Pub: Australian Financial Review
Pubdate: Saturday 04th of December 2010
Section: Perspective
Page: 34
High time to blow the whistle
Corruption allegations abound over the process for selecting hosts for sport's biggest prize. Story Shraga Elam
There will always be sore losers, especially when there are billions of dollars at stake and the chance to stage the world's biggest sporting event. Russia and Qatar emerged victorious when FIFA – the Fédération Internationale de Football Association – named them as respective hosts for the 2018 and 2022 World Cups, leaving Australia wondering how it had got it so badly wrong.
But there are many who are crying foul and think the game is not being played fairly.
Throughout the campaign for hosting rights there was a steady background noise of criticism – noise that's likely to grow louder after these decisions from the opaque organisation.
Allegations of corruption within FIFA, whose headquarters are in Switzerland, are not new but only weeks ago two Swiss MPs launched a campaign to curb and control corruption in the global sport associations operating from their country, including FIFA.
FIFA has a long record of accusations of corruption and lack of transparency. But despite the publication of documentary evidence of such corruption, the FIFA leadership, under Swiss Joseph "Sepp" Blatter, has continued to enjoy – and at times abuse – the rather friendly attitude of the Swiss authorities.
FIFA is given the special status of an association, which puts it and others like it including the International Olympic Committee and the Union of European Football Associations (UEFA) almost outside the legal system – and the need for transparency.
But Swiss politicians are realising the situation is untenable. The damage incurred by being seen as a safe haven for international corruption is not worth the meagre financial benefits that accrue from hosting such organisations. A broad coalition of all the parliamentary factions has emerged in support of the fight against corruption.
MP Roland Rino Büchel is finally making some advances in purging FIFA's corruption. Büchel, a member of the right-wing Swiss people's party (SVP), has been pushing for years to clean up FIFA. He is a sports manager and knows FIFA from the inside, having worked for several years for marketing agency ISL in the Swiss city of Zug.
ISL, before it went bankrupt in 2001, was one of FIFA's main conduits for bribery and most of its employees were, to various degrees, exposed to wrongdoing, though not necessarily party to it.
Several former employees have told the Weekend AFR ISL used to buy the marketing rights for the biennial Africa Cup of Nations. The Swiss company regularly paid about $US10 million for the rights but registered an income of only $US2 million.
This was done several times and cannot be declared as due to a wrong assessment. This "loss" was richly compensated, as FIFA awarded ISL the lucrative commission to sell the marketing and TV rights for the World Cup.
The money made there meant the loss paled into insignificance. Everyone was in on it – the African football officials got their bribes, FIFA was clean and its bosses, such as Blatter, could count on the African votes for their re-election, support for World Cup host decisions and other vital issues.
Blatter is a survival artist. He has used such a mechanism, and not just in Africa, to curb internal attacks against him and put down repeated internal rebellions.
Blatter's motivation is not financial (although his salary is a well-guarded secret), according to former FIFA director Guido Tognoni – himself no angel – but power and publicity.
British journalist Andrew Jennings disclosed on the BBC's Panorama on November 29 a list of ISL bribery payments totalling SF140 million ($145 million).
The BBC and the Swiss daily Tages-Anzeiger claimed they could identify on the list Brazilian Football Federation former president Ricardo Teixeira, Confederation of African Football president Issa Hayatou from Cameroon, and Confederación Sudamericana de Fútbol (South American Football Confederation) president Nicolas Leóz of Paraguay. All deny the allegations.
The Weekend AFR investigations reveal two plausible reasons ISL went into bankruptcy and why FIFA had to devise other bribery methods. First, top ISL managers pursued an irresponsible diversification policy after their bank said they could not rely only on income from the World Cup.
The new investments were a disaster but still ISL could have been rescued. In 2000, Swiss bank UBS developed a plan to raise SF700 million through a bond issue secured by expected incomes from the World Cup in 2002 and 2006 as an "asset-backed securitisation". Half the sum was to go to ISL and the rest to FIFA, which also needed money.
Only a few weeks before the bond was to be issued FIFA pulled out of the deal, which exacerbated ISL's growing liquidity problems. After ISL's bankruptcy FIFA issued the bond through a UBS rival, Credit Suisse.
Another reason for the ISL collapse was, it seems, powerful opposition from Austin "Jack" Warner, Trinidad and Tobago football executive, FIFA vice-president and president of the Confederation of North, Central American and Caribbean Association Football (CONCACAF). Warner, as emails prove, fought against the rescue of ISL.
Several former ISL employees allege Warner's hostility was provoked by their refusal to meet his financial demands. Warner, one of the most powerful people in FIFA, controls most of the region's votes and is devoted to Blatter.
The ISL bankruptcy later proved dangerous for FIFA, given the explosive information in the company's files. To neutralise this danger, FIFA controlled the first creditors' meeting and dictated the nomination of a favourable liquidator. All former ISL employees retained by FIFA were ordered to give their new employer their votes, as under Swiss law every creditor, regardless of liability, has one vote at the meeting. Thus UBS, with a SF250 million liability, has one vote, as does a former ISL employee.
Büchel and others also allege that the liquidator, Thomas Bauer from Ernst & Young, was a FIFA puppet who sabotaged efforts to recover assets from FIFA for work done by ISL and to uncover acts of bribery and retrieve the money.
A compromise was reached with the return of SF2.5 million in bribes, but neither Bauer nor the Swiss court disclosed who had received the bribes.
The cover-up was not complete and from time to time new documents pop up, such as those that have reached the BBC and Tages-Anzeiger. Despite the mounting evidence, morally damning as it may be for FIFA officials, there are few legal implications in Switzerland owing to the statute of limitations and FIFA's status, which puts it above the law. But that may change. Social Democrat MP Anita Thanei,who heads the Swiss Parliament's legal committee, says she will launch a parliamentary initiative for anti-corruption laws to be amended, closing a loophole for sporting bodies.
Büchel, meanwhile, has launched his complementary parliamentary motion and is winning broad support from all parties. Both MPs, who are working together on this issue, desire international co-operation, as not enough will be achieved if FIFA simply leaves Switzerland: it could be seen as an admission of immoral activities but without further consequences.
It's also clear to Büchel that it will take several years to ratify and implement any legal measures, so short-term measures are needed to take advantage of parliamentary support including that of defence and sport minister Ueli Maurer.
Such measures could include a whistleblowers' foundation for FIFA insiders. Many employees abhor the corruption but fear not only losing their job but not being able to get another.
Büchel seems likely and able to use the opportunity to come up with several other creative and effective measures.
High Time to Blow the Whistle
Pubdate: Saturday 04th of December 2010
Section: Perspective
Page: 34
High time to blow the whistle
Corruption allegations abound over the process for selecting hosts for sport's biggest prize. Story Shraga Elam
There will always be sore losers, especially when there are billions of dollars at stake and the chance to stage the world's biggest sporting event. Russia and Qatar emerged victorious when FIFA – the Fédération Internationale de Football Association – named them as respective hosts for the 2018 and 2022 World Cups, leaving Australia wondering how it had got it so badly wrong.
But there are many who are crying foul and think the game is not being played fairly.
Throughout the campaign for hosting rights there was a steady background noise of criticism – noise that's likely to grow louder after these decisions from the opaque organisation.
Allegations of corruption within FIFA, whose headquarters are in Switzerland, are not new but only weeks ago two Swiss MPs launched a campaign to curb and control corruption in the global sport associations operating from their country, including FIFA.
FIFA has a long record of accusations of corruption and lack of transparency. But despite the publication of documentary evidence of such corruption, the FIFA leadership, under Swiss Joseph "Sepp" Blatter, has continued to enjoy – and at times abuse – the rather friendly attitude of the Swiss authorities.
FIFA is given the special status of an association, which puts it and others like it including the International Olympic Committee and the Union of European Football Associations (UEFA) almost outside the legal system – and the need for transparency.
But Swiss politicians are realising the situation is untenable. The damage incurred by being seen as a safe haven for international corruption is not worth the meagre financial benefits that accrue from hosting such organisations. A broad coalition of all the parliamentary factions has emerged in support of the fight against corruption.
MP Roland Rino Büchel is finally making some advances in purging FIFA's corruption. Büchel, a member of the right-wing Swiss people's party (SVP), has been pushing for years to clean up FIFA. He is a sports manager and knows FIFA from the inside, having worked for several years for marketing agency ISL in the Swiss city of Zug.
ISL, before it went bankrupt in 2001, was one of FIFA's main conduits for bribery and most of its employees were, to various degrees, exposed to wrongdoing, though not necessarily party to it.
Several former employees have told the Weekend AFR ISL used to buy the marketing rights for the biennial Africa Cup of Nations. The Swiss company regularly paid about $US10 million for the rights but registered an income of only $US2 million.
This was done several times and cannot be declared as due to a wrong assessment. This "loss" was richly compensated, as FIFA awarded ISL the lucrative commission to sell the marketing and TV rights for the World Cup.
The money made there meant the loss paled into insignificance. Everyone was in on it – the African football officials got their bribes, FIFA was clean and its bosses, such as Blatter, could count on the African votes for their re-election, support for World Cup host decisions and other vital issues.
Blatter is a survival artist. He has used such a mechanism, and not just in Africa, to curb internal attacks against him and put down repeated internal rebellions.
Blatter's motivation is not financial (although his salary is a well-guarded secret), according to former FIFA director Guido Tognoni – himself no angel – but power and publicity.
British journalist Andrew Jennings disclosed on the BBC's Panorama on November 29 a list of ISL bribery payments totalling SF140 million ($145 million).
The BBC and the Swiss daily Tages-Anzeiger claimed they could identify on the list Brazilian Football Federation former president Ricardo Teixeira, Confederation of African Football president Issa Hayatou from Cameroon, and Confederación Sudamericana de Fútbol (South American Football Confederation) president Nicolas Leóz of Paraguay. All deny the allegations.
The Weekend AFR investigations reveal two plausible reasons ISL went into bankruptcy and why FIFA had to devise other bribery methods. First, top ISL managers pursued an irresponsible diversification policy after their bank said they could not rely only on income from the World Cup.
The new investments were a disaster but still ISL could have been rescued. In 2000, Swiss bank UBS developed a plan to raise SF700 million through a bond issue secured by expected incomes from the World Cup in 2002 and 2006 as an "asset-backed securitisation". Half the sum was to go to ISL and the rest to FIFA, which also needed money.
Only a few weeks before the bond was to be issued FIFA pulled out of the deal, which exacerbated ISL's growing liquidity problems. After ISL's bankruptcy FIFA issued the bond through a UBS rival, Credit Suisse.
Another reason for the ISL collapse was, it seems, powerful opposition from Austin "Jack" Warner, Trinidad and Tobago football executive, FIFA vice-president and president of the Confederation of North, Central American and Caribbean Association Football (CONCACAF). Warner, as emails prove, fought against the rescue of ISL.
Several former ISL employees allege Warner's hostility was provoked by their refusal to meet his financial demands. Warner, one of the most powerful people in FIFA, controls most of the region's votes and is devoted to Blatter.
The ISL bankruptcy later proved dangerous for FIFA, given the explosive information in the company's files. To neutralise this danger, FIFA controlled the first creditors' meeting and dictated the nomination of a favourable liquidator. All former ISL employees retained by FIFA were ordered to give their new employer their votes, as under Swiss law every creditor, regardless of liability, has one vote at the meeting. Thus UBS, with a SF250 million liability, has one vote, as does a former ISL employee.
Büchel and others also allege that the liquidator, Thomas Bauer from Ernst & Young, was a FIFA puppet who sabotaged efforts to recover assets from FIFA for work done by ISL and to uncover acts of bribery and retrieve the money.
A compromise was reached with the return of SF2.5 million in bribes, but neither Bauer nor the Swiss court disclosed who had received the bribes.
The cover-up was not complete and from time to time new documents pop up, such as those that have reached the BBC and Tages-Anzeiger. Despite the mounting evidence, morally damning as it may be for FIFA officials, there are few legal implications in Switzerland owing to the statute of limitations and FIFA's status, which puts it above the law. But that may change. Social Democrat MP Anita Thanei,who heads the Swiss Parliament's legal committee, says she will launch a parliamentary initiative for anti-corruption laws to be amended, closing a loophole for sporting bodies.
Büchel, meanwhile, has launched his complementary parliamentary motion and is winning broad support from all parties. Both MPs, who are working together on this issue, desire international co-operation, as not enough will be achieved if FIFA simply leaves Switzerland: it could be seen as an admission of immoral activities but without further consequences.
It's also clear to Büchel that it will take several years to ratify and implement any legal measures, so short-term measures are needed to take advantage of parliamentary support including that of defence and sport minister Ueli Maurer.
Such measures could include a whistleblowers' foundation for FIFA insiders. Many employees abhor the corruption but fear not only losing their job but not being able to get another.
Büchel seems likely and able to use the opportunity to come up with several other creative and effective measures.
High Time to Blow the Whistle
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