Jun 4, 2015

By Wojciech Kornacki

The recently exposed gross institutional misconduct at the Fèdèration Internationale de Football Association (FIFA) teaches us many important lessons about avoiding the proverbial ‘red card’ from the U.S Government.  Below we will analyze what the Federal Acquisition Regulation (FAR) requires of Government contractors and what went wrong with FIFA.  While FIFA is not a government contractor, if it complied with the FAR, it would most likely not face multiple indictments related to racketeering, wire fraud, and money laundering conspiracies.

FIFA is responsible for the regulation and promotion of soccer worldwide, and also for leading many other soccer organizations around the world.  However, just like any other highly successful enterprise, FIFA is not immune to lack of transparency, corruption, and senior leader misconduct.  And FIFA has been quite successful.  According to USA Today, FIFA made $4 billion in commercial revenue from broadcasters and sponsors of the 2014 World Cup in Brazil alone.

FAR, Subpart 3.10 – Contractor Code of Business Ethics and Conduct, sets out policy on contractor business ethics.

(a) Government contractors must conduct themselves with the highest degree of integrity and honesty.

Integrity and honesty includes reporting overpayments, accurate pricing, and no appearances of impropriety, among others.  By apparently engaging in years of corrupt activities, kickbacks, wire fraud, and bribery, FIFA officials appear to have violated this basic policy requirement for Government contractors.

(b) Contractors should have a written code of business ethics and conduct.  To promote compliance with such code of business ethics and conduct, contractors should have an employee business ethics and compliance training program and an internal control system that (1) are suitable to the size of the company and extent of its involvement in Government contracting;

The FAR recognizes that having a written code of business ethics on paper is not sufficient.  What each successful enterprise actually needs is a culture of corporate responsibility.  Annual training on new legal developments, due diligence, pro active anti-corruption officials, and refresher classes are critical.  While FIFA maintains its own Ethics Committee, by itself this is not enough to stop its apparent corrupt practices.

(b)(2) Facilitate timely discovery and disclosure of improper conduct in connection with Government contracts; and

The Mandatory Disclosure Rule requires reporting of criminal law violations, False Claims Act violations, and evidence of significant overpayments.  It does not require constant reporting all the time.  Some misconduct may go unreported.  Until the U.S. Government became involved, FIFA appears not to have reported most of its alleged corrupt practices to anyone, including itself.  Based on this, it appears that its entire reporting mechanism has been ineffective and inadequate.

(c) Ensure corrective measures are promptly instituted and carried out.

On June 2, 2015, the FIFA President announced that he will be stepping down, but it remains to be seen how long the entire process will take place.  The FAR requires prompt corrective measures and cooperation with the U.S. Government.  Government contractors that do not institute prompt changes may be faced with additional adverse criminal, civil, administrative, or contractual actions.

If you would like to know more about Contractor Code of Business Ethics and Conduct, the Mandatory Disclosure Rule, or new developments in the area of U.S. Government compliance, you may call Centre Law and Consulting at 703-288-2800.

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