How Case 1:17-cr-00224-PKC & The FIFA Scandal Could Now Shape The Future Of FINA

Case 1:17-cr-00224-PKC

The paperwork for Case 1:17-cr-00224-PKC lodged at the United States District Court, Eastern District of New York, makes fascinating reading beyond its headline “United States of America – against – Richard Lai”.

In swimming, the term “case No 1:17-cr-00224-PKC” may one day trip off the tongue of swimming readers like “State Plan 14:25” does, so significant could it become. The future shape of FINA hangs on it.

Case 1:17-cr-00224-PKC raises many questions for swimming.

Some of those will be doing the rounds at the annual Congress of the European Swimming League (LEN) in Marseilles today as the old continent contemplates its chances and campaigns ahead in a bid to lead FINA for the first time in 33 years. The swimming debate is now linked to big movers and shakers in the Olympic realm.

Thomas Bach, IOC president, with Sheikh Ahmad al-Fahad al-Sabah and FINA’s Julio Maglione – courtesy of Jens Weinreich

Among the questions running are:

  • What to do about Husain Al Musallam?
  • Why has FINA not imposed a temporary suspension on Al Musallam given that the U.S. citizen he is alleged to have paid bribes, namely Richard K. Lai, a United States citizen, has pleaded guilty? [pleaded guilty to “a criminal information charging him with two counts of wire fraud conspiracy in connection with his participation in multiple schemes to accept and pay bribes to soccer officials.  Lai also pleaded guilty to one count of failing to disclose foreign bank accounts and agreed to pay more than $1.1 million in forfeiture and penalties”.
  • Why has the FINA executive not opened inquiries into all three men and refererred matters to the organisation’s Ethics Panel?
  • Is a statement saying ‘keeping an eye on it’ really enough under the circumstances?
  • Why is the FINA president Julio Maglione not calling for Al-Musallam to step down pending investigations into soaringly serious matters?
  • What does it all mean for the Kuwaiti succession plan at FINA?
  • How best to throw the continent’s weight behind a challenge to Maglione from Paolo Barelli, the LEN president for the top seat at FINA?
  • And – how did it come to this? How did we manage to build a system, attempt to promote it and call it achievement when, in fact, FINA is on the cusp of collapse, with three of its ruling Bureau members now faces charges of corruption?

Two of those men, Coaracy Nunes, of Brazil, and Ben Ekumbo of Kenya, are alleged to have been engaged in illegal activities in relation to the Olympic Games, while Al-Musallam is cited in a U.S. Justice Department indictment.

Case 1:17-cr-00224-PKC lodged at the United States District Court, Eastern District of New York, makes fascinating reading beyond its headline “United States of America – against – Richard Lai”.

Short recap: Lai is the head of Guam football and a fellow member of FIFA, FINA’s football equivalent living on a somewhat higher plain of power and money. Lai has been accused of receiving almost $1 million in kick-backs/bribes. He is a U.S. citizen and therefore subject to American laws and courts.

The paperwork lodged at the Brooklyn office of the U.S. Department of Justice cites “Co-conspirator 2” and “Co-Conspirator 3”.

While the two people are not referred to by name, their leadership roles at the Olympic Council of Asia (OCA) the Kuwait Football Association (KFA) are – and it is those positions that have identified them as Co-Con 2 and Co-Con 3, who are alleged to have played key roles in the payment of those vast sums of money to Lai.

Case 1:17-cr-00224-PKC

The detail of what is alleged includes the following list of the bribes said to have been paid to Lai by Co-Con 2 and Co-Con 3:

  • Nov. 17, 2009: $200,000
  • Oct. 7, 2010: $20,000
  • Feb. 16, 2011: $100,000
  • April 4, 2011: $50,000
  • May 5, 2011: $50,000
  • Aug. 11, 2011: $200,000
  • Jan. 17, 2012: $125,000
  • Feb. 14, 2012: $125,000
  • Additional transfers: at least $200,000:

Husain Al Musallam

When the co-conspirators were identified far and wide as Sheikh Ahmad al-Fahad al-Sabah (No2) and Husain Al Musallam (No3) they denied any wrongdoing. The sheikh stepped down from all his FIFA role pending investigation but continues to act in key positions at the International Olympic Commitee, Al Musallam continues as a serving member of the FINA executive and as Director General of the Olympic Council for Asian.

Sheikh Ahmad is Al Musallam’s boss, both hail from Kuwait, a nation currently suspended from the IOC and FINA over alleged ‘political inteference’ in the running of domestic federations. That suspension has not prevented Kuwait’s officials from continuing to operate in the roles at the IOC ad FINA.

Co-Conspirator No1 in the case is Mohammed bin Hammam, the Qatari official and former AFC head who was banned for life by FIFA in 2012. The extent of his role was exposed in 2014 in a Sunday Times investigation (reported here by the BBC).

Lai has confessed. Internal investigations are underway at FIFA and pressure is mounting for life bans from all international sports roles for “Co-Conspirator No2” and “Co-Conspirator No3” if the evidence in the U.S. that led to Lai pleading guilty is accepted by FIFA, the IOC, FINA and other sports organisations affected.

Included in the case are the following allegations relevant to the FINA First Vice-President:

Case 1:17-cr-00224-PKC

31. After the initial payment of $200,000 in November 2009, the defendant RICHARD LAI periodically received, in offshore accounts he controlled, wire transfers from accounts in Kuwait controlled by Co-Conspirator #3 or his assistants at the OCA. On some occasions, LAI asked Co-Conspirator #3 for additional funds, and on other occasions Co-Conspirator #3 sent or caused the funds to be sent without being asked. These payments continued until in or about the fall of 2014.
32. Such additional transfers included the following, all of which the defendant RICHARD LAI received in the Lai HSBC Hong Kong account: (a) $20,000 on October 7, 2010, through correspondent accounts at Citibank, N.A. and HSBC U.S., N.A. in the United States; (b) $100,000 on February 16, 2011, through correspondent accounts at HSBC U.S., N.A. in the United States; (c) $200,000 on August 11, 2011, through correspondent accounts at HSBC U.S., N.A. and J.P. Morgan Chase, N.A. in the United States (d) $125,000 on January 17, 2012, through correspondent accounts at Citibank, N.A. and HSBC U.S., N.A. in the United States; and (e) $125,000 on February 14, 2012, through correspondent accounts at J.P. Morgan Chase, N.A. and HSBC U.S., N.A. in the United States. Over time and in total, LAI received at least $770,000 in this manner.
33. Like the funds he received from Co-Conspirator #3 in November 2009, the defendant RICHARD LAI kept these funds for himself, and never used them to hire a coach for the Guam national soccer team or to otherwise benefit the GFA. On some occasions Co-Conspirator #3 told LAI to write an email asking for the money, so Co-Conspirator #3 could show it to Co- Conspirator #2.
34. On one occasion when the defendant RICHARD LAI met Co-Conspirator #3 outside of the United States, he attempted to give him a significant amount of cash in a bag, but LAI declined the offer of cash because he did want to travel back to United States territory with more than $10,000 in cash.
35. One of the functions the defendant RICHARD LAI performed for Co-Conspirator #2 and Co-Conspirator #3 in exchange for the funds they sent him was to advise them on who was supporting which candidates in AFC and FIFA matters, including elections, and who Co-Conspirator #2 and Co- Conspirator #3 should recruit to support their chosen candidates. LAI similarly advised Co-Conspirator #2 and Co- Conspirator #3 as to which soccer officials or former soccer officials from various national member associations within the AFC they should attempt to persuade to join them in opposing Co-Conspirator #1. In furtherance of these goals, LAI arranged for meetings between such soccer officials and Co-Conspirator #3 or Co-Conspirator #4. LAI did not personally participate in these meetings or ask the participants what was discussed during the meetings, because LAI understood that at these meetings Co- Conspirator #3 or his assistants would offer or make bribe payments to these soccer officials, and LAI did not want to be present for or gain direct knowledge of such payments.
36. Another component of the defendant RICHARD LAI’s efforts to advance the interests of the faction led by Co- Conspirator #2 and Co-Conspirator #3 was by ensuring that an accounting firm performed a thorough audit of the AFC’s financial records after Co-Conspirator #1 was suspended from holding positions in soccer in 2011. This audit uncovered, among other things, the misuse of funds by Co-Conspirator #1 when he was president of the AFC. After this audit was provided to FIFA, Co-Conspirator #1 was banned for life from holding positions in soccer. Later, a high-ranking FIFA official, the identity of whom is known to the United States Attorney (“Official #1”), met with LAI and thanked him for his work on the audit. Official #1 subsequently rewarded LAI for these efforts by having LAI named to the FIFA audit and compliance committee in or about July 2013.
37. The defendant RICHARD LAI often communicated with Co-Conspirator #3 and Co-Conspirator #4 about these matters, as well as the payments he received, via electronic mail using the LAI email address.
38. Neither the defendant RICHARD LAI nor any of his co-conspirators disclosed the foregoing bribery and kickback schemes to FIFA, the AFC or the GFA, including without limitation to those organizations’ respective executive committees, congresses, or constituent organizations.

The Challenge Within FINA

Battle of the FINA Bureau (clockwise from top left): Dale Neuburger, Husain Al Musallam, Paolo Barelli and Erik Van Heijningen

In a matter that for the first time links FINA to the FIFA scandal, Case 1:17-cr-00224-PKC sets out how everyone, including the United States and its legal authorities, fits into the picture of prosecuting Lai. The paperwork sets out the way things work. For example:

5. FIFA’s purpose was, among other things, to develop and promote the game of soccer globally by organizing international competitions and creating and enforcing rules that govern the confederations and member associations. FIFA helped finance the confederations and their member associations, including by providing funds through the Financial Assistance Program and the Goal Program.
6. FIFA first instituted a written code of ethics in October 2004, which code was revised in 2006, again in 2009, and most recently in 2012 (generally, the “FIFA code of ethics”).
The FIFA code of ethics governed the conduct of soccer “officials,” which expressly included, among others, various individuals with responsibilities within FIFA, the confederations, member associations, leagues and clubs.

FINA, too, is now facing a rewrite of its own Ethics Code this July when the international federation gathers in Congress (“the ultimate authority” of FINA under the constitution, though in practice the Congress of more than 200 nations, each with two votes, has little or no say in daily running and decision-making). A rewrite is required in several key areas of the Ethics Code, not least of all where it deals with who can and should refer complaints to the Ethics Panel. The Code, say both the Panel itself and an in-house governance review team from Carrard, is conflicted. It is not hard to see how they came to deliver that warning to the FINA executive in 2015 and 2016.

The FINA constitution states:

C 24.5 The matters are transferred to the Ethics Panel by the FINA Executive.

It is on that basis that the FINA executive felt empowered to tell Barelli: no, we will not let your complaints go to the Ethics Panel for adjudication.

However, the Ethics Code of FINA also states:

VI. Implementation and duty of reporting and co-operation

1. Persons bound by this Code shall immediately report any potential violation of this Code to the Ethics Panel.

Paolo Barelli – by Giorgio Scala/Deepbluemedia

Barelli did just that. Clearly the intention of that line in the Ethics Panel is to recognise the independence and integrity of the panel to judge whether matters that come before it are worthy of adjudication and accompanying process.

And yet, the FINA executive used the constitution to override Barelli’s right under the Ethics Code to put his complaints directly to the Ethics Panel.

The Court of Arbitration will rule on that matter but the consequences of the case will be far-reaching come what may given the battle now underway for the leadership of FINA.

Whichever man wins the day in the vote in Budapest on July 22, the eve of racing at the World Championships, it is likely to be “winner takes all”.

The conflict in the FINA rule book was highlighted by Barelli’s challenge to the FINA executive when that small group of men refused to refer his complaints against two fellow Bureau members to the Ethics Panel for consideration.

The Italian had wanted his grievances against Dale Neuburger (USA) and Al Musallam – over alleged conflicts of interest and interference in the election for the LEN presidency in 2016 by non-Europeans. Barelli even pleaded with Maglione to allow the Panel to decide so that the matter could be dealt with ‘in-house” and “the wrong kind of headline: could be avoided.

Maglione’s response was: it goes no further, neither in-house, nor out of it. Barelli took his case to the Court of Arbitration. SwimVortex understands that FINA questioned CAS’s right to adjudicate in such a case. CAS, we understand, told FINA ‘actually, this is well within the bounds of our jurisdiction’.

Sources in Lausanne tell SwimVortex that FINA almost list the case by default when a deadline was missed before clemency was applied.

Back to the Brooklyn court documents – and we read:

” … the FIFA code of ethics provided that soccer officials were prohibited from accepting bribes or cash gifts and from otherwise abusing their positions for personal gain. The code of ethics further provided, from its inception, that soccer officials owed certain duties to FIFA and its confederations and member associations, including a duty of absolute loyalty. By 2009, the code of ethics explicitly recognized that FIFA officials stand in a fiduciary relationship to FIFA and its constituent confederations, member associations, leagues, and clubs.”

The details that then flow, including the role of the Asian Football Confederation and how that links to the FIFA scandal and those facing allegations in the Lai case, make fascinatiing reading and – if the case if proven – will provide valuable insight into the immense influence and power weilded by some in the Olympic realm, including FINA.

Spotlight on swimming – by Patrick B. Kraemer

Here is the battlefront – from the FINA Code of Ethics:

D. INTEGRITY

7. No Official shall, directly or indirectly, solicit, accept or offer any concealed remuneration, commission, benefit or service of any nature connected with their participation in Aquatics or with their function as an Official.

8. No Official shall solicit or accept benefits, entertainment or gifts in exchange for, or as a condition of, the exercise of their duties, or as an inducement for performing an act associated with their duties or responsibilities except that gifts, hospitality or other benefits associated with their official duties and responsibilities may be accepted if such gifts, hospitality or other benefits:

a) are within the bounds of propriety, a normal expression of courtesy, or within the normal standards of hospitality;

b) would not bring suspicion on the Official’s objectivity and impartiality; and c) would not compromise the integrity of FINA.

9. No Official may be involved with any company, association, firm or person whose activity is inconsistent with the objectives or interests of FINA. If it is unclear, whether this kind of a connection exists in any given situation, the matter shall be submitted to the Ethics Panel for a decision.

E. NEUTRALITY

10. Officials shall remain politically neutral, in accordance with the principles and objectives of FINA, the confederations, associations, leagues and clubs, and generally act in a manner compatible with their function and integrity.

F. CONFLICTS OF INTEREST

13. Officials shall avoid any situation that could lead to conflicts of interest.

The paperwork for Case 1:17-cr-00224-PKC lodged at the United States District Court, Eastern District of New York, makes fascinating reading beyond its headline “United States of America – against – Richard Lai”. In swimming, the term “case No 1:17-cr-00224-PKC” may one day trip off the tongue of swimming readers like “State Plan 14:25” does, so significant could it become. The future shape of FINA hangs on it. Case 1:17-cr-00224-PKC raises many questions for swimming. Some of those will be doing the rounds at the annual Congress of the European Swimming League (LEN) in Marseilles today as the old continent contemplates its chances and campaigns ahead in a bid to lead FINA for the first time in 33 years.

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