It’s been two months since Swiss police on May 26 raided a luxury hotel in Zurich and arrested seven top executives of FIFA, the world soccer federation that organizes the World Cup. The seven execs all face extradition to the United States and a federal indictment alleging a decades-long bribery scheme.
The indictment issued from the Eastern District of New York. It is gnarly – 161 pages long, naming 14 defendants, identifying 25 un-named co-conspirators, and detailing the role of dozens of football federations and marketing companies.
According to the indictment, high-ranking FIFA officials routinely accepted kickbacks in exchange for granting lucrative marketing deals, broadcast rights, and even the selection of which country will host the next World Cup. For example, an unnamed sports marketing company paid $40MM in bribes so a sports apparel company (reportedly Nike) could be the exclusive outfitter for the Brazil national team.
The world of international soccer is very complicated. FIFA is the governing international body. Each continent has its own Football Confederation, and certain regions have Football Unions as well. It’s all intertwined, with top confederation officials also serving in FIFA. This proliferation of unions and confederations has been a fertile breeding ground for bribes and kickbacks, and the indictment alleges over $150MM in bribes over the years.
Here’s something interesting: although bribery is the central theme of the indictment, nobody has been charged with “bribery” as such. Contrary to popular belief, this is not a case brought under the Foreign Corrupt Practices Act. The FCPA only outlaws bribes that are paid to officials of foreign governments. But FIFA is not a governmental entity. It is entirely private, just like the International Olympic Committee or the NBA.
No federal law directly outlaws paying bribes to executives of a private entity. So how did the feds manage to make bribery the centerpiece of this massive case?
The Feds got there by structuring the case as a RICO conspiracy under 18 USC § 1962. RICO makes it illegal for executives to conduct the affairs of an enterprise through a pattern of racketeering activity.” In RICO terms, FIFA is an “enterprise” that was “corrupted” by the defendants.
This makes for an interesting twist. As portrayed in the indictment, FIFA is not a criminal enterprise but instead a victim of dishonest FIFA officials, who enriched themselves at its expense. (The analogy: FIFA is not so much a mafia crime family, as it is a labor union corrupted by the mob.) The indictment goes to great pains to establish that FIFA had a lawful mission of promoting soccer, and is very careful to allege the defendants owed a fiduciary duty to FIFA.
A RICO conspiracy can be supported by proving certain “racketeering activity” in violation of federal or state law. This case is based on the following racketeering activity/predicate acts:
- Commercial bribery, in violation of the New York Penal Code Section 180.03. This state law makes it illegal to pay a bribe to an employee or fiduciary of a company. Although buried on page 114 of the indictment, this is a key predicate act because it gives the feds the hook they need to go after bribery of non-governmental officials.
- Wire fraud, in particular honest services wire fraud. This theory relies on the defendants owing a fiduciary duty to FIFA, which they allegedly breached by accepting bribes to the detriment of FIFA.
- Money laundering (based on laundering of the bribe payments).
Prosecutors must also overcome the fact that most of the alleged bribes took place overseas. The indictment therefore takes care to establish a nexus between this international bribery scheme and the United States: U.S. wires, use of U.S. banks, meetings in the U.S. If proven, such acts in the U.S. that facilitated foreign bribe payments will probably be enough to support these charges.
So what is the extraterritorial reach of RICO? Can it really be applied to misconduct by foreigners that mostly takes place outside the US?
In 2010, the Supreme Court decided Morrison v National Australian Bank, a securities case, which held that federal statutes are presumed to have no extraterritorial application absent clear indications of congressional intent otherwise. Lower courts are to look to the “focus” of the statute to determine what congressional intent was.
At least three analytical approaches have emerged post-Morrison. One line of cases looks for the existence of a domestic “racketeering enterprise.” Other courts, such as 9th Circuit, look for evidence of a domestic “pattern of racketeering activity.” See United States v Chao Fan Xu, (9th Cir. 2013) The Second Circuit (where the FIFA case originated) takes the broadest view, that the geographic reach of RICO is identical to the reach of the various statutes defining the underlying predicate offenses. In European Community v RJR Nabisco, (2d. Cir. March 2015) , that court held that the RICO statute applies extraterritorially so long as Congress intended the statutes prohibiting the particular RICO predicate acts in question to apply beyond U.S. borders.
Given how unsettled the law is in this area, you can bet that the defendants will fight the scope of the RICO statute tooth and nail.