Structural Compliance and Cultural Ethical Change in an Organization

Thomas Fox
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Sometimes corruption is so endemic in an organization that you wonder if the organization should just blow itself up and start over. In a company going through a Foreign Corrupt Practices Act (FCPA) investigation, a Board of Directors can clean house and bring a new senior management. That has happened at least a couple of times in the history of FCPA enforcement and there is at least one successful example here in Houston, that being Pride International Ltd., who later merged into Ensco plc and became Ensco Offshore Company. Pride was so successful that it was able to exit from a Deferred Prosecution Agreement (DPA) early.

But what happens when there is no one not tainted by the corruption of a prior regime? I am beginning to wonder if the Fédération Internationale de Football Association (FIFA) can clean itself up or if the world’s national soccer powers need to blow the whole thing up and start over. Last week there were more arrests based upon warrants issued by the US Department of Justice (DOJ) in its ongoing criminal investigation of senior executives of the organization. According to an article in the Wall Street Journal (WSJ), entitled “U.S. Indicts 16 New Suspects in FIFA Corruption Case” by Aruna Viswanathan, Joshua Robinson and John Revill, last week US “Authorities unveiled a 92-count indictment that included charges against senior FIFA officials Alfredo Hawit and Juan Angel Napout, who were arrested in a predawn sweep by police at a Swiss luxury hotel.” Further, “The new charges expand on the earlier case with more examples of alleged corruption at Central and South American soccer organizations. The new indictment also cites alleged payments related both to previous tournaments and to matches extending through 2022, including World Cup qualifiers.”

In an article in the New York Times (NYT), entitled “Guatemalan Official Arrested Aboard Cruise Ship in Florida”, Matt Apuzzo reported that in Miami, US customs officials boarded a cruise ship and arrested, “Héctor Trujillo, the general secretary of the Guatemalan soccer federation who is also a judge on the Constitutional Court of Guatemala”. The unsealed indictment referred “to multiple bribe negotiations in Miami involving Media World, Mr. Trujillo and other defendants. Those defendants include Brayan Jiménez, president of the Guatemalan soccer federation, and Rafael Salguero, a former president of that federation who rose higher in the ranks of world soccer and assumed a role on FIFA’s executive committee.”

Now it appears that the FBI is investigating disgraced and suspended (yet still current) FIFA President Sepp Blatter. The BBC online reported “The FBI is investigating the role played by Fifa president Sepp Blatter in a $100m (£66.2m) bribes scandal, a BBC investigation has discovered. Sports marketing company ISL paid a total of $100m to officials including former Fifa president Joao Havelange and ex-Fifa executive Ricardo Teixeira. In return, ISL was granted lucrative television and marketing rights throughout the 1990s.”

Last week, and ironically on the same day as the arrests, FIFA publicly announced some of the changes they were proposing. However the messengers had some other issues to try and clear up. An article in the NYT ‘On Soccer’ column, entitled “A Message in the Hands of the Wrong Messengers by Sam Borden, detailed that the FIFA acting President Issa Hayatou, “dismissed inquiries about any personal improprieties and then read an opening speech about governance that was both hollow and clearly scripted by someone else.” Next the acting General Secretary Markus Kattner “dismissed questions about any personal improprieties and clung blindly to PowerPoint slides that seemed to lack specifics.” When the two top people announcing ethical changes have to answer for their own conduct, you create a serious view that your organization is not very interested in changing.

Borden wrote, “To change that, there are generally two approaches. One is a total housecleaning, which essentially acknowledges that an organization in its current form is irreparable. The other is a crafted approach to finding the right people with magnetic personalities, ease of explanation and, of course, believable motivations to bridge the surface relationship that exists between a group like FIFA and an astronomically larger group that is the world’s soccer fans. As it stands, FIFA has taken neither approach.”

But the question remains, who is left that is not tainted by corruption that could run the organization? I am reminded that when Lance Armstrong was stripped of his seven Tour de France titles, none were awarded to any second place finishers because none were cleared of doping charges. Perhaps given the money that was generated by FIFA for television rights, marketing fees and other levies; it was simply too much money not to turn heads. There certainly has never been oversight or transparency. Certainly there was no culture of compliance.

Samuel Rubenfeld, writing in the WSJ Risk & Compliance Journal, in an article entitled “FIFA Reform Plan Requires Culture Change to Work”, focused on this final aspect, the need for culture change at FIFA, to affect any real ethical change. He quoted Alexandra Wrage, the founder of business anti-bribery group TRACE International “who quit an earlier FIFA reform effort due to lack of adoption by FIFA leadership” for the following, “While the reforms are by far the most serious we’ve seen, successful reform still comes down to key personalities and that’s worrying.” Rubenfeld went on to add that “The latest U.S. indictment highlights the challenges in cleaning up soccer; it alleges graft occurred across generations of FIFA leaders, with new ones coming into their roles promising reform but immediately partaking in the corruption that led their predecessors to leave or face charges.”

Can FIFA clean itself up? That is a very open question at this point. Clearly, the US government has signaled, at least at this point, it is not seeking to bring down the entire organization. Can that signal change? Certainly if there is no person left who has the credibility to run the organization and the entity does not bring in any person who has the credibility to run it. Moreover, with all the money at play here, can anything meaningful be done if not with much greater transparency? Unfortunately all I have right now is questions, questions and more questions. But one thing is certain; we are not seeing a lot of answers from FIFA.

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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.

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