FIFA probe shines light on middle-man sports marketing firms – U.S. News & World Report

By MAE ANDERSON, AP Business Writer

NEW YORK (AP) — The U.S. Justice Department’s targeting of FIFA, soccer’s global governing body, has put a spotlight on the powerful role that marketing firms play in the global sports arena.

Such firms act like talent agencies: They work with athletes, teams and athletic associations to sign sponsorships and advertising deals. In some cases, they buy and resell media and licensing rights.

Big names in the United States include IMG, which was acquired last year by talent agency William Morris Endeavor, and Learfield Sports.

The big four U.S. pro team sports organizations — the National Basketball Association, the National Football League, Major League Baseball and the National Hockey League — sell their broadcasting rights directly to networks. But for many other sports events — from college football to the Olympics to soccer tournaments — third-party agencies often handle the marketing and media rights.

The Justice Department’s allegations against one such agency — Miami-based Traffic Sports USA, whose parent, Traffic Group, is based in Sao Paulo, Brazil — illustrate the potential for corruption.

Most experts caution that, outside of FIFA , such corruption isn’t likely widespread in the United States. Criminal violations are more likely when the third-party agencies buy rights in smaller countries and when government oversight is especially lax.

Here’s how the deals typically work:

A sports marketing company will pay a set amount to acquire rights to a sports event. The company will then try to sell those rights at a profit to corporations and broadcasters.

“If I’m a university producing a soccer tournament, I don’t have to sell sponsorships or produce a radio broadcast — I’ve outsourced all of that,” said Jim Andrews, senior vice president at sponsorship research firm IEG.

In Traffic’s case, according to authorities, executives paid FIFA officials bribes and kickbacks to ensure that Traffic acquired the media and marketing rights associated with soccer tournaments and soccer federations in the United States and other parts of the CONCACAF region — The Confederation of North, Central America and Caribbean Association Football, which is part of FIFA.

For example, according to the indictment, a Traffic executive paid the president of the Venezuelan soccer federation a $1 million bribe in 2007 to ensure that it kept its hold on TV and sponsorship rights for the Copa America, hosted by Venezuela that year.

The indictment alleges that in the 1990’s, as soccer’s popularity rose in the United States and rights to games became increasingly valuable, the schemes expanded.

“Over time, all of these major tournaments have gotten much more lucrative,” Andrews said. “Audiences are bigger, and you can broadcast to an international audience a lot easier than we could 20 year ago, which means a lot more money.”

Traffic is only one of several sports marketing agencies involved in the corruption, according to the indictment. Others include Full Play and Torneos y Competencias S.A., based in Argentina, and an unnamed marketing agency based in New Jersey.

“When you start dealing with huge amounts of money, it’s natural that more and more people will want to try to get a piece of these deals,” said Carlos Eduardo Silva, a marketing professor at the Mackenzie University in Brazil.

He added, though: “These deals are much more exposed than they used to be, and it’s a lot easier to scrutinize them.”

The founder of Traffic Group, Jose Hawilla, pleaded guilty to numerous charges ahead of the indictment. Traffic Group’s U.S. president, Aaron Davidson, is among those who have been indicted. Hawilla agreed to repay $151 million, $25 million of which was paid at the time of his plea.

Two security officers stood in front of Traffic’s offices in an upscale Sao Paulo neighborhood Thursday, turning away reporters and television crews. No one without an appointment was allowed inside.