The FIFA Indictments

I have been thinking about the impact of yesterday’s indictment of numerous FIFA officials on the various organizations’ tax statuses, both here in the United States and abroad — particularly under the tax laws of Switzerland.  The FIFA matter would make for good class discussion, I think.  According to a DOJ Press Release issued this morning:

A 47-count indictment was unsealed early this morning in federal court in Brooklyn, New York, charging 14 defendants with racketeering, wire fraud and money laundering conspiracies, among other offenses, in connection with the defendants’ participation in a 24-year scheme to enrich themselves through the corruption of international soccer.  The guilty pleas of four individual defendants and two corporate defendants were also unsealed today.

The defendants charged in the indictment include high-ranking officials of the Fédération Internationale de Football Association (FIFA), the organization responsible for the regulation and promotion of soccer worldwide, as well as leading officials of other soccer governing bodies that operate under the FIFA umbrella.  Jeffrey Webb and Jack Warner – the current and former presidents of CONCACAF, the continental confederation under FIFA headquartered in the United States – are among the soccer officials charged with racketeering and bribery offenses.  The defendants also include U.S. and South American sports marketing executives who are alleged to have systematically paid and agreed to pay well over $150 million in bribes and kickbacks to obtain lucrative media and marketing rights to international soccer tournaments.

I did some preliminary checking and learned that FIFA is a complicated Swiss based international charitable organization comprising several other national and international nonprofit and tax exempt organizations, including the U.S. Soccer Foundation.  It seems rather axiomatic that when executives — insiders and disqualified persons, likely — use the organization’s venue selection and contracting processes to extract bribes, kickbacks, and other illicit payments from third parties, the organization is being operated for private benefit.  I wonder, though, about the extent to which an umbrella organization’s misdeeds can cause legal issues for one or more of its member organizations, such as the U.S. Soccer Foundation.  And even if the bribes and kickbacks constitute or indicate private benefit, would the organizations subject to U.S. law be able to point to their other activities to support an argument that whatever private benefit existed was substantially outweighed by their good deeds and therefore not fatal to tax exemption?  Anyway, the whole topic, along with all the exhibits and so forth available online would make for good discussion fodder in a class or seminar dealing with tax exemption in the international arena.  The L.A. Times has some useful articles on the subject.  

dkj