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 Romario, a revered striker who led Brazil to victory at the 1994
World Cup wearing the U.S. sportswear giant's boots, is leading a
new congressional probe into sponsorship deals in the wake of U.S.
graft charges that have shaken the soccer world.
Three Brazilians were among those named and charged in the U.S.
indictment, including a former head of the Brazilian Football
Confederation (CBF).
Neither Romario nor Brazilian prosecutors have alleged that Nike did
anything illegal, despite the company's $160 million deal in 1996 to
sponsor Brazil's team being linked to kickback payments in the U.S.
indictment released last week.
Nike was not named in the indictment but there was only one company
that fit the prosecutors' description. In a statement last week,
Nike noted that the charges did not allege it engaged in criminal
conduct or that its employees were involved in or aware of bribery.
Romario, Brazil's leading voice for soccer reform whose playing fame
boosts his influence, says 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, which will start next week, will have the power to
subpoena witnesses, bank records and private contracts, but cannot
issue search or arrest warrants.
Among companies whose sponsorship deals with the Brazil team have
come under scrutiny in recent years are airline TAM, the Brazilian
arm of regional giant Latam Airlines Group, and Ambev SA, now a
subsidiary of Budweiser-maker Anheuser-Busch InBev.
"These brands are going to be front and center in the investigation
... They won't be able to remain silent," said Fernando Ferreira,
head of sports marketing firm Pluri, citing the heavy focus on
sponsors in a similar probe 15 years ago.
"People are fed up and they want to know what sponsors are doing
with the power of their checkbooks to demand changes in the sport."
Sponsors in Brazil have been hesitant to publicly address corruption
concerns, emphasizing their support for the national team rather
than the CBF. The use of intermediaries is common in contracts in
Brazil and sponsors may not have any direct knowledge of wrongdoing.
Previous investigations have revealed deals for broadcast and
marketing rights that involve intermediary firms funneling
sponsorship money to close associates of CBF officials, opening the
door to kickbacks and bribery.
Romario met with Brazil's top federal prosecutor on Monday and said
they were cooperating on the investigation. Federal police have
investigated former CBF officials for money laundering and tax
evasion, but federal prosecutors have not confirmed any formal
charges.
One lawyer with expertise on corruption cases and corporate
compliance said that the CBF's status as a private entity meant that
a company could not be charged with giving it bribes.
"At worst, the problem will be damage to its (the company's) image,"
said the lawyer, who asked not to be identified.
Prosecutors would have to go after intermediaries on other charges,
like money laundering and tax fraud, he said.
"A VERY DIFFERENT MOMENT"
The U.S. indictment said that in the 1996 deal "Sportswear Company
A" - apparently Nike - agreed to pay $40 million in "marketing fees"
that were not in its initial contract with the CBF to the Swiss bank
account of an affiliate of Brazilian sports marketing firm Traffic.
Jose Hawilla, the founder of Traffic who was named by the indictment
as convicted on graft charges, agreed to pay half of everything he
made from the deal to an unidentified senior member of the CBF,
according to the U.S. Department of Justice. That amounted to
"millions of dollars, as a bribe and kickback," the indictment said.
The new Brazilian Senate inquiry reprises a congressional probe 15
years ago. The probe was consumed by political infighting and did
not result in formal charges.
But it brought to light previously secret aspects of the Nike deal
that gave the firm remarkable influence over the team that has won
the World Cup an unmatched five times.
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It revealed that the deal gave Nike the right to arrange five
friendly matches for the team per year, picking opponents and
players included in so-called "Nike games".
Lawmakers also grilled a Nike executive and coaches over one of the
world's greatest soccer conspiracy theories - that pressure from the
sponsorship deal led to the selection of star striker and Nike
poster boy Ronaldo in the 1998 World Cup final even though he was
sick. Brazil lost the game. Nike and Ronaldo denied the allegations.
Despite the controversy, Nike's Brazil business has thrived.The
country contributes around a billion dollars of Nike's annual
revenue, about 5 percent of its global business, compared to just
half a billion in revenue from all of Latin America and other
non-core markets in 1996.
Romario's new investigation quickly gathered the support of fellow
senators and President Dilma Rousseff's government. He says
Brazilians will not tolerate the impunity that followed the last
probe.
"I think it's a very different moment. The soccer kingpins are weak.
The whole world is watching. This isn't just about soccer in
Brazil," he told Reuters by email.
"What I can promise you is that I will do everything possible to put
the crooks behind bars."
Those who investigated the deals of the 1990s say business practices
around the sport have changed little.
"In recent years, the soccer deals have grown much bigger, but
they're still based on the same model, with intermediaries and shell
companies to launder money," lawmaker Silvio Torres, who authored a
report on the 2000 commission, told Reuters.
Several of the sponsorships he investigated remain in place.
Romario has flagged sponsorships as an avenue for graft in the CBF,
citing one deal with TAM.
TAM stopped sponsoring the national team in 2012 after a newspaper
Folha de S.Paulo reported that its contract paid $7 million per year
to companies owned by a close associate of former CBF President
Ricardo Teixeira. A TAM representative said it was ready to clarify
the details of its 2007-2012 sponsorship to authorities.
A Senate investigation uncovered details of a 2001 Ambev sponsorship
deal in which at least $9 million went to an intermediary company
owned by a close associate of Teixeira.
Ambev and Inbev declined to comment on the matter.
Teixeira left the CBF in 2012 amid a police investigation into
reports that he had taken millions of dollars in bribes from a
sports marketing firm. He denied the allegations and was not charged
for any wrongdoing. Efforts to reach Teixeira were unsuccessful.
Current CBF President Marco Polo Del Nero says he knew nothing about
alleged bribery schemes involving the federation and is cooperating
with official investigations.
Under Nike's current Brazilian sponsorship deal through 2026,
details of which are not public, the firm pays the CBF $40 million
per year, according to a source familiar with the contract.
(Reporting by Brad Haynes and Anthony Boadle; Additional reporting
by Rodrigo Viga Gaier in Rio de Janeiro; editing by Stuart
Grudgings)
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