- The Interdisciplinary Corruption Research Network (ICRN) website
- Google Podcasts
- Apple Podcasts
- Pocket Cases
- Radio Public
After a brief summer hiatus, I’m happy to announce that a new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, my collaborators Nils Köbis and Christopher Starke interview Michael Hershman. Mr. Hershman, one of the co-founders of Transparency International (TI), has had a long and distinguished career on issues related to transparency and anticorruption, including work with the U.S. Senate Watergate Committee, the U.S. Agency for International Development, and, more recently, the Independent Governance Committee for FIFA. In the interview, Nils and Christopher talk with Mr. Hershman about his background, the founding of TI, the relationship between corruption and populism, and issues related to corruption and sports, among other topics.
You can find this episode here. You can also find both this episode and an archive of prior episodes at the following locations:
- The Interdisciplinary Corruption Research Network (ICRN) website
- Google Podcasts
- Apple Podcasts
- Pocket Cases
- Radio Public
KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.
Just over one year ago, in June 2019, Ahmad Ahmad, the president of the Confederation of African Football (CAF) and a Vice President of FIFA (international soccer’s governing body), who had long been dogged by reports of corruption, was detained by French police at a luxury hotel in Paris. Eight months later, in February 2020, the accounting firm PwC released an audit of CAF’s finances, documenting scores of financial irregularities by Ahmad and his colleagues, including an alleged kickback scheme involving a company run by a friend of Ahmad that did business with CAF.
CAF is just the latest in a long line of international soccer organizations beset by corruption scandals. Corruption in international soccer, long the subject of rumor and speculation, first made mainstream headlines back in 2015, when the U.S. Department of Justice unsealed a series of indictments against officials in FIFA and the regional soccer federations for North and South American (CONCACAF and CONMEBOL, respectively). Those indictments—and the resulting public outcry—forced FIFA, CONCACAF, and CONMEBOL to adopt a series of structural anticorruption measures, such as publicizing financial statements and creating independent audit committees.
Unfortunately, those reforms are not enough. The alleged corruption by Ahmad and his CAF colleagues is not anomalous, but rather symptomatic of two important factors that will continue to contribute to corruption in international soccer, notwithstanding the reforms implemented by FIFA and a few other federations in the aftermath of the 2015 indictments.
As I explained in my last post, the game of tennis—because of its one-on-one format and unusual scoring system—is especially vulnerable to match fixing. This risk has become ever more significant with the explosion in the global sports betting market, particularly online betting. Professional tennis’s Governing Bodies (which include the Association of Tennis Professionals (ATP), Women’s Tennis Association (WTA), the Grand Slam Board, and the International Tennis Federation (ITF)), have demonstrated their concern about this sort of corruption for over a decade, publishing reviews on integrity in tennis in 2005 and 2008, establishing the Tennis Integrity Unit (TIU) to govern anticorruption matters in 2009, and adopting a mandatory anticorruption educational program for players and officials (the Tennis Integrity Protection Programme (TIPP)) in 2011. Yet, despite these efforts, match fixing and spot fixing continue to be a major problem. In January 2016, Buzzfeed and BBC published a bombshell report alleging not only that match fixing in tennis was pervasive, but also that the TIU and the Governing Bodies had suppressed evidence on the extent of the problem. The Governing Bodies quickly released a statement “absolutely reject[ing]” the suggestion that they had suppressed evidence of match-fixing, but they nonetheless immediately commissioned an Independent Review Panel to evaluate integrity in tennis.
Almost three years later, in December 2018, the Panel published its conclusions and recommendations in a 113-page Report, which the Governing Bodies endorsed. While the Panel found no evidence suggesting that the TIU or the Governing Bodies had covered up any wrongdoing, the Panel did conclude that the sport’s current anticorruption efforts are “inadequate to deal with the nature and extent of the problem,” and recommended changes to the sport’s governance policies and institutions.
The Report’s greatest strength—its no-stone-unturned thoroughness—is also its greatest flaw: More academic than pragmatic, the Report neither prioritizes its proposals nor sufficiently considers their financial feasibility. Given that the Panel attributes economic challenges—such as the under-compensation of lower-ranked players and the lack of resources allocated toward the TIU—as major reasons for widespread corruption in tennis, it seems unrealistic to think that the Governing Bodies could afford an across-the-board implementation of the Panel’s proposals. Thus, the Governing Bodies’ implementation plan should prioritize the Panel’s various recommendations, with an eye toward financial feasibility. Specifically, the Governing Bodies should: Continue reading
Although wagers on tennis make up only a relatively small fraction of the global sports gambling market (estimated at around 12% of that market in 2015, compared to 65% for soccer), tennis seems to account for a disproportionate share of gambling-related match fixing and other forms of corruption. For example, ESSA (a non-profit dedicated to integrity in sports betting) reported that of the 496 cases of “suspicious betting” that it flagged across all sports in 2015, 2016, and 2017, 336 (68%) stemmed from bets on tennis matches. Of course, a suspicious betting alert does not necessarily indicate that match fixing or other corrupt activity actually occurred (see, for example, here and here), but still, that a sport comprising just 12% of the global sports betting market could generate over two-thirds of suspicious sports betting activity is striking, and consistent with expert assessments on the prevalence of corruption in tennis. Indeed, in 2005, Richard Ings, then the Executive Vice President for Rules and Competition for the Association of Tennis Professionals (ATP), wrote that “if a sport could have been invented with the possibility of corruption in mind, that sport would be tennis.”
Two factors in particular make tennis particularly susceptible to gambling-related corruption: Continue reading
From the U.S. federal government prosecuting FIFA officials in New York City to Transparency International both announcing an organizational initiative on sports anticorruption and publishing a 398-page report on the topic, it seems clear that governments and NGOs alike have deemed sports corruption a high priority. One can debate whether sports corruption is sufficiently important to merit this level of attention, though there’s a case to be made (as Lauren Ross argued on this blog a few years back) that sports’ broad appeal, media coverage, and status as a symbol for fair competition together give anticorruption efforts in sports an importance that exceeds the direct social harm caused by, say, match fixing relative to other forms of corruption (like medicine theft). That said, just because there may be special value to sports-related anticorruption initiatives in general doesn’t mean that all legally viable sports-related anticorruption enforcement opportunities should be pursued. Indeed, over-emphasizing sports can lead to a dubious allocation of government resources, a problem illustrated by a recent US case (United States v. Gatto) in which several defendants were convicted for their roles in a college-basketball bribery scheme.
To understand the Gatto case, it’s important first to understand the underground economy for student-athletes. In the U.S., the non-profit National Collegiate Athletic Association (NCAA) governs the $13-billion college sports industry, with most of the NCAA’s revenue coming from men’s college basketball. (If men’s college basketball programs could be bought and sold like professional sports franchises, the most valuable would be worth $342.6 million.) Critically, however, because of the NCAA’s amateurism rules, the student-athletes whose talent drives this industry can neither receive compensation from their universities (beyond cost-of-attendance athletic scholarships), nor earn money through endorsements, autographs, jersey sales, or any other monetization of their name or likeness. The value generated by the unpaid players is captured by others in this system, such as head coaches (who are the highest-paid public employees in 39 out of 50 states), NCAA executives, and university athletic directors. Given this system, it’s altogether unsurprising that top high-school basketball prospects often receive compensation for attending a given university via an underground economy. The corruption scheme at issue in Gatto was a particularly egregious example of this underground economy in action: Employees at an athletic-shoe company (Adidas), which sponsors a number of men’s college basketball programs, conspired with assistant coaches at those programs, and with an aspiring talent agent, to bribe elite high-school basketball prospects to attend the Adidas-affiliated universities. This deal looked to be win-win-win-win. The athletes benefited because they received compensation that better reflected their market value. Adidas benefited both from having elite college-basketball players wearing their brand on national television and from the increased probability that some of these players would sign an endorsement deal with Adidas if they turned professional. The universities profited from the economic windfall associated with enrolling an elite basketball prospect. And the aspiring talent agent boosted his odds of being formally retained when the player turned professional.
Nonetheless, this scheme was technically illegal, and so the jury was analytically correct in convicting the defendants at trial. But just because the defendants broke the law doesn’t mean that the prosecutors should have brought the case. Indeed, this case is one where, for three policy-related reasons, it would’ve been better if the U.S. Department of Justice hadn’t gotten involved: Continue reading
Last May, the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA), finding the federal prohibition on sports betting unconstitutional. Accordingly, all states (not just Nevada) may now legalize sports betting. Excited about the potential revenue bump, a few states, including New Jersey and Delaware, have already passed legislation to open their doors to sports betting. Other states including Pennsylvania, New York, Mississippi, and West Virginia have sports betting bills pending in their legislature, and at least fifteen other states have introduced bills in some form. Unlike PASPA, a federal statute that provided a uniform application for nearly all states across the country, each state’s gambling laws will be unique to their state. And those lawmakers who are considering enacting gambling legislation are also trying to determine how to best regulate the industry—a complicated issue that requires balancing a number of difficult considerations, including: how the state should tax sports betting; whether the state should allow for in person bets only or also online betting; whether the state should permit access to bets with a higher risk of corruption, such as one-off prop bets; and whether the state should the state provide fees to leagues to assist them in corruption prevention. (See here for a discussion of these issues in New York).
While there is a debate in the anticorruption community about whether legalization of sports betting is good or bad for corruption, for those states that do decide to legalize betting, it’s important to do it in such a way that the black market for sports betting shrinks. States considering legalization must ensure that legal betting is a sufficiently attractive option as compared to sports betting in the black market. Otherwise, sports bettors will remain in the black market, which not only would pose numerous challenges for regulating corruption but also would lead to low revenues for states. Thus, at least for those states that choose to legalize sports betting in some form, the twin objectives of maximizing state tax revenue and preventing corruption (especially match fixing and spot fixing), often thought to be in tension with one another, are both advanced by maximizing the market share for legalized betting in their state, as opposed to limiting opportunities for betting.
To maximize market share and decrease corruption risk, states should include the following provisions in sports gambling legislation:
Last October, the United States was rocked by an FBI and DOJ probe into corruption in college basketball. The resulting report detailed a number of ongoing schemes, including bribes paid to players by shoe and apparel companies and bribes paid to coaches to steer players to certain financial advisers. As a response to the government investigation, the National Collegiate Athletic Association (NCAA) established an Independent Commission on College Basketball, chaired by former U.S. Secretary of State Condoleezza Rice, to make recommendations on “legislation, policies, actions and structure(s) to protect the integrity of college sports.” After six months of research, the committee produced a 53 page report which concluded that “[t]he levels of corruption and deception [in men’s college basketball] are now at a point that they threaten the very survival of the college game as we know it,” and outlined a number of recommendations for changing the college basketball system. It is now up to the NCAA to decide whether it will implement the recommendations.
The proposed reforms by the Commission have been met with great skepticism. Critics argue that the report only tinkers at the margins and fails to get to the root causes of the corruption and other problems in college basketball. (For a sampling of the critical responses, see here and here and here). These criticisms go too far. Fixing the complex problems that permeate college basketball will take some time. The reforms outlined in the report, though imperfect, are a step in the right direction, and the NCAA should embrace and adopt them. Among the many proposals advanced by the Commission, the following reforms, if implemented by the NCAA, will have an immediate impact on decreasing corruption in collegiate athletics:
Three years have passed since U.S. federal prosecutors rocked the global sports community by indicting roughly 40 individuals in connection with an investigation into corruption at FIFA. Some preliminary commentary suggested that prosecutors in the FIFA case might bring charges under the Foreign Corrupt Practices Act (FCPA). U.S. prosecutors instead pursued cases under money laundering, racketeering, and fraud charges against the individuals—primarily officials at FIFA and other soccer organizations—who accepted the bribes. In December 2017, for example, prosecutors obtained their first convictions from jury trials in this case, as Juan Ángel Napout (former president of South American football’s governing body) and José Maria Marin (the former president of Brazil’s football federation) were found guilty of racketeering, money laundering, and fraud for accepting large sums of money in exchange for lucrative FIFA media rights deals and influence over FIFA tournament hosting decisions.
The reason that the DOJ has only targeted bribe-taking FIFA officials, and has not used the FCPA to prosecute those who paid those bribes, is that bribes paid to FIFA officials fall outside the FCPA’s scope. But that could, and perhaps should, change.
The 1998 amendments to the FCPA expanded the statute’s scope to cover bribes not just to officials of foreign governments, but to officials of “public international organizations.” An organization may be designated as a public international organization either through an executive order pursuant to an existing statute (the International Organizational Immunities Act), or—importantly for present purposes—“any other international organization that is designated by the President by Executive order[.]” Pursuant to this statutory authority, the President has the power to designate international sports governing bodies like FIFA, the International Olympic Committee (IOC) and others as “public international organizations” for FCPA purposes. (The fact that these sports bodies are nominally private does not prevent this; while most of the roughly 80 public international organizations currently covered by the FCPA are intergovernmental organizations like the World Bank and the International Monetary Fund, the list also includes some private, non-profit organizations, such as the International Fertilizer Development Center.) If the President designated international sports organizations like FIFA or the IOC as “public international organizations” for FCPA purposes, then individuals or firms that bribed officials at those organizations could be prosecuted under the FCPA, so long as the U.S. has jurisdiction over the defendants.
This is not a novel or radical idea. For decades, legislators and activists have clamored for designating sports organizations such as FIFA and the IOC as public international organizations under the FCPA. The discussion first surfaced in 1999, when U.S. Senator George Mitchell requested President Clinton to declare the IOC a public international organization following findings of a bribery-ridden culture in the Olympic movement. Senator John McCain later introduced a bill that would bring the IOC under the definition of public international organization under the FCPA, but the bill never made it out of committee. Although these past efforts proved unsuccessful, the time is ripe for revisiting this idea. Indeed, there are at least two compelling arguments for designating FIFA and the IOC as public international organizations under the FCPA.
The rise of corruption in sport has captured the attention of many anticorruption groups, including Transparency International and the United Nations Office on Drugs and Crime. Sports corruption takes many forms, but one of the most prevalent is match fixing, which occurs when players or officials alter the outcome of a sporting event in a way that benefits those who bet money on those “fixed” games.
In the United States, concerns about match fixing, among other things, led Congress to enact the Professional and Amateur Sports Protection Act (PASPA) in 1992. The Act prohibits most states from legalizing sports gambling, with only Nevada allowed to offer betting on single games. Yet PASPA failed to curb gambling on sports, mainly because bettors turned to the black market; each year, Americans gamble an estimated $150 billion-$400 billion in illegal sports betting.
PASPA appears to be in legal jeopardy: Last December, the U.S. Supreme Court heard oral arguments in the case of Christie v. National Collegiate Athletic Association (NCAA), and while a decision in the case is not expected until later this year, legal experts believe that the Supreme Court will invalidate PASPA. This would provide all 50 states with the opportunity to legalize and regulate sports betting in their state. With that in mind, it is important to consider the effects that legalized sports gambling may have on bribery in professional sports.