Direct Democracy as the Solution to Corruption in Publicly Funded Sports Stadiums

In 2002, billionaire Jeffrey Loria purchased the Miami Marlins, a Major League Baseball team, for $159 million. In May of 2017, Luria agreed to sell the team for reportedly $1.3 billion, earning a profit of over $1.1 billion. Some of that profit can be explained by the increased valuation of all sports franchises in the last decade, but a large reason for the eye-popping jump in value is the Marlin’s new, privately owned—but largely public funded—stadium. In 2011, Miami-Dade County agreed to contribute more than $400 million for the stadium. Including interest, the estimated total cost to the county is $2.4 billion dollars. Prior to reaching a deal for the new stadium, Mr. Loria donated various amounts to local government officials, including $40,000 to the county commission chairman in 2008, and $50,000 to Mayor Alverez.  (The SEC conducted a four-year investigation into whether Loria’s donations were unlawful bribes, but ultimately dropped the investigation.)

Such a story is common in sports stadium construction. In the past 15 years, more than $12 billion in public money has been spent on privately owned stadiums. The loans used to pay for such construction, typically tax-exempt municipal bonds, will also cost the federal government at least $4 billion in taxpayer subsidies to bond holders. There’s an ongoing debate about whether taxpayer dollars should be used to fund privately owned stadiums, but that’s not my focus here. Rather, I want to focus on how this system creates opportunities for corrupt deals between team owners and local government officials.

Before government officials vote on whether to approve public funding for a new stadium, the team’s billionaire owners often make “campaign contributions” to the responsible government officials. It is difficult to prove that these donations are unlawful bribes, as doing so would require proving a quid pro quo exchange. Yet when billionaire owners donate to local government officials, who then happen to approve hundreds of millions of dollars in public funding for the billionaire’s stadium—which directly increases the value of the owner’s assets by hundreds of millions of dollars—it looks a lot like bribery. The example of Mr. Loria making donations to Miami-Dade officials is hardly unique. Consider the following additional illustrations Continue reading

Reforming FIFA: Why Recent Reforms Provide Reason for Hope

Over a year has passed since Gianni Infantino was elected President of FIFA. When elected, Infantino promised to reform the organization and win back the trust of the international football community following the numerous incidents of corruption that preceded his tenure as President (see here and here). Corruption not only existed at the executive level of FIFA, but also permeated down to the playing field, where incidents of match fixing and referee bribery were widespread. On the day he was elected, Infantino remarked, “FIFA has gone through sad times, moments of crisis, but those times are over. We need to implement the reform and implement good governance and transparency.”

Yet despite some reforms in the past year, a recent Transparency International report–which surveyed 25,000 football fans from over 50 countries—showed that the public still lacks confidence in the organization, with 97% of fans still worried about corruption, especially match fixing and bribery of officials. While the results show some improvement compared to the previous year, the numbers should worry both Infantino and FIFA: 53% of fans do not trust FIFA, only 33% of fans believe FIFA is actively working against corruption in football, and only 15% of fans have more confidence in FIFA now than they did during last year’s corruption scandal.

The public’s distrust of FIFA is certainly understandable, as is a degree of cynicism regarding Infantino’s promise to clean up the organization. After all, Sepp Blatter ran on a similar platform to Infantino when he elected President in 1998, also claiming that he was going to reform FIFA. Yet despite the lack of confidence in Infantino and FIFA, there are a few reasons to believe that change may be occurring within the organization, and that FIFA, under Infantino’s leadership, may be making strides in the right direction. Since Infantino’s election, FIFA has undertaken the following steps to curb corruption within football and the organization:

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The Interational Olympic Committee’s Revised Host City Contract: Another Failed Attempt at Preventing Corruption

Recent Olympic Games, including the 2014 Sochi Winter Games and the 2016 Rio Summer Games, have been dogged by corruption scandals (see here and here). The Sochi Games were particularly egregious: Russian politician Boris Nemtsov believes that the total scale of the embezzlement accounts for 50-60% of the stated final cost of the Russian Olympics. One example cited was the main 40,000-seat Fisht Olympic Stadium, which was first projected to cost about $49 million. Anticorruption activist Alexy Navalny estimates that the real final cost could well exceed $520 million and may total more than $700 million, many times the fair value. This has led to some very bad publicity for the International Olympic Committee (IOC), which organizes the Games. In response to these and other concerns, this past February the IOC made changes to its Host City Contract, which sets out the requirements that cities must meet in order to host the Olympic Games. For the first time, the IOC included specific anticorruption standards and human rights requirements, which were noticeably absent from all previous versions.

The revised provision in the contract states that [the host city must] “refrain from any act involving fraud or corruption, in a manner consistent with any international agreements, laws and regulations applicable in the Host Country and all internationally-recognized anti-corruption standards applicable in the Host Country, including by establishing and maintaining effective reporting and compliance.” The IOC’s revised language integrated a number of recommendations from organizations such as Transparency International, Amnesty International, and the Sport and Rights Alliance. IOC President Thomas Bach explained that the IOC adopted the changes because “[t]ransparency, good governance and accountability are key elements of Olympic Agenda.”

However, both the substance of the terms and lack of enforcement mechanisms mean this provision does absolutely nothing in fighting corruption. The change is little more than a public relations stunt by the IOC to improve its image following numerous criticisms from recent games. Rather than applauding Bach for placing words in a contract, anticorruption activists should continue to push for meaningful change at the Olympic Games. The revised contract fails to represent genuine progress on fighting Olympic corruption for three reasons:

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How to Combat Match Fixing, the International Corruption Problem in Sports

The recent rise and prevalence of corruption in sport has drawn the attention of the international community. As Transparency International highlights in their 2016 report, professional sports not only engage billions of people worldwide, but also involve significant amounts of money. Such corruption thus creates tremendous societal and economic burdens. Match fixing is one form of corruption that has impacted a wide range of sports, including tennis, cricket, soccer, boxing, basketball, and baseball all within the last year. This problem not only permeates low-level games, but also impacts high-profile events such as World Cup qualifiers, European Championship qualifiers, and even Champions League Games.

On the surface, it may seem as though match fixing is a victimless crime, or at least one that’s not sufficiently serious to attract the attention of anticorruption advocates. Yet because match fixing scandals have implications that stretch far beyond the playing field, the anticorruption community should care about this problem for at least two reasons. First, as previously discussed on this blog, corruption scandals in sports are highly visible, and corruption in sports can attract public attention in ways that other corrupt activities cannot. Second, match fixing facilitates organized crime and other corrupt activities. Organized criminals engage in match fixing because it is a low-risk enterprise with the potential for large rewards from unregulated betting markets.

A recent report by the United Nation Office on Drugs and Crime investigated match fixing and tried to understand some of its underlying causes. The report cites a number of factors that have allowed this threat to grow, including “personal greed, weak governance structures of sport as a sector, easily accessible global betting markets that are open to exploitation, low prioritization of match fixing as a threat by law enforcement agencies and the use of sport by organized criminals to advance their own interests.” In attempting to address these causes, 28 countries have proposed, adopted, or enacted specific legislation criminalizing match fixing. Yet even in those jurisdictions where such sanctions exist, regulations have been ineffective. Unfortunately, the complicated transnational nature of sports betting makes it difficult for regulations to prevent match fixing in an effective way. Proving that match fixing occurred requires collection and analysis of a substantial amount of betting evidence, which is particularly difficult to obtain in unregulated betting markets. Furthermore, despite the presence of regulations, significant financial incentives continue to pressure athletes to participate in match fixing.

Therefore, given the inherent difficulties with controlling such behavior, there are two things that can be done to more effectively deter match fixing.

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Doping and Corruption in Sports: Why We Should Care, and What We Should Do

In December of 2014, a German TV channel, Das Erste, released a documentary alleging that a “majority” of Russian track and field athletes—up to 99% as claimed by one whistleblower—had been illegally doping, and implicated Russian Athletics Federation (RAF) officials with covering up the abuse. The alleged scheme was simple: in exchange for 5% of an athlete’s winnings, the Russian Anti-Doping Agency (RUSADA) would supply athletes and doctors with performance enhancing drugs (PEDs), and RUSADA and the RAF would protect athletes against positive tests through a combination of tip-offs, false identities, and clean urine.

In response to the allegations, Russian and international authorities were quick to express outrage and condemn any wrongdoing. The RAF threatened legal action against what it deemed “slanderous allegations,” while the International Association of Athletics Federations (IAAF) and the International Olympic Committee (IOC) promised to investigate. Last month, however, Lamine Diack, the president of the IAAF, was placed under criminal investigation by French authorities for allegedly taking 200,000 Euros in bribes to cover up positive Russian doping tests, despite having previously referred to allegations of systematic doping and corruption as “a joke.”

The full scope of the scandal was substantiated in an exhaustive report issued by the World Anti-Doping Agency (WADA) on November 9, 2015, which not only implicated high level officials at the RAF and IAAF, but also Russian government officials in the Ministry of Sport, and even the FSB, the modern-day successor to the KGB. While doping scandals may be most commonly thought of as a few bad apples cheating to win, the WADA report made it evident that this was a full-blown state-sponsored corruption scheme that profited public officials, and as such should merit the attention of the anticorruption community.

This scandal offers several takeaways for the anticorruption community:

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Sports Anticorruption Initiatives: Hail Mary or a Home Run?

Corruption in sports—whether it be match-fixing, the systematic use of performance enhancing drugs, or bribes paid to secure lucrative hosting duties—is by no means a new phenomenon. However, as Transparency International recently noted, this type of corruption has, since at least 2010, been gaining increasing prominence both among anticorruption advocates and the broader international community. Perhaps the most striking example of this trend is the considerable coverage that the various scandals emanating from FIFA’s selection of the World Cup’s host countries has engendered over the past few years (including Melanie’s posts on this blog here and here). Yet the issue is much broader. Last year, for example, a “landmark study” revealed that criminal gangs launder more than £80 billion in the UK from illegal sports betting, and commentators have decried the “dramatic growth in reports of corruption” in sport more broadly.

In response to these increasing concerns regarding corruption in sport, a number of different initiatives have sprung up: The International Olympic Committee has created a “hotline for whistleblowers to report match-fixing and other corruption,” China recently announced that it would be cracking down on the “sport for millionaires” – golf – as part of its broader anticorruption efforts, and last month Transparency International unveiled its Corruption in Sport Initiative, which is focused on “[k]eeping sports clean.”

While it is too early to evaluate the efficacy of some of these programs, it nonetheless may well be worth taking a step back to consider the broader question of whether or not corruption in sports should be a priority for the anticorruption community. Continue reading