Remember hearing for the last several months (or years) how poorly run of an organization FIFA[i] is? How Luis Figo just recently dropped out of the presidential race because of rampant corruption within the organization? Well, the not-so-proverbial shit hit the fan early Tuesday morning, as the United States Department of Justice (DOJ) indicted fourteen individuals on charges of racketeering, wire fraud and money laundering conspiracies, and other related offenses. Nine were within the hierarchy of FIFA, while the other five involved sports marketing schemes intertwined with FIFA’s promotion of events and competitions. Additionally, Swiss prosecutors have announced that they will be pursuing a criminal investigation into FIFA’s awarding of the 2018 and 2022 World Cups.[ii] After countless questions and critiques of the organization, it seems as if FIFA’s day has finally come, and this is only the beginning.
Fourteen members of FIFA or high ranking sports marketing corporations were named in the indictments, with seven being arrested in Switzerland. This list does not even include the 25 co-conspirators yet to be named from FIFA, the South American (Conmebol), North American (Concacaf), and Asian (AFC) federations, the South Africa World Cup Bid Committee, or multiple sports marketing and consulting corporations.[iii]
- Jeffrey Webb: Concacaf president, one of the vice presidents of FIFA, and president of the Cayman Islands Football Association (FA). Webb was actually one of the leading proponents of FIFA releasing the full, unadulterated Garcia Report, the investigation into the bidding processes of the 2018 and 2022 World Cups. It would seem that he was in favor of transparency there; ironically similar transparency within FIFA is currently not doing him any favors now.
- Eduardo Li: President of the Costa Rican FA. Is (was?) about to join FIFA’s executive committee this week, but I wonder if that will still happen…
- Julio Rocha: Former president of both the Nicaraguan soccer federation and the Central American Football Union. Currently a FIFA Development Officer overseeing development in Central America.
- Costas Takkas: Former general secretary of Cayman Islands FA, attaché to Concacaf president (Webb).
- Jack Warner: Former Concacaf President and vice president of FIFA. He resigned in 2011 following FIFA’s Ethics Committee open proceedings against him for, wait for it, bribery and corruption charges! It appears they were correct.
- Eugenio Figueredo: Former president of the Uruguayan FA from 1997-2006. Served as vice president of Conmebol for 20 years (1993-2013), then became the president for a short time after the resignation of Nicolás Leoz (also on the list).
- Rafael Esquivel: President of the Venezuelan FA since 1988 (longest serving in South America). On the FIFA Disciplinary Committee and Conmebol’s Executive Committee.
- José Maria Marin: Former president of the Brazilian soccer federation (2012-2015). Currently on the organizing committee for next year’s Olympic soccer tournament (remains to be seen if that continues to be the case).
- Nicolás Leoz: Former president of Conmebol from 1986-2013. Previously a member of FIFA’s executive committee.
- Alejandro Burzaco: Media executive heading up Torneos y Competencias (and multiple subsidiaries), an Argentine sports marketing company. Secured television rights for the 2006 World Cup.
- Aaron Davidson: President of Traffic Sports USA. Involved in the purchase and sale of soccer media and marketing rights in North and Central America. Also involved in a controlling role in the North American Soccer League.
- José Margulies: Ran Valente and Somerton, two South American companies involved in broadcasting soccer matches.
- (and 14) Hugo Jinkis and Mariano Jinkis: Father and son, president and vice president of Full Play Group, an Argentine sports marketing company.
Guilty pleas for two corporations and four other individuals, Chuck Blazer, Daryan and Daryll Warner, and José Hawilla were also unsealed by the DOJ in relation to FIFA’s corruption.[iv] Apart from these individuals (and the 25 unnamed co-conspirators, plus even more unnamed co-conspirators from the unsealed guilty pleas), one party that stands out is an unnamed “multinational sportswear company headquartered in the United States.” We will get to that in a minute.
Long story short, these executives have been nailed. Hard. The Department of Justice found that these individuals twisted FIFA, a legitimate organization with the intent of regulating and promoting soccer around the world, into a corrupt enterprise through a prevalent system of bribes, kickbacks, and nefarious business practices. Not to dive headfirst into all the brutal legalese and details, these FIFA and sports marketing executives found themselves in positions of power, and continually engaged in at least two decades of illegal arrangements. Not only did these high-ranking individuals facilitate agreements through the awarding of media and broadcasting rights for several tournaments, but elections, World Cup Bids (specifically South Africa)[v] and even a federation’s sponsorship (remember U.S. multinational sportswear company) were illicitly affected. These allegations barely even hit on the fact that many, if not all, of these individuals were diverting federation and association funds into their own pockets.
Even as several new voices called for change and reform, once they got involved in FIFA’s criminal tree that the DOJ refers to as “The Enterprise,”[vi] there was enough power among the corrupt that they could not be overthrown or easily removed from power. As the value of marketing rights increased, the bribes increased and led to a pervasive culture of corruption. The involved sports marketing companies, armed with the additional cash from selling the marketing rights quickly became involved in FIFA politics in their attempts to gain media, broadcasting, and promotional rights to FIFA, Concacaf, and Conmebol tournaments and events. “The Enterprise” was, and has become, global soccer’s version of the Mafia.
Among the numerous, numerous counts detailed in the indictment,[vii] the most notable DOJ charges include:
- twenty (20) counts of wire fraud conspiracies;
- sixteen (16) counts of money laundering;
- unlawful procurement of naturalization;
- five counts of tax fraud; and
- obstruction of justice.
The DOJ found that these individuals perpetrated twelve criminal schemes,[viii] nine of which involved sports marketing around tournaments and competitions. Two were directly related to the 2011 FIFA Presidential election, while one was related to the sponsorship of the Brazilian federation. Overall these twelve schemes led to well over two hundred million dollars in bribes and kickbacks. Racketeering alone, the most serious of these charges per Attorney General Loretta Lynch, carries a sentence of twenty years.
“Sportswear Company A” Interlude
Finally back to the U.S. multinational sportswear company! Along with many of the unnamed co-conspirators, this company is unnamed, but with just a 5th grade research level, the parties in this scheme are quite easy to figure out. Basically Brazil had an agreement with “Sportswear Company B,” but “A” came along to try entering negotiations.[ix] After negotiations continued into 1996, and involving a hefty amount of bribery and kickbacks, the Brazilian federation entered into a new agreement with “Sportswear Company A”. As hard as it is to figure out, this is Brazil’s jersey from 1993-1996, and this is Brazil’s jersey in 1997.[x]
Why Does the United States have jurisdiction?
Great question. At first thought, the U.S. bringing charges against a bunch of guys in almost every other continent, let alone other countries, seems a bit farfetched. However, while not immediately clear, the Department of Justice could be relying on a novel argument in order to gain jurisdiction over the current, and, depending on its success, future defendants.
The DOJ is bringing charges against the defendants using the Racketeer Influenced and Corrupt Organizations Act of 1970; most often referred to by its acronym RICO and usually used to take down organized crime. In order to charge and get a conviction under RICO, the government must show that the defendants committed two or more criminal acts, violating laws other than RICO, while participating in a criminal organization.[xi] Since RICO is was created to fight organized crime in the United States, it does not address whether it applies to actions outside the United States (in legalese, extraterritorial application). Recent Supreme Court decisions have held that if a federal statute does not address its extraterritorial application, the statute cannot be used to prosecute violations of the statute that occurred outside the US.[xii] However, a recent Second Circuit decision found that RICO could have extraterritorial application if the violation of non-RICO laws used to bring the RICO charge are laws with extraterritorial application.[xiii]
The DOJ could cite the European Community v RJR Nabisco Inc. decision as it argues jurisdiction for a RICO charge against the defendants. In RJR Nabisco, the criminal acts the defendants are being charged with included money-laundering and wire fraud. Both money-laundering and wire fraud are crimes where the government has jurisdiction over actions outside the United States because the money laundering or wire fraud defrauds the IRS or other governmental agency, or the criminal action involved a U.S.-based actor, such as a financial institution or internet service provider based in the United States. Here, it looks like the DOJ will use the money laundering and wire fraud charges to not only bring these cases under the RICO act, but also to get jurisdiction to use RICO in the first place.
Will those arrested in Switzerland actually get sent to the United States?
Yes, those arrested by the Swiss police will likely be extradited to the US. Though the Swiss may not have the best reputation for assisting other countries in pursuing white collar criminals, the Extradition Treaty between Switzerland and the United States probably applies to the charges here.[xiv] As the cooperation between Swiss and US officials suggests it’s very unlikely that Swiss authorities would refuse to extradite under Article 3 of the Treaty because the actions leading to the charges are simply violations of “economic policy”.
Further, it might be in the defendant’s best interests to expedite their extradition to the U.S. With the Swiss investigation continuing and the DOJ expressing its interest in apprehending additional members of FIFA, it could be in these defendants best interests to start talking to the DOJ as quickly as possible, especially if they have they have evidence to take down a bigger fish (see, Blatter, Sepp) so that they can try to get a plum plea deal. If the current defendants don’t fight extradition and come to the US quickly, it might be a sign that they are spending a lot of time with the DOJ connecting the dots to the top of the FIFA leadership chart.
The World Cup of Fraud
After today, FIFA has indeed been issued a red card.[xv] U.S. Attorney Kelly Currie of the Eastern District of New York emphasized that today’s indictments and arrests are just the tip of the iceberg, and that “this is the beginning of our effort, not the end.” Other than the unnamed co-conspirators already known to the grand jury, the DOJ is continuing to look at individuals and entities in multiple countries, seeking cooperation as the investigation continues. Lynch and Currie have promised to seek new defendants responsible for taking FIFA’s legitimate function and turning it into the criminal enterprise that was officially exposed today.
[ii] All charges that came out today still do not mention or involve these World Cup bids, which have been scrutinized by many national associations.
[v] Not even getting to 2018 or 2022 bidding with the current indictments.
[viii] For full details on the extent, quantities, and prevalence of these bribes and kickbacks, feel free to read the individual criminal schemes, separated by instance, in United States v. Webb, p. 48-112.
[ix] For the full CBF Sponsorship scheme, hit page 74 of USA v. Webb. We reserve the right to address the beef between these two “unnamed” companies in another article.
[xv] Nice one. Richard Weber, IRS Chief of Criminal Investigation.