The awards season is here. As February begins, many heads and thoughts turn to the movie industries for the lead up to the Oscar awards. Many viewers will take to their local movie houses to see the current slate of nominees or will watch some of the year’s earlier releases on a streaming service. I hope that some of you will turn to two podcasts in the Compliance Podcast Network, which use this month as a jumping off point for discussions and lessons learned. On 12 O’Clock High, a podcast on business leadership, host Richard Lummis and myself are reviewing leadership lessons from Oscar winning best pictures. This year’s lineup includes Chariots of Fire (Feb. 7); The King’s Speech (Feb. 14); Platoon (Feb. 21) and Lawrence of Arabia (Feb. 28). Over on This Week In FCPA, co-host Jay Rosen (a former professional screenwriter) and I will work in an Oscar category, nominees and story into each week’s wrap up. I hope you will join us on one or both podcasts to celebrate one month of Oscars.

Unfortunately in the international sporting worlds, what should have been a few great years of championships have turned more sour, as Rebecca R. Ruiz, reporting in a New York Times (NYT) a piece entitled “Justice Dept. Escalates Inquiry on Global Sports Corruption”, has found that “United States prosecutors have issued grand jury subpoenas in a far-reaching investigation of international sports corruption, seeking new information about some of the biggest sports organizations in the world — including FIFA, the International Olympic Committee and the United States Olympic Committee.”

One might have hoped that after the Fédération Internationale de Football Association (FIFA) scandals from 2015, both before and beyond, the world’s most popular sport might have worked to clean up its act more diligently. However it was apparently not the case. US authorities are still interested in such issues as third parties which provided shoes and clothes to national soccer federations, those involved in broadcasting rights and most particularly the successful 2022 Qatar bid to host the quadrennial championship.

Ruiz noted that of significant interest to the Department of Justice (DOJ) was the award of the world governing body for track and field, known as the International Association of Athletics Federations (IAAF), of the sport’s 2019 world championships to Doha, Qatar, and the 2021 event to Eugene. The Eugene award has been one of the most problematic as it was apparently made with no other competition, essentially on a no-bid basis. While there is not much debate that Eugene is the spiritual capital, if not top track and field city, in the United States, the manner of its award has drawn both scrutiny and criticism.

It was the DOJ subpoenas around the International Olympic Committee (IOC) and United States Olympic Committee (USOC) which drew the greatest attention. One might have thought that after the bribery scandals, criminal indictments and convictions around the Salt Lake City Winter Olympics of 2002 that those involved in the US would have gotten the Memo not to engage in bribery and corruption to garner winning bids.

There were several areas the DOJ was considering in the awards of Olympic bids. Ruiz noted, “Among the specific sports marketing companies that prosecutors are scrutinizing, according to the subpoena, is Helios Partners, a firm that has lobbied global sports officials to award high-profile events to particular cities and countries. Helios helped Russia secure the 2014 Winter Olympics and the coming 2018 World Cup, before its acquisition in 2012 by the Amaury Group, a French media company.”

All of this stands in the stark light of the scandal engulfing USA Gymnastics (USAG), involving convicted felon Dr. Lawrence G. Nassar, a former doctor for the American gymnastics team convicted of sexually abusing scores of young athletes. The United States Olympic Committee (USOC) has been roiled by this scandal. It demanded and received the resignations of the entire USAG Board. Reports indicated that the USOC set the directors’ resignations as a condition USAG had to meet if it wanted to avoid being terminated as the governing body for the sport.

Why are international sports such a fertile area for corruption and now DOJ inquiry? There are several obvious reasons. The first of course is money. The amount of money spent annually on the Olympics, the World Cup, the World Track and Field Games is beyond astronomical, well into the billions ($$$). This includes money for the rights to host the events, money for the broadcast rights and money for ads and sponsorship. The second is opaqueness of these organizations. They are international organizations, usually incorporated in Switzerland, where there is no substantive government oversight and no accountability to anyone but the leadership, who of course control the purse strings and dole out the money.

Why should the US authorities concern themselves with such broad based international corruption? While international sporting organizations are typically not covered by the Foreign Corrupt Practices Act (FCPA), for US companies, there is the civil side enforced by the Securities and Exchange Commission (SEC) through the Accounting Provisions, which consist of the books and records provisions and the internal controls provisions. According to the 2012 Guidance, “The FCPA’s accounting provisions operate in tandem with the anti-bribery provisions and prohibit off-the-books accounting. Company management and investors rely on a company’s financial statements and internal accounting controls to ensure transparency in the financial health of the business, the risks undertaken, and the transactions between the company and its customers and business partners. The accounting provisions are designed to “strengthen the accuracy of the corporate books and records and the reliability of the audit process which constitute the foundations of our system of corporate disclosure.””

As we saw with the FIFA scandal, there was huge factor for companies to consider around negative publicity. That scandal was the largest worldwide sporting corruption case ever brought. It is also the highest profile corruption case ever brought because of the worldwide popularity of the sport. The DOJ’s successful prosecutions in December will only lead to more scrutiny. It has already commanded the world’s attention since May 2015. If any US companies are now linked to bribery and corruption with the IOC or IAAF, their names will be dragged through the international press ad nauseum. If there are leaks about information on companies before they investigate or get out ahead of any allegations, which may spill into the press, it will certainly not look good.

Finally, is the point that corruption is a global scourge, as it is a demonstrable component of political instability and terrorism. Now the DOJ has added the economic aspect to this list. But just as the FIFA scandal exhibited that corruption, which may appear to be victimless and not appear to hurt anyone, can, does and has destroyed the fabric if not the soul of some of the world’s greatest institutions. Even if you simply think it is much to-do about a game, we all should have some expectation that games will be played fairly with the best team on any given day. Just as the FIFA scandal shows that ‘fixing’ has been there for a long time. The world’s most popular sporting events all deserve better. As Americans we should all want to fight the scourge of corruption wherever it might appear, and we certainly believe that there should be a level playing field for all who want to compete.

 

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2018

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