Nike's "entanglement with the biggest scandal in the soccer world" began with a 10-year, $200M deal with the Brazilian Football Federation (CBF) in '96, according to Germano & Kowsmann of the WALL STREET JOURNAL. It was a "headlong plunge into unfamiliar territory" for the company. Sources said that Nike "entered a country -- and the top echelon of a sport -- without much knowledge about how deals there were negotiated." This resulted in "missteps that ultimately caught Nike up" in the investigation into corruption at FIFA. Nike's contract states that the company "was to pay the Brazilian soccer federation directly, not a middleman working on its behalf." But the 161-page indictment made public last week "alleges in a barely veiled reference to Nike" that $30M of the sponsorship pact was "paid out through a side deal between the company and a middleman." The indictment alleges that the middleman "used part of that money to pay bribes." Nike said that it is "cooperating with authorities." The indictment "sheds light on how the big-money business of soccer created big risks for its sponsors." Nike to secure the deal in Brazil "had to negotiate with a middleman -- called Traffic Brazil -- which was the marketing agent for the Brazilian soccer federation." Traffic Sports Founder & Owner José Hawilla, whose name also "appears as a signatory to the contract, has admitted to crimes including money laundering, fraud and extortion related to the broad soccer probe" (WSJ, 6/5).
FOLLOW THE LINES GOING SOUTH: REUTERS' Haynes & Boadle wrote Nike and some other big int'l companies "face a grilling over their powerful role in Brazilian soccer as a former star player turned senator vows to expose what he describes as suspect marketing contracts and their links to corrupt payments." Former Brazilian footballer Romário, who led Brazil to victory at the '94 World Cup wearing Nike boots and is now a senator, is "leading a new congressional probe into sponsorship deals in the wake of U.S. graft charges that have shaken the soccer world." He said that he "wants to investigate such sponsorship deals to see if they were used to funnel money to officials and exert undue influence on the sport." The commission will "start next week" (REUTERS, 6/5).
