The Swiss connection

Over the past two decades, tens of millions of pounds generated by the global sports industry have found their way into the coffers of a little-known Swiss-based company with links to some of sport's top administrators. Now, says David Conn, a day of reckoning may be near
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The Independent Online

Faced with the biggest crisis of his career, Sepp Blatter, president of world football's governing body Fifa, acted swiftly and true to form. He called a press conference. Three weeks ago, following a furious executive meeting at Fifa's luxurious Zurich headquarters concerning the catastrophic collapse of the marketing company he once called his "sweetheart", Blatter emerged to soothe the world's media, in his five fluent languages, with the news that all is well. The finances are sound – looking up even – and if his worldwide "family of football" is squabbling for now, his own position at its head remains secure.

For so practised a press conference performer, it was not Blatter's greatest moment. The truth is that he is under extraordinary pressure – as, increasingly, is Fifa itself and, by extension, world football. Blatter, a Swiss former PR man, has worked for Fifa for 26 years. He succeeded his mentor, the Brazilian transport magnate Joao Havelange, as president in 1998. Havelange, a formidable operator, had wrested control of world football from the clerical, ever-so-British administration of Sir Stanley Rous in 1974, and turned "the beautiful game" into a global industry. That industry is now on the brink of a spectacular crisis, triggered by the sensational bankruptcy in May of an obscure Swiss-based marketing company called ISL.

Few people who do not work in sport have heard of ISL, which was formed in 1982 by the late Horst Dassler, boss of Adidas and founder of modern "sports business". Yet for the past 19 years it has played a central role in the explosive worldwide growth of the sports industry, marketing television and sponsorship rights for World Cup football and the Olympic Games. Based – like many bodies concerned with the lucrative business of organising sport – in Switzerland, it also had offices in New York, London, Paris, Tokyo and Munich. Even after Dassler's death, in 1987, it continued, under the ownership of Dassler's children, to command astonishing power and wealth.

Recently, however, it overreached itself in the face of competition from other, newly aggressive sports marketing companies, as it tried to get a foothold in other sports, such as tennis and racing. It suffered a body blow when, in 1995, it lost the rights to package the Olympics to sponsors and broadcasters – a contract it has held since 1983 and on which, with its Fifa contracts, ISL had built its fortune. This loss created a black hole that even its longstanding relationship with Fifa, including the exclusive licence to market the 2002 and 2006 World Cups, could not save.

ISL's bones are now being picked over by a liquidator in the Swiss town of Zug, while Blatter, and Fifa, have sought to head off allegations of corruption by suing ISL themselves. But ahead of last week's meeting, Uefa, European football's governing body, increased the pressure by tabling 25 pointed questions at Blatter, raising queries about when and how much he knew about ISL's problems, and how much of Fifa's deals with ISL he was reporting even within Fifa. Effectively, Uefa was accusing him of being secretive and unaccountable, if not worse. While Blatter protested his innocence and reassured afterwards that all would become clear, Uefa is keeping its counsel. "We are reserving judgement on the answers and information provided today," said Uefa's chief executive, Gerhard Aigner. "We sincerely hope satisfactory answers can be given, in order to try to create clarity and transparency."

Uefa is still holding out the possibility of a challenge to Blatter at today's extraordinary congress of Fifa at Buenos Aires. Even if Blatter escapes censure, helped by his political base outside Europe, this is the clearest challenge yet to an organisation grown rich and powerful on one foundation: the worldwide popularity of football.

Fifa was formed in 1904 by Jules Rimet, a French lawyer who envisaged creating an international "football family" as a means of spreading wholesome Christian sporting values around the world. Stanley Rous, a teacher at Watford Grammar School who was committed to the British amateur tradition, became Fifa's president in 1961, running the jewel in its crown, the four-yearly World Cup, from modest offices in a house in Zurich's suburbs.

The turning-point came in 1970. This was the year – commonly agreed by football fans to have been among the most glorious in the game's history – when the World Cup, in Mexico, was won by the Brazil of Pele, Gerson and its captain Carlos Alberto, playing the game with unprecedented brilliance. (In fact, the Brazilians' "natural game" was the result of a ferociously scientific training regime, partly learnt from Nasa's system for preparing astronauts, and made possible by the wealth and professionalism of the long-serving president of the Brazilian Sports Federation, Joao Havelange.) It was also the year when the global TV audience for the World Cup reached hitherto unimagined heights. And (though this was less remarked on at the time) it was the year when Havelange, seeing the commercial potential of that audience, began his campaign to wrest the Fifa presidency from Rous. Lobbying hard among African and Asian delegates, whom he lured with the promise of fuller support from the governing body, Havelange steadily gained ground on Rous – who was too patrician to electioneer in any way. Finally, in 1974, Havelange won his prize.

"It was a watershed moment in the history of world sport," said John Sugden and Alan Tomlinson, co-authors of an insightful book on Fifa's control of football, Great Balls of Fire. Out, immediately, went the remnants of Rous's amateur tradition and the quasi-religious belief in the moral values of sport. Havelange's Fifa would always pronounce itself committed to a "football family", but it quickly became clear that the family would be branded, packaged and marketed, committed to the idea of making as much money as possible from selling the game to the global audience.

The musty little offices where Rous had worked with a couple of secretaries and dogs were soon abandoned. Instead, Havelange built Fifa a more palatial residence elsewhere in Zurich, enjoying the hospitality of Dassler, wheeler-dealer of Adidas, while the offices were being refurbished. As the second half of the 1970s unfolded, Havelange and Dassler, together with an English marketing man, Patrick Nally, dedicated themselves to extracting much more from TV, and to selling sponsorship to major companies. Coca-Cola, courted by Nally, was the first to buy, paying millions to ease into new global markets as the fizzy drink of exclusive choice to Havelange's football family.

Blatter goes way back to these beginnings. Dassler picked him out of his marketing job for the Swiss timing company Longines to run, as technical director from 1975-81, the Futuro football development plan, sponsored by Coke and Adidas. (Dassler and Nally had arranged this sponsorship through a Monte Carlo-based company, Société Monegasque du Promotion Internationale – SMPI – which they had founded in 1975.) Blatter showed skill in doing deals and smoothing local difficulties; Havelange was impressed, and promoted him to become Fifa general secretary.

Dassler, who had built Adidas in harness with Fifa and the International Olympic Committee, founded ISL – International Sport and Leisure – in 1982, superseding the now defunct SMPI. Havelange immediately granted ISL the right to sell Fifa's properties, and ISL pioneered the marketing of sports tournaments into exclusive sponsorship packages, using sport as a vehicle for multinationals to earn massive brand recognition. When Havelange retired in 1998, he boasted that, mainly due to him, football had become a $250bn industry, and Fifa a $4bn operation.

Yet – and here are the roots of the current crisis – the development of this huge licence to print money was not matched by any comparable modernisation in the structure. Despite an increase in its member associations and presidential elections every four years, its politics meant it stayed in the grip of a tiny clique controlled by Havelange. Even now, Fifa, like other sports governing bodies, remains amateurish in its constitution and procedures, secretive and largely unaccountable.

By 1987, the year of Dassler's death, Fifa had promised ISL the rights to every World Cup until 1998, with options for 2002. Blatter described this relationship recently as "like a Venetian night of love", whatever that might be. What's clear is that Havelange, Blatter and ISL were very tight indeed. Since the 1990s, questions have been raised about deals that excluded everyone outside the charmed Havelange circle from the financial honeypot. Mark McCormack's International Management Group (IMG), for example, has repeatedly tried and failed to break into World Cup sponsorship. But the questions have rarely become more than that, for the simple reason that no one outside the circle really knows what goes on within it. Reporting, even within Fifa, about the flows of the money, has been minimal, and Fifa enjoys protection in Switzerland from normal rules on accounts and disclosure.

This, and the political influence of what are seen as lesser footballing nations, have for years become a source of bitterness at Uefa, the European governing body based on the shores of Lake Geneva. When Fifa's presidential elections came round in 1998, its Swedish president, Lennart Johansson, campaigned to succeed Havelange partly on a "cleanliness and openness" ticket. Havelange threw his fearsome weight behind Blatter, who had been his steadfast protégé throughout Fifa's growth. On the eve of the World Cup final in Paris between the host nation and Brazil, Blatter, the insider, won.

That was the Ronaldo final, the game in which Brazilian football's new prodigy played despite having suffered a fit the night before, allegedly following pressure from Nike, whose sponsorship deal with Brazilian football gives them near-control of the national team. Nike has denied it, but the Brazilian government's congressional hearings – into that affair, and into the running of Brazilian football – have led to corruption charges being brought against Ricardo Texeira, the president of the Brazilian football federation (and Havelange's former son-in-law).

If Pele embodied an age of relative innocence, then Ronaldo, hailed as his successor, was a casualty of a new age Havelange, Dassler and Blatter had ushered in: worn out by stress and the relentless demands of commercialism. In the fall-out from the ISL collapse, the arcane processes by which these demands reached their current intensity may finally be made clear.

Blatter's media performance last month will not have been enough to allay concerns about football's rapid commercial growth; and nor will many minds be put at rest if he manages to avoid censure in Buenos Aires today. Uefa's 25 questions, ranging over Blatter's salary, management structure and relationship with ISL, effectively alleged corruption and secrecy at the heart of Fifa, and sooner or later such allegations must be answered. In Germany, allegations have been made that Blatter benefited from an ISL slush fund in Liechtenstein filled with Brazilian TV money. Blatter denies this, and Fifa has issued pro- ceedings against ISL. Blatter has also denied improperly favouring ISL over other, non-Fifa related companies (such as IMG), which claim to have offered Fifa more money than ISL for the right to market the 2002 and 2006 World Cups, only to be spurned for their pains. Such a cavalier attitude, if it existed, could prove expensive. The collapse of ISL has cost Fifa at least £30m already, and it is still counting.

In the heat of the initial fall-out, Blatter made a characteristically flamboyant challenge to journalists: "Look into my eyes," he said. "Never, ever have I been corrupted." He did add that he had been offered bribes many times, but said: "I cannot be corrupted – I have nothing to hide." He also vehemently defends Fifa's structure, claiming its voting and committee systems do make it accountable and democratic.

To followers of the epic saga of sleaze and the Swiss-based International Olympic Committee, much of this will be familiar; and, indeed, ISL has played a part in that long-running scandal as well.

But for those who have concluded that the business of international sport is beyond cleaning up, there is hope in sight. Uefa is not alone in its view that Fifa's authority needs to be challenged. Governments, too, are now taking some interest in the need to hold to account sporting governing bodies that have become so inordinately powerful in the global marketing age. What remains to be seen is whether Blatter's multi-lingual charms will see him out of this and leave Fifa untouched again – or whether, with ISL gone, the pressure will prove irresistible. Either way, most fans will welcome this challenge to the authority of Fifa, the organising body for a simple, beloved game that rolled, unnoticed, into the hearts of the global corporations, and became wealthier, and more powerful, than many of the countries it claims to serve.