Monday, June 1, 2015

Does the Foreign Corrupt Practices Act Apply to FIFA?

Over the past decade the US government has increasing used a 1977 law to go after corrupt international business practices that touch on US shores in some way. The provisions of the Foreign Corrupt Practices Act (FCPA) are far-reaching and consequential.

But does the act apply to FIFA? Here a few expert perspectives:

First, on the "no" side:
[T]he FIFA-related action is NOT an FCPA enforcement action.  Rather the individuals were charged with racketeering conspiracy, wire fraud, money laundering and certain defendants were also charged with tax evasion and obstruction of justice.

Nevertheless, the conduct alleged could potentially result in FCPA scrutiny for certain companies.

As the FCPA Guidance rightly notes: “the FCPA does not cover every type of bribe paid around the world for every purpose …”.

Indeed, the FCPA’s anti-bribery provisions only apply to bribe payors and not bribe recipients and the various FIFA officials are generally alleged to be bribe recipients.  Further, for there to be a violation of the FCPA’s anti-bribery provisions a “foreign official” must be an actual or intended recipient of a payment scheme.
This legal note (in PDF) agrees that FIFA itself in unlikely to fall under the FCPA, but argues that national FAs certainly might:
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.
As always in such matters, its complicated. Here is what Reuters reported on the possible application of the FCPA in relation to Nike's alleged role in the scandal:
The description of the $160 million, 10-year deal signed by "Sportswear Company A" matched exactly the details of Nike's agreement to become the footwear and apparel supplier and sponsor of the world's most successful national soccer team.

Still, the U.S. Justice Department is likely to take a tougher stance against those who solicited bribes than those who paid them, especially if a company did not have a long history of paying bribes, said former U.S. federal prosecutor Michael Volkov.

"Where the case is going, it's not focusing as much on the people who were shaken down as it is on the people doing the shaking," Volkov said.

While the 14 defendants in the indictment are being charged with crimes such as money laundering and wire fraud, the United States has normally prosecuted U.S. businesses for foreign bribery under the 1977 Foreign Corrupt Practices Act (FCPA).

That law's anti-bribery provisions apply to dealings with governments and government officials and may not be of much use in the soccer world because soccer associations are typically not government agencies. The Brazilian Football Confederation (CBF), which signed the 1996 deal with Nike, is a private organization.

"The FCPA does not prohibit private bribery," said Homer Moyer, who specializes in FCPA cases at the law firm Miller & Chevalier in Washington.

If Nike is thought to have paid bribes by transferring funds from a U.S.-based account, the Justice Department might consider charging the company with "international promotional money laundering," said a former official with the Justice Department's money laundering section.

While seldom used in the past, prosecutors have made increased used of this charge in recent years, said the source, who spoke on condition of anonymity due to his private sector work.

Prosecutors could employ a provision of the FCPA that requires companies to keep accurate accounting records. If the sportswear company in the Brazil deal disguised or hid wrongdoing in its books, it may have violated the law, lawyers said.
For the US to go further than it did last week in its pursuit of FIFA would seem to require breaking some new jurisprudential ground. Stay tuned. 


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