The latest revelations to emerge regarding FIFA could signal the end for football's world governing body. Described as "toxically corrupt", FIFA's reputation may have been so badly damaged, some commentators are suggesting that it is time for football to start again from scratch.

In May 2015, we reported that the U.S. authorities had indicted 14 current and former Fifa officials and associates on charges of "rampant, systemic and deep-rooted" corruption. Earlier this month a further 92-count indictment was issued charging an additional 16 defendants with racketeering, wire fraud and money laundering conspiracies pursuant to the Racketeer Influenced and Corrupt Organisations (RICO) Act. The latest charges relate to the defendants' alleged participation in an"unconscionable" scheme of corruption spanning 24 years, designed solely to enrich those involved. The updated indictment also includes additional charges against a number of defendants listed in the original indictment.

In summary, it is alleged that numerous high ranking Fifa officials participated in various schemes which allowed them to receive well over $200 million in bribes and kickbacks, in return for lucrative media and marketing rights to international soccer tournaments and matches. The U.S. Department of Justice (DoJ) also announced that eight defendants have pleaded guilty under seal and agreed to forfeit more than $40m.

Ongoing investigations

The DoJ has made clear that its investigation is continuing. It has confirmed that it is committed to ending the widespread corruption within international football and will continue to collaborate with its international partners, in particular the Swiss Authorities.

Whilst Blatter has not been criminally indicted, the U.S prosecutors are beginning to close the net on the top management of Fifa.  The Swiss prosecutors have also accused Blatter of criminal mismanagement or misappropriation over a TV rights deal and of a "disloyal payment" to a European football chief.  Consequently, the U.S. and Swiss authorities are now carefully analysing Blatter's knowledge of what is transpiring to be decades of wrongdoing.

In this regard, the BBC recently aired a programme alleging that it had seen a letter obtained by the FBI confirming that Blatter had "full knowledge" of the kickback payments made to Fifa by the sports marketing agency, ISL, and that he was "always apprised" of all activities. To recap, ISL was Fifa's former media and marketing partner and responsible for handling TV rights negotiations for the World Cup.  Over an eight year period in the 1990s ISL paid a total of $100m to officials including former Fifa president Joao Havelange and ex-Fifa executive Ricardo Teixeira. In return, ISL was granted lucrative television and marketing rights. Although this information was publicly revealed in 2008, the individuals involved were not criminally convicted because accepting these payments did not constitute a crime under Swiss law at the relevant time.  Blatter denied knowing about the payments and was fully exonerated of any criminal or ethical misconduct.

This recent letter may, however, prove otherwise. It is clear that the prosecutors are adopting a zero-tolerance attitude towards bribery and corruption, generally. They are also actively seeking to uncover further documents that might implicate all of those involved.  After issuing the updated indictment, U.S. Attorney General Loretta Lynch said: “The betrayal of trust set forth here is outrageous". She added a clear message that: "every culpable individual who remains in the shadows, hoping to evade our investigation: you will not wait us out. You will not escape our focus."

Indeed, Fifa's own ethics committee has set down a firm marker. On Monday, Blatter and Uefa boss, Michel Platini, were found guilty by the committee of breaches surrounding a £1.3m payment made in 2011. It held that they had demonstrated an "abusive execution" of their positions, suspending them both from any football related activities for 8 years.

Insurance implications

These latest developments will be concerning to the Fifa officials involved and their D&O insurers. The defence costs being incurred as a result of the various investigations, and the criminal prosecutions, will be considerable.  Whether the D&O policy responds to any "claim" submitted will ultimately depend on the wording used.  However, given the number of defendants involved, and the extensive scope of the investigations in various jurisdictions, the defence costs could significantly erode the limits of indemnity.  To the extent that cover is available under the D&O policies, in principle, these revelations are likely to impact on policy response. For example, insurers may consider the following:

  • The guilty pleas

If insurers' prior consent was not obtained, the guilty pleas will constitute an admission of liability and may invalidate cover if this provision is a condition precedent to insurers' liability.

  • Fraud/Dishonesty exclusion

The guilty pleas could also trigger the fraud/dishonesty exclusion, now, if it allows for insurers to expressly rely on formal admissions of liability. Even if this is not expressly written into the exclusion, insurers will need to consider the policy wording carefully to establish if a final adjudication is still required.  Given the individuals have admitted criminal liability, obtaining an adjudication in the underlying proceedings will not be possible.

Insurers may also wish to consider what impact, if any, the recent findings of Fifa's own ethics committee against Blatter and Platini may have on cover for any claims submitted directly by them.

  • Prior knowledge

The knowledge and awareness of top Fifa officials is being carefully scrutinised by the prosecutors. If it established that Blatter and/or others were aware of the systemic corruption long before the D&O policies incepted, and withheld this information from insurers, provided underwriters consider it to be material, avoidance arguments might exist.

Alternatively, rather than avoid the policy, insurers may be able to rely on a prior knowledge exclusion.

  • Policy exclusions

Other policy exclusion may well trigger. The most obviously relevant are the wilful misconduct, RICO and Money Laundering exclusions which are often attached to D&O policies. Insurers might be able to limit their exposure by relying on these, now, based purely on the nature of the allegations in the updated indictment.

Conclusions

As the Fifa scandal continues to unfold insurers should remain vigilant and assess the impact that any new revelations have on the coverage position.

It is likely that further damaging information will emerge before the final whistle is blown.