SBJ/June 4 - 10, 2001/No Topic Name
FIFA goes to court, accuses ISL parent
Published June 4, 2001
International soccer governing body FIFA has asked a court to investigate claims of fraud against ISMM Group, the parent of longtime marketing partner ISL. Accusing the Swiss group of "attempting to keep FIFA in the dark," the federation made its claims in connection with a $60 million payment by Brazilian broadcaster TV Globo to ISMM on Sept. 17 for the television rights to the 2002 and 2006 World Cups.
Two weeks ago, the liquidation of ISMM/ISL (based in Zug) was assured when French group Vivendi pulled out of rescuing the Swiss marketing group. ISMM's deadline had already been extended to allow possible salvation by acquisition.
FIFA President Sepp Blatter, meanwhile, said five companies have offered help in finding more sponsors for next year's World Cup finals in Korea and Japan. FIFA in April set up its own marketing company, FIFA Marketing AG, to step into the breach if ISL couldn't fulfill its obligations. FIFA Marketing has recruited staffers from ISL's soccer division.
A decision on whether another company will be named as a permanent replacement for ISL will not be made before the next FIFA executive committee meeting June 12. Current sponsors have been asked to submit contracts signed with ISL to FIFA for examination by today.
On May 25, FIFA described its own financial situation as stable. The federation has been talking to investment bankers about a possible international bond issue to raise $56 million, the sum FIFA estimates it could lose because of the ISL/ISMM failure. FIFA said the bond would be backed by revenue from the sale of marketing rights, and not television, for the 2002 World Cup.
In its charges of wrongdoing against ISMM, FIFA said it had an agreement with ISMM requiring all payments from licensees to go into a Swiss bank account monitored by FIFA. FIFA claims the payment from TV Globo was put into a different ISMM account, which FIFA had no knowledge of or access to.
FIFA's complaint is directed against the chief financial officer of ISMM, Hans-Jürg Schmid, and senior vice president Hans-Peter Weber, plus unnamed third parties. "We have decided to take this step on obtaining evidence that payments due to FIFA were being withheld," Blatter said. "This money belongs to football, and FIFA intends to do everything within its power to shed light on this affair and retrieve the money."
The ISMM Group denied any impropriety and said the payments made by TV Globo constituted a loan.
The fraud allegations are bound to further heat up the atmosphere in the top level of soccer politics. Blatter, in his first term in office, is under huge pressure these days. FIFA recently called off the World Club Championship tourney that was to have taken place this summer in Spain. Blatter launched the event last year as FIFA's first big event in club (as opposed to national team) soccer.
European governing body UEFA, whose president, Lennart Johansson, was defeated by Blatter in the FIFA presidential election in 1998, has come down hard on FIFA, expressing "grave concern at the lack of transparency and clarity" in recent developments. It called for a "full and complete explanation on all issues relating to the bankruptcy of ISL, the cancellation of the World Club Championship, the financing of the Confederations Cup and the role played in these and other related matters by the FIFA president and the FIFA administration."
It is thought that a motion of no confidence regarding Blatter may be considered at the June 12 meeting.
ISMM held the TV rights to the 2002 and 2006 World Cups outside of Europe and the United States.
Jay Stuart is editorial director of SporTVision magazine and Sports TV Report and Sports Investor newsletters.