today bring the total number of individuals and entities charged to date to 41. Of those, 12 individuals and two sports marketing companies have already been convicted as a result of the ongoing investigation.  The convicted defendants have agreed to pay more than $190 million in forfeiture.  In addition, more than $100 million has been restrained in the United States and abroad in connection with the alleged criminal activity.  The United States has issued mutual legal assistance requests seeking the restraint of assets located in 13 countries around the world.’

Eight plead guilty to DoJ charges

The DoJ also announced that it had been busy. Eight defendants have pleaded guilty to the DoJ charges levelled against them, seven of which pleaded guilty in November.

On 26 May, Zorana Danis, the co-founder and owner of International Soccer Marketing Inc., pleaded guilty to a two-count information charging her with wire fraud conspiracy and filing false tax returns. As part of her plea, Danis agreed to forfeit $2 million.

On 9 November, Fabio Tordin, the former CEO of Traffic Sports USA Inc. and currently an executive with Media World LLC, pleaded guilty to three counts of wire fraud conspiracy and tax evasion. As part of his plea, Tordin agreed to forfeit more than $600,000. The DoJ also confirmed that a search was carried out today at Media World’s Miami offices.

On 12 November, Luis Bedoya, a member of the FIFA Executive Committee, a CONMEBOL vice president and, until last month, the president of the Federación Colombiana de Fútbol, pleaded guilty to racketeering conspiracy and wire fraud conspiracy charges.  As part of his plea, Bedoya agreed to forfeit all funds on deposit in his Swiss bank account, among other funds.

On 16 November 2015, Alejandro Burzaco, the former general manager and chairman of the board of Argentinean sports marketing company Torneos y Competencias S.A., pleaded guilty to racketeering conspiracy, wire fraud conspiracy, and money laundering conspiracy.  As part of his plea, Burzaco agreed to forfeit more than $21.6 million.

On 17 November, Roger Huguet, the CEO of Media World and its parent company, pleaded guilty to two counts of wire fraud conspiracy and one count of money laundering conspiracy. As part of his plea, Huguet agreed to forfeit over $600,000.

On 23 November, Jeffrey Webb, a former FIFA Vice President and Executive Committee member, CONCACAF President, Caribbean Football Union Executive Committee member and Cayman Islands Football Association president, pleaded guilty to racketeering conspiracy, three counts of wire fraud conspiracy and three counts of money laundering conspiracy. As part of his plea, Webb agreed to forfeit more than $6.7 million.

Also on 23 November, Sergio Jadue, a Vice President of CONMEBOL and, until last month, the President of the Asociación Nacional de Fútbol Profesional de Chile, pleaded guilty to racketeering conspiracy and wire fraud conspiracy.  As part of his plea, Jadue agreed to forfeit all funds on deposit in his U.S. bank account, among other funds.

On 25 November, José Margulies, the controlling principal of Valente Corp. and Somerton Ltd, who served as an intermediary who facilitated illicit payments between sports marketing executives and soccer officials, pleaded guilty to racketeering conspiracy, wire fraud conspiracy and two counts of money laundering conspiracy.  As part of his plea, Margulies agreed to forfeit more than $9.2 million.

In total, 41 individuals and entities have been charged by the US authorities in connection with their investigations. To date, 12 individuals and two sports marketing companies have already been convicted.

Scale of alleged corruption

The level of corruption uncovered by the DoJ involves many different countries and millions of US dollars, including illicit payments to football officials from sports broadcasters in return for TV contracts. “In the original indictment, we alleged that between 1991 and the present, two generations of soccer officials conspired to solicit and receive well over $200 million, often in alliance with sports and marketing executives who sought lucrative contracts and to shut out competitions through the systematic payment of bribes and kickbacks”, said US Attorney General Loretta Lynch at today’s press conference.

“The bribe payers agreed to pay the officials between $400,000 and $600,000 per year, and in some cases up to $1 million, as long as those officials remained in office”, said Federal Prosecutor Robert Capers. “We are progressing in our efforts to root out what has been decades of systemic corruption. So we say to you, enough is enough.”

Richard Weber of the Internal Revenue Service (IRS) pointed out that the defendants come from over 20 different countries. “We have traced funds through at least 40 countries in the course of this investigation”, he said. “Indeed, the World Cup of fraud”.

FIFA reform process

The announcement of the arrests in Zurich this morning overshadowed FIFA’s announcement on how it plans to reform itself following allegations of corruption. Acting FIFA President Issa Hayatou was forced to answer questions about whether he had taken kickbacks from FIFA’s broadcasting partner International Sports & Leisure (ISL) in the 1990s.

“ISL offered 100,000 French Francs – which is about US$16,000 – to help pay for the 40th anniversary party of the Confederation of African Football”, he explained. “This is recorded in the finances of the CAF. The IOC blamed me for that. I did not take a cent.” Hayatou was sanctioned by the International Olympic Committee (IOC) in 2011 over the payment.

One of the biggest changes suggested by François Carrard, Chairman of the FIFA 2016 Reform Committee, was to limit FIFA officials to three terms of four years. If this rule had been in place when Joseph S. Blatter was elected President of FIFA in 1998, he would have had to leave the organisation in 2010, the year in which the controversial ‘double vote’ to award the 2018 FIFA World Cup to Russia and the 2022 World Cup to Qatar took place.

Carrard also suggested that an ‘Independent Compensation Committee’ should be formed to publish the salaries of senior FIFA officials; and that a minimum of six women should sit on the FIFA Executive Committee. The proposals, featured above and in graphic form below, will be put to the FIFA Congress on 26 February 2016 for approval.

Conclusion

Once again, the US authorities appear to have blindsided FIFA. Tomorrow’s newspapers will be full of articles about the new corruption charges against FIFA, rather than articles about FIFA’s planned reforms, as FIFA had hoped. At its press conference today, FIFA refused to be drawn on whether it was heading for a financial deficit during the current financial year, as has been reported.

However, Carrard’s presentation, featured above, did announce that FIFA plans to increase the number of teams competing in the World Cup from 32 to 40. FIFA earns almost half its revenue from the World Cup, so any increase in teams would presumably mean an increase in revenue for FIFA. However, as one journalist pointed out a today’s press conference, in the current climate that could appear to be distasteful. It appears that FIFA will face an uphill struggle to push through its planned reforms following today’s events.

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