Liquidate FIFA?
Posted on 10/06/2015 in General | Tags: Liquidate FIFA, intermediaries, Football Regulators, football agents
Football Agents and Intermediaries
In this article for football agents & Sports Lawyers, has been reproduced with the kind permission of the author Guy Thomas, Insolvency Partner at Taylor Walton. It consideres the concept for liquidating FIFA or what can International Football learn from the world of Restructuring and Insolvency?
After the shock of the last few days; dawn raids in Switzerland, resignations, celebrations, denouncements, sealed US Federal indictments and (of course) Charles Blazers’s bizarre TV announcement, it’s time consider where this might be heading and what risks wider Football is facing as the recriminations and repercussions begin to spread around the world.
I don’t intend to cover here the question of whether FIFA will review /reallocate the hosting of the World Cup in 2018 (Russia) and 2022 (Qatar). That is a huge problem but essentially one of international politics, contract, organisation and procedural dispute.
Rather, I want to focus now on the risks faced by International Football in the coming months (whether Sepp Blatter hangs on or not) and whosoever is appointed as his successor. My concern is that International Football (as opposed to just FIFA) will lose control of its money.
Amongst the slew of posturing and shrieks that have surrounded the (not quite yet) resignation of Blatter from FIFA this week, four quotes from the President of FIFA, the Chairman of the English FA, the US Attorney General and a US Federal Judge respectively, stood out.
Four Quotes that point the way
Seb Blatter: “FIFA needs a profound restructuring”.
Greg Dyke : “"The real issue now is that whoever replaces Blatter has to be squeaky clean – it has to be someone who can bring in the forensic accountants to sort out the money and find out where it’s gone”.
Loretta Lynch: “The Investigation is on-going” “We will now be speaking through the Courts”.
US Federal Judge, the Honorable (sic) Raymond J Dearie: “FIFA, and its membership or constituent organisation. The Charges relate to events involving an exchange of elicit payments for one purpose or another. They identify FIFA…as what we call a RICO enterprise”. [Note: RICO stands for a Racketeering Influenced Corrupt Organisation)
Restructuring / Reform
First off let us get a couple of the obvious points out of the way:
Reform has to, and will, happen but it is my view that nothing of substance that is initiated or answering to Blatter will survive his departure. Such is the taint of the current regime (especially after Blazer’s “Guilty” plea to US Federal Charges) that Blatter should go and go soon. His functions can be handled by an interim leader and delegated to committee’s pending the election of a new President.
FIFA (as well as its current leadership) will remain in intense focus of US Federal investigations and Court action.
Much as we lovers of the game, may wax on about the spirit of the game, its ability powerful to bring people together, linking and support people of all ages, race and creeds (all of which I believe are true). Money is the lifeblood of any global sports organisation. FIFA is an incredibly influential, multi-billion dollar sports and social organisation but without its money it would be catastrophically weakened and basically ineffective.
Now let’s turn to the (currently) less obvious.
Collision Course
FIFA and those who would genuinely want to get urgent reform under way are in a direct collision course with US Federal authorities and their on gong investigation and potential prosecution of the current regime.
This nexus of this collision will be the organisations money, and particular its ability to hold and distribute its revenue and assets around the world.
Just as in the world of insolvency and restructuring the power and ability of a Court appointed official to seize control of bank accounts and records is swift and terrible to behold.
The next step in the US Federal investigation is to start seizing control of bank accounts and records.
Unless the new leaders of International Football can find a way to insulate the money of FIFA as it goes through its reforms and restructuring then they risk losing control of its money to US authorities.
Allen Stanford, Stanford Financial Group & Stanford 20/20 Cricket: An example from history
One of the options open to the US authorities is the appointment by a US Court of a Receiver.
Receivers are tasked with collation and seizure of a RICO organisation's bank accounts and assets.
For an example of how far their reach is and how ruthless such a Receiver can be, then look no further than the globetrotting US Receiver appointed to seize the assets of Sir Allen Stanford's Stanford Financial Group.
Stanford, as well as embarrassing English cricket Board with his 20/20 knee jogging antics was the head of a corrupt financial scheme with offices, bank accounts and assets all over the world. It was in the eyes of US authorities a criminal organisation. Sound familiar?
At the beginning of its crisis, the Antiguan Government decided that, as it was based in their territory, they would rather a UK based accounting, forensic and insolvency firm (Vantis) be appointed to unpick the mess (or as Greg Dyke might say "follow the money") so, under Antiguan law appointed two liquidators (Peter Wastell and Nigel Hamilton-Smith) to take over control of the Bank and investigate.
The US Receiver and Antiguan Liquidator then began competing investigations and aggressive seizure actions. This tussle became very expensive and messy very quickly and spread over dozens of jurisdictions as the US Court Appointed Receiver Ralph S Janvey (based out of Texas) used freezing and seizure procedures designed to investigate / fight criminal enterprises and the Antiguan Liquidator used civil procedures to achieve the same goal. As an interesting side note, when those proceedings reached London, the Liquidator sought the High Court’s protection whilst the Receiver mainly relied upon the Central Criminal Courts.
There was, eventually, after millions in legal fees had been expended, a settlement between the competing appointments but most commentators have it as an away win for the Receiver.
http://en.wikipedia.org/wiki/Allen_Stanford
What could happen with FIFA?
How bad could it get? In theory, frankly nightmarish. A US Court Appointed Receiver could end up controlling all of FIFA’s bank accounts whilst it continues to investigate the allegations of fraud and corruption against it. Further the authorities may seek orders that effectively seek injunctions to effectively deny other countries from participating in the competitions due to be hosted by Russia & Qatar.
Take a moment to consider either of those outcomes. Now consider this. Whatever the obvious wrongs that need correcting at FIFA the money that sits in those accounts has, for the most part come from European (and to a lesser extent Asian and African) countries, television rights, businesses, clubs and (of course) fans.
Where after all would International Football be without the wealth injected into it by the European marketplace? Why then isn’t the solution to this “criminal” issue coming from Europe?
What are the alternatives?
Any criminal activity by FIFA or its senior staff should be rooted out and the perpetrators prosecuted but that should not be an excuse for the kind of the encroachment by the US authorities envisaged above.
The game of “follow the money” should be seen through and where appropriate recoveries made but not at the expense of just replacing one regime with another that has no interest Footballs spirit and passion.
FIFA should seek a mechanism to protect its assets for the next generation of reformers and administrators to follow the next election AT THE SAME TIME as ensuring that there is an independent forensic investigation of its prior transactions.
There is no suggestion that FIFA doesn’t have the funds to withstand this battering of its reputation and assets but we must recognise the need for change without losing control to a US investigation.
A new organisation could be formed out of the ashes (and wealth) of the old, its affairs investigated and recovery action taken (both criminal and civil).
To this end, I propose the solvent liquidation of FIFA, the appointment of an independent office holder and the formation of a new International Football organisation.
I know this won’t happen overnight but the US investigation is only just getting started, watch this space.
Guy Thomas is an Insolvency Partner at www.taylorwalton.co.uk with an interest in Sports Law
6 June 2015
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