FIFA Charged of Corruption: Will Sponsors Show Red Card? - Analyst Blog
The governing body of the most popular sport in the world – FIFA – trashed its reputation on Wednesday. Seven senior officials were arrested on corruption charges in Switzerland, shocking players, fans and the markets alike. Now, the alleged officials face extradition from the country.
Department of Justice Acts
The Swiss police arrested these officials in collaboration with the U.S. Department of Justice. Further, Swiss authorities also declared a criminal investigation related to the awarding of the rights to host the 2018 World Cup in Russia and the 2022 event in Qatar.
Reportedly, U.S. officials intended to carry out more arrests. The spotlight on the scandal has fallen right before the FIFA elections, slated to be held in Zurich, on Friday. Although the European soccer body – UEFA – called for the elections to be postponed, FIFA said that voting will be carried out as intended. But the fate of the FIFA President, Sepp Blatter, who is fighting for a re-election to the fifth term, is now completely uncertain.
Accusations of Widespread Corruption
U.S. authorities announced that certain officials and sports media and promotions executives were charged in cases involving intricate money laundering schemes, huge amounts of untaxed incomes and millions in offshore accounts held by FIFA officials. These investigations exposed around $150 million in bribes over a period of 24 years, in a sarcastic reminder of the increasing corruption in soccer.
The investigation accused the officials of using various schemes to take bribes from sports marketing firms connected to major tournaments. Further, the selection of the 2010 World Cup host and the 2011 FIFA presidential election were allegedly fraught with corruption.
The U.S. regulators reportedly claimed that vast amounts of money were interchanged between sports marketing firms and FIFA officials from its regional branch – CONCACAF or the Confederation of North, Central America and Caribbean Association Football.
Stocks Facing Penalty
Going by the U.S. Department of Justice indictment, an unidentified global sports company agreed in 1996, to pay $160 million over 10 years to become Brazil's exclusive footwear, apparel, accessories, and equipment supplier. Rumors point to iconic sports apparel and shoe supplier Nike, Inc. NKE, which sponsored the Brazilian national team.
The U.S. authorities also claim that the company agreed to other financial terms which were not included in the initial contract. This reportedly involved paying an extra $40 million as marketing fees to an associate of the sports marketing company Traffic.
Adidas AG ADDYY, which has forged a long association with FIFA, reportedly announced that FIFA should set up more transparent compliance standards. Anheuser-Busch InBev SA/NV BUD, which owns the 2018 World Cup sponsor Budweiser brand, reportedly said it is closely monitoring developments at FIFA.
Global beverage major The Coca-Cola Company KO said the charges have ruined the mission and ideals of the FIFA World Cup, and is concerned about these accusations. Further, credit card processing company Visa Inc. V reportedly said it is disappointed with FIFA and will reconsider its sponsorship deal, if the governing body fails to reform itself.
Such developments might have serious impacts on some large corporates which are in charge of FIFA’s multi-million sponsorship deals. These companies can’t risk their brand reputation and will have to examine their ties with FIFA if they smell even a whiff of wrongdoing.
It will be interesting to see how these international brands maintain a squeaky-clean image yet keep their access to soccer’s huge global fan base. It’s that penalty area none would like to be in.
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