Sports and secrecy go together. Hut-hut and hush-hush are almost one and the same. Look at all those disguised traps in the stadium task force’s plan for a Chargers subsidy that could purloin a billion dollars from San Diego County taxpayers.
Shhhh. The public doesn’t know what is going on in closed-door huddles among San Diego’s mayor, the county, and the Chargers. Or among National Football League owners.
But United States teams hardly have a monopoly on secrecy. The real excitement today is in overseas tax and secrecy havens — mainly Switzerland, history’s most notorious hideaway for stashing money, dodging taxes, and concealing secrets. The Swiss-based Fédération Internationale de Football Association, better known as FIFA, regulates and promotes soccer and is in charge of major international soccer tournaments, particularly the World Cup, which crowns the global champion every four years.
Scholars and law-enforcement officials have known for years that the association is a thoroughly corrupt enterprise. In late May, the United States Justice Department unsealed a 47-count indictment charging 14 individuals with racketeering, wire fraud, and money laundering, among other offenses that had been going on for 24 years. Charges like racketeering are usually used on the Mafia or drug cartels. “Undisclosed and illegal payments, kickbacks, and bribes became a way of doing business at [the soccer federation],” said James Comey, director of the Federal Bureau of Investigation.
Federation corruption is “rampant, systemic, and deep-rooted, both abroad and here in the United States,” said Attorney General Loretta Lynch.
One of those arrested was Jack Warner, a federation official from Trinidad and Tobago — a Caribbean tax-and-secrecy haven. The New York Times described how in 2004 Warner was shopping the right to host a World Cup. Morocco offered Warner a $1 million bribe. But South Africa offered $10 million to a group that Warner controlled and landed the 2010 World Cup. Warner diverted his millions for personal use.
Also indicted was Jeffrey Webb, a former banker in the Cayman Islands, the Caribbean pirate cove. According to Tax Justice Network, the Caymans are the world’s fourth-largest tax-and-secrecy haven, behind Switzerland, Luxembourg, and Hong Kong. The Caymans are the world’s fifth-largest money center (or sixth, depending on the source). That is amazing for such a tiny string of islands. Webb had been manager of business development at Fidelity Bank (Cayman) Limited.
Webb is head of the federation branch covering Central and North American soccer. It had been headed by Warner before Webb took it over. Bloomberg News says the organization was corrupt before Webb took the reins. The bribe-taking continued to flourish. The indictment states that Webb and a co-conspirator covered up one bribe by funneling the money through an overseas company that makes soccer uniforms and balls.
Among other things, the indictment charges that Webb was arranging bribes even before he took over the Central and North American branch of the federation. Some $50,000 was plunked into a Cayman Islands account controlled by a Webb associate. On another occasion, a $3 million bribe “was sent through an elaborate maze of companies to disguise that Webb was the ultimate beneficiary,” says Bloomberg. The money ultimately went into Georgia real estate, says Bloomberg.
Switzerland is also home of the International Olympic Committee, which has had its share of money scandals (Salt Lake City 2002, Nagano 1998, for example). And then there’s Union Cycliste Internationale, known for doping scandals. Switzerland is also home to the International Ice Hockey Federation, the International Crossbow Shooting Union, and international federations representing archery, Olympic winter and summer sports, baseball, softball, amateur boxing, canoeing, gymnastics, volleyball, skiing, roller sports, and rowing, plus the Court of Arbitration for Sport, the World Anti-Doping Agency, and the International Federation of Sports Chiropractic.
Why do all these sports organizations choose to locate in Switzerland? Insiders will insist they need the country’s war neutrality. Or claim they want employees who speak several languages, as many people in Switzerland do. These tales are as credible as Wall Streeters telling you they are going to Switzerland to ski and the Caymans to snorkel.
The real reason is that Switzerland has a law applying to associations, or what it calls “charities.” A sports group gets all kinds of tax breaks. But most importantly, the Swiss do not insist on disclosure and transparency. Bank details on financial transactions are hidden from public view.
It’s little wonder that this landlocked European country of only eight million people attracts not only much of the world’s dirty money but also sports organizations that preach wholesomeness while practicing corruption.
Even before the indictments came down, Switzerland was looking into requiring the sports governing bodies to manifest more accountability and transparency. After the United States Justice Department acted, the Swiss launched an investigation of their own. The nation carried out arrests on United States’ request. (Switzerland and the Cayman Islands, among some other tax havens, are now cooperating — sort of — with nations hunting down tax-dodging citizens.)
The United States soccer indictments have spurred law-enforcement action elsewhere. According to Yahoo.com, South African police are looking into bribes that may have been passed as that country maneuvered to get the 2010 World Cup. Police are looking into Australia’s bid for the 2022 World Cup.
What do those bribes accomplish? It isn’t a healthy economy for the host countries. There is little evidence that Olympics or World Cups boost long-term tourism, draw investment, or stimulate local economies. Brazil, host to last year’s World Cup and host to the 2016 Summer Olympics, may spend $25 billion on new stadiums, according to the New York Times. Seldom-used stadiums are economic sieves. Nonetheless, Qatar may spend $200 billion for the 2022 World Cup, using near-slave labor to build more stadium seats than there are residents of the country.
Early this year, a book by Smith College economist Andrew Zimbalist hit the shelves. Its name is Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup. The conclusion, according to Brookings Institution Press, the publisher, is, “Zimbalist finds no net economic gains for the countries that have played host to the Olympics or the World Cup. While the wealthy may profit, those in the middle and lower income brackets do not, and Zimbalist predicts more outbursts of political anger like that seen in Brazil surrounding the 2014 World Cup.”