A large-scale sponsorship deal signed between “a multinational sportswear company headquartered in the U.S.” and the Brazilian Football Federation (CBF) in 1996 came under scrutiny last week as part of an investigation by U.S. authorities that alleged “rampant, systemic and deep-rooted” corruption in organized football.
It was described in an indictment unsealed in New York last Wednesday, which marked the start of an extraordinarily turbulent week for the football business – with dawn arrests in Switzerland, allegations of large-scale corruption involving top international football officials and executives, the re-election of Sepp Blatter as Fifa president and the sudden announcement of his pending resignation yesterday.
Neither Nike nor the prosecution have confirmed that the group is the unnamed sportswear company involved in the CBF deal under investigation, and nowhere is Nike mentioned in the indictment. However, several details of the agreement fit with the Brazilian football deal that supported Nike's expansion in the global football business from the second half of the 90s. The Brazilian national team, which had just won the 1994 World Cup, was previously sponsored by Umbro.
Nike said in an immediate reaction that it was “concerned by the very serious allegations,” reiterating that it “strongly opposes any form of manipulation or bribery.” The group says it has been cooperating “and will continue to cooperate” with the authorities. Nike emphasized the next day that it was not targeted by the investigation. “There is no allegation in the charging documents that any Nike employee was aware of or knowingly participated in any bribery of kickback scheme,” its statement read.
As part of the indictment unsealed by the U.S. Department of Justice, 14 people are alleged to have taken part in fraudulent schemes around football events, broadcasting and marketing agreements, with bribes and kickbacks reaching more than $150 million. It includes charges of racketeering, wire fraud and money laundering conspiracies spanning two decades.
Earlier on Wednesday, seven Fifa officials were arrested at the Baur au Lac hotel in Zurich, just as delegates were preparing for the federation's congress. The U.S. authorities also raided the Miami head office of Concacaf, the Confederation of North, Central American and Caribbean Association Football, which includes the U.S.
On the same day, the office of the Attorney General of Switzerland (OAG) seized documents at Fifa's head office in Zurich, as part of an investigation into the executive committee's choice to organize the 2018 World Cup in Russia and the 2022 edition in Qatar. Fifa said it instigated this process by approaching the Attorney General last November and insisted that it was the damaged party.
Nine of the defendants in the U.S. investigation are officials from Fifa and other football organizations. Four of them are sports marketing executives and another one is a broadcasting executive. The defendants include two Fifa vice presidents and executive committee members: Jeffrey Webb from the Cayman Islands, president of Concacaf; and Eugenio Figueredo from Uruguay, former president of Conmebol, the South American Football Confederation. Another is Jack Warner, former vice president of Fifa and president of Concacaf. Apart from the 14 people indicted, four individuals and two corporations entered guilty pleas.
The alleged schemes under investigation include a deal signed in 1996 by “Sportswear Company A” to become the CBF's exclusive footwear, apparel, accessories and equipment supplier. The deal negotiated with the Traffic Sports marketing agency was valued at $160 million for ten years but the indictment alleges that the sportswear company “agreed to pay a Traffic affiliate with a Swiss bank account an additional $40 million in base compensation.” According to the indictment, Traffic invoiced “Sportswear Company A” for $30 million in payments between 1996 and 1999, after an agreement that allowed Traffic to invoice the sportswear company directly for marketing fees earned upon successful negotiation and performance of the sponsorship agreement. A representative of Traffic Brazil then allegedly paid half of the money he made from the sponsorship deal “as a bribe and kickback” to an unnamed high-ranking official at the CBF and Conmebol – amounting to “millions of dollars.”
The spectacular events unsettled many at and around Fifa, an organization that has repeatedly been hit by allegations of widespread mismanagement and bribery. Blatter is not among the defendants, but the indictments raised awkward questions for the man who has been in charge since 1998. They came as Blatter was facing a challenge to his bid for a fifth term at the helm from the Jordanian Prince Ali Bin al-Hussein. With continued support from the African and Asian confederations, Blatter obtained 133 out of 209 votes in the first round, which was below the two-thirds majority required for an immediate win, but Prince Ali pulled out ahead of the second round.
Blatter's supporters defiantly rejected suggestions that he should leave the organization to allow for substantial reforms and he apparently ignored unrest at Uefa, the European football organization, where dissent was strongest. But on Tuesday afternoon, at a hastily convened press conference in Zurich, Blatter announced that he would step down after the election of a new president at an extraordinary congress, which will be convened in December at the earliest. Meanwhile, Blatter said he would focus on driving far-reaching, fundamental reforms. A few hours later, American media reported that Blatter was under investigation by U.S. prosecutors into federal corruption. The Swiss Attorney General stated that Blatter is not part of their investigations.
Prince Ali has indicated that he may run again. Other personalities touted as potential candidates are Michel Platini, current president of Uefa, the European football organization, who pleaded with Blatter to resign last week; Greg Dyke, chairman of the English Football Association; and Luis Figo, the former Portuguese player.
U.S. authorities made it clear that pressure was unlikely to abate. Attorney General Loretta Lynch, who is leading the U.S. investigation, was quoted as saying that the indictment was just the beginning of the probe. It involved the Federal Bureau of Investigation (FBI) and the criminal investigation division of the Internal Revenue Service (IRS).
José Hawilla, owner and founder of the Traffic Group, is one of the four people who pleaded guilty in the U.S. investigation, where he was charged of conspiracy in racketeering, wire fraud and money laundering as well as obstruction of justice. He agreed to forfeit over $151 million, $25 million of which was paid at the time of his plea in December.
José Maria Marin, former CBF president, is one of the seven people who were arrested in Zurich. Marin's successor, the current CBF chief Marco Polo del Nero, said the federation would review any contracts under suspicion in the U.S. charges, and denied any involvement. It was reported that Brazilian police started their own investigations into alleged money laundering and tax evasion relating to football in the country. The Wall Street Journal added this week that Brazil's federal police have asked prosecutors to indict Ricardo Teixeira, head of the CBF from 1989 to 2012, with allegations including money laundering and tax evasion.
The Adidas Group, which is one of Fifa's key sponsors, swiftly reacted to the U.S. investigation on Wednesday. “The Adidas Group is fully committed to creating a culture that promotes the highest standards of ethics and compliance, and we expect the same from our partners,” it commented on Wednesday. “Following today's news, we can therefore only encourage Fifa to continue to establish and follow transparent compliance standards in everything they do. Adidas is the world's leading football brand, and we will continue to support football on all levels.” Adidas had been targeted a few days earlier by campaigners who exhorted sponsors to speak out about the working conditions of migrant laborers in Qatar.
Visa, another major sponsor, referred to its “profound” disappointment and concern about the developments and made it clear that Fifa should take swift and immediate measures to address the issues. “Should Fifa fail to do so, we have informed them that we will reassess our sponsorship,” the company said. “This lengthy controversy has tarnished the mission and ideals of the Fifa World Cup,” Coca-Cola lamented. Hyundai and McDonald's both expressed their concern and said that they were closely monitoring the situation.
At least some of the same sponsors appeared to be enthusiastic about the latest developments this morning. “We welcome Fifa's commitment to change,” said the Adidas Group. “Yesterday's news marks a step in the right direction on Fifa's path to establish and follow transparent compliance standards in everything they do.”
