In Due Diligence and World Cup Bids: Follow the Money

by Thomas Fox
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Follow the MoneyFor those watching the 2104 World Cup, this year’s tournament has certainly been spectacular, from the US reaching the round of 16, the incredible goals scored by Robbie Van Persie and Tim Cahill, to yesterday’s heartbreak for Mexico, who led until the 88th minute, only to be tied and then loose in stoppage time to the Netherlands, this year’s event has been one for the ages. However one very large shadow hangs over the sport’s governing body, Fédération Internationale de Football Association (Fifa) and allegations of corruption in its award of the 2022 World Cup to Qatar.

There were reports as far back as 2011 that Mohamed bin Hammam, offered bribes to members of the Caribbean Football Union (CFU) at a meeting organized by the Fifa vice-president, Jack Warner. As reported by The Guardian, in a 2011 article, entitled “Fifa in crisis after claims against Jack Warner and Mohamed bin Hammam”, Owen Gibson reported, “nine of Fifa’s 24 executive committee members have been accused of corruption in recent months.” But these 2011 reports have paled in comparison to the reports detailed in the past few months regarding allegations of corruptions concerning the award of the 2022 tournament to Qatar.

Earlier this month, The Sunday Times rocked the sporting world with its article “Plot to Buy the World Cup” by Jonathan Calvert and Heidi Blake. In the article, they reported that a number of football officials took £3m in return for support of the Qatari bid. The BBC, in an article entitled “Qatar World Cup 2022: Investigator nears probe conclusion”, said “The Sunday Times claims to have obtained secret documents that implicate the former AFC president in corrupting members of football’s governing body to win the right to stage the 2022 World Cup. The newspaper alleges the documents, seen by BBC sports editor David Bond, show that Qatari Bin Hammam, 65, was lobbying on his country’s behalf at least a year before the decision to award the country hosting rights. They also allegedly show he had made payments into accounts controlled by the presidents of 30 African football associations and accounts controlled by Trinidadian Jack Warner, a former vice-president of Fifa.”

This initial account has been supplemented by additional reports detailing these allegations. In another article in The Guardian, entitled “Mohamed bin Hammam accused of payments to help Qatar World Cup bid”, Agence France-Presse wrote that “Bin Hammam also paid $1.6m into bank accounts controlled by the Trinidadian Jack Warner, also a former vice-president of Fifa, $450,000 of which was before the vote for the World Cup”, citing the report in The Sunday Times. Both Qatar and bin Hammam have denied any improprieties in the award of the bid to Qatar.

But there were more reports of payments to those voting on the Qatar bid beyond Jack Warner. In a June 16th report in the online publication, República, entitled “ANFA chief admits receiving money from Hammam” it reported that Nepal Football Association (ANFA) President Ganesh Thapa had been promised $800,000 from bin Hammam and had been paid $115,000. It also reported that Thapa’s son received $100,000 from bin Hamman. Thapa was quoted as saying that the money was for a business deal, “It is right that I received $115,000 but it was in connection with the business I have partnered with Hammam.”

There have been other issues raised regarding Qatar’s bid to host the World Cup. One is its treatment of the workers who are building the stadiums for the event and the appalling conditions that the workers building the stadiums to host the event are facing. In an article in the online magazine Slate, entitled “The Qatar World Cup Is a Human Rights Catastrophe. It’s Time to Do Something About It” Jeremy Stahl reported that the Nepali embassy has said 400 citizens of its country had died during construction in Qatar and India has reported that 500 of its citizens have died. The article quoted Sharan Burrow, the general secretary of the International Trade Union Confederation (ITUC), who said in an ESPN documentary “that at current rates, 4,000 people will die to make the 2022 World Cup a reality.” The ITUC itself had reported in March that there had been 1200 deaths in the construction of the facilities for the World Cup.

Another significant issue is the heat. Qatar can reach between 40-50C during the summer months, and for those of you who don’t read Celsius temperatures that translates to between 104 to 122 degrees Fahrenheit. I have been in such temperatures and I can assure you that is hot weather. However, although Fifa awarded the 2022 World Cup tournament to Qatar back in 2011, it has only now become aware of the fact that there is hot weather in the summer months in Qatar. If you have watched any games in this year’s tournament, you have seen European players wilt in 80+ degree, which for a Texan is rather pleasant. But no matter how much conditioned air you can pump into a stadium in Qatar, the fact is that it will be 120+ outside.

Even if the stadiums are air conditioned, how are you going to walk to them in that heat? To say that Fifa was unaware that it gets hot in the summer in Qatar seems disingenuous at best. As reported by Roger Blitz, in a Financial Times (FT) article entitled “Fifa faces quandary over World Cup in Qatar”, Sepp Blatter, Fifa President, has gone on record to say that awarding the 2022 World Cup to Qatar was “a mistake”.

But as my friend Mike Brown might say that when you are performing due diligence, ‘follow the money’. This is not only important in thinking about allegations of corruption in the award of the bid to Qatar but also in the overall context of Fifa and the World Cup. It has been estimated that over one-tenth of the world’s population is watching this year’s World Cup. In the US alone, the interest is so high its game against Portugal had more viewers than Game 5 (the final game) of the recent NBA championship. This could well lead to billions for the television rights in 2022 alone. That means that advertisers and sponsors will be paying a pretty penny to be associated with World Cup 2022. Do you think some of the current sponsors, such as Adidas, Coca-Cola, Sony or Visa will want to be associated with such allegations of corruption or deaths of workers from such appalling working conditions?

There is a chorus growing to move the 2022 World Cup from Qatar to another country. Speaking with its usual grownup voice, the FT editorial board has called for a re-vote on the location of the 2022 World Cup tournament venue, in an article entitled “Blow the whistle on Fifa, please”, they said, “The case for rerunning the bid for the 2022 competition looks unassailable. Final judgment should await a pending report into the Qatar bid by Fifa’s top internal investigator. But a string of controversies – among them the health concerns over staging the competition in Qatar’s furnace-like climate – means a new venue is now needed.” But more than simply re-voting on the 2022 bid, the FT said, “Western governments and lawmakers should therefore bring their influence to bear. The US Congress could consider holding hearings to examine the relations between American multinationals and Fifa. US companies have to abide by stringent anti-corruption laws. Congress would be right to examine the implications of US companies doing business with a major international body that has such weak governance. Such public hearings might make corporate sponsors reconsider their stance.”

What are the lesson for the compliance practitioner? Sometimes you need to step back and look at the big overall picture. If a deal has come into your company that is particularly high reward, it generally means that it was high risk. You may want to do a more in-depth look at all aspects of the deal, from the business partners involved, to your internal gifts, travel and entertainment for your employees involved in securing the contract. Putting a second or even third set of eyes on something might well protect your company if something does not seem right, feel right or look right.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Thomas Fox, Compliance Evangelist | Attorney Advertising

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