Why should sports governing bodies take allegations of corruption seriously? Lessons from the FIFA investigations

Published 13 July 2015 By: Neil Swift

FIFA Logo and FBI Agents

Sport has long considered itself largely able to self-govern, both by sport-specific regulation and with the assistance of various umbrella organisations covering cross-sport and cross-jurisdictional issues: referees are on hand to deal with rule breaches apparent during the course of play; participants can be punished retrospectively for misconduct unnoticed or insufficiently punished during the game; governing bodies administer recognised anti-doping programmes, and sanction those who otherwise contravene the relevant rules of conduct that apply outside the field of play. Only rarely do sports bodies and sportsmen and women find themselves and their conduct examined through the lens of the criminal law.

 

Commercial pressure to preserve integrity

However, sport is far more than just a game. As a business, it has global reach and immense monetary value. It attracts the interest of the public far more than almost all other businesses. There is ticketing and event management, media and broadcast rights, merchandising and sponsorship, whilst international events often go hand in hand with huge infrastructure projects, often designed to reinforce (or reinvent) the reputation of the host city or country on the world stage. All of this value depends on the integrity both of sporting competition and within the relevant governing organisation itself – a governing body which is considered to be institutionally corrupt fundamentally undermines its mandate to regulate the conduct of others.

In order to protect that integrity, and with it the commercial interests of what are often global corporations and brands, external oversight and regulation are necessary. As we have seen with the recent events surrounding FIFA, there can only be so many newspaper reports and rumours before law enforcement has no option but to see if the smoke leads back to fire.

 

Criminal investigation

So what of FIFA? Law enforcement agencies in both the US and the Swiss are now conducting criminal investigations into individuals associated with FIFA.

The genesis of the US investigation has all the ingredients of a classic mob story: the official with an ostentatious lifestyle; difficult questions from the tax man about the unexplained (and unreported) wealth; then the not so difficult decision, accepting the life-line of cooperation with the FBI, telling all about former associates, leaving their fate in the hands of the U.S. Department of Justice in return for preferable and preferential treatment. With that inroad, others have been persuaded to accept a deal, and in the process lead investigators deeper into and higher up the organisation.

This is exactly how the authorities would tackle an organised crime syndicate.

The high profile arrests in Switzerland, at the request of the US, concerned the award of previous regional tournaments. Those arrested face charges of wire fraud, racketeering and money laundering. All are very serious offences, which carry with them substantial prison sentences – racketeering, essentially carrying out the activities of a criminal organisation, carries with it a maximum sentence of 20 years imprisonment. As those arrested in Switzerland will be very much aware, taking on the DOJ in a contested trial is a high stakes game. Indeed, the number of those concerned about an involuntary trip to the US will only increase: the FBI has reportedly confirmed that its investigation now covers the circumstances surrounding the award of the 2018 and 2022 World Cup, to Russia and Qatar respectively, as well.1

The Swiss investigation concerns only the award of the 2018 and 2022 World Cups.2 Whilst the US exercises its global jurisdictional reach, the Swiss have little choice but to address the domestic issues thrown into the light – suspicious banking transactions and money laundering, involving the receipt and movement of dirty money through accounts in Switzerland.

The ramifications are being felt in other jurisdictions too. Barclays, Standard Chartered and HSBC have reportedly3 had to consider whether corruptly obtained monies (identified by the US) have been laundered through the UK banking system. 

But the UK’s anti money laundering legislation, the Proceeds of Crime Act 2002, has much wider application than that. It is a criminal offence for someone to enter or become concerned in an arrangement which they know or a suspect facilitates the use of criminal property by or on behalf of another.4 Under the Act, criminal property is not simply money: the commercial rights associated with the grant of a World Cup tournament are capable of amounting to such property.5 Those within the UK’s jurisdiction must consider the risk of committing a criminal offence if they are party to agreements to sponsor or construct infrastructure for a World Cup tournament host that may have paved its way with bribes.

The key test is suspicion, i.e. does the person suspect that the arrangement concerns property which represents a person’s benefit from conduct which would be an offence had it occurred in the UK6 - the payment of bribes to secure votes or favour would, in all likelihood, amount to such an offence.

So what does suspicion mean? The Court of Appeal in R v Da Silva7 said that it is an ordinary English word and should be given its ordinary meaning. In this context, a court would have to be satisfied that a person thought that there was a possibility, which was more than fanciful, that the World Cup and the attendant commercial rights had been obtained as a result of corruption. Whilst a vague feeling of unease would not suffice, there is no requirement for the suspicion to be “clear” or “firmly grounded and targeted on specific facts”. With concerns about FIFA growing over several years from newspaper reports to the commencement of criminal investigations, it stretches belief for a person to say that they had no reason to suspect something was seriously awry.8

Should the UK wish to add its weight to the pressure on FIFA to reopen the World Cup bidding process, they have a route to do so. Companies which provide support and assistance to Russia or Qatar, notwithstanding their suspicions, can be prosecuted as can those members of senior management concerned in the arrangements.9 The punishment can be severe, with sentences of imprisonment of up to 14 years, unlimited fines, and confiscation. The SFO has said that it is examining the material it has in its possession, whatever that may be.

 

What can other sporting bodies learn from this?

When the allegations of corruption about the 2018 and 2022 World Cups surfaced, and then could be ignored no longer, FIFA attempted to put its own house in order, commissioning Michael Garcia, a respected US regulatory lawyer, to conduct an investigation into the bidding process surrounding these two highly lucrative sporting events. We still do not know whether and to what extent the report was flawed as a result of the inability to compel co-operation by those no longer within the FIFA family: the report was summarised, and, we infer from Garcia’s resignation shortly thereafter, sanitised, for public consumption. Clearly this internal enquiry was not considered to be an adequate response.

It is incumbent upon sports governing bodies, if and when such serious allegations are made, that they are investigated promptly and properly. A whitewash simply will not do. Although it has taken some time, a hefty dose of investigative journalism, and the censure of the US, the concerns surrounding FIFA were simply too numerous to ignore.

Does that mean that other organisations are at risk? In my view it does. Through its actions, the US has sent out a very clear message that it will not tolerate a wholly self-policing organisation, with huge social significance and economic power, to carry on with business as usual in the face of credible evidence of serious criminality. Other organisations should take a very close look at themselves, investigating anything of concern in an appropriate way, in order to avoid becoming the next sporting scandal.

 

Steps to take

To minimise that risk an organisation should:

  1. Ensure that it has in place adequate guidance on the acceptance of gifts and hospitality and a clear zero tolerance of bribery;
  2. Operate transparent procedures in and around procurement and the award of tournaments – anything which carries with it the potential for substantial economic or other benefit for third parties;
  3. Ensure a transparent and accountable method for selecting officials, minimising the scope for abuse by limiting the length and number of terms of office;
  4. Properly investigate allegations of wrongdoing and ensure that appropriate follow up action is taken and seen to be taken;
  5. Recognise that not all problems can be dealt with internally and, where appropriate, involve external law enforcement.

 

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Author

Neil Swift

Neil Swift

Neil Swift is a Partner in the business crime department at Peters & Peters Solicitors LLP. He qualified in 1999 and became a Partner in 2010.  He has a broad range of experience in the fraud area, advising individual and corporate clients in relation to investigations and prosecutions by all major law enforcement bodies, including in particular the Serious Fraud Office, HM Revenue & Customs, and the Office of Fair Trading (now Competition and Markets Authority).
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