You know when you hear about some friend who bought some weed off a new drug dealer, only to find out it was probably half oregano, and they’re upset but don’t know what to do, and you tell them “Well, it’s not like you can take a drug dealer to court?” Apparently, the crooked marketing execs and venal soccer officials in South America never received such life advice.
Your common business contract will usually include a choice of venue clause, which sets forth how and where any dispute arising from the agreement would be heard. According to the Wall Street Journal, several contracts between Traffic Sports—formerly one of South America’s preeminent marketing firms that specialized in selling the television rights of CONMEBOL’s international tournaments to broadcasters—and various South American officials who sold their federations’ media rights to Traffic had such clauses that pointed to America’s courts. The problem being that these contracts very often only arose after Traffic agreed to pay off these high-ranking officials in exchange for good prices on those television rights.
And in fact, Traffic had twice filed suit in Miami courts over contracts like this. One was a relatively small time affair involving the rights to Honduras’s national team matches. The country’s soccer officials sold those rights to someone else despite Traffic believing the rights contractually belonged to them. There, the court ruled against Traffic. A week ago, federal authorities indicted two Honduran officials on bribery charges related to the sale of television rights.
In another, bigger dispute, Traffic brought CONMEBOL to court over the rights to the 2015 Copa América. Traffic was upset that they had already bribed CONMEBOL officials and yet later discovered that the federation sold the rights to that tournament to someone else.
For this matter, Traffic hired a prestigious American sports attorney who has worked with each of the big four professional leagues. They took this so seriously because there was tons of money at stake, as the WSJ lays out:
The contract between Traffic and Conmebol called for Traffic to pay a total of $46 million for the exclusive marketing rights to three consecutive Copa America tournaments. For the 2011 tournament, the contract called for Traffic to pay $15 million in exchange for all the revenue it could generate from sponsorship and advertising.
That revenue likely reached $150 million, according to court documents and industry experts. In its suit against CONMEBOL, Traffic called the 2011 Copa America the most-watched sporting event in the world that year.
For that large an event, Traffic’s $15 million fee was relatively low, said Christopher Renner, chief executive of Helios Partners, a financial consultant for international sports.
More unusual, he said, was the lack of any provision for CONMEBOL to receive a share of revenue after Traffic had recovered its $15 million and other costs. Typically, any revenue achieved above costs would be split 50/50, Mr. Renner said.
U.S. prosecutors allege that Traffic reaped huge profits from the contract and redistributed them to officials of CONMEBOL in the form of bribes and kickbacks.
A lawyer familiar with the case contended that he did not know that the underlying contract was founded on bribery, and concealing that fact from the contract itself and later the courts was the key to the parties’ plans on getting into court in the first place. It was sort of like agreeing to buy weed off your drug dealer, then drawing up a phony contract to buy some of the dealer’s homemade art as pretext for the payment, then suing the dealer when the weed was bad by saying the contract stipulated that the painting had to come in a frame.
It probably wasn’t all that difficult to tell what was really going on, though, if you really looked. However, the judge in this case never got far enough along to really deal with it, as Traffic and CONMEBOL agreed to a settlement that, as the WSJ describes it, was “what prosecutors call one of the largest bribery schemes in the history of international sports.”
The agreement called for Traffic and two rival marketing firms to form a joint venture and to share the marketing rights to the 2015, 2019 and 2023 Copa America tournaments. In exchange for those rights, the two firms would pay CONMEBOL $300 million, according to the federal indictment.
Not specified in the contract—but decided in private—was that the three firms would pay more than $100 million in bribes to officials of CONMEBOL and other soccer organizations, the federal indictment says.
Photo via AP