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03 JUNE 2015
The FIFA scandal: Is this the ‘tip of the iceberg’?

Photo: Flickr, AsianFC.
There have been widespread calls for increased transparency in the business of international soccer after U.S. authorities on May 27 unveiled a long-running Mafia-style corruption scandal involving officials of FIFA (the Federation Internationale de Football Association) in Zurich, topped by indictments and arrests. The scandal erupted against the backdrop of FIFA’s 65th Congress on May 29, where its president Sepp Blatter was reelected. (Editor’s note: Blatter announced on June 2 that he would resign.)

Already, credit card company Visa said it would reassess its sponsorship deals unless Fifa makes changes, while Coca-Cola, McDonald’s, Hyundai Motor and Adidas expressed concerns, according to media reports. The FIFA scandal has also became the setting for international political duels. Russian President Vladimir Putin backed Blatter’s re-election and accused the U.S. of meddling in areas outside its jurisdiction, while British prime minister David Cameron called for Blatter to step down.

In the early hours of May 27, Swiss law enforcement officials arrested seven top FIFA officials from a five-star hotel in Zurich, as the U.S. Justice Department indicted 14 people for racketeering, money laundering and wire fraud. The department’s Federal Bureau of Investigation did not name Blatter, but found FIFA officials and U.S. and South American sports business entities involved in bribes and kickbacks totaling $150 million over several years for arranging media and marketing deals for soccer tournaments.

Also charged was Jack Warner, who was formerly a FIFA vice president and secretary of the Trinidad & Tobago’s Football Federation. He is accused of receiving $10 million in exchange for his vote on South Africa hosting the 2010 World Cup. He has turned himself in to Trinidad & Tobago police. U.S. authorities also searched the Miami headquarters of CONCACAF (the Confederation of North, Central America and Caribbean Association Football), one of the six regional confederations that make up FIFA.

The lure of big money

“This is the best thing that could have happened to the game,” said Warren Barton, longtime player with the English Premier League and now an analyst for Fox Sports’s soccer coverage. “It shook the world — not just soccer but the business world as well. People are realising how powerful the game is and how much money is involved in the game, and in that respect we have to have the game transparent.” A Justice Department press release points out that according to FIFA, 70% of its $5.7 billion in total revenues between 2011 and 2014 was attributable to the sale of TV and marketing rights to the 2014 World Cup.

“Now, we get to the deal making” after the arrests and the indictments, said Andrew Brandt, NFL business analyst with ESPN, a Wharton lecturer in sports business and a faculty advisor at the Wharton Sports Business Initiative. “People are going to talk, … make deals, … immunise themselves by turning over evidence, and that could go all the way to the top.”

On May 28 (prior to Blatter’s resignation), Barton and Brandt discussed the ramifications of the FIFA scandal on the future of the game on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111.

“These individuals and organisations engaged in bribery to decide who would televise games, where the games would be held and who would run the organisation overseeing organised soccer worldwide,” said U.S. Attorney General Loretta E. Lynch at a press conference. “They did this over and over, year after year, tournament after tournament.” FIFA officials used the U.S. banking system for their dealings, she noted. “They clearly thought the U.S. was a safe financial haven for them,” she added. Lynch led the probe when she was earlier the U.S. Attorney General for the Eastern District of New York in Brooklyn.

Barton agreed with Brandt that more details would emerge as the indicted people face the prospect of jail terms. He said suspicions of such dealings have been around for a long time “but we needed hard evidence” that is now available. He felt the wrongdoings unearthed now are just “the tip of the iceberg.”

Under pressure

In any event, Barton said he wanted Blatter to take responsibility for the wrongdoings. “It is damaging the image of the game. The game is bigger than any one individual,” he said. “Ultimately whether Sepp Blatter knew about it or not — which I think he did — it [occurred] on his watch, so he has to take full responsibility.”

Blatter said on May 28, according to a report in The Guardian, “I know many people hold me ultimately responsible [but] I cannot monitor everyone all the time. If people want to do wrong, they will also try to hide it.”

Barton also called for a second look at the FIFA voting process that enabled Russia to host the World Cup in 2018 and Qatar to host it in 2022. If no wrongdoing is found, he said he had no issue with the two countries hosting the World Cup events. All the same, he said “it didn’t sound right” that Qatar gets to host a summertime event like the soccer World Cup, where summer days often see temperatures of up to 125 degrees Fahrenheit. (The event has been moved to November, instead of June or July, due to the high temperatures.) Swiss authorities said they have launched a criminal investigation into how Russia and Qatar were selected.

‘Mafia-style’ tactics

Barton and Brandt were also shocked by the methods used by the actors in the corruption scandal. The indictment details the scope of the conspiracy. It talks of the use of “consulting services” agreements “to create an appearance of legitimacy for illicit payments,” bankers, financial advisors, and currency dealers for illicit payments; shell companies, numbered bank accounts in tax havens; concealment of foreign bank accounts; bulk cash smuggling; safe deposit boxes, and more.

Brandt characterised those as “tactics used by drug traffickers and organised crime syndicates.” Added Barton: “It has what a movie would be made of.” He noted that “arrogance” drove actors in the conspiracy to have acted in such brazen ways. “Hubris and arrogance,” agreed Brandt.

Barton worried about the impact of the scandal on the future of the sport’s popularity. “The game is being tarnished by this,” he said. “Now you have kids looking at the game in a different light.” Brandt disagreed. “The sport’s ascendancy continues … [and its] popularity seems as high as ever.”
Useful resources:

Knowledge@Wharton
Knowledge@Wharton is the online research and business analysis journal of the Wharton School of the University of Pennsylvania. Visit our InfoCentre or website.

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