The Finnish Broadcasting Company Yle has discovered another piece in a puzzle that has thrown the world's governing body for football, Fifa, into turmoil amongst numerous allegations of corruption.
Seven Fifa officials were arrested at a Zurich hotel at the end of May and US authorities have charged 39 football officials and sports business executives with taking bribes in the millions for football television and marketing deals.
Following up on information they had recently uncovered, Yle reporters asked the Swiss sports marketing company Infront Sports & Media for an interview about the close relations of the company with Fifa. It is not the first time the company has to answer questions on the subject.
Infront has several large contracts with Fifa, but there is another reason the media and civic organisations are interested in the company. The President and CEO of Infront is a certain Philippe Blatter from Switzerland, nephew of Fifa President Sepp Blatter.
Infront's communication representatives are clearly not happy about the attention, and yet no one from the company was ready to step forward and comment on the issue on camera. Yle had to be satisfied with an email.
"All accusations of nepotism are unfounded, especially when you look at how our business operations have expanded to various fields, according to the business model created by Philippe Blatter," an Infront spokesperson stated.
The company also points out in the missive that at present, only 10 percent of its turnover derives from Fifa contracts.
Turn back the clock
In order to be able to understand the role of the Swiss company in the international sports business, it is necessary to go back in time and describe events that transpired more than a decade ago.
It is late spring 2001 and International Sports and Leisure (ISL), a Swiss-based company specialising in sports marketing, files for bankruptcy.
For more than a decade, ISL had worked closely with Fifa. Among other things, the company managed the marketing of the biggest sports event in the world, the Fifa World Cup.
Even before the bankruptcy, tensions existed between the two organisations. At one point, Fifa asked the Swiss police to launch an investigation into the disappearance of tens of millions of euros. According to the contract between Fifa and ISL, the money received from selling the TV rights should go into the joint account of both parties. Turns out ISL withheld some of its profits.
Years later, it was revealed that ISL paid out up to 100 million euros in bribes, several million of which were paid to João Havelange, the long-term president of Fifa. The payoff was revealed in the court records and later inquests conducted afterwards.
ISL was an integral part of the corrupt system created within Fifa for decades. When it went belly-up. it left more than 150 million euros of debt and a big mess, as ISL was supposed to play a central role in the marketing of the World Cup in Korea and Japan in the summer of 2002.
Colossal bankruptcy reveals corruption
ISL had started two companies in Switzerland to handle the company's marketing. The address of the two new companies was stated as the Fifa's Zurich headquarters.
After the bankruptcy, Fifa took over the companies and filled the boards of directors with its own employees. A new president was appointed for both boards: the Swiss native Joseph “Sepp” Blatter, who started his career as Fifa President in 1998.
But Fifa didn't have the marketing know-how that was needed. According to the view of Andrew Jennings, a British journalist who investigated Fifa for 20 years, the football association also wanted its finances to be managed by outside companies, as this made it more difficult to monitor monetary transactions.
Fifa was pressed to find a new, reliable partner in cooperation. Unsurprisingly, there was no shortage of interested parties who wanted their share,as enormous sums of money are to be had in the football business. But Fifa had a different idea.
Roland Büchel, a sitting member of the Swiss parliament and a former employee of ISL, has criticised Fifa heavily in recent years. In his opinion, the role of ISL in sports marketing was unusual.
"ISL was very closely attached to both Fifa and the International Olympic Committee. Such close relations don’t exist in sports marketing anymore. However, it can now be seen that companies like Infront are creating close links [to sports organisations]. This is something that has to be monitored closely," Büchel said in an Yle interview from Bern.
Birth of a new empire
Enter 2002 and the Swiss company register welcomed a new firm: Infront Sports & Media. Behind it are two established companies specialising in sports marketing: CWL and Prisma Sports & Media.
Fifa makes a swift decision to enter into a contract with Infront regarding the marketing rights of the 2006 Fifa World Cup. According to the deal, Infront would control the marketing rights, pay Fifa for the use of them, and thus, pass millions of euros on to the football association. The foundation of the new empire was laid.
Infront acquired new premises in Zug, Switzerland - at the same address that ISL, the former trusted business partner and source of unreported income for Fifa, used to operate in for decades. At the same time, the former ISL operations were also transferred to Infront's management team. In 1999 ISL started a company to manage the telecasting technology of the Fifa World Cup, including transmission signals.
After ISL's bankruptcy, the managerial positions, board of director seats, and holdings in Host Broadcasting Services (HBS) were transferred to Infront on the fly. Since 2002, HBS has managed the telecasting technology of all the Fifa World Cups, and is also contracted to broadcast the World Cups in Russia in 2018 and Qatar in 2022.
Picking up where ISL left off?
Infront's PR representatives strictly deny that the company took the place of ISL on the market, when asked for comment from Yle.
"Infront has nothing to do with ISL. ISL was a competitor of Infront. The location [in the same address] is purely coincidental," wrote the Infront rep.
And yet, the first glitch in the relationship between Infront and Fifa occurred in 2005. Without warning, FIFA chose not to renew the contract on the marketing rights of the World Cup with Infront. A significant share of the turnover of the company disappeared overnight.
Infront reacted to the problem by expanding into other sports. In the first years, the company only dealt with football, but these days it covers many other sports as well. Infront now has significant contracts in the field of cycling, cross-country skiing, Alpine skiing and basketball, for example. In 2013, the company made a ten-year marketing contract with the International Ice Hockey Federation IIHF and is now considered a trusted partner in ice hockey circles.
In the summer of 2015, Infront sold its Finnish operations to two Finns: Harry Harkimo, the majority owner of the Finnish ice hockey club Jokerit, and Mika Sulin, the former President of the Finnish Olympic Committee.
In 2006, Infront appointed a new CEO, a man with direct connections to Fifa: Philippe Blatter.
The Blatter era
The Sepp Blatter era at Fifa began in 1998. During this time, the International Football Association grew from a small sport governing body with about a dozen employees into an international business with turnover in the billions of euros.
Money has entered the world of professional sports with a bang, and football is the biggest and most followed sport in the world. TV contracts are worth enormous sums of money. The Fifa World Cup is a huge business: the transfer fees of players are astronomical, and the wages are beyond the comprehension of a regular person. When Lionel Messi scores goals, it’s a beautiful game. When making marketing contracts or deciding who will host the World Cup, however, things get ugly.
Philippe Blatter entered the picture when the elder Blatter was at the height of his power. For nearly a decade, Philippe Blatter was the CEO and President of Infront. Before starting at Infront, Blatter worked for the international consulting firm McKinsey & Co. According to Andrew Jennings, Philippe Blatter was designing a new financial strategy for Fifa already while working with McKinsey & Co. Later on, another former employee at McKinsey & Co, Markus Kattner, became Fifa's director of finance.
Contracts worth millions
During the first couple of years under Philippe Blatter's leadership, Infront was not very successful at competing for Fifa contracts. But from 2002 to 2015, Infront and Fifa entered into several lucrative contracts. Infront often managed the telecasting technology, TV rights, and the so-called hospitality packages of the World Cups. Hospitality services included the sales of VIP ticket packages and the organisation of accommodation for the teams, managers and referees, for example.
What all the contracts are worth is unknown, as most of the specifics have never been published. A careful estimate says that Infront acquired a turnover worth hundreds of millions of euros through Fifa over the last ten years.
Infront also managed the company responsible for the archives of Fifa, Fifa Films. The archives include all the World Cup matches from 1966 to 2006, so if you want to relive the moment Diego Maradona scored against England in the 1986, you'll have to talk to Infront.
"Dirty deals"
Contracts between Fifa and Infront attracted a lot of criticism over the years. The media in Britain especially referred to them as "dirty deals". Sylvia Schenk, senior advisor on sport to Transparency International, demanded Fifa come clean in a 2011 BBC interview. In her opinion, a situation where two companies lead by relatives are negotiating giant contracts with each other is intolerable.
Sepp and Philippe Blatter have consistently denied accusations of nepotism. According to former ISL employee Roland Büchel, the relationship between Fifa and Infront is still questionable.
"Sometimes, there are coincidences in life, sometimes not. Philippe Blatter worked for [consulting firm] McKinsey & Co when ISL filed for bankruptcy. At McKinsey & Co, Blatter dealt with matters concerning Fifa and knew the contracts made by the association very well. Now, Infront has entered into certain contracts with Fifa. Everyone can decide for themselves whether it is a coincidence," Büchel has said.
China's richest man wants in
Philippe Blatter's work as Infront's CEO has made him a very wealthy man. Infront has already been sold twice since the turn of the 21st century. First, in 2011, the British private equity group Bridgepoint bought the company from its founders. According to The Financial Times, the purchase price was 600 million euros.
Just four years later, in the summer of 2015, it was Bridgepoint’s turn to make money with Infront. It is very common for private equity funds to keep their acquisitions for a few years only, polishing up the company to make it fit for sale in the interim.
In June 2015, Bridgepoint announced it was selling Infront to Dalian Wanda Group for 1.05 billion euros. Wanda is owned by the richest man in China, Wang Jianlin.
Jianlin’s holdings also include 20 percent of the Spanish football club Atlético Madrid. The Forbes Magazine has estimated that Jianlin’s property is worth 31.5 billion dollars. He has been a member of the Communist Party of China since 1976. According to The New York Times, Jianlin is close to Chinese and US leaders and regularly meets with several Hollywood stars.
Payday for Philippe Blatter
Private equity group Bridgepoint ran the Infront holdings through Luxembourg. In its investigation of these holdings in the Luxembourg company register, Yle discovered that the top-tier management of Infront owned a 5.4 percent share of the company.
The complicated holdings arrangement was managed through a holding company in Luxembourg, an Italian asset management company, and the Swiss bank BSI. Bridgepoint spokespeople confirmed that "all private equity investments tend to include some form of alignment of interest, normally in the form of a minority shareholding", but did not want to reveal any more details. Infront also refused to comment on the holdings of Philippe Blatter, or any other director or manager in the company, in any way.
"Infront is a privately owned company whose biggest shareholder is Wanda Group. The details of its shareholdings will not be published," Infront said in its email.
Private equity funds often design a kind of a stock option plan for the management of the companies they own. This is done by giving the management an opportunity to buy shares in the company for a nominal price. When the company is later sold, the top management can sell their shares. The records of the company register of Luxembourg show that the top management of Infront bought shares in the company for less than four million euros. After the company was sold in the summer of 2015, the value of these shareholdings could be calculated as 55.9 million euros.
Never suspected of criminal activity
Infront representatives did not care to comment on the percentage of the shares owned by Philippe Blatter, or whether the top management sold their shares when the company was sold. The company was also reluctant to clarify why the holdings were arranged in an unusually complicated manner, even for a tax haven.
Officially, the shares of the Infront management are owned by EOS Servizi Fiduciari, an Italian affiliate of the Swiss bank BSI. This asset management company keeps the shares for the real shareholders, however, allowing the actual owners of the shares - and the funds gained by selling them - to remain concealed. If Philippe Blatter was offered stock options, his share would have likely been between five and ten million euros.
Infront has not been linked to one single corruption case, and the company has not been suspected of any criminal activity. The company states it does not approve of corruption in any shape or form. The view at Infront is that strong ethical values are “the prerequisite for success” in the world of business.
REFERENCES:
Information in the company register of Switzerland and Luxembourg, Infront Sports & Media newsletters from 2003 to 2015, Fifa annual reports from 2002 to 2014, the book “The Dirty Game. Uncovering the Scandal at Fifa” by Andrew Jennings, BBC.