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 The civil probe, which is in its early stages and may not lead to
any findings of wrongdoing or enforcement action, is being conducted
by the U.S. Securities and Exchange Commission.
It opens a new front in a wide-ranging investigation by the U.S. and
Swiss authorities into bribery involving soccer officials, marketing
executives and various companies. In late May, the U.S. indicted
nine soccer officials - most of whom held positions at FIFA - and
five executives for a range of offences related to more than $150
million of alleged bribes and kickbacks.
The SEC probe centers on publicly-traded companies who have been
involved in soccer contracts, such as athletic shoes and sportswear
company Nike Inc, said the source, who asked not to be named because
of the non-public nature of the investigation.
The exact scope of the probe and the names of other companies being
scrutinized could not be learned.
An SEC spokeswoman declined to comment.
Although Nike has not been specifically named or charged with any
wrongdoing, the company was swept into the scandal when U.S.
prosecutors in the indictment described bribes and kickbacks in
connection with a landmark 1996 Nike deal in Brazil.
The description of the $160 million, 10-year deal signed by
"Sportswear Company A" matched exactly the details of Nike's
agreement to become the footwear and apparel supplier and sponsor of
the Brazilian national team, which at that time was the most
successful in the world.
In a statement on Friday, a Nike spokesman said that the company "is
committed to cooperating with any government investigation into the
FIFA matter.”
In late May, Nike said that the government had not alleged that it
violated the law or knowingly took part in a kickback scheme.
DISGORGEMENT
Securities experts say the SEC could potentially have a hook in the
case through the Foreign Corrupt Practices Act (FCPA), an
anti-bribery law.
The SEC and the U.S. Department of Justice both have power to bring
FCPA cases, with the SEC's jurisdiction centering on violations by
public companies.
The law's core anti-bribery provisions only apply to payments to
governments or government officials. The Brazilian Football
Confederation (CBF), which signed the 1996 deal with Nike, is a
private organization.
But the law contains a corporate books and record-keeping
requirement that applies to other kinds of illicit payments - such
as commercial bribery - that may not be related to government
corruption.
A provision of the FCPA prohibits companies from falsely recording
bribe payments as legitimate business expenses.
For example, if companies misrepresented bribes paid to soccer
officials as marketing or other kinds of expenses in their books, it
could be considered a violation of the law, lawyers said.
Violations of this so-called books and records provision can lead to
fines and disgorgement of ill-gotten gains.
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For SEC cases, it is not enough of a defense for a company to say it
did know that any of its overseas units were involved in paying
bribes.
"Nobody at the parent has to know that the transaction was a bribe
and was misreported, only someone at the subsidiary has to know,"
said one attorney specializing in the FCPA. The attorney is not
directly involved in the case but asked to remain anonymous to
protect client relationships.
"With a bribe, you have to prove that the parent knew. With books
and records, you just have to have a bad entry for the parent to be
responsible."
Nike is the only U.S. public company to be referenced in the U.S.
indictment of the officials and executives.
Major publicly traded companies in the U.S. who are FIFA sponsors
include McDonald's Corp, Visa Inc and Coca-Cola Co.
On Friday, Coca-Cola and McDonald's both added pressure on FIFA for
reforms only days before its executive committee meets on
Monday.[ID: nL2N0ZX1MG]
The SEC has invoked the FCPA's books and records provision before to
charge public companies for violations in connection with commercial
bribery.
Earlier this year, the agency brought civil FCPA charges against
Goodyear Tire & Rubber Co, whose Kenya subsidiaries were accused of
paying bribes to employees of government-owned entities, as well as
private companies.
Goodyear agreed to pay more than $16 million to settle the charges
without admitting or denying wrongdoing.
In another case in 2013, the SEC and the Justice Department both
filed parallel civil and criminal FCPA cases against ATM-maker
Diebold, a publicly traded company accused of bribing government
officials in China and Indonesia.
The U.S. government not only cited official bribes; it also accused
the company of books and records violations in connection with
payments to private Russian bank employees.
The company entered into a deferred prosecution agreement with the
Justice Department, and paid penalties and disgorgement to settle
the matter.
"Even if bribes are made only on a commercial basis, if they are
misreported as promotional or other expenses, they can be the basis
for FCPA liability,” Sidley Austin attorneys wrote in a client memo
earlier this year.
(Additional reporting by Mica Rosenberg in New York; Editing by
Soyoung Kim and Martin Howell)
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