The start of the 2014 World Cup in Brazil has brought renewed interest to the issue of corruption in international sports. Allegations recently resurfaced concerning potential bribery associated with Qatar’s successful bid for the rights to the 2022 World Cup. The Sunday Times reported that it has obtained “millions of documents” evidencing payments made by a Qatari national to officials of soccer’s international governing body, the Fédération Internationale de Football Association (“FIFA”), to secure Qatar’s bid. 1 According to the Sunday Times, FIFA delegates and African football officials received cash, gifts, lavish junkets, and private jet travel in exchange for their influence and support. Prior to the revelations, FIFA had already hired former US Attorney for the Southern District of New York Michael Garcia to investigate allegations of corruption; Garcia has stated his report on the matter will be released next month.
These allegations raise the question of whether a corrupt payment to an organization such as FIFA would violate the US Foreign Corrupt Practices Act (“FCPA”). 2 The Eleventh Circuit’s recent opinion in United States v. Esquenazi3 provides a timely framework for considering the question.
The FCPA prohibits corrupt payments to “any officer or employee of a foreign government or any department, agency, or instrumentality thereof . . . .” 4 An international athletic organization, such as FIFA or the International Olympic Committee (“IOC”), is not a foreign government, department, or agency. Therefore, a bribe paid to an official of such an organization would violate the FCPA only if the organization met the definition of an “instrumentality” of a foreign government, as recently examined in Esquenazi. Because FIFA and the IOC are not funded, controlled by, or otherwise associated with any particular government, these organizations likely would not be considered instrumentalities of a foreign government.
A more significant question, however, is whether the national athletic associations which comprise FIFA or the IOC would constitute “instrumentalities” of their respective governments for FCPA purposes. For example, soccer in Brazil is organized under FIFA member organization the Confederação Brasileira de Futebol. Qatar participates in FIFA through the Qatar Football Association, and the Olympiyskiy Komitet Rossii represents Russia in the IOC. These entities and national organizations like them often play a large role in organizing, hosting, and controlling international sporting events that can attract millions, if not billions, of dollars. If national athletic associations are determined to be instrumentalities of the government, any bribes to officials of such associations may violate the FCPA. Companies dealing with foreign sports organizations should take measures to ensure compliance with US anti-corruption law.
In Esquenazi, the Eleventh Circuit provided an analysis for determining whether an organization constitutes an “instrumentality” of a foreign government. An instrumentality of a government is “an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own.” Factors include:
- the foreign government’s formal designation of the entity;
- whether the government has a majority interest in the entity;
- the government’s ability to hire and fire the entity’s principals;
- the extent to which the entity’s profits go directly to the government;
- whether the entity has a monopoly over the functions it carries out;
- whether the government subsidizes the entity’s costs;
- whether the entity provides services to the public at large in the foreign country; and
- whether the public and the government of the foreign country perceive the entity to be performing a governmental function.5
As applied to a national athletic association, the Esquenazi factors would examine the degree to which the association is government funded, whether its officers are appointed by or associated with the government, and whether the government has formally designated the entity for a particular purpose. The analysis may include an examination of whether the entity has a monopoly on sports, or the regulation of a particular sport, in the country.
In addition, any examination of a national sports association for FCPA purposes should consider whether the association is perceived in its own country as performing a governmental function. While sports and the regulation of sports are largely non-governmental matters in the United States, not all countries treat athletics the same way. Many countries have ministrylevel positions for the regulation of sports.6 Just as hospitals outside the United States are largely governmental entities, a national athletic association in certain countries may be sufficiently tied to a governmental purpose – such as public health, economic and community development, or cultural development – such that the athletic association is perceived as performing a governmental function. 7
Events such as the World Cup and the Olympics generate substantial revenue for corporate partners, from sponsorship and advertising opportunities, to construction, logistics, travel, finance, and day-of-event sales of goods and services. Companies which hope to benefit from the excitement and potential revenue produced by international sporting events should take measures to ensure compliance with all anti-corruption laws, including the FCPA. An appropriate risk assessment for such events would consider the Esquenazi factors outlined above in reviewing potential partners, agents, and clients in advance of a company’s participation in any international athletic competition.
* * *
For more information about our firm or our anticorruption practice, please visit our website at www.mmlawus.com or contact:
Timothy P. Peterson Robertson T. Park Adam Stern
+1-202-661-7027 +1-202-661-7022 +1-202-661-7016
email@example.com firstname.lastname@example.org email@example.com
1 Jonathan Calvert and Heidi Blake, Plot to buy the World Cup, THE SUNDAY TIMES, June 1, 2014, http://www.thesundaytimes.co.uk/sto/news/uk_news/fifa/article1417325.ece.
2 Such payments may, in addition, violate other anti-corruption laws, such as the UK Bribery Act. This article does not examine the potential application of such laws.
3 No. 11–15331, 2014 WL 1978613 (11th Cir. May 16, 2014).
4 The FCPA also prohibits payments to “public international organizations;” however, the FCPA defines such organizations as only those entities so designated by executive order. 15 U.S.C. § 78dd-1(f)(1). Neither FIFA nor the IOC have been designated as such.
5 Esquenazi at *8-9.
6 See, e.g., the Australian Minister for Sport; the Ministry for Sport of Russia; and the Ministry of Culture, Sports and Tourism for the Republic of Korea.
7 See, e.g., Olympic Funding Often Reflects Country’s Values, Voice of America, Oct. 27, 2009, http://www.voanews.com/ content/a-13-2008-06-16-olympic-funding-often-reflects-countrys-values-66821302/374425.html (“The United States is one of only three countries where Olympic athletes receive no government funding.”); James Buckley, Jr., The toughest race for Olympic athletes is the one for funding, CNBC, Feb. 5, 2014, http://www.cnbc.com/id/101374365 (“[U]nlike millions of athletes in other countries . . . the careers of [US] Olympic athletes are not financially supported by the government.”)