REFORMING FIFA Steven A Bank Paul Hastings Professor

REFORMING FIFA Steven A. Bank Paul Hastings Professor of Business Law UCLA School of Law January 27, 2016

What is FIFA?

What is FIFA? • Fédération Internationale de Football Association • Non-Governmental Organization - Swiss non-profit association founded in 1904 • Formed to promote and govern soccer globally • Big business • 2011 -2014: $5. 7 billion in revenues ($338 million in profits), 70% from TV and marketing rights for the 2014 World Cup • Finances Confederations and member associations through Financial Assistance Program and Goal Program (2011 -2014: $1. 052 billion)

FIFA’s Organizational Chart Audit UEFA members CAF members Executive Committee Judicial General Secretariat Disciplinary Ethics Appeal CONCACAF members CONMEBOL members AFC members OFC members

Corruption • 2010 – president of OFC revealed he was offered $12 million for his vote for the 2018 World Cup in Russia • 2011 – evidence of collusion between Spain/Portugal and Qatar World Cup bids for 2018/2022 • 2012 – FIFA appointed US attorney Michael Garcia to investigate corruption, focusing on 2018/2022 World Cup bids • 2014 – Garcia delivered a 350 -450 page report, but FIFA’s Ethics Committee adjudicatory chair refused to make it public and issued a 42 page summary clearing Russia and Qatar of any wrongdoing

DOJ Indictment • Filed May 20, 2015 in the Eastern District of NY • 14 officials, including 9 current and former FIFA Executive Committee members and 5 corporate executives, and 25 unnamed coconspirators • 47 counts of wire fraud, racketeering, and money laundering relating to World Cup bids and marketing deals going back 25 years • Raids conducted by US and Swiss authorities at FIFA offices in Miami and Zurich • Superseding indictment filed Nov. 25 against 16 more defendants

Chuck Blazer • EVP of US Soccer and Exec Comm of FIFA from 1996 -2013 • Failed to file tax returns between 2005 -2010 (probably earlier), on approximately $22 million of income (we know about) • Admits to taking and facilitating bribes for the 1998 and 2010 World Cups and for the broadcast rights to the Gold Cup between 1998 and 2003 • CONCACAF paid for his homes in New York, Miami, and Bahamas, including $6000/month rent for an adjoining apt in Trump Towers just for his cats • Plead guilty and went undercover against FIFA executives

Jack Warner • Former head of CONCACAF and member of FIFA Executive Committee • Reportedly accepted a $10 million bribe from the South African government for his vote and the vote of his CFU bloc for the 2010 World Cup • On behalf of his CFU, acquired Caribbean TV rights to the 2010 and 2014 Wworld Cup from FIFA president Sepp Blatter for $600, 000 and licensed them for $20 million • Accused of diverting $750, 000 in Haitain earthquake relief funds from FIFA and the Korean FA to a bank account he controlled

Aaron Davidson • Lawyer who is former head of Traffic Sports USA and commissioner of NASL • Allegedly paid $5 million in bribes to FIFA exec and CONCACF president Jeffrey Webb to secure marketing rights for the USMNT’s qualifying rounds to the 2018 and 2022 World Cups • Traffic Group CEO, Jose Hawilla, admitted that the company paid over $100 million in bribes to secure marketing and TV rights

FIFA Reform Task Force • Led by Francois Carrard, former IOC director -general from 1989 -2003 during the corruption scandal surrounding the 2002 Winter Olympics in Salt Lake City • Took a swipe at the US, perhaps in response to the Federal prosecutions, calling soccer in America “just an ethnic sport for girls in schools” • Still under control of FIFA Executive Committee • Most past reform proposals ignored or only given lip service

Official Reform Proposals FIFA • Term limits • Separation of political (“FIFA Council”) and management (General Secretariat) functions • “Independent” committee members • Diversity (more women) • Integrity checks • Football stakeholders committee • Increased Transparency CONCACAF • Term limits • Replace 7 person Executive Committee with 15 person Council • 3 out of 15 members of the Council must be “independent” • Integrity checks • Independent Audit and Compliance, and Finance Committees • Increased Transparency

Corporate Governance Reform Playbook? Transparency Sarbanes-Oxley § 401 – Management Discussion & Analysis of off-balance sheet arrangements Independence Dodd-Frank § 952 – All members of the Compensation Committee must be independent Ethics Sarbanes-Oxley § 406 – Must either adopt and disclose your Code of Ethics for top financial managers or explain why you have not done so Term Limits EC – recommends independent directors serve a maximum of 12 years France – a director serving more than 12 years no longer considered independent UK – either terminate a director after 9 years or explain why they should still be considered independent US – ISS downgrades governance score of companies where directors have served more than 9 years

Executive Committee Member Associations Confederations

Mechanisms of Corporate Accountability • Members • Shareholders • Debtholders • Stakeholders • Government • Labor • Market forces • Competitors • Rating Agencies • Consumers

Members • Direct election of Executive Committee and of World Cup hosts • Confederations

Shareholders • No shareholders under current model • Public benefit corporation model

Hybrid Member-Shareholder Model • Partner with a third party, independently owned, agency to sell all marketing/media rights and only give FIFA veto power (UEFA model) • FIFA/International Sport and Leisure scandal a cautionary tale

Debtholders Sponsors can exercise debt-like control with contractual conditions

Stakeholders • Stakeholders Committee an attempt to involve others, but would need to be granted more power • Variant on the Public Benefit Corporation model • Sponsors, players, labor all potentially offer this type of accountability

Government • Criminal prosecution, such as the US DOJ indictments and investigations in Switzerland other countries • Swiss Non-Profit law • European Court of Justice • Classification of FIFA as a “Public International Organization” under the Foreign Corrupt Practices Act

No Governmental Interference “FIFA has the mandate to control association football worldwide, in all its aspects. This mandate is delegated to the national association, to control association football at the national level. . The associations have the obligation to do it on their own, in an autonomous way without outside interference, from the government or any other parties. In general, political interference is when a government tries to take direct control. ” Thierry Regenass, FIFA Director of Member Associations and Development

Labor

Market Forces

Can FIFA Fix Itself? “If a member of Bahrain’s royal family is the cleanest pair of hands that Fifa can find, then the organisation would appear to have the shallowest and least ethical pool of talent in world sport. ” - Nicholas Mc. Geehan, Gulf researcher at Human Rights Watch (referring to Shaikh Salman, a frontrunner to replace Sepp Blatter)