What FIFA lost on ISL
ISL's serious liquidity problems in the course of 2000 and 2001 still causes great concern in the financial sector in FIFA. Since a settlement, President Blatter has maintained that FIFA has lost ‘only’ 42-46 million dollars on the ISL bankruptcy. This is a small amount compared to the 340 million dollar loss Blatter stated earlier in a letter to the 24 members of FIFA’s Executive Committee.
Back in 1996/1997 FIFA had sold the television and marketing rights to the World Cups in 2002 and 2006 to ISL, who then became responsible for attracting commercial sponsors to the events and subsequently securing FIFA high revenues.
With ISL facing bankruptcy FIFA could anticipate a need for an expensive and time consuming renegotiation of every individual sponsor contract entered by their fallen marketing agency. So it was in FIFA’s interest to help ISL survive the financial troubles. However the salvage operation failed and ISL went bankrupt with a 300 million dollars debt in May 2001.
To avoid starting from scratch FIFA took over 70 ISL-employees and employed them in its own recently founded marketing company.
In January 2002, the news bureau AFP came into possession of a letter to the 24 members of FIFA’s Executive Committee. In the letter president Sepp Blatter states that FIFA will eventually lose an astronomical amount of 340 million dollars which is about 10 times the amount he had previously announced. The letter caused the initiation of an internal audit committee led by vice president David Will with the aim of examining FIFA’s financial situation in the wake of ISL’s bankruptcy.
However the work of the audit committee was suspended by president Blatter after only one months work. Blatter claimed that there had been breaches of confidentiality by members of the committee.
FIFA’s vice president David Will was furious that the committee was not allowed to finish the investigation into FIFA’s finances. He had realised that FIFA’s economy was deeply troubled and that revenues from the sale of marketing rights for the 2006 World Cup was figuring in the accounts for 2000 and 2001 to make up for the bad condition.
In May 2002, FIFA and the administrator of the bankrupt ISL-estates reached an agreement regarding the settlement of claims resulting from the bankruptcy.
FIFA agreed to pay 26,8 million Swiss francs (23 million US Dollars) to the insolvent estate but maintained an outstanding debt on 51 million Swiss francs (approximately 43.5 million US Dollars) in the insolvent marketing agency.
Since the settlement, President Blatter has maintained that FIFA has lost ‘only’ 42-46 million dollars on the ISL bankruptcy. A seemingly small amount compared to the 340 million dollars mentioned in the January 2002 letter to the members of the Executive Committee.