Healthcare, FIFA and the common threads of fraud
I spent a good portion of last week following the news surrounding FIFA, soccer's international governing body, most recognized for overseeing the World Cup. Last Wednesday, the Department of Justice (DOJ) indicted nine FIFA officials and five corporate executives for a cacophony of charges including racketeering, conspiracy and corruption. Four other individuals and two corporations involved in the long-running scheme have already pleaded guilty.
It was big news in the sports world, if only because it legitimized what many already suspected. Prosecutors allege that, for the last 24 years, FIFA officials took more than $150 million in bribes and kickbacks from sports marketing firms for the media and marketing rights to various soccer tournaments like the World Cup. Marketing firms would then sell those rights to media networks and major corporate sponsors. Given that the World Cup is the most popular sporting event in the world, this was an easy sell: Between 2011 and 2014, 70 percent of FIFA's $5.7 billion in revenue was attributed to TV and marketing rights.
The indictment was both surprising and pedestrian. The scope of the charges offered a disturbing image of corruption, with 14 defendants and 25 co-conspirators implicated in the intricate scheme dating back to 1991.
On the other hand, FIFA has already developed a reputation as one of the most corrupt organizations in the world. The allegations, laid bare in a 162-page indictment, offered a strange concoction of shock and awe mixed with shoulder-shrugging predictably. Just another powerful organization rotting from the inside.
In that respect, the allegations against FIFA are not unlike pouring through any number of healthcare fraud indictments over the last several years. Some, like the recent New York City fraud ring that lured the homeless with free sneakers, offer a deplorable level of ingenuity. Others, like the allegations against Biodiagnostic Laboratory Services (BLS), shed some light on the way in which these schemes enrich healthcare executives in the form of luxury cars and private jets. Then there's the occasional 90-person scheme spanning six cities that gobbles up $260 million in stolen Medicare funds.
International soccer is a markedly different industry than healthcare--but, as I realized this past week, fraud schemes are structurally the same regardless of who reaps the benefits. Like slipping the Las Vegas bouncer a $50 at the door, a kickback pays for preferential treatment, whether that's a fat TV deal or a steady stream of patient referrals. (If only the U.S. Mint made $1 million dollar bills, these schemes might be easier to carry out.)
Of course, TV and marketing rights don't directly prey on the sick and vulnerable the way many healthcare fraud schemes do. But, as always, corruption ultimately flows downstream. Following the DOJ indictment, Swiss authorities opened an investigation into FIFA awarding World Cup hosting rights to Russia and Qatar in 2018 and 2022, respectively. Both countries have an abhorrent history of human rights violations. The pervasive assumption is FIFA officials were paid to rig the vote.
Qatar, which reaches 120 degrees in the summer, has already come under fire for an astounding number of deaths tied to the construction of World Cup stadiums. The International Trade Union Confederation estimates that 1,200 workers have died so far; the death toll could reach 4,000 by 2022. Look hard enough and you'll see that these schemes rarely leave anyone unscathed.
There are plenty of other fraud schemes of similar ilk. In May, four cancer charities were charged with orchestrating a $187 million fraud scheme in which donations went to the pockets of executives, not the cancer patients donors thought they were helping. The charities claimed they provided pain medication, transportation to chemotherapy and hospice care when, in fact, the money funded cars, luxury cruises, concert tickets and even college tuition for the family members of executives.
These indictments only serve as a reminder that fraud is not exclusive to the healthcare industry. In that respect, an organization such as PharMerica is not that much different than FIFA. Ultimately, when endemic fraud takes root, it matters very little whether you're in charge of the world's most popular sporting event or distributing medication to the elderly.
However, it's not all doom and gloom. Rampant fraud schemes will always surround us, but there's evidence that fraud enforcement can win out. On Tuesday, just five days after being re-elected to his fifth term as FIFA's president, Sepp Blatter resigned as corruption allegations continued to swirl around him.
PharMedica pays $31.5M to settle invalid prescription allegations
Pulling back the curtain on a $200M fraud scheme
New York City healthcare fraud ring lures homeless with free sneakers
Medicare fraud takedown nabs 90 in six cities