By Mark Baber
May 29 – Multinational US-based sportswear company Nike is reported to be the company at the centre of the bribery scandal over the Brazil shirt deal with the company claiming it is ‘cooperating with the authorities.’
Allegations over Nike’s 1996 contract with the Brazilian Football Federation (CBF) are long-standing, with major questions over the final destination of the money received. There were also major questions raised at the time over Nike’s sweatshop practices, including an article in the New York Times which stated, “More than a third of Nike’s products are manufactured in Indonesia, a human rights backwater where the minimum wage was deliberately set below the subsistence level in order to attract foreign investment. Workers at sweatshops with Nike contracts are grudgingly paid $2.20 a day. It took four years of sometimes violent struggle to get the minimum wage that high.”
In this week’s indictment published in New York, Nike, described as “Sportswear Company A,” features prominently in the “CBF Sponsorship Scheme,” one of the major schemes described.
According to the indictment: “The Brazilian national team won the 1994 World Cup, which was hosted by the United States in June and July of that year. Around the same time, a representative of a multinational sportswear company headquartered in the United States (“Sportswear Company A”), the identity of which is known to the Grand Jury, approached CBF to determine whether CBF was interested in being sponsored by Sportswear Company A. At the time, CBF already had a sponsorship agreement with another American sportswear company (“Sportswear Company B”), the identity of which is known to the Grand Jury. Thereafter Co-Conspirator #11, a high-ranking CONMEBOL and CBF official, and Co-Conspirator #2, on behalf of Traffic Brazil, which at the time served as CBF’s marketing agent, began negotiations with representatives of Sportswear Company A.”
According to the indictment: “The negotiations lasted into 1996. The parties ultimately agreed to a 10-year deal.”
Nike agreed a 10-year deal with the CBF in 1996, then one of the biggest sports sponsorships ever signed, aimed at associating the brand’s mainly Indonesian-produced products with the world’s most successful team in order to be able to sell them for huge mark-ups on the cost of manufacture.
According to the indictment “Sportswear Company A” had “to pay CBF $160 million over 10 years for the right to be one of CBF’s co-sponsors and to be CBF’s exclusive footwear, apparel, accessories, and equipment supplier. CBF remitted a percentage of the value of the payments it received under the Agreement to Traffic Brazil.”
However, according to the indictment, “Additional financial terms were not reflected in the Agreement. Sportswear Company A agreed to pay a Traffic affiliate with a Swiss bank account an additional $40 million in base compensation on top of the $160 million it was obligated to pay to CBF pursuant to the Agreement. On July 14, 1996, three days after the Agreement was signed, a representative of Sportswear Company A and a representative of Traffic Brazil (Co-Conspirator #2) signed a one-page letter agreement acknowledging as follows: “CBF has authorized Traffic, or its designated banking agent, to invoice [Sportswear Company A] directly for marketing fees earned upon successful negotiation and performance of the … [Agreement].” Between 1996 and 1999, Traffic invoiced Sportswear Company A directly for $30 million in payments.”
In addition, according to the indictment, “Co-Conspirator #2 agreed to pay and did pay Co-Conspirator #11 half of the money he made from the sponsorship deal, totaling in the millions of dollars, as a bribe and kickback.”
Clearly “Sportswear Company A” (Nike) have some major questions to answer about their role in the scandal, although there is nothing in the US indictment to suggest any Nike officials have yet been charged.
Nike have said in a statement that they are cooperating with authorities and “Nike believes in ethical and fair play in both business and sport and strongly opposes any form of manipulation or bribery.”
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