FIFA: Losses announced following the corruption scandal

By Jonathan Copping, Sports Lawyer, Bolt Burdon Law Firm, London, United Kingdom

FIFA announced, on 7 April 2017, a record loss of £314 million ($391million) for 2016 caused by mounting legal costs, and FIFA President Gianni Infantino’s pledge to increase development funding for member associations around the world. And more losses are on the way. FIFA expects to lose $489 million, before tax, in 2017!

FIFA has been mired in legal proceedings and investigations following the US Justice Department filing charges against senior FIFA officials in May 2015 and the subsequent pre-dawn raid at the exclusive Baur au Lac Hotel in Zurich on 3 December 2015. Following the arrest and charge of members of FIFA’s executive committee in relation to the receipt of bribes and kickbacks, FIFA engaged the American law firm, Quinn Emanuel, to undertake an internal investigation into wrongdoing at FIFA. It has been reported that FIFA has incurred £80 million in legal costs dealing with its own investigations into corruption; however, it is not clear whether the total of that sum was paid to Quinn Emanuel.

In addition to this increase in legal costs, FIFA has also increased the amount it gives to each member association. FIFA has promised to distribute £4 million ($5 million) to each of the 211 member associations every four years; in addition to distributing £32 million ($40 million) to each of the six continental associations every four years.

Although the financial loss of £314 million, caused by expenditure of £718 million against total revenue of £404 million, is eye-watering, FIFA’s overall financial position appears to be quite healthy. The 2016 financial report produced by FIFA shows that FIFA has reserves of £838 million, which it expects to increase to £1.33 billion in 2018 after the World Cup in Russia, as a result of which FIFA expects to make a profit of $1.1 billion, based on the sale of TV rights around the world for this event, although Russian TV networks are baulking at the high price of them, recently reported to be $120 million (£96.5 million)!

FIFA’s total estimated revenue for the period of 2015-2018 is £4.55 billion. This figure is calculated by working out the total value of the contracts that FIFA will enter into in that 4 year period. Contracts relating to 76% of the estimated revenue have already been entered into at the date of the financial report.

The size of the estimated revenue indicates that FIFA has survived the corruption scandal and, rather surprisingly, the estimated revenue is an increase of 5% on the revenues for the period 2011-2014, demonstrating that corporations and commercial rights holders are willing to stick by FIFA.

One interesting point that has arisen out of the financial report is the amount of reserves that FIFA holds. It appears that much more of them could be invested and distributed to fund projects for the development of football around the world, especially at the ‘grass roots’ level of the game.

 

Jonathan Copping can be contacted by e-mail at ‘JonathanCopping@boltburdon.co.uk’