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.
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 multi-billion-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.
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 did not 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.
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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.
Write to Matthew Futterman at matthew.futterman@wsj.com and
Christopher M. Matthews at christopher.matthews@wsj.com
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