Is the world soccer organization (FIFA) board now the poster child for "Bad" governance? Absolutely! A blind board is a bad board. A board that permits open conflicts of interest or at least does little to stop this is a bad board. A board that just says "yes" to whatever leadership wants is a "bad" board. A board that is not accountable to its constituents or anyone else for that matter is a "bad" board. And the list goes on... Bad, bad, bad. Too big to fail? Likely. So really the only good out of this is the stopping of the bad behaviors, for the moment. And, maybe there are lessons that pretty much most folks already know but these folks just don't practice.
It does appear though that the tolerance for bad behavior among sports players is just extended to the organizations that oversee the players. And maybe this is no surprise. And maybe too that it's no surprise that sports fans will not call for any type of different behavior from either the governing bodies or the players. And maybe that's just the way it is.
Bad, bad, bad.
Here's the Wall Street Journal article that nicely describes the situation.
FIFA Corruption Allegations Reach Into Soccer’s Highest Levels
Scandal is largest in modern sports history; alleged bribes and kickbacks spanned more than two decades
Soccer’s global governing body has reaped a bounty of cash from the World Cup and other wildly popular tournaments it organizes, peddling the television and marketing rights to fund leagues in the four corners of the world.
But prosecutors alleged Wednesday that senior officials of the International Federation of Association Football, known as FIFA, got more than $150 million in bribes and kickbacks as part of a sprawling scheme that functioned like a criminal enterprise. The corruption scandal is the largest in modern sports history, involving allegations of cash-stuffed suitcases and vote-buying before South Africa’s selection as host of the 2010 World Cup and the FIFA presidential election in 2011.
The 161-page indictment detailed what U.S. Attorney General Loretta Lynch called “rampant, systemic and deep-rooted” corruption in an organization that had revenue of nearly $10 billion from 2007 to 2014, largely from the sale of TV and marketing rights to World Cup events in 2010 and 2014.
The alleged scheme spanned more than two decades and involved a web of marketing firms and middlemen who used the world’s seemingly insatiable appetite for soccer to enrich themselves, prosecutors said. Their investigation is continuing, which could lead to criminal charges against other current or former FIFA officials.
Wednesday’s arrests of seven FIFA officials in Zurich by Swiss police and criminal charges against seven other people are the latest black eye for the world’s most popular sport. In Italy, police rounded up earlier this month more than 50 people suspected of fixing dozens of games in the country’s third- and fourth-tier leagues.
Nothing in soccer’s history compares to the allegations made Wednesday by federal prosecutors in Brooklyn, N.Y. Swiss authorities said they opened a separate criminal probe related specifically to the selection of Russia and Qatar as future World Cup hosts.
Among those arrested were two current FIFA vice presidents, including the head of the North American, Central American and Caribbean regional soccer body known as Concacaf, the head of Venezuela’s national football federation and former head of Brazil’s federation. The U.S. is seeking the extradition of the seven FIFA officials.
FIFA seemed blindsided by disclosure of the probes and arrests. Police arrested some officials at the five-star Baur au Lac Hotel in central Zurich, just two days before the nonprofit organization was expected to re-elect its longtime president, Joseph “Sepp” Blatter, to a fifth term.
Mr. Blatter wasn’t named in the 47-count U.S. indictment or Swiss probe. He has led FIFA for 17 years, during much of the period U.S. officials say illegal activity took place in FIFA. Long a controversial leader, he has defended FIFA and himself against corruption accusations.
Who’s Who in FIFA Probe
For years, FIFA has carried out its own internal investigations of wrongdoing, admitting to corruption several times, including the bribery scheme of former president Joao Havelange, who denied wrongdoing. But this marks the first time that officials were charged by a country’s judicial system.
Ms. Lynch said the defendants “corrupted the business of world-wide soccer to serve their interests and to enrich themselves.”
Some outsiders said the crackdown could lead to widespread changes in FIFA and the multibillion-dollar business of soccer. “If you compare this to doping, this might be FIFA’s Ben Johnson moment,” said Chris Renner,chief executive of sports-marketing firm Helios, a reference to the Olympic sprinting champion who was caught using performance-enhancing drugs in 1988.
The criminal charges and ongoing investigations are a big headache for marketers who have spent hundreds of millions of dollars to tie their brands to FIFA. Those sponsors include multinational giants in apparel, food and financial services.
IEG, a Chicago research firm owned by WPP, estimates that FIFA’s six official marketing “partners” spent nearly $190 million for sponsorship rights in 2014. Those companies included Adidas, Coca-Cola Co., Emirates, Hyundai-Kia Motors, Sony Corp. and Visa. A second tier of World Cup-specific sponsors spent $171 million on the 2014 event.
The companies expressed concern over the charges, but none announced plans to pull out of sponsorship deals. McDonald’s Corp. said it “takes matters of ethics and corruption very seriously and the news from the U.S. Department of Justice is extremely concerning.”
Nike Inc. isn’t named in the indictment, but the document includes allegations of bribery involving an unnamed U.S. sportswear company. Nike wouldn’t comment specifically on the issues raised in the indictment but said it is concerned by the allegations and is cooperating with the investigation.
Just 30 years ago, global organizations such as FIFA and the International Olympic Committee, were largely sports governing bodies focused on organizing competitions that produced little cash. The IOC was practically bankrupt in the 1970s, while FIFA was essentially run out of a house in Switzerland.
Since then, they have evolved into generators of billions of dollars in annual revenue through sales of media and intellectual property rights. From 2011 to 2014, FIFA reported $5.7 billion in revenues, 70% of which came from the sale of marketing and television rights to the 2014 World Cup in Brazil.
As profits grew, contracts with the biggest sports organizations became increasingly valuable—and ripe for the allegedly under-the-table dealings outlined Wednesday in the U.S. government’s indictment.
Prosecutors allege that U.S. and South American sports marketing executives paid more than $150 million in bribes and kickbacks to FIFA officials for media and marketing rights to international soccer tournaments.
Some of the allegations describe tactics used by narcotic traffickers and terrorism financiers. According to prosecutors, conspirators used numbered bank accounts in tax havens, bulk cash smuggling, safe-deposit boxes, intermediaries and currency dealers to conceal the illegal payments.
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Former Concacaf chief Jack Warner, one of the defendants named in the indictment, allegedly told an unnamed person to fly to Paris and accept a briefcase packed with $10,000 stacks from a South African bid committee official in a hotel room. Prosecutors said the person boarded a return flight within hours, carrying the briefcase back to Mr. Warner in Trinidad and Tobago.
Before the vote to decide the host country, a representative of Morocco’s bid committee offered to buy Mr. Warner’s vote for $1 million, the indictment alleged.
Mr. Warner decided to cast his secret ballot for South Africa instead. Prosecutors suggested that he was swayed by the promise of a $10 million bribe to Mr. Warner and two other FIFA executive committee members.
One of the members was Charles Blazer, then Concacaf’s general secretary. The two members also voted for South Africa, according to the indictment.
The money came from funds that were supposed to be sent from FIFA to South Africa to “support the World Cup,” prosecutors said in the indictment. The $10 million flowed to bank accounts controlled by Mr. Warner, who allegedly transferred some of the money to personal accounts and made $750,000 in payments to Mr. Blazer.
Mr. Blazer became a star witness in the U.S. government’s investigation after agreeing to begin cooperating with authorities in 2011.
Prosecutors also alleged that Mr. Warner used his connections to try to buy votes for FIFA presidential candidate Mohamed bin Hammam before the 2011 election.
After the candidate wired $363,537.98 to an account controlled by Mr. Warner, he allegedly helped arrange a two-day meeting at the Hyatt Regency Hotel in Trinidad and Tobago that was attended by high-ranking soccer officials.
After Mr. Bin Hammam said he was seeking their support, Mr. Warner allegedly told attendees that they could pick up a “gift” at a hotel conference room. Officials were allowed to enter one at a time, the indictment said, and each person was handed an envelope with $40,000 inside.
The next day, Mr. Warner allegedly told recipients that the money came from Mr. Bin Hammam. “If you’re pious, open a church, friends,” Mr. Warner allegedly said. “Our business is our business.”
Mr. Warner turned himself over to police Wednesday after they issued an arrest warrant at the request of authorities in the U.S. According to the Associated Press, he didn’t enter a plea.
A statement issued by his political party cited Mr. Warner as saying he had “been afforded no due process” in the probe. “I reiterate that I am innocent of any charges.”
The indictment also highlighted the role of little-known sports marketing companies, which enter into contracts to own media and marketing rights to soccer tournaments, including TV broadcast and sponsorship rights. Of the 12 schemes outlined in the U.S. indictment on Wednesday, nine of them involved such companies, according to prosecutors.
One of the biggest players in the industry was the Traffic Group, a multinational sports marketing conglomerate headquartered in Brazil. It had two U.S. subsidiaries, Traffic Sports International Inc. and Traffic Sports USA Inc.
The owner and founder of Traffic Group, José Hawilla, pleaded guilty in connection with the case in December and agreed to forfeit $151 million. Two Traffic subsidiaries also have pleaded guilty.
Traffic held marketing rights to tournaments. But prosecutors claim it got its foothold in the market through corruption.
In a series of deals, Traffic executives bribed Concacaf and FIFA officials in order to win marketing rights. Traffic and other companies like it would then sell those rights to broadcasters and corporate sponsors, prosecutors alleged.
In 1991, Traffic Brazil entered into a contract with the South American confederation to acquire the rights for the 1993, 1995 and 1997 Copa America tournaments, but was allegedly told by a senior confederation official that the firm’s founder “would make a lot of money from the rights he was acquiring,” which the official “did not think...was fair that he did not also make money.”
Traffic’s founder then facilitated a six-figure U.S. dollar payment for the contract, according to the indictment. Later, as the U.S. and Mexico accepted invitations to compete in the tournament, the official allegedly demanded larger bribes from Traffic—and got them.
The requests kept coming, according to the indictment. In 2007, when the tournament was to be held in Venezuela, the president of the federation there solicited a $1 million payment from Traffic in exchange for his continued support for Traffic’s exclusive marketing rights.
Traffic had competition. By 2010, six presidents from member associations in South America formed a bloc to wrest control over the confederation’s commercial properties. The group included those with close ties to another marketing firm.
In the end, the two firms decided to share a 2013 contract, but it came with a hefty price: $110 million in bribes to a series of senior South American soccer officials, the indictment alleges. At least $40 million has been paid so far, according to the indictment.
Many of the tournaments Traffic held the rights to drew sponsorships from the largest companies in the world, according to public records. Four executives of sports marketing firms, including Traffic, were charged as part of the new case.
In March 2014, Traffic executive Aaron Davidson allegedly said about the practice of paying bribes to obtain commercial rights: “Is it illegal? It is illegal. Within the big picture of things, a company that has worked in this industry for 30 years, is it bad? It is bad.”
Former soccer stars welcomed the crackdown. “Today, soccer wins, transparency wins. Enough of dirty deals, enough of lies,” Diego Maradona, a World Cup winner, told Argentine radio. FIFA operates “above judicial systems, above presidents and above democracy,” he said.
Brazilian soccer star turned senator Romario Faria, who led Brazil to its fourth World Cup win in 1994, took to the floor of Brazil’s senate to congratulate the Federal Bureau of Investigation and Swiss police on the arrests, which he hopes will begin a cleanup of Brazilian soccer.