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Wednesday
Feb012017

Laura Tulchin: To clean up big-time sports events, start with monitors

The former governor of Rio State, Sergio Cabral, was arrested in November on corruption charges. He was accused of taking bribes from construction companies. One of the contracts under investigation involved the renovation of the Maracana stadium ahead of the 2014 FIFA World Cup and 2016 Olympic Games.

In December, Rio's outgoing mayor, Eduardo Paes, was named in connection with the Operation Car Wash scandal. He's also the subject of allegations about contracts for the 2016 Olympic Games.

So once again, the specter of corruption linked to mega-sporting events has put a spotlight on the issue for law enforcement agencies, regulators, government officials and the public around the world. And just in time: allegations of corruption have already surfaced ahead of the 2018 World Cup in Russia and 2022 World Cup in Qatar.
 
As we’ve seen in countless parallel cycles of public scrutiny and corruption enforcement in the corporate sector, there will be a tipping point when a behavioral change will have to come to the sports world. But what will that change look like?

How can sporting organizations, host cities, and others involved in the business of sport start to implement the kinds of compliance standards that will drive sustainable improvements?

Monitors are a good place to start.

South Korea’s voluntary effort to install government monitoring across several different ministries to oversee spending related to the 2018 Olympic Games is an explicit recognition that the huge influx of money ($4.4 billion) for rapid construction increases the risk of spending irregularities, if not outright fraud or corruption.

Korea's action follow best practices in the United States. Independent, third-party monitors have been used proactively for projects particularly susceptible to wide-scale corruption, such as the cleanup of Ground Zero after the September 11 attacks, and the construction of the new Yankee Stadium.

In these cases, governments (typically city or state) or private owners identify the need for checks and balances in an oversight structure designed to quickly spot and remediate fraud, corruption, and waste before it can metastasize.
 
In the case of the Ground Zero cleanup, integrity monitors were said to prevent $47 million from being illegally siphoned in fraudulent construction billing. That monitoring was deemed so successful that monitors were also hired to oversee the construction of the Freedom Tower, September 11 museum, and related transportation projects.

We’ve also seen successful deployment of monitorships in collegiate sports, most notably when the NCAA required Penn State to engage an integrity monitor to oversee its football program following a sex abuse scandal. Shouldn’t the international sports community make efforts at least as serious as American college football?

The concept of proactive monitors is still relatively new. The most common shortcoming we see is a lack of transparency and cooperation between the organization being monitored and the monitor team. Fully transparent, open communications between both parties is the fundamental building block to any successful monitorhship. Without it, monitors simply cannot do their jobs and will serve as little more than window dressing.
 
That's why the ongoing development of rigorous transparency standards regarding the allotment of funding is so important. This approach could follow the model currently being developed by the World Bank to include information about the beneficial owners of companies that bid for its contracts.

Designed to eliminate anonymously owned companies receiving major public or private sector contracts, this additional layer of transparency would require all funding entities to collect, verify and publish beneficial ownership information for any company receiving a contract. The model, while designed for public finance projects in developing countries, has natural applications for the world of sport, construction, and many other industries.

No amount of public outcry will ever completely eliminate corruption in the world of sport. But by taking a rigorous approach to transparency and development of compliance standards, we can reduce the number of large-scale, systemic crimes that have tarnished so many of our favorite pastimes.

____

Laura Tulchin, pictured above, is an Associate Director at Exiger, the global regulatory and financial crime, risk and compliance firm.

Reader Comments (1)

During the past year I've written about 20 blogs for The Compliance and Ethics Blog on sports scandals and how sports organizations could benefit from implementing an effective integrity and compliance program. To view these blogs which have been reposted on my site, go to: www.sportsofficiatingconsulting.com.
February 1, 2017 | Unregistered CommenterDavid D Dodge
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