Last week, the US Department of Justice in New York unsealed a 47-count indictment against 14 defendants and at the same time numerous FIFA officials and other persons were arrested as they gathered for annual FIFA meeting in Zurich. The indictment alleges they created and executed a criminal scheme that spanned the globe and started as early as 1991 to solicit and make and conceal payments in order to corruptly influence decisions such as the selection of World Cup host countries. In addition to senior soccer officials, the indictment also named sports-marketing executives from the United States and South America who are accused of paying more than $150 million in bribes and kickbacks in exchange for various deals associated with soccer tournaments. Four individual defendants and two corporate defendants have entered guilty pleas that were also unsealed.
The indictment alleges that various individuals in their official capacity committed fraud, bribery and money laundering. They then sought to cover up the payments they made or received by using fake consulting contracts, sending money through associates working in banking, using safe deposit boxes, and hiding foreign bank accounts.
The violations alleged relate to organized criminal activity, specifically, “racketeering,” in violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act. Racketeering in this case consists of allegedly operating a criminal organization or “enterprise” and taking steps in furtherance of the enterprise by the commission of various “predicate acts” of criminal conduct. The predicate criminal acts were wire fraud, money laundering and money laundering conspiracy, interstate and foreign travel in-aid-of racketeering, obstruction of justice and multiple acts involving bribery.
The primary tool for the DOJ in the last 10 years as it pertains to prosecuting bribery has been the Foreign Corrupt Practices Act (FCPA) which makes it illegal to pay a bribe (directly or indirectly) to a foreign governmental official in exchange for any benefit. This case is unique because there are no allegations – so far – of bribing foreign officials, so the FCPA is not applicable. Only private actors and private organizations have been named (again, so far). Furthermore, the FCPA only criminalizes giving or offering to give bribes, not receiving them.
By using the Racketeer Influenced and Corrupt Organizations (RICO) Act, the government broadened the scope of the crimes they could charge. RICO is a law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. The relevant acts in this case are money laundering, bribery and wire fraud. Although several of the indicted individuals have some connection to the United States either as citizens or owners of property, many have no connections to the US. They are foreign nationals who do not have any business or personal interests in the US. The use of United States financial systems allowed the US to allege that the actions occurred in the US. The United States is able to exercise jurisdiction over those individuals on the basis of the actions they took which involve financial institutions in the United States. The indictment notes that the defendants and their co-conspirators “relied heavily on the United States financial system in connection with their activities.” The mere use of a United States bank for corrupt purposes could expose a non-US person or entity to prosecution.
Is FIFA a Criminal Enterprise?
No. The US alleges FIFA is actually the victim. The racketeering schemes allegedly deprived FIFA, the six continental confederations, and their constituent organizations of their right to the honest and loyal services of the soccer officials involved.
Why the US?
The government’s indictment appears to be motivated by the adverse impact on international soccer – which is a huge international business – of bribery and kickback schemes relating to media and marketing rights. The indictment notes that the schemes had powerful anti-competitive effects, distorting the market for the commercial rights associated with soccer and undermining the ability of other sports marketing companies to compete for such rights on terms more favorable to the rights holders.
The alleged conduct is subject to the jurisdiction of the United States because: 1. Some of the defendants are US citizens; 2. Some of the acts occurred within the territory of the United States and 3. Under US law, if the “effects” of crimes conducted outside the US adversely affect commerce or harm citizens within the US, then jurisdiction in a US court is permissible.
Do Multinational Companies Need to Take This Seriously?
Anti-corruption is the number two priority of the Department of Justice – second only to anti-terrorism. The Justice Department is expanding its concept of reach, beyond purely public corruption covered by the FCPA, to include other actions of global significance involving payments to corrupt decision-making, coupled with concealment of the actions and related assets.
Multinational companies that should pay close attention are those with bank accounts or financial transactions in the United States, meetings or other activity within the United States, wire and other communications within or through the United States, and travel to or through the United States. These multinational companies should closely examine, and revise, their codes of corporate conduct to prohibit and prevent corrupt payments, falsification of financial records, and similar conduct; and to implement effective training, auditing, investigation, and reporting functions to detect, deter, and report violations as necessary. The Department of Justice rewards cooperation and self-reporting as well as reporting violations committed by others. And the Department of Justice has greatly increased the level of the tactility and cooperation in the Latin American sphere in the last few years.