Blockbuster: U.S. Dept. of Justice slaps FIFA, partners with a raft of corruption charges

NEW YORK – The U.S. Department of Justice stunned the soccer world Wednesday morning, unsealing a raft of corruption, fraud and money-laundering indictments against high-ranking officials in FIFA, soccer’s global governing body, and partnering with Swiss law enforcement officials to apprehend seven of the officials in Zurich as FIFA gathers for Friday’s presidential election.

Nine FIFA officials – including CONCACAF honcho Jeffrey Webb and his already-disgraced predecessor – have been charged, along with five corporate executives alleged “to have systematically paid and agreed to pay well over $150 million in bribes and kickbacks to obtain lucrative media and marketing rights to international soccer tournaments” dating back to 1991.

While most of the implicated parties and their alleged activity took place outside the U.S., some of the bank and internet activity took place stateside and far-reaching anti-corruption laws empower the DOJ and the Federal Bureau of Investigation to pursue such activities abroad.

The charges add up to 47 indictments in all, the product of years of intensive investigation. And DOJ officials, speaking at a midmorning press conference in Brooklyn, emphasized that their work is far from over.

The events in question include World Cup qualifiers, the CONCACAF Gold Cup, Copa América (South America’s championship tournament), next year’s jointly-organized CONMEBOL/CONCACAF Copa América Centenario and many more. DOJ is also investigating the controversial selection process of 2010 World Cup hosting rights and the 2011 FIFA presidential election.

DOJ noted that according to FIFA, 70 percent of its $5.7 billion in total revenues between 2011 and 2014 was attributable to the sale of TV and marketing rights to the 2014 World Cup. These enormous amounts of money enabled crooked officials to build “an alliance with unscrupulous sports marketing executives who shut out competitors and kept highly lucrative contracts for themselves through the systematic payment of bribes and kickbacks,” in the words of the DOJ announcement.

The investigation significantly implicates Traffic Sports, the controversial soccer marketing company which currently holds the media rights to many CONCACAF and CONMEBOL properties and also previously operated the North American Soccer League. Traffic is alleged to have splashed more than $100 million just to acquire the rights to future editions of Copa América alone.

In recent years Traffic had trimmed down its involvement in the daily running of the NASL, but it still owns and operates the Carolina RailHawks. Traffic USA president Aaron Davidson, who also heads the RailHawks organization and serves as the NASL’s chairman and chief executive, is among those charged on Wednesday, and reports say he was arrested late Tuesday in Miami, where he lives.

Sportswear giant Nike – though technically as-yet unnamed in the indictments – also finds itself drawn into the situation, with allegations that its acquisition of sponsorship rights to the Brazilian national team in 1996 was aided by bribes and kickbacks.

“The indictment alleges corruption that is rampant, systemic, and deep-rooted both abroad and here in the United States,” said U.S. Attorney General Loretta Lynch in a DOJ press release. “It spans at least two generations of soccer officials who, as alleged, have abused their positions of trust to acquire millions of dollars in bribes and kickbacks.  And it has profoundly harmed a multitude of victims, from the youth leagues and developing countries that should benefit from the revenue generated by the commercial rights these organizations hold, to the fans at home and throughout the world whose support for the game makes those rights valuable.

“Today’s action makes clear that this Department of Justice intends to end any such corrupt practices, to root out misconduct, and to bring wrongdoers to justice – and we look forward to continuing to work with other countries in this effort.”

The New York Times first broke the story around midnight ET Wednesday, and within moments the outlet’s reporters posted photos of Swiss authorities entering the lavish Baur au Lac hotel in Zurich to arrest FIFA dignitaries staying there.

Swiss law enforcement getting room numbers for FIFA execs they are heading upstairs to arrest pic.twitter.com/F69djqpcu5

— Michael S. Schmidt (@MichaelSSchmidt) May 27, 2015

The defendants arrested were Webb, Eduardo Li, Julio Rocha, Costas Takkas, Eugenio Figueredo, Rafael Esquivel and José Maria Marin, at the request of the United States. Meanwhile, a search warrant was executed at CONCACAF headquarters in Miami.

The guilty pleas of the four individual and two corporate defendants that were also unsealed today include the guilty pleas of José Hawilla, the owner and founder of the Traffic Group, Traffic USA’s Brazil-based parent organization, and the related Traffic Sports International Inc., and Chuck Blazer, the quirky, long-serving former general secretary of CONCACAF and former U.S. representative on the FIFA executive committee who reportedly became a cooperating witness for the FBI in 2011 after being threatened with tax evasion charges.

The following is DOJ’s list of indicted defendants and listed charges/pleas:

As set forth in the indictment, the defendants and their co-conspirators fall generally into three categories: soccer officials acting in a fiduciary capacity within FIFA and one or more of its constituent organizations; sports media and marketing company executives; and businessmen, bankers and other trusted intermediaries who laundered illicit payments.

Nine of the defendants were FIFA officials by operation of the FIFA statutes, as well as officials of one or more other bodies:

Jeffrey Webb: Current FIFA vice president and executive committee member, CONCACAF president, Caribbean Football Union (CFU) executive committee member and Cayman Islands Football Association (CIFA) president.

Eduardo Li: Current FIFA executive committee member-elect, CONCACAF executive committee member and Costa Rican soccer federation (FEDEFUT) president.

Julio Rocha: Current FIFA development officer.  Former Central American Football Union (UNCAF) president and Nicaraguan soccer federation (FENIFUT) president.

Costas Takkas: Current attaché to the CONCACAF president.  Former CIFA general secretary.

Jack Warner: Former FIFA vice president and executive committee member, CONCACAF president, CFU president and Trinidad and Tobago Football Federation (TTFF) special adviser.

Eugenio Figueredo: Current FIFA vice president and executive committee member.  Former CONMEBOL president and Uruguayan soccer federation (AUF) president.

Rafael Esquivel: Current CONMEBOL executive committee member and Venezuelan soccer federation (FVF) president.

José Maria Marin: Current member of the FIFA organizing committee for the Olympic football tournaments.  Former CBF president.

Nicolás Leoz: Former FIFA executive committee member and CONMEBOL president.

Four of the defendants were sports marketing executives:

Alejandro Burzaco: Controlling principal of Torneos y Competencias S.A., a sports marketing business based in Argentina, and its affiliates.

Aaron Davidson: President of Traffic Sports USA Inc. (Traffic USA).

Hugo and Mariano Jinkis: Controlling principals of Full Play Group S.A., a sports marketing business based in Argentina, and its affiliates.

And one of the defendants was in the broadcasting business but allegedly served as an intermediary to facilitate illicit payments between sports marketing executives and soccer officials:

José Margulies:  Controlling principal of Valente Corp. and Somerton Ltd.

The convicted individuals and corporations

The following individuals and corporations previously pleaded guilty under seal:

On July 15, 2013, the defendant Daryll Warner, son of defendant Jack Warner and a former FIFA development officer, waived indictment and pleaded guilty to a two-count information charging him with wire fraud and the structuring of financial transactions.

On Oct. 25, 2013, the defendant Daryan Warner waived indictment and pleaded guilty to a three-count information charging him with wire fraud conspiracy, money laundering conspiracy and the structuring of financial transactions.  Daryan Warner forfeited over $1.1 million around the time of his plea and has agreed to pay a second forfeiture money judgment at the time of sentencing.

On Nov. 25, 2013, the defendant Charles Blazer, the former CONCACAF general secretary and a former FIFA executive committee member, waived indictment and pleaded guilty to a 10-count information charging him with racketeering conspiracy, wire fraud conspiracy, money laundering conspiracy, income tax evasion and failure to file a Report of Foreign Bank and Financial Accounts (FBAR).  Blazer forfeited over $1.9 million at the time of his plea and has agreed to pay a second amount to be determined at the time of sentencing.

On Dec. 12, 2014, the defendant José Hawilla, the owner and founder of the Traffic Group, the Brazilian sports marketing conglomerate, waived indictment and pleaded guilty to a four-count information charging him with racketeering conspiracy, wire fraud conspiracy, money laundering conspiracy and obstruction of justice.  Hawilla also agreed to forfeit over $151 million, $25 million of which was paid at the time of his plea.

On May 14, 2015, the defendants Traffic Sports USA Inc. and Traffic Sports International Inc. pleaded guilty to wire fraud conspiracy.

All money forfeited by the defendants is being held in reserve to ensure its availability to satisfy any order of restitution entered at sentencing for the benefit of any individuals or entities that qualify as victims of the defendants’ crimes under federal law.