Bloomberg News

Ex-FIFA President Joao Havelange Resigns After Bribes Found (1)

April 30, 2013

Former FIFA President Joao Havelange resigned from an honorary post with soccer’s ruling body after a report said he received bribes from the organization’s now-defunct marketing partner.

The 96-year-old Brazilian quit his position as “honorary president” earlier this month, according to a report into payments made by the ISL marketing company released today by Hans-Joachim Eckert, a former German judge hired by FIFA to rule on ethics breaches.

Havelange and two former executive committee members -- Ricardo Teixeira and South American federation president Nicolas Leoz -- were named as accepting “not inconsiderable amounts” through “front companies in order to cover up the true recipient.”

The report comes as FIFA prepares to meet next month in Mauritius for its annual congress where delegates will be asked to vote on governance changes. FIFA was forced to introduce new rules after a backlash from sponsors, fans and other soccer stakeholders following scandals in recent years.

During his two-decade tenure as FIFA president, Havelange used the relationship with ISL to bring in sponsors including Coca-Cola Co. (KO:US), Adidas AG (ADS) and McDonald’s Corp. for its quadrennial World Cup. That tournament is worth around $5 billion now.

Blatter ‘Clumsy’

While Havelange and his former son-in-law Teixeira improperly accepted payments from ISL in exchange for the rights to the 2002 and 2006 World Cup broadcasts, the bribes didn’t violate FIFA rules as the governing body didn’t set up a code of ethics until 2004, at least four years after the pair last accepted funds, Eckert, head of FIFA’s adjudicatory chamber, said in a statement.

Ex-Brazilian soccer head Teixeira quit FIFA last year and Leoz, who had led South American soccer since 1986, resigned from his post, “citing personal reasons,” earlier this month.

The report cleared current FIFA president Sepp Blatter of any criminal or ethical wrongdoing but described him as “clumsy” for not being aware of the payments to Havelange after ISL transferred 1.5 million Swiss francs ($1.6 million) into a FIFA account for the Brazilian. Blatter was interviewed by FIFA investigator Michael J. Garcia, a former U.S. attorney for the Southern District of New York.

Loss of Credibility

“It is undisputed that the former chief accountant of FIFA brought this to the attention of then-General Secretary Blatter, and the former arranged for the return transfer to ISL,” Eckert said. “President Blatter stated during his interview with Mr. Garcia that he ‘couldn’t understand that somebody is sending money to FIFA for another person,’ but at that time he did not suspect the payment was a commission.”

Blatter’s conduct “may have been clumsy because there could be an internal need for clarification, but this does not lead to any criminal or ethical misconduct,” Eckert said.

Havelange appointed Blatter as FIFA’s general secretary, the organization’s most senior administrative role, in November 1981 and the pair worked closely together until Blatter succeeded Havelange as president in 1998. FIFA in 2004 paid 2.5 million Swiss francs compensation to ISL’s bankruptcy administrators to end a dispute over the payments.

Sylvia Schenk, head of sport at anti-corruption watchdog Transparency International, said Blatter has lost “credibility” as FIFA president.

“Having watched this money transfer and having done nothing, no one would call that clumsy,” she said. “He knows what’s going on and doesn’t want to do anything.”

‘Untold Damage’

Blatter released a statement after Eckert’s report welcoming that he had been cleared of misconduct.

“I have no doubt that FIFA, thanks to the governance reform process that I proposed, now has the mechanisms and means to ensure that such an issue -- which has caused untold damage to the reputation of our institution -- does not happen again,” he said.

Guido Tognoni, who held a number of executive roles at FIFA during his 13-year tenure, described Blatter as Havelange’s “right hand” and the pair as “FIFA’s power couple for 20 years.”

“Blatter is the one person living today who knows the most about FIFA’s history and what happened there,” Tognoni, who headed FIFA’s media operations under Havelange, said in a telephone interview. “I find it extremely surprising to hear he doesn’t know about the bribes.”

Reputation Hit

FIFA’s reputation was hit in 2010 following the bidding battle for the right to stage the 2018 and 2022 World Cups that went to Russia and Qatar respectively. Teixeira and Leoz were among the voters, seven of whom have left FIFA after either being accused of graft or found to have breached anti-corruption regulations.

“It is reasonable for people to have doubts and even more doubts now about the decision at that time,” Schenk said about the World Cup awards. “I can’t argue about that.”

The ethics report does not state the total sum ISL paid but says the payments took place over eight years between 1992 and May 2000. A separate report released by a Swiss court last year said Havelange and Teixeira received at least $22 million between them.

To contact the reporter on this story: Tariq Panja in Rio de Janeiro at tpanja@bloomberg.net

To contact the editor responsible for this story: Christopher Elser at celser@bloomberg.net


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