FIFA: Friends in Fraud Always
Wednesday’s arrests of high ranking international soccer executives have made front page news around the world. We should be outraged. We should be angry. We should toss our jerseys and refuse to buy any of the sponsors’ products! Burn the evildoers!
And yet, these revelations have sent exactly zero shockwaves through the community. No one is surprised.”Those officials were taking bribes? No! Say it ain’t so!”, said exactly no one. “The idea of being shocked about bribery and racketeering at FIFA is like being shocked about jumping into a pool and finding yourself wet,” said Dave Zirin, sports editor at The Nation magazine.
There are so many offensive parts to this story that it’s hard to know where to begin. Do your own research – you’ll quickly be nauseated by the relentless greed, the disdain for getting caught, the horrific abuses, the dips into your pocket. And it’s been systematically going on for years.
This group became so arrogant, it awarded the 2022 World Cup to Qatar. Qatar. You know, the country with no soccer history, a lack of infrastructure, no stadiums, daytime temperatures of over 50 Celsius. And those problems don’t include the abuse of migrant workers who appear to be dying at the rate of one a day. But what Qatar did have was barrels of money to grease the FIFA wheels.
This is not an attack on Qatar or the Qatari people. It is meant to ask, how did this happen? How could a worldwide organization like FIFA foster such pervasive corruption? And then, what does this mean for your investment portfolio?
The overarching point of last week’s article on the Fraud Triangle is that compliance is up to the leaders. Leaders must lead. And in FIFA, it seems fairly clear that the attitude started at the top with Sepp Blatter, FIFA’s president since 1998. It hasn’t been proven that he was part of any illegal conduct, but when the news of these arrests broke, how did he react and lead his team?
Let’s hear it from Mr. Blatter himself: “Such misconduct has no place in football, and we will ensure that those who engage in it are put out of the game,” Blatter said. “We will continue to work with the relevant authorities and we will work vigorously within FIFA in order to root out any misconduct, to regain your trust and ensure that football worldwide is free from wrongdoing.”
Glaringly absent from any part of his statement is any sense of personal responsibility. He’s been the President of FIFA since 1998. Much of this thievery has thrived under his “leadership”, and yet, none of it appears to be his fault.
I don’t know Mr. Blatter and I’m not saying he’s committed fraud. I have no way of knowing. I am saying that this corrupt environment at FIFA is his fault, and as the leader he must take full responsibility for it. It’s like being the CEO of a public company: even when it’s not your fault, it’s your fault because you’re the CEO.
That’s how the latest FIFA scandal affects your portfolio. The leadership team matters. Find a successful management team, and look at how they have historically carried themselves. There’s a reason people like Paul Colborne have a huge loyal following. Review his history at Startech Energy Inc., Crescent Point Energy Trust, and Star Point Energy Trust, to name a few: he and his team have a history of creating real shareholder value.
Steve Jobs set a tone at Apple. Warren Buffet’s personality is imprinted deep into Berkshire Hathaway. And what did Mr. Blatter do at FIFA?
Start here to get a flavour of the kind of environment he helped create since he became FIFA president.
Then forward to today, with John Whittingdale, England’s Secretary for Culture, Media and Sport, calling for Mr. Blatter’s resignation because the “deeply flawed and corrupt organisation” requires a change of leadership.
Even VISA, long term FIFA sponsor, warned today that FIFA must reform its ways and, “This starts with rebuilding a culture with strong ethical practices…”.
A culture of compliance starts at the top. Don’t risk your money with a leader that thinks otherwise.
Mr. Clausi is an experienced investment banker, executive, director and shareholder activist. A graduate of Osgoode Hall Law School called to Ontario's bar in 1990, ... <Read more about Peter Clausi>