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Sunday, November 25, 2012

AFC executive committee meets to discuss sweeping reforms to root out corruption




  

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By James M. Dorsey

The Asian Football Confederation's (AFC) executive committee meets on Thursday for initial make-or break discussions of proposed reforms that threaten to weaken the grip on the organization of its suspended president Mohammed Bin Hammam and could initiate the unravelling of its controversial ties to a Singapore-based sports marketing company.

The meeting could also determine the fate of an uphill battle by reformers for sweeping change in the organization that sources say “is still riven with corruption.” The reformers were boosted earlier this month when they succeeded in getting responsibility for an investigation into Mr. Bin Hammam’s financial management of the AFC and his relationship to the group’s marketing partner, Singapore-based World Sports Group, which has a $1 billion marketing rights agreement (MRA) with the AFC, transferred to world soccer body FIFA.

"The AFC is so divided that it is incapable of investigating itself. The only way to get a proper inquiry at this moment is through FIFA. That constitutes the fallback position of the reformers within the AFC," one source said.

Sources said the FIFA investigation, which besides the AFC also involves charges of bribery in the Caribbean against Mr. Bin Hammam, was certain to lead to the demise of the Qatari national, who has been suspended as both AFC president and FIFA vice-president pending the outcome of the inquiry. Mr. Bin Hammam has repeatedly denied all wrong doing and charged that the accusations against him of bribery, corruption and financial mismanagement were a conspiracy by FIFA president Sepp Blatter to destroy him.

The initial moves to remove Mr. Bin Hammam from his positions in world and Asian soccer came last year. Mr. Bin Hammam was forced to drop his effort to unseat Mr. Blatter as president in a FIFA presidential election because of charges that he had sought to buy the votes of Caribbean soccer officials.

The sources said the takeover of the AFC inquiry, which involves an internal audit on behalf of the AFC conducted by PricewaterhouseCoopers (PwC) that extensively questions the MRA, would have to investigate the agreement that is so closely held that even AFC executive committee members have been unable to see it as well as the company’s relationship with the AFC and Mr. Bin Hammam. 
The PwC audit concluded that Mr. Bin Hammam had used an AFC sundry account as his personal account, raised questions about the negotiation and terms of the MRA and rang alarm bells about $14 million in payments to Mr. Bin Hammam by a WSG shareholder in advance of the signing of the agreement.

“It is highly unusual for funds (especially in the amounts detailed here) that appear to be for the benefit of Mr Hammam personally, to be deposited to an organization’s bank account. In view of the recent allegations that have surrounded Mr Hammam, it is our view that there is significant risk that…the AFC may have been used as a vehicle to launder funds and that the funds have been credited to the former President for an improper purpose (Money Laundering risk)” or that “the AFC may have been used as a vehicle to launder the receipt and payment of bribes.”

A payment of $2 million to Mr. Bin Hammam was made, according to the PwC audit, by International Sports Events (ISE), which is believed to have a ten per cent stake in WSG, while $12 million were transferred by a company related to ISE, Al Baraka Investment and Development Co. The two companies are part of Saudi billionaire Saleh Kamel’s commercial empire.

PwC said that Al Baraka “may (through the Arab Radio & Television Co {ART}, which it owns) have been a 20% beneficial owner of the group at that time (of the payment). Further, our enquiries indicate that Mr. Mohyedin Saleh Kamel, the Assistant Chief Executive Officer (Investments) of the Dallah Al-Baraka Group may have been (from 2005 2009) the Managing Director of ISE.” PwC said that Mohyedin Saleh Kamel is believed to be Mr. Kamel’s son. It said that ART and ISE appear to share a post office box in Saudi Arabia.

WSG chairman and CEO Seamus O’Brien partnered last year with Sela Sport, a Saudi company represented by Hussein Mohsin Al Harthy, to acquire a majority stake in the New York Cosmos. Media reports and well-placed sources suggest that Mr. Al Harthy is Mr. Kamel’s brother-in-law. The 2012 Directory of Islamic Financial Institutions published by Routledge lists Mr. Al Harthy, who sits on the board of a number of companies of Mr. Kamel’s Dallah Al Baraka group, as a founder, together with the Saudi billionaire, of the Al Baraka Islamic Investment Bank BSC in Bahrain.

WSG has so far not commented publicly on the PwC report or its relationship or that of its shareholder with Mr. Bin Hammam. However in an August 28, 2012 panicky letter to this reporter that first threatened ongoing legal action against him, WSG Group Legal Advisor Stephanie McManus asserted that “PWC are incorrect and misconceived in suggesting that the MRA (master rights agreement) was undervalued. They have neither considered the terms of the contract correctly, the market, nor the circumstances in which it was negotiated.” Ms. McManus’s comments failed to address the bulk of the concerns raised by PwC.

The letter implicitly acknowledged the accuracy of this reporter’s reporting by stating that his sources “must have deep knowledge of the matters referred to in your article,” yet charged that the reporting contained “false statements, unwarranted and malicious claims and unsubstantiated conclusions.” The letter further falsely asserted in contradiction to emails from WSG promising over a period of more than a year to respond to questions that this reporter had posed without ever following up that he had never sought comment from the company.

AFC General Secretary Alex Soosay, who has long played both sides of his divided organization, recently supported WSG's efforts to squash all reporting on its relationship to the AFC and Mr. Bin Hammam in a statement included in a submission to the Singapore High Court as part of WSG's legal effort to force this reporter to disclose his sources.

The legal effort, part of a company strategy apparently designed to hide its secrets at whatever cost rather than protect legitimate privacy, is intended to intimidate and threaten the media and their sources, whistle blowers and anyone critical of WSG. Sources said WSG cared little about reputational damage that its actions may cause because the company and Mr. O’Brien would have a lot to lose with a weakening of Mr. Bin Hammam’s influence, reform of the AFC, greater transparency and a thorough investigation of WSG’s relationship with the Asian soccer body. “There is a lot at stake for O’Brien,” one source said.

In a move designed to tighten Mr. Bin Hammam and WSG's grip on key parts of the AFC including its Mr. Soosay as well as its marketing, legal and finance committee, the AFC this month fired its marketing director Satoshi Saito, who was seconded for two years to the group by the Japanese Football Association (JFA). Sources said that Mr. Saito was advised that his contract would not be extended and that he no longer had to come to the office. Mr. Saito, the sources said, had long been barred from meetings with WSG, AFC's marketing partner, on the grounds that "the company holds all plenipotentiary rights to AFC's marketing rights." Some sources said the fact that Mr. Saito was likely to be replaced by a lower level manager rather than a director strengthened WSG’s grip, but was also motivated by the soccer body’s budgetary shortfalls.

WSG’s legal effort against this reporter as well as alleged efforts by WSG to intimidate those who refuse to toe its line that the PwC charges and questions are not what they appear to be comes as the noose seems to be tightening around the company's neck. Sources said that even if FIFA stopped short of challenging the WSG contract because of Mr. Blatter’s alleged long-standing relationship with Mr. O’Brien – something sources judge unlikely given that it represents a significant chunk of the PwC report --, Mr. Bin Hammam’s downfall would from FIFA’s perspective have to involve the loosening of his grip on the AFC. The sources said a reformed AFC was certain to question WSG's MRA if the executive committee failed to decide to do so in its forthcoming meeting on Thursday.

The recommendations for reform being put to the meeting are expected to include PwC’s advice to AFC that it seek legal advice to ascertain whether actions it uncovered constituted criminal and/or civil breaches by Mr. Bin Hammam and others and whether the facts in in the audit constituted sufficient evidence for a formal criminal complaint. They also are believed to include PwC’s recommendation that AFC get legal counsel on whether the WSG shareholder payments warranted “further work to determine if there is a relationship between the awarding of contracts to WSF (World Sports Football, a WSG subsidiary) and (Qatari broadcaster) Al Jazeera and the significant payments made to Mr. Bin Hammam.” Finally, the recommendations are certain to include PwC’s advice that AFC seek legal counsel on whether there were sufficient grounds to renegotiate or cancel WSG’s MRA. An executive committee decision to act on the PwC advice would further focus the FIFA investigation.

Sources said the outcome of the AFC executive committee meeting was hanging in the balance. They said that Mr. Bin Hammam could control enough votes in the 21-active member committee to delay the reforms. 
They said Mr. Soosay as well as the executive committee members from the United Arab Emirates, Saudi Arabia, Oman, Nepal, Thailand Sri Lanka, and Pakistan would likely seek to stall reform and implementation of the PwC recommendations. They said it was unclear where the Bahraini, Bangladeshi, Indian, Vietnamese and Myanmar delegates stood.

Although former Bin Hammam associates including acting AFC acting president Zhang Zhilong, have joined the ranks of the reformers, they are hampered by their history. Mr. Zhilong recently accused Mr. Bin Hammam and his lawyer, Eugene Gulland, of employing “intimidatory tactics” in his battle within the AFC. Messrs Bin Hammam and Gulland have rejected the accusation.

Nevertheless, sources say that Mr. Zhilong is treading carefully. "Zhilong is doing his best but Bin Hammam has made clever use of history -- Zhilong was head of the finance committee under Bin Hammam. Zhilong is a little bit scared and can’t be too aggressive. He knows that he is not without blame and that the ground under him is not rock solid,” one source said.

Sources warned that a failure by the executive committee to embrace reform and act on the PwC recommendations could spark the AFC’s demise. "If these people really believe Bin Hammam can make a comeback, AFC's days are numbered," one source said.

Sources said East Asian nations, including China, Japan, South Korea, Taiwan and Hong Kong were informally discussing breaking away from the AFC to establish their own regional confederation if the executive committee failed to adopt the reforms. A breakaway would be crippling for the AFC and WSG with Japan and South Korea alone accounting for 70 percent of the revenues of the Asian soccer body as well as the MRA.

"This week is make or break for the reformers within the AFC. It is likely to shape the future of the AFC and its commercial partners," one source said.

James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies and the author of The Turbulent World of Middle East Soccer blog. 

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