Unless you were on another planet last week, you know that the U.S. Department of Justice announced a wide-ranging criminal action against nine FIFA officials and five corporate executives. (See here for the various criminal informations and the 164-page criminal indictment).
Perhaps because the criminal actions – largely against foreign nationals – alleged corruption the FIFA-related action was widely reported in the media as a Foreign Corrupt Practices Act enforcement action. For instance, this Washington Post sought to explain how Watergate (a historical event which in part lay the groundwork for the FCPA) explains how the U.S. can prosecute FIFA officials and implied that the FCPA was somewhat relevant to the criminal charges last week.
However, the 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.
Under the FCPA, “foreign official”:
“means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.
The term “public international organization” means– (i) an organization that is designated by Executive Order pursuant to section 1 of the International Organizations Immunities Act (22 U.S.C. § 288); or (ii) any other international organization that is designated by the President by Executive order for the purposes of this section, effective as of the date of publication of such order in the Federal Register.
In short, FIFA officials are not “foreign officials” under the FCPA and because they are not “foreign officials” the FCPA’s anti-bribery provisions are not implicated.
Nevertheless, the conduct alleged in the FIFA-related charging documents could potentially result in FCPA scrutiny for certain companies.
Indeed, the FIFA-related charging documents refer to a multinational sportswear company headquartered in the U.S. (“Sportswear Company A”) and how this company paid the Brazilian soccer federation (“CBF”) $160 million over 10 years for the right to be one·of CBF’s co-sponsors and to be CBF’s exclusive footwear, apparel, accessories, and equipment supplier. According to the indictment, CBF remitted a percentage of the value of the payments it received under the agreement to Traffic Brazil, an intermediate entity at the core of the FIFA-related allegations.
The indictment alleges:
“Additional financial terms were not reflected in the Agreement. Sportswear Company A agreed to pay a Traffic affiliate with a Swiss bank account an additional $40 million in. base compensation on top of the $160 million it was obligated to pay to CBF pursuant to the Agreement. On July 14, 1996, three days after the Agreement was signed, a representative of Sportswear Company A and a representative of Traffic Brazil … signed a one-page letter agreement acknowledging as follows: “CBF has authorized Traffic, or its designated banking agent, to invoice [Sportswear Company A] directly for marketing fees earned upon successful negotiation and performance of the . . . [Agreement].” Between 1996 and 1999, Traffic invoiced Sportswear Company A directly for $30 million in payments.
[Traffic Brazil] agreed to pay and did pay [a high-ranking CBF official] half of the money he made from the sponsorship deal, totaling in the millions of dollars, as a bribe and kickback.”
Given the above definition of “foreign official,” the CBF official is unlikely to qualify.
However, the Wall Street Journal reported that Nike is believed to be “Sportswear Company A” and Nike is an issuer subject to the FCPA’s books and records and internal controls provisions, provisions which are more generic than the anti-bribery provisions and operate independently of the anti-bribery provisions.
At the very least, the above allegations as to Nike could potentially implicate the FCPA’s books and records and internal controls provisions. Even though the alleged conduct occurred in the late 1990’s, FCPA enforcement actions are commonly based on old conduct given that cooperation – not legal principles such as statue of limitations – is often the name of the game in FCPA enforcement actions. Nevertheless, an enforcement action based on conduct that allegedly occurred 15 years ago would seem to press this common enforcement tactic to the extreme.
In response to the FIFA-related actions, Nike released as statement indicating that the company has “been cooperating, and will continue to cooperate, with the authorities.”
Many are describing the FIFA-related actions as yet another example of extraterritorial application of U.S. law.
Before jumping to this conclusion, consider the following.
- As to the core alleged bribery scheme, three of the defendants are U.S. citizens; various of the regional soccer associations implicated have offices in the U.S.; several of the intermediate sports marketing companies have headquarters, offices or affiliates in the U.S.; and the indictment contains several allegations concerning use of U.S.-based bank accounts, phone calls from the U.S.; and in-person meetings in the U.S. in furtherance of the alleged bribery scheme.
While such U.S. allegations may be overshadowed by non-U.S. allegations in the charging documents, the FIFA-related enforcement action certainly does not break any new ground concerning expansive jurisdictional theories – theories often alleged in FCPA enforcement actions against foreign actors.