Yellow card

Accused of the dirty game FIFA is facing the budget cuts and the weakening of its brand.  As per The World Bank estimate, the scale of corruption leads to the increase of the business losses in the world by 10% per year, which equals to a trillion dollars that pass through hands as bribes.
The Organization for Economic Cooperation and Development shows similar but also not very comforting evidence that annual corruption amounts to approximately 5% of global GDP.

At the same time, seven out of ten the most corrupt African countries, located to the south of the Sahara, occupy the last ten places of the so-called Human Development Index (composite statistic of life expectancy, education, and standard of living). The Infant mortality in the countries with the high level of corruption is twice as much comparing to the countries where corruption is minimal.
Above information was included as one of the leading arguments of the British Prime Minister David Cameron’s speech at the last European summit, who is persistently offering Europe and the world his agenda of the fight against the corruption.
David Cameron and his party use it for their domestic political reasons and due to the inevitable need to establish the new relationship with the EU, which UK is about to leave. In any case, the National referendum on this issue will be held in end of 2017, the outcome of which is the matter of great concern for the country's business circles.
The direct reason for starting this campaign by David Cameron was, of course, the continuous corruption scandal around FIFA.  According to some reports, the scandal allegedly was initiated by some British journalist who handed over the documents, he possessed for some time, to US legal officials. These data were added to those that they already had and thus initiated the investigation.
The political undertones in FIFA case are not limited to the British trail.  There is another point of view, according to which the scandal was initiated by Americans and the anti-Russian forces in general, wishing to use whatever possible to denunciate, cancel or postpone the 2018 World Cup in Russia. The best way to achieve that purpose was to blame the FIFA that had chosen Russia.
The fact that this scandal was instigated by the United States adds fuel to fire. The extraterritorial jurisdiction of USA causes much misunderstanding and rejection.
In addition, both the USA and Britain playing the leading role in the attacks on FIFA, coincidentally, lost the nomination competitions to hold the World Cup to Qatar and Russia some time ago.
However, we can only guess if some special time was chosen deliberately of if the campaign was pre planned, and if so, by whom.  Firstly, it more that clearly demonstrates that the worldwide sport is inseparable from the politics.  Secondly, whatever the outcome of the case will be, FIFA as well as the other international sports and perhaps not only sports organizations will have to work in a different reality.


Pale faces, trembling hands
Racketeering, fraudulent money laundering and bribery totalling $ 150 million comprise the set of US Department of Justice indictment of, according to some sources, 14 and according to other, - 18 senior acting and former executives and officials of FIFA.
It is believed that the 79-year-old Joseph Blatter resigned immediately after the election as the head of FIFA as per the advice of the lawyers. They considered that the US authorities were prowling too close to him, and, if anything, it would be more convenient for him to defend himself, as a private person.
As an interim result of the investigation lasting nearly two decades, the arrests and searches took place at the headquarters of FIFA in Switzerland.  The arrested are facing a fair chance to appear before the US court. There were many speculations about some strangeness of choosing the venues of football Championships and other oddities in the functioning of FIFA.  However, such decisive actions have never been made.
At some point, the nearly explicit discontent and criticism of FIFA and its leadership even forced Joseph Blatter to establish something like the ethics commission in July 2012 and to hire a well-known American lawyer, Michael Garcia to investigate the allegations of the votes trading and bribery.
However, after two years of investigation Michael Garcia was unable to explore the whole array of necessary documents and evidence, neither could he meet with the key figures of the case. His activity resulted in the publication of an abbreviated version of the final report, which Garcia himself called “a collection of the misconceptions and wrong conclusions."  In December 2014, he left FIFA, and FIFA continued to function as if with a clear conscience.
The current activity of the fighters against corruption in football clearly shows that, at least for the moment, FIFA is not immune anymore, and there is no reason to believe that someone would want to put an end to it. According to the eyewitnesses, pale as a sheet, with trembling hands officials could be seen during searches at the headquarters of FIFA. Which shows that they understood the seriousness of the situation. The press is full of allusions that once the FIFA officials have all the relevant information they, perhaps, will be inclined to talk providing more details and much willingly, increasing by this the number of defendants and the amount of money involved. The investigators intend to look into all the nooks of the financial mechanism of FIFA.  Well, or at least to declare that they have looked.


Fundraising issues
FIFA, uniting 209 football federations, earns money by simple, traditional means: the sale of the rights to broadcast the World Football Championships; the sale of so-called, and also related to the Championships  Hospitality rights; the sale of tickets for the Championship matches; the sale of the rights to use the FIFA brand, for example, for video games and at last by investing.  A significant proportion of revenue is provided by the sponsors and the partners of FIFA, who are the very same sponsors, but more closely affiliated and privileged.
Thus, for example, from 2011 to 2014 FIFA earned $ 5.7 billion, including slightly more than $ 2 billion in 2014, the year when the World Cup in Brazil was held.  The final match of the championship between Germany and Argentina, according to FIFA, was fully or partially viewed by one 1 billion people.  The profit of FIFA resulted from this Championship was $ 2.6 billion, $ 2.4 of which was gained from the sale of rights to TV broadcasters.
The tickets’ sales brought $ 527 million, regardless the fact that the demand was estimated at slightly more than eleven million and only about a third of this number of tickets was put on sale.  The sponsors provided FIFA with $ 1.6 billion within the period from 2011 to 2014. According to the FIFA 2014 Financial Report, the income breakdown for 2011-2014 was as follows: 43% - TV rights, 29% - marketing agreements (with the sponsors and partners), 28% - miscellaneous.
The question arises- what has happened to this money?  In principle, the answer is known. $ 88 million was spent for the salaries of FIFA staff in 2014, including $ 40 million to 13 top officials.  The Federation also invests in the development of the football.  From 2011 to 2014 $ 1 billion was invested in the development of the football infrastructure, sports facilities, equipment and education.
However, there were some strange and inexplicable investments. For example more than $ 10 million was spent on the acclaimed by critics film ‘United Passions’, produced and directed by the French screenwriter Frederic Auburtin (‘The League of Dreams’ released in Russian version in 2014).
FIFA, as written on their website, has adopted the Financial Statements system according to the Western public companies standard in 2003, so that the all-financial information on the activities of the Federation is in the public domain and looks quite decent.
However, according to the practise of the public companies, in general and particularly in the football, the most interesting activities are typically deployed without witnesses.  In addition, FIFA is not a company as such but a hybrid of the business organization and an institution distributing some benefits at its discretion.  Hence, it may cause the potential discontent and result in various abuses.


The smile of the Cheshire cat
For those dissatisfied with FIFA its business called ‘Hospitality’ serves as a kind of a red flag in bullfighting.  Its two constituents are the tickets sale and the offering the service packages to large companies for the invitation, accommodation and entertainment of the important persons during the FIFA events, mainly the football World Cups.
It is worth mentioning that the offered tickets are the best and, of course, the most expensive ones, and the accommodation is provided exclusively in the suites, not mentioning the catering, transport and other extras for the fun of especially important and valued guests.
Starting from 1986 this business was farmed out to one single contractor selected, as you may guess, without any tender.  The press, however, has the evidence that $ 240 million had been paid for the exclusive right to act in such instance during the championships of 2010 and 2014.
Actually, there are only two companies really working with FIFA in that capacity: the MATCH Hospitality, registered in Zurich and the British Cheshire and the MATCH Event Services AG created in 2007. Both companies have quite a complicated history of mergers and sales of the shares within the last few years, but still remain tightly connected with Enrique and Jaime Byrom brothers and are the daughter companies of Byrom Plc.
It is very compact, soldered family business.  Byrom brothers are the majority shareholders (65%).  Jaime Byrom is the executive president of the MATCH Hospitality while Enrique Byrom is the member of the Board of Directors.  The Swiss company Infront Sports & Media, engaged in the sports marketing and advertising is also listed as shareholder.  Since 2005 its president and CEO is Philippe Blatter, the nephew of Joseph Blatter.
In 1986, the Byroms business was active at the World Cup in Mexico as an independent operator, but later both companies became the regular subcontractors of FIFA.  Moreover, they are involved not only in the Championships, but also in the Confederations Cups (National teams’ tournaments, taking place in the host country a year before the next World Cup).
One can imagine the scale of their business by the wide-published fact that out of about 3 million tickets for the 2014World Cup in Brazil, 450 thousand were allocated to the MATCH Hospitality for their corporate clients.  Tickets were included in the service package for guests, and the cost of the package varied from $ 700 to more than $ 100 thousand per person.  By the way, the British CEO of the MATCH Hospitality Ray Whelan is wanted by the Brazilian police. They intend to interview him in relation to the fraud with tickets for the Championship in 2014.
In November 2011, the continuation of the cooperation between the MATCH Hospitality and FIFA was announced.  The company has obtained the exclusive right to work at the World Championships to be held in Russia in 2018 and in Qatar in 2022.  The agreement between the parties also covers the Confederations Cups in 2017 and 2021 and the FIFA Women's World Cups in 2019 and 2023.
Philippe Blatter’s Infront Sports & Media can also look forward to the bright future.  In 2011, again without any tender, it acquired the rights to broadcast matches of the World Cups in Russia and Qatar all over the Asia, that is, in such key markets as China, Indonesia and India. The  Infront Sports & Media covered the broadcastings of the Championships in 2002, 2006, 2010 and 2014.
It is also worth mentioning, that Philippe Blatter prior to the Infront Sports & Media worked at McKinsey Sports Practice, where he served the interests of FIFA.  In 2002, the former general secretary of FIFA, Michel Zen-Ruffinen claimed that starting from 2000 Joseph Blatter placed orders with McKinsey for $ 7 million, precisely because his nephew worked at that company.

"Yes, I took bribes"
The former member of the executive committee of FIFA (voting for candidate countries to host the World Cup), now 70 years old and recovering after the intensive treatment of the bowel cancer American Chuck Blazer acknowledged in writing and verbally, that he and other members of the executive committee took bribes by simply trading their votes, when they worked out the decision on the 2010 World Cup in South Africa.
He admitted the bribery was involved in the 1998 World Cup in France.  He gave his evidence to authorities back in 2013 and thereafter, as they say, worked undercover recording conversations with his colleagues of FIFA using the bug in his key ring.
"Starting from the beginning of 1993”, Chuck Blazer says in his affidavit, “Until 2000, I and the others agreed to take bribes and kickbacks ...".  Having bought two luxury apartments in super luxury Tramp Tower in New York, he put one of them at the disposal of his cats.  He hid money offshore and did not pay taxes, thus when the authorities charged him with, besides others, the enormous financial frauds, he decided to choose the active cooperation.
Among arrested in Switzerland, including those basing on the Blazer’s evidence, were the officials of FIFA: the Vice-president Jeffrey Webb, the member of the Executive Committee of FIFA in Costa Rica Eduardo Li ... The former vice president of FIFA, Jack Warner, accused of taking bribes amounting to $ 10 million is hiding in his home in Trinidad.  By the way, owning the luxury real estates in the most beautiful places of the world is the very common feature of those involved in the scandal.


Toxic brand
Joseph Blatter is not suspected of wrongdoings yet.  The question is whether those violations have really taken place and if the head of FIFA knew about them.  It seems, however, that FIFA sponsors have already made their decisions.  Firstly, back in 2011 some of them for the first time dared to criticize FIFA and appealed to reform it. At that time Coca-Cola, Emirates, Adidas and Visa have articulated their concern about the accusations of corruption in FIFA.
In the current situation, the largest sponsor companies of FIFA (Adidas, Coca-Cola, Emirates, Visa, Sony and Hyundai) are under the even greater pressure from their consumers.  Visa stated not only its concerns, but advised that it has informed FIFA of its intention to review the sponsorship unless there would be any changes.
Adidas spoke in the same spirit.  All the sponsors of FIFA, in one way or another made their statements of condemnation, except "Gazprom", which has a sponsorship agreement in connection with the 2018 World Cup in Russia.  It is estimated that the monopoly paid $ 80-100 million for it.
One can assume that even if FIFA would not lose some part of its sponsorship budget, the latter still will be reduced.  Sony and Emirates refused to renew their sponsorship contracts in November 2014. The 8 years’ contract with Sony's is estimated at $ 280 million. Emirates, commenting on the termination of the cooperation, said that its’ results did not meet their expectations.
In January 2015, the so-called the ‘lower level’ of sponsors like Castrol, Johnson & Johnson and Continental Tyre left FIFA.  Among the sponsors of this level are McDonald's, Anheuser Busch InBev, the Brazilian Oi and Seara and the Chinese Yingli Solar.  Such sponsors usually sign contracts for four years, that is, one cycle of the championship before the next championship, and pay about $ 10- $ 25 million.
It is a high time for the sponsors to think whether the association with the FIFA would strengthen their brands, or the effect will be reversed.  Brand Finance Consultancy has estimated that losses of the major brands due to their association with the FIFA’s tainted reputation could cost up to $ 1 billion.
At the same time, the uncertainty threatens to drag on. The investigations and processes of this kind can last for years.  Moreover, it is not clear who will succeed Joseph Blatter.  Most mention Michel Platini, the head of UEFA.  However, he, for that matter, voted for holding the World Cup in Qatar.  Moreover, not only voted but also actively promoted the idea of transferring the Games to the winter season to avoid the summer heat in Qatar.
Reporters have unearthed that ten days before the vote Michel Platini was invited to lunch at the Elysee Palace by the President of France Nicolas Sarkozy, where he met with the prime minister of Qatar.  Next year, the state owned Qatar Sports Investments bought the French football club Paris Saint-Germain, and pretty soon after that, the son of Monsieur Platini became the head of the Qatari sports clothing company BURRDA.

Yulia Zheglova