In the 164-page indictment, the U.S. Attorney for the Eastern District of New York charges fourteen individuals who held leadership positions with FIFA, regional or national soccer federations, along with sports marketing executives, with participation in a $150 million conspiracy spanning a 25-year period. The case is brought under the U.S. Racketeer Influenced and Corrupt Organizations Act, or RICO, as it is commonly known. Jack Warner, former CONCACAF president and FIFA vice president, is alleged to have been the kingpin of the scheme. Of the fourteen defendants, one is a U.S. citizen, and one a dual citizen of Uruguay and the U.S. The remaining defendants are citizens of Argentina, Venezuela, Paraguay, Costa Rica, Brazil, Nicaragua, the United Kingdom, Trinidad & Tobago and the Cayman Islands. The acts of which the defendants are charged occurred largely outside the U.S.
The indictment details ten criminal schemes whereby bribes and kickbacks were paid to soccer officials in exchange for the procurement by sports marketing companies of media and marketing rights to various soccer tournaments. The indictment also alleges a scheme whereby South Africa officials agreed to pay Warner and unnamed co-conspirators, all FIFA executive committee members, $10 million in exchange for their agreement to vote for South Africa as the host for the 2010 World Cup. In so doing, South Africa allegedly outbid Morocco which offered a mere $1 million. Another scheme alleges that, in a meeting held in Trinidad and Tobago, CFU officials were sworn to secrecy and instructed to enter a room one at a time, where they each received an envelope containing $40,000 from a FIFA official, in order to induce them to vote for him in a FIFA presidential race.
The indictment aims to wrap up the various schemes into one grand RICO conspiracy. It also alleges 46 additional counts of wire fraud, money laundering and other crimes.
Elements of RICO
RICO was originally intended to apply to organized crime, but it is broadly written, and so has expanded to many other types of criminal schemes. Under RICO, it is unlawful for any person associated with an enterprise to conspire to conduct, or participate in the conduct, of the enterprise’s affair through a pattern of racketeering activity. 18 U.S.C. § 1962(d).
An “enterprise” is broadly defined to include any individual or legal entity, or “any union or group of individuals associated in fact, although not a legal entity.” 18 U.S.C. § 1961(4).
“Racketeering activity” is defined with reference to specific criminal statutes that are listed as predicate RICO offenses. 18 U.S.C. § 1961(1). The list of predicates is a diverse group, including the widely-used wire fraud and money laundering statutes alleged in the indictment, as well as mail fraud, bribery of public officials (but not of private individuals as alleged here), extortion, drug trafficking and terrorism-related offenses. The RICO statute requires that a “pattern of racketeering activity” consist of a minimum of two acts of racketeering in ten years, 18 U.S.C. § 1961(5), although the courts have generally required much more, including a showing that the activity is related and continuous.
The FIFA indictment alleges that the “enterprise” consists of FIFA and its six continental federations, along with affiliated regional federations, national member associations and various sports marketing companies. While the collection of entities, particularly the pairing of sports marketing companies with soccer organizations, appears somewhat cobbled together, this type of an “association in fact” enterprise can suffice for RICO purposes, where it is shown that the members of the enterprise shared a common purpose. Boyle v. United States, 556 U.S. 938, 944-50 (2009); United States v. Krasniqi, 555 Fed. Appx. 14, 17 (2d Cir. 2014). Here the prosecution attempts to meet this requirement by asserting that the common purpose was to regulate and promote international soccer, including commercializing media and marketing rights. The defendants, along with 25 unnamed co-conspirators, are alleged to have participated in the conduct of this enterprise through a pattern of racketeering activity.
RICO’s Territorial Reach
The overall role of the U.S. as a location for the schemes is tangential at best. It is alleged that Traffic USA, and other unnamed U.S. marketing companies, negotiated for marketing rights associated with various tournaments, but the indictment contains few references to business dealings inside the U.S. In many instances, the involvement of the U.S. is limited to the use of U.S. banks to wire funds in connection with marketing contracts or bribe payments, or to launder money by passing funds, in part, through U.S. accounts. There are a few meetings alleged to have occurred in the U.S., a few telephone calls from or to the U.S., but not a whole lot more. There is absolutely nothing to suggest that the U.S. was a central location where the schemes were orchestrated or carried out.
For example, in one of the alleged schemes to acquire Copa do Brazil tournament marketing rights, all the activity appears to have occurred overseas, excepting two discussions over bribe payments, and the use of U.S. wires in connection with the scheme. In another scheme involving marketing rights for Copa América tournaments in Central America, it appears that the activity, including contract negotiations and bribe solicitations, occurred among non-U.S. citizens outside the U.S. The only U.S. connection alleged is the use of U.S. wires for contract payments, and bribe payments to one co-conspirator. The alleged scheme whereby CFU individuals received bribes from the FIFA presidential candidate was directed by Jack Warner, presumably from overseas, and the bribes handed out at a meeting in Trinidad and Tobago. The only U.S. involvement was that one of the CFU individuals who attended the meeting was from a U.S. territory, and after the meeting, flew home and deposited his money in his U.S. bank account. The scheme where South African officials allegedly outbid Morocco in bribe offers for the 2010 World Cup likewise bears scant U.S. connections; the entire scheme occurred abroad among non-U.S. citizens. At pains to allege ties to the U.S., the indictment notes that a co-conspirator picked up a briefcase from a South African official in Paris that contained “U.S. currency.” But the only U.S. activity was a subsequent wire from Switzerland to the U.S., and an individual travelling to New York to deliver a bribe to a co-conspirator, who, in turn, had his bank representative pick up the check in New York and deliver it to the Bahamas.
(As an interesting side note, close to nothing appears to have occurred in the Eastern District of New York, except for a “Queens meeting” (in the Eastern District) that gets a minor reference in the indictment, and a few individuals who landed at JFK (also in the Eastern District), before taxiing to Manhattan in a separate district, the Southern District of New York. All the actual acts of wire fraud or money laundering are alleged to have occurred in Manhattan, or, with respect to a few, in Florida.)
How then can such a case be brought in the United States? The territorial reach of RICO was addressed in a recent opinion issued by the United States Court of Appeals for the Second Circuit (which includes New York), European Community v. RJR Nabisco, Inc., 764 F.3d 129, 136-37 (2d Cir. 2014), reh’g en banc denied, 2015 U.S. App. LEXIS 5991, 783 F.3d 123 (2d Cir., Apr. 13, 2015). In that case, the Court held that the territorial reach of RICO is coextensive with the territorial reach of the predicate acts alleged.
In RJR, a civil RICO action, plaintiffs alleged that RJR Nabisco orchestrated a global money-laundering scheme, and laundered money through New York-based financial institutions. According to the complaint, the scheme began with the smuggling of illegal narcotics by criminal organizations from Columbia and Russia into Europe. In Europe, the narcotics were sold for euros, laundered by money brokers and exchanged for the domestic currency of the criminals’ home countries. The money brokers then sold the euros at a discount to cigarette importers, who used the euros to purchase RJR’s cigarettes from wholesalers, who, in turn, purchased the cigarettes from RJR, and shipped them to importers. The money brokers used the funds from the cigarette importers to continue the laundering cycle. 764 F.3d at 133.
The lower court found that the complaint failed to “even remotely suggest” that defendants had any hand in directing the drug smuggling, currency swap or currency purchase aspects of the criminal systems, or to explain how it directed or even participated in the remaining criminal activity. European Community v. RJR Nabisco, Inc., No. 02-CV-5771, 2011 U.S. Dist. LEXIS 23538, at *22 (E.D.N. Y., Mar. 8, 2011). The district court interpreted a previous Second Circuit opinion, Norex Petroleum Ltd. v. Access Industries, Inc., 631 F.3d 29 (2d Cir. 2010), as barring any extraterritorial application of RICO, and dismissed the Complaint on the ground that RICO cannot apply to activity outside the United States and cannot apply to a foreign enterprise. Id. at *12-13, 17-18. See 764 F.3d at 134.
On appeal, the Second Circuit reversed. The Second Circuit stated that RICO should not be construed so as to allow a defendant associated with a foreign enterprise to escape liability for conduct that violates a RICO predicate. Id. at 138. “Surely the presumption against extraterritorial application of United States law does not command giving foreigners carte blanche to violate the laws of the United States.” Id. Instead, the Second Circuit determined that the extraterritorial reach of RICO does not depend on the location of the enterprise, but instead depends on the particular predicate act alleged. Id. at 136. “RICO applies extraterritorially if, and only if, liability or guilt could attach to extraterritorial conduct under the relevant RICO predicate.” Id. Thus, if the particular predicate offense extends to conduct committed overseas, so does RICO, but only with respect to that predicate offense.
Of the two primary predicate offenses on which the FIFA indictment relies, wire fraud does not have extraterritorial reach, meaning that it cannot occur entirely outside the United States, while money laundering does have extraterritorial reach in limited circumstances. Id. at 139-41.
The elements of wire fraud under 18 U.S.C. §1343 are: (1) a scheme to defraud victims of (2) money or property through the (3) use of the wires. Angermeir v. Cohen, 14 F. Supp. 3d 134, 145 (S.D.N.Y. 2014). When the wires are used in furtherance of a fraud, the communications need not contain false or misleading information themselves. It suffices if the wires are incidental to “an essential part of the scheme or a step in the plot.” De Sole v. Knoedler Gallery, LLC, 974 F. Supp. 2d 274, 307 (S.D.N.Y. 2013). Further, there is no requirement to allege that defendants wired anything themselves. Defendants need only cause the wires to be used, or initiate a series of events that would foreseeably result in their use. Chevron Corp. v. Donziger, 974 F. Supp. 2d 362, 589 (S.D.N.Y. 2014).
Because wire fraud does not have extraterritorial reach, the government must show that the wire fraud was sufficiently domestic. There is still a level of uncertainty as to what this requires in a RICO action. In RJR, the court found it unnecessary to draw the line between the domestic and extraterritorial application of the wire fraud statute. 764 F.3d at 142. And there is a bit of tension between various statements the RJR court made on the subject. On one hand, it stated: “If domestic conduct satisfies every essential element to prove a violation of a United States statute that does not apply extraterritorially, that statute is violated even if some further conduct contributing to the violation occurred outside the United States.” Id. at 142. Based on this sentence, it can be argued that the essential elements to prove a wire fraud include both the scheme to defraud, and the use of the wires.
However, the Court also stated that the reach of RICO is the same as the reach of the predicate offenses, and in wire fraud prosecutions, the courts have only required that the misuse of wires occur in the United States, and not the scheme to defraud. Under this standard, a domestic wire fraud claim is easily stated by alleging a domestic wire or an international wire to or from the United States. See, e.g. United States v. Trapilo, 130 F.3d 547, 552 (2d Cir. 1997) (The wire fraud statute proscribes the use of the telecommunication systems in the United States. “Nothing more is required.”); United States v. Gilboe, 684 F.2d 235, 237-38 (2d Cir. 1982) (A Norway citizen and Hong Kong resident’s wire fraud convictions were upheld on one offense, based upon wire communications between Hong Kong, where the defendant resided, and New York; and on the second offense, based on wire transfers from China, through New York, and onto the Bahamas). See also United States v. Kim, 246 F.3d 186 (2d Cir. 2001) (upholding convictions where defendant and co-conspirators did not personally use U.S. wires, but defendant approved inflated travel invoices with knowledge that the use of U.S. wires would follow by a New York bank’s payment of the invoices).
If the prosecution must prove a United States nexus with respect to both the scheme to defraud and the use of wires, the prosecution faces a challenging task; if however, it need only show a misuse of United States wires, its job is far easier. The money-laundering statute by its express terms applies extraterritorially, provided that (a) the conduct is by a United States citizen; or (b) the conduct occurs in part in the United States. 18 U.S.C. § 1956(f). Thus, a United States citizen can be held liable for money laundering that occurs completely abroad, while a non-citizen cannot. In the FIFA indictment, since all but two of the defendants are non-citizens, the money laundering is alleged to have occurred, in part in the U.S., with funds originating in, passing through or ending up in U.S. accounts.
Proving a RICO Conspiracy
When reading the indictment, one might question whether the defendants truly were engaged in one grand conspiracy, or whether they were largely acting separately in discrete schemes, looking only to line their own pockets.
Jack Warner is the only defendant involved in the CONCACAF Gold Cup Scheme. (He is alleged to have accepted bribes in that scheme from 1996-2003, although the only two wire transfers that are specifically alleged occurred in 1999.) Warner likewise is the only defendant who is alleged to have received bribes, or to have otherwise participated, in the CFU World Cup Qualifiers Scheme No. 1, the 2010 FIFA World Cup Vote Scheme or the 2011 FIFA Presidential Election Scheme. The role of defendants Eduardo Li, then president of the Costa Rican soccer federation, and Julio Rocha, then president of the Nicaraguan soccer federation, is limited to one scheme, in which they are alleged to have received bribes in separate negotiations. Although the RICO conspiracy is alleged to have begun in 1996, Jeffrey Webb, Costa Takkas and Davidson do not make appearances in a scheme until 2012. Takkas’ role is limited to one scheme. Davidson and Webb are also alleged to have participated in a second scheme in 2012. Only two schemes allege the participation of more than three defendants. The first, the CONMEBOL Copa América alleges that four defendants received bribes (although at different times) and the last scheme, the CONMEBOL/CONCACAF Copa América Centenario Scheme, alleges involvement of ten defendants.
How can Eduardo Li, taking a meager six-figure bribe from a marketing company on behalf of the Nicaraguan soccer federation, be viewed as a co-conspirator with Warner, conducting a bidding auction among nations for his vote to host the World Cup, and netting $10 million? The answer lies in the expansive nature of RICO, and in particular, the wide definition of a RICO conspiracy, that is a gift to prosecutors.
The government need not prove that each defendant personally agreed to commit the predicate acts necessary to constitute a RICO violation, but only that each defendant agreed to participate in an enterprise, and to further its criminal objectives. There is no requirement that each member of a conspiracy conspire directly with every other member. United States v. Friedman, 854 F.2d 535, 562 (2d Cir. 1988). A defendant can agree to join an enterprise, even though he lacks knowledge of the identity of all the co-conspirators or all the details of the conspiracy. United States v. Rastelli, 870 F.2d 822, 828 (2d Cir. 1989). Defendants can agree to participate in different and unrelated crimes, and they can come and go, as here, with one defendant involved in a scheme in 1996, another in a scheme in 2012. See Friedman, 854 F.2d at 562.
Still, to be convicted of a RICO conspiracy, one must be aware of the general contours of the conspiracy, and know that it extends beyond his individual role. United States v. Cervone, 907 F.2d 332, 344 (2d Cir. 1990). He must agree to participate in the conspiracy through the enterprise. See, e.g., United States v. Sessa, 125 F.3d 68, 71 (2d Cir. 1997). That is what the indictment attempts to show—that all the defendants were able to accept bribes and kickbacks by virtue of their positions in the soccer enterprise. And to be fair, although many defendants play discrete roles, the schemes are related in that they all involve bribery, most all involve business negotiations over media and marketing rights, and the schemes have overlaps in co-conspirators and marketing companies.
Defense attorneys likely will argue, however, that the indictment alleges twelve separate schemes, and that participants in one scheme did not share a common purpose with participants in other schemes. Proving that each defendant, particularly lesser defendants such as Li or Rocha, had knowledge of the general outlines of the sweeping conspiracy alleged—even if not all the details–and agreed to participate in it–might prove a challenge to the government.
The Indictment’s Aftermath
The indictment alleges that the RICO conspiracy had anti-competitive effects that distorted the market for commercial rights associated with football, and undermined the ability of other sports marketing companies to compete with the companies that engaged in the schemes (as well as causing injury to FIFA and its constituents). While the Brooklyn case is a criminal RICO proceeding, RICO provides for civil actions as well, which can be brought by parties injured by a RICO scheme. It allows for treble damages and attorneys’ fees. In analogous circumstances, companies who were unsuccessful in bids for government construction projects have brought RICO actions against the winning bidders following criminal proceedings where it was alleged that the winning bidders had procured the contracts via a bribery scheme. Thus, it will come as no surprise if private parties, such as sports marketing companies who were unable to obtain FIFA-related contracts, follow on the heels of the FIFA criminal action with their own civil suits seeking treble damages and attorneys’ fees.