DOJ is “Swinging for the Fences” in Expanding Traditional Industry Focus
The Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”) typically stick to a game plan when it comes to the Foreign Corrupt Practices Act (“FCPA”), historically focusing on high risk markets and select industries with heavy foreign government involvement, such as energy and resource extraction, life sciences and pharmaceuticals, and financial services. But recent reports suggest that the agencies may be broadening their FCPA investigatory focus and scrutinizing new markets and industries.
One such industry to come under the spotlight is professional sports. Last year it was reported that Major League Baseball (“MLB”) has come under investigation by the DOJ and Federal Bureau of Investigation (“FBI”) for FCPA violations.1 More specifically, a grand jury subpoenaed multiple MLB club officials and agents regarding specific baseball franchises’ dealings with immigration officials in Latin America and the Caribbean. One former baseball operations executive stated that the investigation likely focuses on the MLB clubs’ interactions, by themselves or through agents, with foreign immigration officials in order to obtain identification documents, assist in the visa application process, and falsify identity documents in order to change players’ ages and make them more marketable.2
It is well known that many key recruits for the MLB are natives of and train in Latin American and Caribbean countries before coming to the United States to join major baseball clubs. However, the clubs’ relationship with buscones, third-party agents who train, scout, and recruit players in foreign countries, has come under increased scrutiny in recent years. This has resulted in some internal MLB penalties for individuals who have “mishandled players on the international market” such as John Coppolella of the Atlanta Braves.3
The MLB grand jury subpoenas come on the heels of an active year with respect to investigations into corruption in professional sports. Early last year, grand jury subpoenas were issued by the Eastern District of New York seeking information related to FIFA, the United States Olympic Committee, the International Olympic Committee, and the International Association of Athletics Federation.4 Although the investigations did not implicate FCPA violations, they did address possible money laundering, racketeering and fraud by the international and domestic sports bodies. Moreover, last year Lance Armstrong reached an agreement with the DOJ to settle long-running FCA allegations for lying about his use of performance enhancing drugs (“PEDs”) while accepting sponsorship by the United States Postal Service.
Professional sports leagues are beginning to take notice of the increased regulatory attention. In February, the National Football League (“NFL”) announced a search for a newly created position: Director, Compliance.5 This Director will assist the Vice President of Compliance in promoting an ethical corporate culture and, more specifically, “focus on policies relating to compliance with the Foreign Corrupt Practices Act, other anti-bribery laws, and relevant regulations.” The NFL also advertised an expanded scope for its compliance department, adding guidance to individual NFL teams along with league-specific issues. Professional sports organizations’ apparent willingness to dedicate compliance resources to address anti-corruption compliance among other areas suggests an awareness of the increased scrutiny of their programs.
It remains to be seen whether these recent investigations are indicative of a larger and sustained enforcement focus on combatting corruption in professional sports. What is clear is that U.S. authorities are increasingly knowledgeable about the potential touch points for corruption in professional sports, and are increasingly willing to pursue what may have once been an overlooked industry with respect to corruption. Companies, associations, and professionals such as agents and scouts operating in the professional and semi-professional sports industries should conduct a corruption-focused risk assessment to gauge the potential risk areas for corruption, address any gaps in procedures designed to mitigate against such risk, and educate and monitor personnel involved with government entities and officials. We will continue to monitor these cases and provide updates.
1 Jeff Passan, Sources: A federal grand jury is investigating MLB’s international dealings, and officials on all sides are worried, YAHOO! SPORTS (Sep. 28, 2018), https://sports.yahoo.com/sources-federal-grand-jury-investigating-mlbs-international-dealings-officials-sides-worried-055827471.html.
2 Mike Koeler, Major League Baseball Reportedly Under FCPA Scrutiny, FCPA PROFESSOR (Oct. 1, 2018), https://fcpaprofessor.com/major-league-baseball-reportedly-fcpa-scrutiny/.
3 Chris Cwik, MLB bans former Braves GM John Coppolella for life after prospect violations, YAHOO! SPORTS (Nov. 21, 2017), https://sports.yahoo.com/mlb-bans-former-braves-gm-john-coppolella-life-prospect-violations-214142862.html.
4 Andy Spalding, New Investigations announced in mega-sport corruption, FCPA BLOG (Feb. 1, 2018), https://www.fcpablog.com/blog/2018/2/1/new-investigations-announced-in-mega-sport-corruption.html.
5 David D. Dodge, NFL to Hire Director, Compliance, THE COMPLIANCE AND ETHICS BLOG (Feb. 4, 2019), https://complianceandethics.org/nfl-to-hire-director-compliance/.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.