World Cup corruption: boardroom risk
It has all the ingredients of a mob story: the official with an ostentatious lifestyle; difficult questions from the tax man about the unexplained wealth; then the not so difficult decision, accepting the life-line of cooperation with the FBI, telling all about former associates, leaving their fate in the hands of the U.S. Department of Justice in return for preferable and preferential treatment. But rather than blowing open an organised crime syndicate, the organisation hitting the news (again) for all the wrong reasons is FIFA, the governing body of world football. The headlines yesterday were all about the arrest of 7 senior football officials at a luxury hotel in Switzerland.
The investigation concerns the historical award and organisation of tournaments in the Americas, the fatal jurisdictional error being the alleged payment of dollars in return for favours. Enter US Department of Justice, stage right. However, the other and arguably more interesting breaking news was the opening by the Swiss authorities of a criminal investigation into the award of the 2018 and 2022 World Cups, to Russia and Qatar respectively. The ripples from that development will be felt in boardrooms around the world, but in particular with those with Anti-Money Laundering legislation like that in the UK, where liability can be founded upon suspicion of criminal activity. When the allegations surfaced, and then could be ignored no longer, FIFA attempted to put its own house in order, commissioning Michael Garcia to conduct an investigation into the bidding process surrounding these two highly lucrative sporting events. We still don’t know whether and to what extent the report was flawed as a result of the inability to compel co-operation by those no longer within the FIFA family: the report was summarised, and, we infer from Garcia’s resignation shortly thereafter, sanitised, for public consumption.
Now, the Swiss are taking the matter sufficiently seriously to have commenced an investigation into criminal mismanagement and money laundering. The Office of the Attorney General is looking into alleged irregularities in the award of the two World Cup tournaments, the corresponding unjust enrichment occurring partially in Switzerland, and the alleged victim being FIFA itself. The significance for those in boardrooms in Britain is this: it is a criminal offence for someone to enter or become concerned in an arrangement which they know or a suspect facilitates the use of criminal property by or on behalf of another. The rights associated with the grant of a World Cup tournament are capable of amounting to such property, and those within the UK’s jurisdiction must consider the risk of committing a criminal offence if they enter into or continue to sponsor or construct infrastructure for a World Cup tournament host that may have paved its way with bribes. Clearly the Swiss Attorney General has something to base his suspicion on.
Neil Swift is a Partner in the Business Crime Department and can be contacted at email@example.com or 0207 822 7777.