Keeping Score of FIFA's Corruption, Compliance and Efforts for Reform

Keeping Score Of FIFA’s Corruption, Compliance And Efforts For Reform, Part 1

Brandon Fox - October 9, 2017

Foul Play 22 members of FIFA’s top committee – the executive The first installment of this two-part series committee – would choose the tournament’s host summarizes the Garcia Report’s findings of through a majority vote. The vote often took place misconduct. Author Brandon Fox also focuses on over several rounds and involved a winnowing the difficulties investigators faced as a result of process. Initially, each member voted for one of all leaders failing to cooperate and contrasts the eligible bids. If no bid received a majority, the proposal misconduct and lack of cooperation to the U.S. with the fewest number of votes would be eliminated. Soccer Federation’s behavior. The process was repeated until one bid received a majority of the votes. In late June, the world’s governing soccer organization released the “Garcia Report,” which contained more Several countries bid to be the hosts for 2018 and/or than 400 pages chronicling the extensive corruption 2022. FIFA’s executive committee ultimately selected and conflicts of interest that occurred in FIFA’s Russia to host the 2018 World Cup and Qatar to host awarding of the men’s 2018 and 2022 World Cup the 2022 event. The Garcia Report, however, found venues.[1] The report, authored in 2014, concluded the vote was tarnished by extensive corruption and that there was prima facie evidence that a dozen collusion by executive committee members. then-current or former executive committee members committed ethical violations. The publication of the That the selection process was tainted is not Garcia Report came after other scandals by FIFA surprising, as the executive committee appeared to officials, including the prosecutions of high-ranking overlook obvious problems with the winning bids. officials in the Eastern District of New York for For example, human rights issues clearly did not corruption and fraud. receive priority with either selection. Additionally, the selection of Qatar in 2022 immediately left many The Awarding of the World Cup wondering how a country with average temperatures greater than 100 degrees Fahrenheit in the summer Venues for 2018 and 2022 (when the World Cup takes place) could win the The World Cup is the world’s most prestigious and bid. While high temperatures are an obvious safety widely viewed soccer tournament. Countries compete concern for players, coaches and fans attending the in qualifying tournaments to make the 32-team games, the Garcia Report found that the executive championship tournament, which is played every four committee simply “fail[ed] to consider the issue of years at locations selected by FIFA’s governing body. the temperature in Qatar.” Even a physician who served on the executive committee did not raise In 2010, FIFA was to choose the hosts of the 2018 concerns about the extreme heat during deliberations, and 2022 World Cup tournaments. Although it was according to the Garcia Report. Given the physician’s unusual for FIFA to pick hosts for two championships silence, it should not come as a surprise that the at the same time, the selection process otherwise was Garcia Report found that he had at least two conflicts supposed to occur in the ordinary manner. This meant of interest: First, the physician’s son received a job that countries seeking to host a tournament would at a hospital affiliated with Qatar’s training academy. submit their proposals and be evaluated. Then, the

Reprinted with permission © 2017 Second, his close friend’s son received a “business In addition to the executive committee members, the opportunity” from Qatar’s bid team. But this was just Garcia Report found that other high-ranking soccer one of a dozen examples of executive committee officials abused their positions by seeking benefits members having conflicts of interest, and some were for third parties. Notably, the Garcia Report found a much more egregious illustrations of graft. prima facie case of ethical violations by the chairman of the group that evaluated bids before they came The Garcia Report Finds the up for vote. According to the Garcia Report, the Executive Committee Acted chairman, at the time of the evaluations, was trying to with Impunity convince a Qatar training academy affiliated with the country’s bid to hire the chairman’s son and to find his Many executive committee members were easy brother-in-law a position as a tennis coach. Ironically, targets to corrupt. The Garcia Report found that the the chairman of the evaluation group announced executive committee had a “culture of expectation at the end of the process, “we have accomplished and entitlement.” This was not because of a lack our work in the spirit of integrity, objectiveness and of rules governing members’ conduct. Instead, the transparency.” As a result of the chairman’s attempt to Garcia Report found that many executive committee obtain personal favors, the Garcia Report found that members displayed “a disregard for ethic guidelines his evaluation of Qatar’s bid (the winning 2022 bid) and an attitude that the rules do not apply to them.” was “tainted.” Third-Party Beneficiaries Side Deals and Hidden Interests The Garcia Report detailed several occasions when The Garcia Report discussed side deals between executive committee members sought or were offered associations intended to influence the bid process. benefits for family members and close associates. For example, the report concluded that Australia These benefits came in many forms, including jobs, provided more than $6 million to the Oceania Football consulting fees and sponsorship money. For example, Confederation in exchange for its support. Australia Australia 2022 hired a consultant who was a close also sent and promised about $4 million to benefit associate of an executive committee member. a sports facility in Trinidad and Tobago. That money The Garcia Report concluded that Australia 2022 really went to executive committee member Jack tried to disguise its relationship to the consultant’s Warner, who allegedly commingled and embezzled relationship by having a company hire him as a it. Warner was able to do this because he secretly subcontractor to “create appearance of distance.” owned parcels of land where the facility was built Australia 2022 also omitted specific language that and falsely represented to people that the facility was would have bound the consultant to FIFA’s rules. owned by the soccer organization that governs North As a result, the consultant did not have to report his America and Central America. contacts with any executive committee member or cooperate with the investigation into misconduct, Additionally, bid countries paid for executive unlike those governed by FIFA’s rules. committee members’ soccer clubs to travel to tournaments and friendly matches (i.e., exhibition Some of the benefits given to influence executive games). While some of this was done in the ordinary committee members were highly lucrative. The course, not every deal was a legitimate transaction. Garcia Report discussed how an official connected Instead, some were much more lucrative than the to Qatar 2022 provided millions of dollars to the executive committee members’ clubs could have daughter of the president of the Brazilian Football obtained under normal circumstances. One official Confederation. Qatar 2022 also promised to provide stated that he viewed the arrangement of a friendly $1 million to sponsor an event that the son of an match as a “quid pro quo” for the member’s vote. executive committee member was hosting. Qatar Not only could these matches be windfalls for the 2022 ultimately withdrew its support for the project members’ countries, but individuals who were close after receiving advice from counsel. to the members also received commissions for setting up these matches.

Reprinted with permission © 2017 Personal Benefits The lack of cooperation was not limited to the sitting Bidding countries often paid for the travel of executive executive committee members. One former member committee members and their families. The payments initially ignored investigator’s requests. The former could be astounding. For example, one country paid member then had another person act as a liaison $5,500 a night for an executive committee member’s to the investigative body and demanded that all hotel room. This was in addition to providing the questions be addressed to both the liaison and the executive committee member with a dedicated driver official so they could jointly respond. This odd request and other services. In contrast, soccer’s biggest stars, was even more unusual because the proposed liaison including Lionel Messi, stayed in rooms that were less was also a subject of the investigation. The former than $300 a night. member then made public declarations in which he said that he had no intention of cooperating, Not every benefit was monetary. For example, overstated the number of questions posed to him England was asked to bestow an honorary knighthood in writing and falsely claimed investigators only on one South American soccer official. submitted questions in English and not in his native language. After FIFA levied a provisional ban for his All told, the Garcia Report concluded that there were lack of cooperation, the former official submitted prima facie cases of ethical violations by 12 then- written answers to questions. This shows that the current or former executive committee members. provisional ban was somewhat effective, in that the To put this number in perspective, FIFA only has 22 former member did answer some questions. But the provisional ban was not forceful enough, because executive committee members sitting at a time. the former member still refused to answer other Executive Committee Members’ questions, such as how he voted to award the 2018 and 2022 World Cups. Reactions to the Investigation According to the findings, executive committee While investigators were able to obtain some members’ acceptance and solicitation of personal information from this former member, they were benefits was only the beginning of their wrongdoing. only able to do so because the individual was still a The Garcia Report found that leaders of FIFA felt the soccer official bound by FIFA’s rules of mandatory rules did not apply to them during the investigative cooperation. Many other former executive committee process either. When investigators sought to interview members refused to cooperate, and FIFA could take members about the allegations, many showed no measures to force their cooperation because disdain for the process by acting “belligerent” toward they were no longer soccer officials in any other investigators, according to the report. capacity. Out of 11 former members approached by investigators, only five agreed to be interviewed or to The report discussed how two executive committee provide written answers. members initially refused to cooperate in the investigation. One demanded to know who had These reactions show how some in positions of initiated the investigation and tried to insist on having power can respond to being questioned and how the lead investigator recuse himself. The member then essential it is to have independent investigations refused to answer questions in a live interview. Only when dealing with allegations of corruption among later did the member agree to answer questions, and executives. The inability of investigators to obtain then only in writing. voluntary cooperation shows how important it is for an organization to have a broad policy regarding who Another member showed hostility toward the must assist investigators and how they must assist. investigators, stating it was “probably one of the few cases where the boss is being investigated by the The United States’ Bid employee.” As the Garcia Report noted, this was the While the reports were disheartening in many wrong reading of the situation: FIFA’s investigative respects, there was one silver lining: United States body was independent and did not answer to the officials were not part of the problem. Indeed, the executive committee. report found U.S. officials neither colluded in the

Reprinted with permission © 2017 awarding of bids nor gave any executive committee the investigatory body. According to the report, members inappropriate gifts. Instead, the U.S. officials the U.S. Soccer Federation also provided helpful were aware of the rules and actively took steps to recommendations on how to reform the bidding ensure that they were in compliance with the rules. process and mitigate the risk of misconduct in the future. With respect to gifts to soccer officials, evidence showed that the USA Bid Committee did an Even in the aftermath of the scandal, the football appropriate analysis in trying to find a gift that met world cannot expect its officials to toe the line. Part the monetary threshold under FIFA’s rules and would 2 will discuss how better leadership, stronger rules, also be viewed as “nice and relevant to our bid.” The a targeted compliance program, periodic monitoring report found that the USA Bid Committee did not and a strengthened investigatory function can mitigate give anything of value “with an aim to influence” the the risks of misconduct and ensure cooperation of bidding process. FIFA’s officials. It will also discuss how these same steps and safeguards can be applied within any The U.S.’s friendly matches also were arms-length organization to ensure compliance and minimize transactions free of corruption. The Garcia Report issues in the event of an outside investigation. found that the U.S.’s exhibition matches had commercial terms that were “in line with the standard [1] The most detailed and extensive report was fees paid for such competitions” and did not serve authored by Michael Garcia. Because Mr. Garcia was as a way for the USA Bid Committee to make recused from conducting portions of the investigation indirect contributions to third parties to influence the that related to United States and Russia, there were bidding process. reports authored by other investigators that were also released at the same time as Mr. Garcia’s report. Additionally, one problem the Garcia Report found Many news articles, however, referred to the reports with many countries is that they gave funds to collectively as the “Garcia Report.” To be consistent, if executive committee members’ countries to help not entirely accurate, this article does the same. soccer development when they were bidding on the World Cup. But as soon as the venue was selected, the bidding countries would stop giving those countries’ development funds. This made it at least appear as though the payments were not intended to boost the sport’s development in the country, but instead were to influence the votes. Once again, the U.S. was different. The report found that there were no material changes to the U.S. Soccer Federation’s development projects before and after the bidding process, which showed that the U.S. did not launch development projects with a view of influencing the bidding process.

Accordingly, if any country was the victim of the corruption, it was the U.S., which initially bid on both years and received neither.

The U.S. Soccer Federation’s behavior was different even with respect to its reaction to the FIFA investigation. Leaders actively cooperated in the investigation and replied to all requests by

Brandon Fox - October 10, 2017

Changing the Game Plan FIFA also decided to change its rules to force its In late June, FIFA, the world’s governing soccer voting members to consider experts and objective organization, released the “Garcia Report,” chronicling criteria in evaluating and selecting venues. This will the extensive corruption and conflicts of interest increase the possibility that important issues, such as that occurred in FIFA’s awarding of the men’s 2018 Qatar’s extreme heat, will be considered when voting and 2022 World Cup venues. Part 1 summarized the members select the venue. report’s findings. Part 2 discusses how specific steps and safeguards can mitigate the risks of misconduct By diluting each voter’s power, FIFA has created less and ensure cooperation among FIFA officials – and at of an incentive for bidding countries to attempt to any organization. corrupt an individual voter. That’s not to say bidding countries will stop inappropriately influencing the Leadership voters. There will always be a risk of corruption. But it reduces the possibility that future decisions will be FIFA’s problems started at the top. FIFA’s investigators tainted in the way the 2018 and 2022 selections were. found an astounding number of executive committee members committed misconduct and showed disdain FIFA has more that it can do. While its fix may have for the investigation. FIFA’s failures were systemic and solved the power issue, it did not touch others. reflected a culture of corruption. An organization’s Surprisingly, FIFA has not changed its ethical rules or culture cannot be fixed simply by strengthening rules code of conduct since 2012. or creating a targeted compliance program. Indeed, these are meaningless if the leaders themselves are corrupt. Executives must have integrity and show a Strengthening Rules commitment to everyone’s compliance with the law. Many members broke FIFA’s rules by seeking and FIFA needs to identify candidates for its executive accepting benefits to influence their votes. But FIFA, committee that have shown integrity and a dedication like any organization discovering misconduct, must to complying with rules and laws. analyze whether changes to its rules could help mitigate the risk of misconduct reoccurring. A few Limiting Power of the Executive changes, such as requiring voting members to report gifts, paid travel and income and assets, would help Committee reduce the chance that votes will be compromised, One of the biggest reasons the executive committee especially if coupled with a robust monitoring program. was so rife with corruption was that members had incredible power. In the scandal’s aftermath, FIFA has Requiring Members to Report Gifts limited the executive committee’s power. FIFA diluted Many executive committee members believed the the committee’s voting power by having each of FIFA’s rules did not apply to them. This is troubling because 211 members (called FIFA’s Congress) cast a vote to senior leaders must demonstrate a commitment to select the World Cup venue, instead of having the 22 rules and laws. members of the executive committee solely decide the issue. In effect, this caused executive committee But there may have been good reason for members to members’ votes to be diluted by 90 percent. think the rules did not apply to them: some didn’t. For Collectively, they went from having 100 percent of the example, while bid teams were supposed to report voting power to choose the venue to approximately gifts they gave to executive committee members, 10 percent. Individually, each person now has less those members did not have a disclosure obligation. than 0.5 percent of the power to choose the venue, Similarly, only bidding teams had to report contact instead of approximately 5 percent. with executive committee members.

Reprinted with permission © 2017 The best practice is to have both parties disclose not solve a dilemma for gift recipients who may a reportable event. Reporting requirements can be not be able to determine the value of items. Some onerous, but they are important for several reasons. items might be worth thousands of dollars, but the First, reports provide organizations with needed recipients might believe they have no value and information. With this information, organizations can therefore accept the gifts. Others might be worth little, determine whether gifts or contacts were proper, but the soccer official believes the gifts are more than whether there were any anomalies (e.g., only the trivial and reject them. The information deficit can receiver disclosed the gift), whether one official is cause soccer officials to make poor decisions and will receiving more gifts than others and whether one still lead to awkward conversations. entity is giving more gifts than others. FIFA should consider amending its rules to force bid Second, reporting requirements act as a deterrent. teams and foreign governments to pre-clear their An official may choose not to accept a gift because gifts to voting members if valued above a specific of the need to disclose it. This may be because of the threshold. A benefit to pre-clearance is that it would time commitment involved in filling out the paperwork. provide everyone clarity as to whether a gift is It may be because the report will be public and the acceptable. It also would provide the same deterrent official does not want the appearance that the gift will effect as discussed above regarding disclosure influence the official’s vote. The deterrent effect will requirements. This is because bid teams are less result in fewer gifts being accepted, which will lead to likely to give extravagant gifts if they have to pre-clear fewer allegations of corruption. them with FIFA. This procedure also would eliminate awkward conversations between the soccer officials Third, the reporting requirement also reinforces the and the gift giver, since the soccer official can rely on rules. An official will have to consider whether the gift the pre-clearance disclosure to determine the value is acceptable each time he or she has to disclose the and appropriateness of the gift. And if an item isn’t gift. And an improper gift creates a prisoner’s dilemma pre-cleared, the soccer official would know to return if there’s a dual-reporting requirement. An official it. Since the Garcia Report found that there was flouting the rules by not reporting the gift not only runs confusion among the bid teams about which gifts the risk of the organization discovering it, but also that were appropriate and which were not, pre-clearance the gift giver will disclose it. would be a valuable service to everyone.

Clarifying Limits and Pre-Clearing Gifts Travel Disclosures Organizations often struggle with the right way to limit Based on the absurd travel costs paid on behalf gifts. Some prohibit personal benefits over a specific of soccer officials by bid teams, the Garcia Report dollar amount. Others will use terms that are subject recommended limiting executive committee members’ to interpretation, such as allowing “de minimis” or ability to travel to bidding nations. This change would “customary and ordinary” gifts. FIFA’s rules used not only cut down on benefits provided to soccer terms that themselves caused confusion regarding officials, but also on the potential unreported contact which gifts were acceptable. Prior to 2012, officials between officials and the bidding countries. While could not accept anything exceeding “the average these are obvious benefits to having such limitations, relative value of local customs.” This was too vague this proposal may be too restrictive without getting and difficult to apply. Officials could not be expected to the real issues. Indeed, travel to bidding countries to know the “average relative value of local customs” can be beneficial, as voting members are able to for every country. Further, it would likely be viewed as see firsthand the countries’ facilities, infrastructure disrespectful for an executive committee member to and ability to host the World Cup. These benefits reject gifts from foreign governments if the executive can outweigh the outright restriction on travel. A committee member felt the gifts were excessive. better requirement would be to have voting members disclose all travel costs paid by third parties, similar FIFA’s current rules, as amended in 2012, do not set to the disclosure requirements the U.S. places on its a monetary cap. Instead, soccer officials may only Congressional members. accept gifts that “have symbolic or trivial value” and are not meant to influence their actions. This does

Reprinted with permission © 2017 Friendly Matches While data storage can be expensive for Some of the corruption issues related to the organizations, it may take years for misconduct scheduling of friendly matches between a bidding allegations to surface and for the investigation team and one affiliated with an executive committee to be finalized. Electronic data is vital in helping member. Some bidding teams paid more than they prove or refute statements made by witnesses would have in a customary transaction. Once again, and whistleblowers. There are good reasons for an pre-disclosure of FIFA friendly matches and their organization to choose a data preservation policy terms would mitigate the risk associated with using of five years. First, this is the length of time the U.S. friendly matches to corruptly ingratiate themselves Department of Justice preserves its own electronic with executive committee members. communications on servers. Second, five years is the typical statute of limitations for federal criminal Reporting Income and Assets charges. An organization therefore cannot be faulted The Garcia Report found that an executive for limiting its storage to five years. While countries’ committee member had secret interests in sports privacy laws might place restrictions on how this data facilities receiving millions of dollars from a bidding can be used, the proper collection and preservation of country. This type of potential conflict of interest the data ensures the data will be there if needed. can be mitigated by requiring voting members to file disclosure statements listing all sources of income Strengthening Monitoring and and ownership of companies and commercial real Investigative Functions estate. While this disclosure would be a burden No matter how strong the rules and compliance on members, it would reduce the possibility that a functions are, it is impossible to eliminate misconduct bidding country would intentionally or unintentionally with 100 percent certainty. Accordingly, it is important invest in a voting member’s business or lease the to have strong monitoring and investigatory functions. member’s property. FIFA should also consider whether this disclosure should be made public or Monitoring Compliance with Rules and Law not. Each option has advantages (transparency) Not all misconduct will be reported to the and disadvantages (lack of privacy), although organization. Instead, it may be reported too late organizations need to consider international privacy or not at all. Whistleblowers often choose to avoid laws and their ability to obtain waivers if it desires a an organization’s complaint procedure and instead public disclosure. allege misconduct in the media, to law enforcement or in the form of a lawsuit. Accordingly, organizations Data Preservation should be proactive and engage in periodic, risk- FIFA investigators identified a problem with data based monitoring. This could entail occasional review preservation. Specifically, one bidding team did not of expense reports, emails or other transactional provide investigators with emails because, it claimed, documents for potential red flags. Such monitoring the communications were not kept on its servers has several benefits. First, it helps an organization and were more than three years old. This raises learn of issues and problem employees before they issues with respect to how the communications were become larger liabilities. Second, monitoring acts as a occurring and how they were being stored. deterrent to officials who might otherwise be tempted to engage in misconduct. Third, an organization can Organizations should require all official electronic point to its monitoring efforts when responding to communications to take place on their systems. This questions by law enforcement or the media about a type of policy makes it easier for organizations to whistleblower’s complaints. review, preserve and recover those communications. If an official receives a communication on a private Logging and Tracking Complaints account, the organization’s policies should require In practice, any FIFA ethics complaint was sent to the official to forward the communication to the its secretary general, who would decide whether the official’s organizational account. The organization’s matter should be submitted to investigators. This put policy should be broad enough to cover electronic the secretary general in a difficult position of trying communications in any form, such as emails, texts to determine the merit of the complaint before any and instant messages, in any account, website or investigation took place. In one instance, the secretary application. general did not forward a meritorious complaint

Reprinted with permission © 2017 to investigators, who learned of the misconduct provision. Organizations should negotiate mandatory during a separate investigation. FIFA – and other cooperation as part of a severance agreement, organizations – should have rules that call for all whether or not the employee is a whistleblower. And complaints to be forwarded to investigators without any nondisclosure term should specifically state it an initial assessment of merit. Investigators should log does not apply to internal investigations. the complaints, explain their reasons for acting or not acting on them and track the investigation’s progress. Definition of Cooperation The definition of what amounts to cooperation is Institute Third-Party Safeguards important to include in organizations’ rules. For Organizations often find that corrupt transactions FIFA, cooperation meant that the soccer officials involve third parties, who may be used as conduits could refuse to answer questions unless submitted for improper payments. The Garcia Report found in writing. Being able to avoid a live interview by some bidding teams and FIFA officials engaged in demanding written questions does not help the corruption through third parties. One bidding team truth-finding function of the internal investigation. caused a contractor to hire a FIFA official’s close Soccer officials used this provision to delay their associate as a subcontractor. As a result of this responses to questions, to involve other witnesses multiple-layered relationship, the associate had in coming up with answers and to avoid follow-up no reporting requirement when it came to gifts or questions. Organizations should instead leave it up to contacts with executive committee members. This investigators to determine how to conduct concealment also caused problems for investigators, their inquiries. as the associate was not obligated to cooperate with FIFA’s investigatory body. To reduce the risk of Conclusion similar conduct, FIFA’s rules should require bidding While organizations can never guarantee that their teams to identify all members of the bid team, officials will abide by ethical rules, organizations can including advisors, consultants, contractors and mitigate the risks of conflicts of interests and improper subcontractors. Everyone working with bidding teams influence with strong rules, disclosure requirements, should sign and file statements certifying that they compliance efforts and investigative functions. have read and understand FIFA’s ethical rules, agree That the Garcia Report found so many high-ranking to be bound by them, will provide FIFA with the right executives who engaged in improper behavior and to inspect their books and records and will cooperate refused to cooperate with the investigation shows with an investigation. FIFA needs to revisit and strengthen its rules.

Mandatory Cooperation Organizations have vital interests in officials’ cooperation in investigations of potential misconduct. In addition to being expansive in defining who must cooperate, organizations should ensure that failure to cooperate will have consequences. For employees, this could mean suspension and termination. For contractors, this could mean the termination of a contract and potential disgorgement.

It also is important to have clear and expansive language in severance agreements. One FIFA whistleblower initially refused to cooperate based on concerns she would be breaching the nondisclosure term of her severance agreement. The whistleblower did not cooperate until the bidding team waived this