The soccer world was rocked this morning to learn 14 defendants have been charged with racketeering, wire fraud, money laundering conspiracies, and other offenses, in a wide-ranging corruption scheme. The defendants include two current FIFA Vice Presidents as well as the current and former Presidents of the Confederation of North, Central American and Caribbean Association Football (CONCACAF). Translation: this is huge.
FIFA is an abbreviated version of Fédération Internationale de Football Association, the international governing body of soccer. Soccer is, of course, called football everywhere else in the world except in the U.S., where we call American football, football.
FIFA has as its primary goal “to improve the game of football constantly and promote it globally in the light of its unifying, educational, cultural and humanitarian values, particularly through youth and development programmes.” A truly international organization, it’s been referred to as the “United Nations of Football.” Today, it employs about 310 people from over 35 nations and consists of 209 member associations. That’s a huge leap from its humble beginnings in 1904 when it served just seven member associations (France, Belgium, Denmark, Netherlands, Spain, Sweden, and Switzerland).
The organization serves a huge audience: soccer is considered the most popular sport in the world with nearly 3.5 billion fans. It is played by 250 million players in over 200 countries.
That sort of popularity means that the media and marketing rights associated with soccer events and tournaments are incredibly lucrative. When those rights are sold to sports marketing companies, often through multi-year contracts covering multiple editions of the tournaments, the revenue generated can be quite substantial: according to FIFA, 70% of its $5.7 billion in total revenues between 2011 and 2014 was attributable to the sale of TV and marketing rights to the 2014 World Cup. FIFA, of course, owns the rights to the World Cup.
The indictment alleges that, between 1991 and the present, the defendants and their co-conspirators engaged in various criminal activities, including fraud, bribery and money laundering. It’s alleged that sports marketing executives shut out competitors and kept highly lucrative contracts for themselves through a series of bribes and kickbacks. Soccer officials have been charged with conspiring to solicit and receive well over $150 million in bribes and kickbacks in exchange for their official support.
FIFA consists of various member associations, as mentioned above. The U.S. Soccer Federation is one of 41 member associations of the confederation known as CONCACAF, headquartered in the United States. The South American confederation is called CONMEBOL. Most of the allegations in the indictment relate to the solicitation and receipt of bribes and kickbacks by soccer officials from sports marketing executives in connection with the commercialization of the media and marketing rights associated with various soccer matches and tournaments, including FIFA World Cup qualifiers in the CONCACAF region, the CONCACAF Gold Cup, the CONCACAF Champions League, the jointly organized CONMEBOL/CONCACAF Copa América Centenario, the CONMEBOL Copa América, the CONMEBOL Copa Libertadores and the Copa do Brasil, which is organized by the Brazilian national soccer federation (CBF).
The defendants charged in the indictment include high-ranking FIFA officials, as well as leading officials of other soccer governing bodies that operate under the FIFA umbrella. Jeffrey Webb and Jack Warner, the current and former presidents of CONCACAF, the continental confederation under FIFA headquartered in the United States, are among the soccer officials charged with racketeering and bribery offenses. Also charged in the scheme are Eduardo Li, the Costa Rican soccer federation (FEDEFUT) president; Julio Rocha, former Central American Football Union (UNCAF) president and Nicaraguan soccer federation (FENIFUT) president; Costas Takkas: current attaché to the CONCACAF president and former CIFA general secretary; Eugenio Figueredo, current FIFA vice president, former CONMEBOL president and Uruguayan soccer federation (AUF) president; Rafael Esquivel, Venezuelan soccer federation (FVF) president; José Maria Marin, current member of the FIFA organizing committee for the Olympic football tournaments; and Nicolás Leoz, former FIFA executive committee member and CONMEBOL president.
FIFA’s current President, Joseph “Sepp” Blatter, who has served since 1998, was NOT indicted in the scheme. Blatter is considered one of the most influential men in the world, coming in at #70 on Forbes’ list of Powerful People.
Other alleged schemes relate to the payment and receipt of bribes and kickbacks in connection with the sponsorship of CBF by a major U.S. sportswear company, the selection of the host country for the 2010 World Cup and the 2011 FIFA presidential election and defendants who are alleged have paid $150 million in bribes and kickbacks in exchange for media and marketing rights to international soccer tournaments. Those charged include Alejandro Burzaco, controlling principal of Torneos y Competencias S.A., a sports marketing business based in Argentina; Aaron Davidson, President of Traffic Sports USA Inc. (Traffic USA); and Hugo and Mariano Jinkis, controlling principals of Full Play Group S.A., a sports marketing business based in Argentina.
Additionally, one defendant was in the broadcasting business but allegedly served as an intermediary to facilitate the financial part of the scheme. He is José Margulies, controlling principal of Valente Corp. and Somerton Ltd.
The charges were announced this morning by Attorney General Loretta E. Lynch, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Director James B. Comey of the FBI, Assistant Director in Charge Diego W. Rodriguez of the FBI’s New York Field Office, Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Erick Martinez of the IRS-CI’s Los Angeles Field Office.
Also earlier this morning, Swiss authorities in Zurich arrested seven of the defendants charged in the indictment (Jeffrey Webb, Eduardo Li, Julio Rocha, Costas Takkas, Eugenio Figueredo, Rafael Esquivel, and José Maria Marin) at the request of the United States. A search warrant is being executed today at CONCACAF headquarters in Miami, Florida.
Clearly, this has been in the pipeline for some time. To that end, four individual and two corporate defendants have already pleaded guilty in the matter. Those pleas were unsealed today and include guilty pleas from Daryll Warner, son of defendant Jack Warner and a former FIFA development officer; Daryan Warner; Charles Blazer, former general secretary of CONCACAF and former U.S. representative on the FIFA executive committee; José Hawilla, the owner and founder of the Traffic Group, a multinational sports marketing conglomerate headquartered in Brazil; and two of Hawilla’s companies, Traffic Sports International Inc. and Traffic Sports USA Inc., based in Florida. Those guilty pleas, entered from 2013 to the present, are as follows:
- Daryll Warner waived indictment and pleaded guilty to a two-count information charging him with wire fraud and the structuring of financial transactions.
- Daryan Warner has also waived indictment and pleaded guilty to a three-count information charging him with wire fraud conspiracy, money laundering conspiracy and the structuring of financial transactions. Daryan Warner forfeited over $1.1 million around the time of his plea and has agreed to pay a second forfeiture money judgment at the time of sentencing.
- Charles Blazer waived indictment and pleaded guilty to a 10-count information charging him with racketeering conspiracy, wire fraud conspiracy, money laundering conspiracy, income tax evasion and failure to file a Report of Foreign Bank and Financial Accounts (FBAR). Blazer forfeited over $1.9 million at the time of his plea and has agreed to pay a second amount to be determined at the time of sentencing.
- José Hawilla, the owner and founder of the Traffic Group, the Brazilian sports marketing conglomerate, waived indictment and pleaded guilty to a four-count information charging him with racketeering conspiracy, wire fraud conspiracy, money laundering conspiracy and obstruction of justice. Hawilla also agreed to forfeit over $151 million, $25 million of which was paid at the time of his plea.
- Two weeks ago, on May 14, 2015, the defendants Traffic Sports USA Inc. and Traffic Sports International Inc. pleaded guilty to wire fraud conspiracy.
The indicted and convicted individual defendants face maximum terms of incarceration of 20 years for the RICO (Racketeer Influenced and Corrupt Organizations Act) conspiracy, wire fraud conspiracy, wire fraud, money laundering conspiracy, money laundering and obstruction of justice charges.
In addition, Eugenio Figueredo faces a maximum term of incarceration of 10 years for a charge of naturalization fraud and could have his U.S. citizenship revoked. He also faces a maximum term of incarceration of five years for each tax charge.
Charles Blazer faces a maximum term of incarceration of 10 years for the FBAR charge and five years for the tax evasion charges, and Daryan and Daryll Warner face maximum terms of incarceration of 10 years for structuring financial transactions to evade currency reporting requirements. Each individual defendant also faces mandatory restitution, forfeiture and a fine.
By the terms of their plea agreements, the corporate defendants face fines of $500,000 and one year of probation.
Internal Revenue Service (IRS) CI Chief Richard Weber said, about the indictments, “Today is a good day for soccer fans, and it is a great day for the global fight against corruption and international tax evasion.”
He went on to say, “Whether you call it soccer or futból, the fans, players, and sponsors around the world who love this game should not have to worry about officials corrupting their sport. This case isn’t about soccer; it’s about fairness and following the law. FIFA’s official slogan is “For the Game. For the World.” But the co-conspirators in this case corrupted the game for the sole purpose of personal gain; not for the game, and certainly not for the world.”
IRS-CI was involved in many aspects of the case. Chief Weber noted that “Spanning over several continents and dozens of countries, the investigation conducted by IRS Criminal Investigation was complex and thorough. The indictments and guilty pleas announced today highlight what can happen when those in positions of power abuse that trust, engage in undisclosed self-dealing and misappropriate funds. The targets of today’s announcement allegedly conspired with one another to use their positions within and around the FIFA organization to profit through schemes involving bribes and kickbacks including unauthorized World Cup ticket sales.”
Special Agents and investigative support personnel from the IRS-CI Los Angeles Field Office assisted in the investigation by “following the money” and identifying and reviewing accounts held in over 33 countries as well as dozens of offshore corporations used to hide beneficial ownership. IRS-CI identified hundreds of millions of dollars of criminal proceeds and, so far, more than $12,000,000 of previously untaxed income subject to U.S. taxation. IRS-CI’s tracing of these funds has led to the seizure of assets in excess of $155,000,000.
Chief Weber noted, “As the best financial investigators in the world, IRS-CI Special Agents exposed complex money laundering schemes, uncovered millions of dollars in untaxed income of U.S. residents, and discovered tens of millions of dollars hidden away in accounts in countries like Hong Kong, the Cayman Islands, and Switzerland. This really is the World Cup of fraud, and today, we are issuing FIFA a Red Card.”
The government’s investigation is ongoing. A FIFA press conference is scheduled for later today and I’ll update as more information becomes available.