Reforming FIFA from the Inside Out.

Author:Bank, Steven A.
Position:International Federation of Association Football
 
FREE EXCERPT

TABLE OF CONTENTS I. INTRODUCTION 266 II. FIFA AND ITS CORRUPTION 278 III. FIFA REFORM 285 A. 2011-2013 285 B. 2015-2016 288 III. THE SEARCH FOR ACCOUNTABILITY 292 A. Independent Directors in the United States 292 B. Obstacles to FIFA's Reliance upon the 296 Independent Director Model IV. HARNESSING THE POWER OF INSIDERS 298 A. Whistleblowers 299 B. Disincentives to Whistleblowing 302 C. Whistleblower Reforms 305 1. Anti-retaliation Protection 305 2. Facilitating and Encouraging Whistleblowing 306 D. Utilizing Whistleblowers in FIFA 310 1. The Power of Whistleblowing in Football 310 2. Resistance and Retaliation in FIFA 311 E. The Potential for Whistleblower Reform in FIFA 317 V. CONCLUSION 320 I. INTRODUCTION

Although the World Cup in Russia dominated the headlines in the summer of 2018, a black cloud remained over the Federation Internationale de Football Association (FIFA), (1) the tournament's organizer and soccer's global governing authority. (2) In 2015, in what has been called "the World Cup of Fraud," (3) more than forty individuals associated with FIFA were indicted in the United States for fraud, bribery, and money laundering involving hundreds of millions of dollars. (4) An internal investigation by American law firm Quinn Emanuel Urquhart & Sullivan, LLP reportedly uncovered evidence of corruption that went far beyond the original indictments. (5) Former FIFA president Joseph "Sepp" Blatter and former Union of European Football Associations (UEFA) President Michel Platini, neither of whom were named in the US indictments, were both suspended from FIFA for ethics violations. (6) Moreover, in both of the regional confederations governing soccer in the western hemisphere--the Confederation of North, Central American, and Caribbean Association Football (CONCACAF) and the South American Football Confederation (CONMEBOL)--three presidents in a row were indicted and/or suspended for ethics violations. (7) In an attempt to stem the bleeding, FIFA quickly adopted a package of reform measures. (8) These followed closely on the heels of a previous reform effort that FIFA had undertaken after allegations of corruption and bribery surrounding Mohammed bin Hammam's failed campaign for FIFA president in 2011. (9)

What is FIFA's problem? The conventional wisdom has been that it is too insular. As a result, reformers have pushed FIFA to bring in more outsiders. (10) As one observer noted,

[f]or decades its leadership has been drawn almost exclusively from the ranks of the rich and powerful men who serve without term limits or transparency. If FIFA is to have any chance at persuading the world that it's serious about reform and rehabilitating its brand, the organization needs to embrace new leadership and consider recruiting outside the football fraternity. (11) The theory is that an outsider should march into FIFA offices, "presumably with rubber gloves and bleach," and "clean the place out, with fresh elections, new executives, and new rules." (12)

Given these views, it should not be surprising that one of the central features of FIFA's reform plans has been to increase the number of outsiders in key positions. (13) FIFA created an Ethics Committee and an Audit and Compliance Committee, each headed by an independent chair and staffed with members unaffiliated with any other FIFA body. (14) It also mandated that at least half of the members of a number of committees, including the Governance, Review, Finance, and Development Committees, and the Compensation Subcommittee of Audit and Compliance, be comprised of members deemed to be independent under FIFA rules. (15) This is in addition to the requirement that FIFA itself be subject to audits by external auditors who are considered independent under Swiss law. (16) Consistent with the outsider focus of these reforms, Gianni Infantino, FIFA's president, appointed Fatma Samoura, someone with no ties to the sport at all, to the position of secretary-general of FIFA. (17) In announcing her appointment, Infantino praised the fact that Samoura "will bring a fresh wind to FIFA--somebody from outside not somebody from inside, not somebody from the past. Somebody new, somebody who can help us do the right thing in the future." (18)

This push for more independent oversight is straight out of the pages of the US corporate governance reform playbook. For years, increasing the number of outside directors has been a go-to reform in the context of publicly held corporations. (19) Some studies have shown that they help guard against the kind of managerial expropriation that can occur when shareholders are too numerous and dispersed to monitor the managers themselves, (20) although others point out that they also face some unique disincentives to investigate. (21)

Even if outside directors may be beneficial in public corporations, they have not had much of an effect as of yet in FIFA. While problems relating to the old regime continue to surface, such as excessive compensation

arrangements for former executives, (22) disclosures from the Panama Papers that officials may have used transactions to funnel ill-gotten funds through offshore accounts, (23) and fresh revelations of corruption among old-guard football officials, (24) new problems have emerged.

In 2016, Infantino was subject to investigation for ethics violations of his own after reports surfaced that he had ordered the destruction of tapes of a FIFA Council meeting, made lavish expenditures without authorization, and improperly attempted to influence the election of the next UEFA president. (25) Although ultimately cleared of some of those accusations, (26) perhaps the more serious concern is that Infantino pushed through a resolution that would enable the council to remove members of FIFA's supposedly independent committees. (27) This led Dominic Scala, the chairman of the Audit and Compliance Committee, to resign, and has called into question the independence of these committees. (28) Indeed, some have suggested that Infantino was cleared because Ethics Committee members were worried that they would be replaced on the committee if they voted otherwise, (29) an event that came to pass anyway when FIFA subsequently ousted the chairs of the investigatory and adjudicatory branches of the Ethics Committee and the chair of the Governance Committee, (30) prompting several remaining members of these committees to resign in protest. (31) FIFA's long-standing auditor, KPMG, also resigned with immediate effect, (32) citing a lack of "trust that the new management would do what they said they were going to do to improve governance." (33)

In 2017, the Council of Europe launched an investigation of FIFA on the grounds that "new FIFA management under Gianni Infantino has made little effort to overhaul the scandal-ridden football body." (34) In its report, it concluded that FIFA's reform efforts might have made sense on paper, but failed in their implementation. (35) Indeed, according to the Council of Europe's chief investigator, the new chair of FIFA's Ethics Committee may have failed to disclose her ties to one of the former FIFA officials who had pled guilty to corruption charges. (36) Infantino's apparent response was to propose changes that would gut the reforms even further, creating a Bureau of the FIFA Council that would replicate the old Executive Committee and removing the one fully independent member of the Compensation Subcommittee. (37) As one reporter observed, even after all the upheaval of the last few years, "FIFA remains more or less unchanged." (38)

This Article argues that the fundamental problem with FIFA is not so much its insularity as its lack of accountability. FIFA, along with the International Olympic Committee and sixty or more other sports organizations, is headquartered in Switzerland and organized as a nonprofit Swiss association. (39) A nonprofit can still earn profits in the sense of earning revenues in excess of expenses, but it has no stockholders. Even though outsiders can theoretically watch insiders to guard against abuse, (40) no one watches the outsiders in a nonprofit except perhaps donors in organizations that, unlike FIFA, rely upon them. The United States has attempted to address this conundrum for nonprofits through external regulation by state attorneys general and federal tax authorities. (41) The oversight of FIFA, however, by Swiss authorities is still relatively lax and ineffective, (42) notwithstanding recent legislation to address that. (43) Sponsors sometimes do provide a measure of oversight, but they are often not committed to it and, even if they are, others are more than happy to take their place. (44) The closest analogues to stockholders are member nations that comprise the congress that theoretically oversees the FIFA Council. Member nations, however, are ill-equipped to serve in a monitoring role against corruption. Many are themselves corrupt or woefully disorganized. (45) For those that are not, FIFA's ability to favor or punish one individual member nation or region over others with respect to hosting rights or development grants inhibits them from speaking out. (46) The independent members of FIFA committees are therefore selected by insiders and largely remain beholden to them.

Given FIFA's fundamental lack of accountability, it is not surprising that the reforms enacted to date appear to have been relatively ineffective. They are an attempt to apply public company governance regulations to a nonprofit organizational structure. In the public company environment, outside directors are traditionally considered to be a check against managers. (47) Outsiders are potentially useful in this case because they are "disinterested," in the sense that unlike managers they do not work for the company and therefore are able to approach potential conflict situations, such as awards of executive compensation and decisions whether to pursue change-in-control transactions...

To continue reading

FREE SIGN UP