FIFA has been the subject of most headlines surrounding corruption in the football world going back decades, but much of the indictment brought by the US Department of Justice (which you can read in full here courtesy of Bloomberg) refers to the misconduct of multi-national sports marketing agency Traffic Group.
Even ahead of the indictment’s publication on Wednesday, Traffic Group had already been subject to government investigations in Brazil. A well-placed source tells Business Insider the company has been on a “downward spiral” for the past five years in terms of its perception in the industry.
In December, The DOJ says the owner and founder of Traffic Group, José Hawilla, waived indictment and pleaded guilty to charges of racketeering conspiracy (the most severe crime, which has a maximum penalty of 20 years in US jail,) wire fraud conspiracy, money laundering conspiracy, and obstruction of justice. Hawilla also agreed to forfeit over $US151 million in ill-gained profits made from bribes and kickbacks from sports governing bodies, sportswear companies, and officials over a two-decade period.
Aaron Davidson, Traffic Group’s US president (and also chairman of the North American Soccer League) has also been indicted by US federal prosecutors.
The indictment alleges Traffic Group’s corruption began back in the early 1990s when Hawilla cut a deal to acquire the worldwide commercial rights for the CONMEBOL’s Copa America national team tournament, soliciting tens of millions of dollars in bribes to do so, which also included deals for sponsorship rights acquired by US sportswear companies.
It is also claimed Hawilla paid Jack Warner (then president of North American football governing body CONCACAF, who has since been indicted by the DOJ) and Charles Blazer (then CONCACAF general secretary, who has since pleaded guilty to wire fraud and tax evasion and faces incarceration of up to 10 years) bribes to win rights for the CONCACAF Gold Cup. And the DOJ says in its indictment that Traffic Group also paid bribes for other rights involving federations in Costa Rica, Trinidad and Tobago, and Nicaragua.
One of the achievements Traffic Group is most famous for is mediating the $US369 million deal between Nike and the Brazilian national football team in 1996 — the sports marketing company proudly boasts about this on its website. But, as Bloomberg points out, even this deal looks fishy. The indictment mentions an “unidentified U.S sportswear company” that signed a partnership with the Brazilian football federation in 1996, on which the sports marketing company took a commission, which went on to be paid to a “high-ranking” official at Brazil’s football federation CBF.
Nike declined to comment to Bloomberg on the specific allegations but said in a statement: “Nike believes in ethical and fair play in both business and sport and strongly opposes any form of manipulation or bribery. We have been cooperating, and we will continue to cooperate, with the authorities.”
A history of corruption
When Business Insider asked several sports marketing executives in the UK — where football was invented and the home of one of the most popular club football leagues in the world — barely any could offer much insight on Traffic Group. But in Brazil, they are well-known, thanks to its relationship with Copa America and CBF.
Even if the arrests had not happened, the “golden era” is over for Traffic Group, said one Brazil-based sports marketing executive, who spoke to Business Insider on a condition of anonymity for fear of “retaliation” as “these guys are like members of the Mafia.” Our source added: the last five years the company has been on a “downwards spiral.”
Traffic Group started in 1980 selling pitch-side advertising boards at small Brazilian football competitions. From there, it grew up to acquire rights for several competitions and federations such as the South American federation CONMEBOL, reselling broadcast sponsorships.
In 1987, it took over the organisation and marketing of the Copa America (America Cup.) The business later expanded its locations to the United States and further afield in the early 2000s. But it is most famous for its relationship with the Brazilian national football team.
That relationship has been subject to scrutiny since the early 2000s. As documented in Leandro Cipoloni’s book, “The Dirty Side of Football,” there have been two Brazilian government investigations into the CBF and its commercial relationships, concerning bribes and kickbacks. Nobody involved in either organisation faced jail time over corruption allegations until now.
Our source said: “In a way, CBF corruption is old news in Brazil. The relationship between Traffic and Brazil has always been dodgy to say the least. Everyone has known it has been going on for a while. There have been TV reports. Two Brazilian parliamentary investigations in the early 2000s … but MPs were able to stop the publication of the investigation. That was insane – how could a federal report be deemed not suitable for publication? The real news now is that people could go to jail. But corruption within CBF, that’s not news for us.”
What’s next for Traffic?
Traffic Group was once one of the five biggest sports marketing agencies in the world, according to Reuters. The continued success of the Brazilian football team appeared to be the linchpin of its success. But now, just as Brazil has missed out lifting the World Cup for the past three competitions, Traffic’s star has faded.
Traffic didn’t do enough to move with the times, according to one source, who says “they just sell rights and players.” Other sports marketing agencies offer strategic counsel that stretch from grassroots marketing to digital campaigns.
Cipoloni told Reuters in reaction to Wednesday’s arrests: “Now the house of cards is coming down.”
“Traffic still makes money from its relationship with CBF and CONMEBOL but they are not the role model they used to be and [if the US DOJ or Swiss DOJ investigations] change those relationships they will not have a business to be in any more,” our source said.
He added: “Fifteen years ago when I was thinking about going into sports marketing in Brazil, I said ‘I want to be at Traffic.’ Now — even five years ago — I would not even think about it.”
Our source said the allegations facing Traffic Sports and the scandals surrounding Brazilian football could even put off big multi-national sponsorship agencies, like IEG and Octagon, which recently entered the country in the build up to the 2014 Brazil World Cup and the 2016 Rio Olympics from staying in the country once the major competitions are over.
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