Written by Richard Wee & Daniel Tan
“I also regret all the harm I did to soccer, which is the sport that I love…” said Alfredo Hawit, the former president of the Confederation of North, Central American and Caribbean Association Football (CONCACAF).
The 2015 Fédération Internationale de Football Association (FIFA) corruption scandal is said to be the biggest scandal in the world of sports. The scandal is not the first ugly revelation about corruption in sports – there are in fact ample of such shame such as the 1999-2000 India-South Africa match fixing scandal, the 2013 Indian Premier League Spot-Fixing, the 2002 Winter Olympics Scandal, the 2009 European football Match Fixing, the Black Sox 1919 World Series and the 2022 Qatar World Cup.
It is undeniable that sports corruption torpedoes the reputation and integrity in sports. The sports industry should be given the justice it should deserve. This article addresses the FIFA corruption scandal and the laws to hold the offenders liable.
The FIFA Corruption Scandal
In May 2015, the United States indicted the then FIFA officials due to “rampant, systemic, and deep-rooted” corruption after a probe by the Federal Bureau of Investigation (FBI). In December of the same year, 16 more officials were charged following the apprehension of two FIFA vice-presidents. Amongst the executives who were found guilty were Alfredo Hawit, the then FIFA President Sepp Blatter and UEFA President Michel Plattini.
Alfredo Hawit was sentenced to time served for his role in accepting $1.66 million in bribes in the FIFA scandals. He was found guilty based on two offences of wire fraud conspiracy and one offence of racketeering conspiracy and conspiracy to obstruct justice on 11th April 2016. Each offence imposed a possible sentence of up to 20 years. The United States District Judge who meted out the sentence, Pamela K. Chen, said that Hawit tried to conceal bribes and even exploited the name of his wife, a superior court judge. He also tried to hide the payments by directing co-conspirators to create a bogus contract. In the words of the judge: “The government’s investigation and prosecution in this case has rightfully served as a wake-up call to the entire professional soccer world and to all of its associations that business cannot be conducted in this manner.” The former CONCACAF president was banned for life by FIFA on 19th December 2016 after the adjudicatory chamber of its independent ethics committee found him guilty of infringing FIFA’s code of ethics provisions on general rules of conduct; loyalty; duty of disclosure, cooperation and reporting; conflicts of interest; bribery and corruption.
On 2nd June 2015, Sepp Blatter resigned in the wake of allegations that he would soon be investigated by the United States and Sweden on charges of corruption and fraud. He denied the wrongdoings but his denial was questionable since more allegations were made against him. He was alleged of signing a television contract “unfavourable” to FIFA and making a “disloyal payment” to Michel Platini using two million Swiss francs in FIFA funds therefore breaching his fiduciary duties to the organisation. In December 2015, Blatter was banned from FIFA for eight years for that payment to Platini. Blatter’s appeal was dismissed in 2016 but his sentence was reduced to a six-year ban. In June 2017, FIFA, after a more detailed probe, unveiled that Blatter and two other superior members of the organisation had stolen $80 million in “a coordinated effort to enrich themselves through annual salary increases, World Cup bonuses and other incentives” over a period of five years. Although corruption charges were dropped against Blatter in 2018, FIFA was adamant that its former president is still far from innocent. Indeed, Prosecutor Thomas Hildbrand furthered criminal proceedings against Blatter in June 2020 for suspected criminal management to include a $1 million loan FIFA made to the Trinidad and Tobago football federation in 2010.
Michel Platini has been investigated in respect of a $2 million payment he obtained from FIFA in 2011. He is suspected of being an accessory to criminal mismanagement, of misappropriation and forgery. The former UEFA president submitted invoices to FIFA in January 2011 seeking payment for an uncontracted additional salary from working as a presidential adviser in Blatter’s first tenure and the payment was made to him the next month. Five different courts and tribunals comprising the Court of Arbitration for Sport, the European Court of Human Rights and the FIFA ethics committee have found Platini guilty since Swice prosecutors unfolded the allegation in September 2015. The Swiss attorney general’s office confirmed the proceedings against Platini and said “various hearings are planned at (our offices) in Bern during the third quarter of 2020.”
Platini’s four-year ban expired in October 2015 and he has intended to return to the sport. The sustained allegation was resurrected two years after Platini said Swiss prosecutors told him that he had been dismissed of wrongdoing.
The Limits of Criminal Law
If at all sports corruption occurs in the context of Malaysia, how does the law approach this? Criminal law is obviously one of the laws that are applicable but it only offers criminal remedies to the claimant, i.e. imprisonment and harsh penalty. More often than not, the claimant will be more interested in civil remedies such as monetary compensation because the offender has caused the claimant to suffer a huge monetary loss and the claimant intends to seek compensation to remedy such loss. Hence, equity a.k.a the law of trusts is the branch of law that the claimant may rely upon to seek civil remedies.
Equity as a Sword
Trusts law can be employed to trace the monies of the beneficiaries that are lost in inequitable transactions and to hold a fiduciary liable. It is submitted that the principles of equity, constructive trust in particular, are applicable to sports corruption.
In the case of Attorney General of Hong Kong v Reid  3 WLR 1143, the Privy Council held that bribe money received by a person in a position of trust can be traced into any property bought and is held on constructive trust for the beneficiary. For example, a person in the position of Alfredo Hawit who has a fiduciary duty to the sports organisation buys a house using the bribe money accepted. The Court can then trace the money in the hands of the fiduciary to the property. The property bought is therefore held on constructive trust for the fiduciary. What if a bona fide purchaser is involved? The same example above is added with the fact that the fiduciary sells the house to a bona fide purchaser. Can the beneficiary sue the purchaser to obtain the money that is now in his hands?
The answer is no. A bona fide purchaser who has paid the value of the house cannot be sued in such inequitable transaction because equity confers on him rights which are superior to any other parties, including the beneficiary. Therefore he has a good title to the property. However, the fact that a bona fide purchaser cannot be sued does not mean that equity fails to function as a sword to “attack” the fiduciary wrongdoer. In this hypothetical scenario, the courts again use the rules of tracing to trace the money that originally laid in the hands of the fiduciary, to the property and then back to the hands of the fiduciary. The money is held on constructive trust for the beneficiary. What about a more complex hypothetical scenario that involves dissipation of property? For instance, a person in the position of Alfredo Hawit spends the bribe money received on a holiday. The holiday has now been dissipated – the trust money is not traceable thus preventing the beneficiary from recovering it. The beneficiary now confronts the fiduciary only to find out that he is happily using dissipation of assets as a defence. In this situation, the courts would be unlikely to use the rules of tracing but may allow a personal claim by the beneficiary against the fiduciary to recover the exact amount of the money lost on the basis of breach of trust.
However, in the case of Lister & Co v Stubbs (1890) 45 Ch D 1, the Court of Appeal took a different view. The Court differentiated two situations where a fiduciary misappropriates the trust money from the beneficiary to buy a property for his own and where a fiduciary does not misappropriate the trust money but receives a secret profit from a third party when he is in the position as a trustee. The Court held that the first situation falls within the rule of Attorney General of Hong Kong v Reid whereas in the second situation, the relationship between the defendant and the plaintiff was of a debtor-creditor relationship and the Court did not recognise the existence of a constructive trust because the secret profit obtained by the fiduciary is not the beneficiary’s asset therefore he could not claim something that does not belong to him. Nevertheless, the fiduciary who breaches his duty is still defenceless against a personal claim brought by the beneficiary. The Court would award some compensation to the beneficiary but definitely not as much as the secret profit gained which more often than not is a tremendous amount.
In the case of Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd  EWCA Civ 347 the Court of Appeal refused to rely on Stubbs and preferred the ruling in Lister. Interestingly, the similar issue arose again in the more recent case of FHR European Ventures LLP v Cedar Capital Partners LLC  UKSC 45 where the Supreme Court held that the decision in Sinclair Investments was wrong. The Supreme Court held that an unauthorised gain made by a fiduciary would be held on constructive trust for the beneficiary even though the gain is not the beneficiary’s property. Other common law jurisdictions resonate with this decision, such as the Australian cases of Chan v Zacharia (1984) 154 CLR 178 and Grimaldi v Chameleon Mining NL (No 2)  FCAFC 6. It is important to note that a fiduciary is strictly bound by the no-profit and no-conflict rule regardless of any misappropriation of trust funds whatsoever.
Should sports corruption occurs in any Malaysian sports organisation, cases such as Reid and FHR European Ventures may be relied upon by the beneficiary. It is submitted that sports corruption is an ignominy in the sports industry and sports organisations should have in place stringent anti-corruption policies and regulations to deter the occurrence of corruption. Indeed, a beneficiary may seek a criminal remedy for a fiduciary’s breach of trusts, but that may not be appealing to the beneficiary as such remedy does not monetarily compensate the loss suffered. In the event any member of the sports organisation in the position as a fiduciary commits and/or involves in any corrupt activity, the beneficiary may “attack” the fiduciary using the law of trusts as a sword.
Published on 3 August 2020