REFORMING FIFA
Steven A. Bank
Paul Hastings Professor of Business Law
UCLA School of Law
January 27, 2016
What is FIFA?
What is FIFA?
• Fédération Internationale de Football Association
• Non-Governmental Organization - Swiss non-profit association
founded in 1904
• Formed to promote and govern soccer globally
• Big business
• 2011-2014: $5.7 billion in revenues ($338 million in profits), 70% from TV and
marketing rights for the 2014 World Cup
• Finances Confederations and member associations through Financial
Assistance Program and Goal Program (2011-2014: $1.052 billion)
FIFA’s Organizational Chart
Audit
UEFA
members
CAF
members
Executive
Committee
Judicial
General
Secretariat
Disciplinary
Ethics
Appeal
CONCACAF
members
CONMEBOL
members
AFC
members
OFC
members
Corruption
• 2010 – president of OFC revealed he was offered $12 million for his vote
for the 2018 World Cup in Russia
• 2011 – evidence of collusion between Spain/Portugal and Qatar World Cup
bids for 2018/2022
• 2012 – FIFA appointed US attorney Michael Garcia to investigate
corruption, focusing on 2018/2022 World Cup bids
• 2014 – Garcia delivered a 350-450 page report, but FIFA’s Ethics Committee
adjudicatory chair refused to make it public and issued a 42 page summary
clearing Russia and Qatar of any wrongdoing
DOJ Indictment
• Filed May 20, 2015 in the Eastern District of NY
• 14 officials, including 9 current and former FIFA Executive Committee
members and 5 corporate executives, and 25 unnamed coconspirators
• 47 counts of wire fraud, racketeering, and money laundering relating
to World Cup bids and marketing deals going back 25 years
• Raids conducted by US and Swiss authorities at FIFA offices in Miami
and Zurich
• Superseding indictment filed Nov. 25 against 16 more defendants
Chuck Blazer
•
EVP of US Soccer and Exec Comm of FIFA
from 1996-2013
•
Failed to file tax returns between 2005-2010
(probably earlier), on approximately $22
million of income (we know about)
•
Admits to taking and facilitating bribes for
the 1998 and 2010 World Cups and for the
broadcast rights to the Gold Cup between
1998 and 2003
•
CONCACAF paid for his homes in New York,
Miami, and Bahamas, including
$6000/month rent for an adjoining apt in
Trump Towers just for his cats
•
Plead guilty and went undercover against
FIFA executives
Jack Warner
•
Former head of CONCACAF and member
of FIFA Executive Committee
•
Reportedly accepted a $10 million bribe
from the South African government for
his vote and the vote of his CFU bloc for
the 2010 World Cup
•
On behalf of his CFU, acquired Caribbean
TV rights to the 2010 and 2014 Wworld
Cup from FIFA president Sepp Blatter for
$600,000 and licensed them for $20
million
•
Accused of diverting $750,000 in Haitain
earthquake relief funds from FIFA and the
Korean FA to a bank account he
controlled
Aaron Davidson
•
Lawyer who is former head of Traffic
Sports USA and commissioner of NASL
•
Allegedly paid $5 million in bribes to FIFA
exec and CONCACF president Jeffrey
Webb to secure marketing rights for the
USMNT’s qualifying rounds to the 2018
and 2022 World Cups
•
Traffic Group CEO, Jose Hawilla, admitted
that the company paid over $100 million
in bribes to secure marketing and TV
rights
FIFA Reform Task Force
•
Led by Francois Carrard, former IOC directorgeneral from 1989-2003 during the
corruption scandal surrounding the 2002
Winter Olympics in Salt Lake City
•
Took a swipe at the US, perhaps in response
to the Federal prosecutions, calling soccer in
America “just an ethnic sport for girls in
schools”
•
Still under control of FIFA Executive
Committee
•
Most past reform proposals ignored or only
given lip service
Official Reform Proposals
FIFA
• Term limits
• Separation of political (“FIFA
Council”) and management
(General Secretariat) functions
• “Independent” committee
members
• Diversity (more women)
• Integrity checks
• Football stakeholders committee
• Increased Transparency
CONCACAF
• Term limits
• Replace 7 person Executive
Committee with 15 person Council
• 3 out of 15 members of the Council
must be “independent”
• Integrity checks
• Independent Audit and
Compliance, and Finance
Committees
• Increased Transparency
Corporate Governance Reform Playbook?
Transparency
Sarbanes-Oxley § 401 – Management Discussion & Analysis of off-balance sheet arrangements
Independence
Dodd-Frank §952 – All members of the Compensation Committee must be independent
Ethics
Sarbanes-Oxley § 406 – Must either adopt and disclose your Code of Ethics for top financial
managers or explain why you have not done so
Term Limits
EC – recommends independent directors serve a maximum of 12 years
France – a director serving more than 12 years no longer considered independent
UK – either terminate a director after 9 years or explain why they should still be considered
independent
US – ISS downgrades governance score of companies where directors have served more than 9
years
Executive
Committee
Member
Associations
Confederations
Mechanisms of Corporate Accountability
• Members
• Shareholders
• Debtholders
• Stakeholders
• Government
• Labor
• Market forces
• Competitors
• Rating Agencies
• Consumers
Members
• Direct election of Executive Committee and of World Cup hosts
• Confederations
Shareholders
• No shareholders under current model
• Public benefit corporation model
Hybrid Member-Shareholder Model
• Partner with a third party, independently owned, agency to sell all
marketing/media rights and only give FIFA veto power (UEFA model)
• FIFA/International Sport and Leisure scandal a cautionary tale
Debtholders
Sponsors can exercise debt-like control with contractual conditions
Stakeholders
• Stakeholders Committee an attempt to involve others, but would
need to be granted more power
• Variant on the Public Benefit Corporation model
• Sponsors, players, labor all potentially offer this type of accountability
Government
• Criminal prosecution, such as the US DOJ indictments and
investigations in Switzerland and other countries
• Swiss Non-Profit law
• European Court of Justice
• Classification of FIFA as a “Public International Organization” under
the Foreign Corrupt Practices Act
No Governmental
Interference
“FIFA has the mandate to control association
football worldwide, in all its aspects. This
mandate is delegated to the national
association, to control association football at
the national level. . . .The associations have
the obligation to do it on their own, in an
autonomous way without outside
interference, from the government or any
other parties. In general, political
interference is when a government tries to
take direct control.”
Thierry Regenass, FIFA Director of Member
Associations and Development
Labor
Market Forces
Can FIFA Fix Itself?
“If a member of Bahrain’s royal family is
the cleanest pair of hands that Fifa can
find, then the organisation would
appear to have the shallowest and least
ethical pool of talent in world sport.”
- Nicholas McGeehan, Gulf researcher at
Human Rights Watch (referring to
Shaikh Salman, a frontrunner to replace
Sepp Blatter)