nike inc. sponsorship

Project Description:

in the wall street journal sat/sun, june 13-14 2015 edition article: us probes nike brazil money, copy article and write a 1-2 page analysis (one inch margins, double spaced) with a short summary about the article and how it relates to one of the following: strategic management decision making, competitive advantage, opportunity in a market or global strategic management.

u.s. authorities are examining payments made by nike inc. under a groundbreaking 1996 soccer sponsorship with brazil for possible evidence of any wrongdoing by the company in addition to its counterparts in the deal, people familiar with the matter said.
the examination indicates the company is still of interest as the justice department pursues its wide-ranging probe of corruption in the global soccer business.
allegations of corruption around nike’s 10-year, $160 million agreement to sponsor brazil’s national team are discussed in barely veiled terms in the justice department’s 161-page indictment of officials in and around soccer’s governing body, fifa.
the indictment describes a multinational u.s. sportswear company that struck a deal to sponsor the brazilian federation, and then cut a side deal with a sports-marketing middleman, who allegedly used payments from the company for bribes and kickbacks. the people familiar with the matter confirmed the company is nike.
nike said the indictment doesn’t allege that the company or its employees engaged in criminal activity and said it is committed to ethical behavior.
nike’s negotiating counterparts at the brazilian soccer federation cbf and the middleman, traffic, are described in the indictment as unindicted co-conspirators. the indictment doesn’t discuss nike or any of its employees by name.
the inquiry by u.s. prosecutors has raised questions about a deal that was a crucial win for nike. at the time, the company was widely seen as out of the race in soccer. but it pushed boldly into brazil in an effort to sign the reigning world champions and gain clout in the sport. the brazilian contract helped drive nike’s revenue and sponsorship heft in soccer to where it is today: neck-and-neck with rival adidas ag.
people involved the sports-marketing business at the time said in recent interviews that nike rushed into the top echelon of a sport and into a country that it didn’t understand very well.
questions about the deal began long before u.s. authorities began their probe. the brazilian federal accounting office audited cbf’s accounts around the turn of the millennium and found anomalies with payments made by nike to the brazilian federation, according to the records of a brazilian parliamentary commission that held an inquiry into the deal at that time.
the agreement called for nike to make scheduled payments directly to the cbf via its account at banco real, according to a translation of a copy of the agreement in the commission’s records.
but the audit found that nike sometimes routed payments via different accounts, according to a translation of the audit report included in the committee’s records.
“there were several banking transactions that weren’t done directly to that account, instead going through a triangulation through banks, whose goal should be better explained,” the translation of the audit report copy says.
the report doesn’t include an explanation of the transactions. according to the contract, nike could send the money via other accounts if instructed to do so by cbf. it’s unclear to whom nike made the payments, which according to the schedule set forth in the contract were due in annual installments of between $5 million and $20 million over 10 years.
the brazilian parliamentary inquiry in particular questioned whether the terms of the contract were overly favorable to nike in terms of control over exhibition matches and appearances by players. it also questioned why the contract was done through an intermediary.
reynaldo “ingo” ostrovsky, who served as nike’s communications manager in brazil after the contract was signed, testified in 2001 that nike originally approached traffic when it became interested in sponsoring the brazilian national team knowing the sports-marketing firm held the marketing rights.
in the testimony, mr. ostrovsky was asked by the brazilian lawmakers how much nike had to pay traffic for the rights to cbf.
“the contract makes it quite clear that nike did not make any payments to traffic,” mr. ostrovsky said, according to a translation of the transcript. “the contract says the financial settlement, if any, it will be done between the cbf and the traffic. we do not, have not made any financial or monetary settlement with traffic.”
mr. ostrovsky declined to comment.
translated language from a copy of the contract included with the commission report says that nike agreed to make payments directly to cbf, which would then make any payments due to traffic.
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