FIFA Reputation Tarnished After Ruling

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

December was not a good month for FIFA — the lordly, all-embracing organization that rules the global game of soccer. Not a good month at all. At FIFA’s headquarters in Zurich, Switzerland, they are used to being treated with awed respect. They expect to get their own way, and they usually do.

Apparently, nobody told a U.S. district judge, Loretta Preska, about FIFA’s sanctity. After presiding over a case in which MasterCard sued FIFA for breach of contract, Preska issued her judgment on December 7. She found in favor of MasterCard, awarded them costs, and absolutely flayed FIFA for the way it conducted negotiations with MasterCard.

MasterCard has been FIFA’s exclusive financial services sponsor for the past five World Cups. It’s been an apparently satisfactory arrangement for both parties, with Pelé bringing his immense personal charm as the Master-Card World Cup spokesman.

The current contract expired with this summer’s tournament in Germany. A new contract was under negotiation at the beginning of this year, in accordance with MasterCard’s contractual first-refusal rights (or “first right to acquire” as FIFA prefers to name it).

But while FIFA was dealing with MasterCard, it was also talking to Visa. “FIFA’s negotiators,” says Judge Preska, “lied repeatedly to MasterCard” by not telling them they were speaking with Visa, and they “lied to Visa” when they repeatedly assured Visa that MasterCard had no first-refusal rights.

Judge Preska confronts FIFA with its own “fair play” slogan, calling these negotiations “anything but fair play.” Her report is a masterpiece — so clear, so concise, and so light on the legalese that it makes irresistible reading.

Her straight-to-the-point style is evident throughout — as in her withering remark, tossed in almost as an aside, that FIFA’s Tom Houseman “holds himself out as legal counsel but is not authorized to practice law in any jurisdiction” Houseman, along with the FIFA marketing director Jerome Valcke and two other negotiators from the FIFA marketing department, Robert Lampman and Stefan Schuster, do not fare well under Judge Preska’s critical gaze. She draws attention to the way in which they “characterized their breaches” as “white lies,” “commercial lies,” or “bluffs.”

Parts of Schuster’s testimony are labeled “wholly incredible,” other parts “ludicrous.” On one point, Valcke’s credibility is “totally destroyed.”

Briefly: Valcke and his associates negotiated with MasterCard and got everything they wanted — basically, $180 million in cash, for an eight-year deal covering the World Cups to be staged in 2010 and 2014. Approval for the deal was voted by the three required FIFA committees, and a final contract was drawn up, signed by MasterCard, and couriered to FIFA. But it was never signed by FIFA. Unknown to MasterCard were FIFA’s parallel negotiations with Visa, who — in Judge Preska’s words — were being given “blowby-blow descriptions of the status of the FIFA-MasterCard negotiations.”

At the moment when FIFA appeared ready to clinch a deal with MasterCard, Valcke called Visa and told them that, if they upped their $150 million offer by $30 million (i.e. to match Master-Card’s bid) they, not MasterCard, would be FIFA’s new financial services partner. Visa agreed. The Visa offer was then presented to the FIFA committee meeting and — in Judge Preska’s words — “further to Mr Valcke’s prior assurance … that ‘Visa would be the partner,’ Messrs. Valcke and [FIFA President Sepp] Blatter . . . then engineered that result at the FIFA board meeting.”

The Visa offer was actually presented as consisting of $195 million. The extra $15 million was termed “marketing in kind” — a commitment that Houseman described as “pretty meaningless.”

There followed the curious affair of differently dated contracts. Two copies of the Visa deal were signed by Blatter and Visa International president Christopher Rodrigues on April 6, 2006. Both contracts were produced for the court: Visa’s version bore the April 6 date, but the FIFA copy was dated April 3. The FIFA version also carried a “signature of Mr. Rodrigues that, to the untrained eye, appears noticeably different from the signature of Mr. Rodrigues on the Visa-produced version of the contract.” FIFA offered no explanation for the discrepancy.

The date was important because on April 5 FIFA informed MasterCard that it already had an agreement with Visa — when, in fact, nothing was signed until the following day.

Well before these suggestions of skulduggery, the FIFA marketing department staff was clearly aware that things had gotten out of hand. Evidence from internal e-mails shows an anxiety to find a convincing reason to offer MasterCard for the rejection of its offer. Schuster ponders “how we (as FIFA) can still be seen as having at least some business ethics”, and how to “make the whole f***-up look better for FIFA.” Lampman sees nothing but trouble: “Guys … having read all these exchanges upon wake up here it seems like a dream … a nightmare that is! … this is going to be very ugly.”

Although under warning from MasterCard that legal action was pending, and they should not announce their deal, FIFA and Visa went ahead anyway, with a press conference on April 10.

MasterCard’s resulting legal action has now led to Judge Preska’s verdict in its favor — a judgment that prohibits FIFA from going ahead with its Visa contract and requires it to accept the MasterCard agreement.

FIFA reacted to the verdict on the same day with ringing self-assurance: It would appeal the verdict in the Swiss courts and “fully expects to prevail.” It also added: “FIFA remains convinced that at all times it acted in good faith.”

A statement that lost credibility only five days later, when FIFA summarily fired all four marketing negotiators — Valcke, Houseman, Schuster, and Lampman — and admitted that “Even though the judgment has proved to be very biased in favor of MasterCard, the fact cannot be overlooked that FIFA’s negotiations breached its business principles. FIFA cannot possibly accept such conduct among its own employees.”

With that statement, FIFA is admitting the guilt of its employees, and greatly reducing the chances of a successful appeal. The revelations in Judge Preska’s report are indeed devastating. FIFA clearly knows that it has a massive task ahead to ensure all of its many sponsors, present and future, that fair play reigns in Zurich.

pgardner@nysun.com


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