Wed, Dec 9, 2020

Compliance, Transparency and Sustainable Growth Should Be Considered Top Priorities in the 2021 Brazilian Sports Agenda

This year was undoubtedly challenging for sports organizations all over the world, including Brazil.

From cancelled competitions to postponed events, including the Summer Olympic Games, the Brazilian sports industry has suffered significant financial losses. Some clubs and federations are still struggling to recover financially from the drastic reduction of funds from sponsors and other sources of revenue. 

While not much could be done other than to sit back and wait for the enormous difficulties brought on by the pandemic to be over, it is important to observe the progress a number of sports associations in Brazil have achieved within the last year. 

We can see a change in approach from a number of clubs, who have realized how essential it is to ensure that governance and transparency are appropriately structured in sports organizations. The decades of disastrous results that irresponsible administration have brought to the table have become clear. At the same time, the clubs that began to organize and invest in corrective and preventive actions have begun to stand out. To put it simply, clubs who invested in sustainable growth, transparency and properly managed finances are more likely to be successful in the game.

During 2020, Kroll was engaged in high-profile projects to investigate potential fraud and other irregularities at top-tier football clubs. These were almost always prompted by current board or executive management trying to identify the causes of significant debt, poorly operated finances, suspicious contracts (with vendors, agents and players) and an almost endless list of other abnormalities in how clubs have been managed.

Within the scope of our projects with Brazilian football clubs, we identified a number of trends across the industry. Our investigations brought to light significant and systemic irregularities related to players’ contracts. These have included looking at the questionable relationships between clubs and players’ agents and the arbitrary payments of significant—and not always justifiable—commissions. Some of our findings also include payments for board members who set up shell companies to simulate legitimate business with clubs.

Using a club’s structure for personal benefit was also a recurring theme. Our analyses found a club executive who used the entity’s travel structure and covered up his personal travel expenses, including luxurious overseas trips with his family. Another senior figure would use the club’s corporate credit card (a novelty he introduced at the beginning of his tenure) to pay for his tailored suits, new computer and even his taste for adult entertainment facilities.

But clubs are doing more than looking at significant mismanagement and the issues that have been swept under the carpet. We have seen a genuine attitude change by a number of our clients, as well as other clubs, to drive a positive change in professionalizing their management structure, which includes investing in preventative controls, setting up an independent compliance function and allowing independent investigations to be carried out.

As the tumultuous 2020 comes to a close, we see that at least 10 clubs from Brazil’s top-tier league have either changed or are about to change their current executive management and board members through internal elections. As new football executives are chosen and begin their tenure leading some of the most successful teams in the continent, we hope that compliance, transparency and sustainable growth continue to be considered top priorities on the agenda.

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