We’ve seen it before: a player or coach of a major sports organization is fined, suspended, or even banned for life from the sport to which they have dedicated their lives to excel in…all for the rush of the short-term gamble.
As early as 1920, a Chicago jury found that eight players for the White Sox were guilty of fixing the 1919 World Series, dubbing this the “Black Sox Scandal.” Their ban from baseball remains in place today.
In 1989, a lifetime ban was handed down for Pete Rose, who holds the record for the most hits in baseball, but who will never be inducted into the Hall of Fame. Pete Rose was caught placing a number of bets on the Cincinnati Reds baseball team, for whom he was actively coaching between 1985-1987.
In 2008, renowned NBA referee Tim Donaghy was sentenced to 15 months behind bars for sharing information on basketball games with a gambler and pled guilty to wire fraud for accepting thousands of dollars in exchange for the insider information.
During the 2022 season, the National Football League suspended wide receiver Calvin Ridley for the entirety of the season for having placed bets the year before while not actively participating in the league, but taking time away from the game to address personal issues.
Early in the 2024 NHL season, Shane Pinto was suspended for 41 games (half the season) for gambling.
Over and over again, we’ve seen that access to mobile sports betting makes the ability to place bets even easier, with the latest scandal leading to Tucupita Marcano’s lifetime ban from the MLB after placing over $150,000 in bets on baseball.
Regretfully, there are recent examples of corruption taking hold in Government and the private sector as well. Take the case against Senator Bob Menendez (N.J. -D), who, alongside New Jersey businessmen Wael Hana and Fred Diabes, is currently on trial for corruption charges that include acting as an agent of the Egyptian government and to benefit the government of Qatar. The short-term gains for the Senator and his colleagues included cash, a new car, and even gold bars. The potential long-term cost for the Senator and his accomplices is time behind bars, raising the question – was it worth the risk?
Not only can these gambles cost one their livelihood and reputation, but the wider reaching impact of corruption contributes to a general sense of mistrust by those who are fans of sport. If we continue to see bad actors at work not only in sports, but in government offices, it will cost more than a championship, or a place in the record books, it could lead to a general sense of mistrust of institutions, which is good for no one.
The lessons learned from these scandals remain clear: what seems like a short-term gain is far outweighed by the consequences suffered in the aftermath of the gamble. Corruption in any form is the wrong bet.
Blaise Stanicic
Associate Director, Compliance Training, TRACE
For James Stevens, the former supervisor at Philadelphia’s mass transit system who admitted to taking bribes over many years, a 37-month prison sentence marks a sad end to a 45-year career. He will also lose his pension, which would have paid $6,000 monthly.
Robert Welsh, who owned the company that gave the bribes, is scheduled to be sentenced on July 18. But his dealings with law enforcement may not be over.
It will be interesting to see if officials in Canada, which had recently been called out by the OECD for scant enforcement of its foreign bribery laws, examine or prosecute the British Columbia-based company that ultimately purchased the Welsh’s company. Stevens is alleged to have arranged the sale in 2018, after being frustrated with his inability to extract further bribes from Welsh.
Officials may wish to consider why Stevens was involved at all, and whether the US $300,000 price reflects fair market value (a low price may be a red flag for improper kickbacks). In particular, while the buyer’s audited financial statements list the assets that were considered in the price, that breakdown does not include any value attributable to contracts worth about $1.34 million that came with the sale. The buyer won another contract with the transit system just a few months later, in addition to a purchase order worth about $1.1 million – an amount large enough to make up roughly 20% of the prior year’s total revenues. The size and timing of these awards begs the question of just what Stevens and the purchasing company discussed in their arrangement.
While Canada’s Corruption of Foreign Public Officials Act does not have corporate strict liability in the form of a “failure to prevent bribery” offence (as in the U.S., U.K., and Australia), it does have a books and records provision prohibiting accounting practices intended to conceal corrupt practices. In addition, corporate liability attaches when a “senior officer” knows about, or is part of, the offense.
When Welsh sold his company in 2018, the buyer hired him on to be part of its “management team.”
As for Stevens, it’s not clear whether he will be able to hear the SEPTA trains from his prison cell.
This is the second of the “Last Stop on the Gravy Train” series. Click here to view the first post.
FCPA Compliance Consultant, TRACE
Last month, James Stevens, a former supervisor at Philadelphia’s mass transit system, was sentenced to 37 months in prison for taking roughly $86,000 in cash and other benefits in connection with $4.6 million in camera supply and maintenance contracts. Known locally as SEPTA, the system is the 6th largest in the U.S., and serves 750,000 daily riders.
The bribes are alleged to have been made between 2014 and 2018, and included expensive concert tickets, frequent dinners, and payments to a sham charity that were pocketed by Stevens. (The vendor also endorsed Stevens’ contract negotiation skills on the latter’s LinkedIn profile – although that detail isn’t specified in the indictment.)
As with many corruption cases, the details reveal lessons and insights for anticorruption practitioners. This post highlights some practical takeaways for other organizations; a later post will discuss the potential downstream impact of the corruption.
(Sometimes) Legitimate Payments
Among the improper benefits that the U.S. Department of Justice cited in its prosecution of Stevens are sponsorships of his department holiday parties. Yet companies are often asked to help cover similar expenses.
Indeed, it is common for customers or public officials to ask their vendors and other business partners to help sponsor charitable fundraisers or social events, usually with an eye towards building goodwill by spending time together in a more relaxed setting. In such instances, a sponsoring company should look to confirm various facts, including:
In fundraisers, the charity is formally registered with the relevant authorities. In the U.S., the Internal Revenue Service maintains a searchable registry of tax exempt organizations. Bear in mind, though, that the database includes trade and political organizations in addition to charities, so practitioners should check the specific type of tax exemption claimed (listed at Box I in the Form 990 filing).
The charity is well established and serves a public purpose.
The event carries organizational imprimatur – i.e., the sponsorship is solicited with the knowledge and endorsement of the company or agency where that customer or public official works, and (where applicable) with the knowledge and endorsement of the charity.
The sponsoring company would send a handful of employees or other representatives to the event, to participate in the social nature of the event.
There are enough other sponsors so as to avoid any inference of undue influence (or the nature/amount of your company’s sponsorship is not so significant that it could be seen as excessive or improper).
The amount of the sponsorship is consistent with the nature of the event. Factors here include the lavishness of the venue, the nature of the event, and the number and types of invitees.
The payment is made to a proper recipient – usually the company or agency seeking the contribution (as opposed to individual employees), or the charity itself.
Culture Matters
Around the same time, other management-level employees in a different part of SEPTA had been abusing corporate credit cards for their personal benefit, to the tune of nearly a million dollars. They would get caught after a 2019 audit. Not too long after that, the agency was criticized for hiring recent retirees as independent consultants, even though they were collecting SEPTA pensions at the time – a practice that SEPTA’s general counsel later admitted he should not have allowed.
It’s not clear whether Stevens, who claimed to report directly to the general counsel, sought internal approval for having a contractor foot the bill for the holiday parties, or otherwise disclosed the funding. Given that these parties were held at an ordinary pub, they were likely not lavish – and his staff may have simply believed the event was paid through SEPTA’s budget, or with Stevens’ own personal funds.
But this seems unlikely for the hotel rooms given to Stevens and his colleagues during a 2015 visit by Pope Francis to Philadelphia. The rooms were originally booked by the Delaware-based vendor for its own use, so that its staff could be on hand in case of problems. But Stevens and SEPTA employees had no such need for the rooms, as they could have simply used SEPTA’s head office – located on the same block as the hotel. If anyone at SEPTA thought it was improper or unusual to be booking these hotel rooms, it does not appear to have led to any sufficient remedial action within SEPTA.
This is the first of the “Last Stop on the Gravy Train” series. Click here to view the second post.
FCPA Compliance Consultant, TRACE