Judge’s Ruling Allows Lawsuit with Possible Fraud, Racketeering and Antitrust Violations Against USSF
Last week IMS obtained court documents which were filed against US Soccer in 2006 by Champions World. While the case is old, a July ruling by a judge in the 7th Circuit Court of Illinois denied a motion by US Soccer for judgment on the pleadings.
Judge Harry D. Leinenweber concluded that US Soccer had no right to govern professional soccer except in the Olympic and amateur sports. The Ted Stevens Olympic and Amateur Sports Act does not allow US Soccer authority to govern professional soccer in the United States. “ChampionsWorld has sufficiently alleged a pattern of racketeering activities by MLS,” wrote Leinenweber. “Furthermore, MLS’s argument that ChampionsWorld has suggested no rational motive for MLS’s alleged racketeering activities does not stand up.”
According to yesterday’s Wall Street Journal report, Champions World “creditors partially blamed its demise on some $3 million in fees it had to pay the USSF to sanction its matches. In a subsequent lawsuit, the creditor’s lawyers argue that such fees and partnerships between the USSF and Major League Soccer, the top professional soccer league in the U.S., created an unfair burden and violated antitrust laws. MLS, through its subsidiary Soccer United Marketing (SUM), is also a promoter of international soccer.”
Major League Soccer’s spin off corporation Soccer United Marketing (SUM) does most of the promoting of international soccer matches in the US and is credited for allowing MLS’s survival as the league has been growing. All MLS team owners also own a portion of SUM. According SUM’s own website it is the preeminent soccer business company in North America and hold exclusive rights to Major League Soccer; the United States Soccer Federation; promotional and marketing rights to Mexican National Team games played in the United States; the marketing and promotion of the CONCACAF Gold Cup™, and marketing, promotional and broadcast rights to the prestigious eight-team Mexican club tournament – InterLiga™. SUM also manages promotional and marketing rights in the United States for Mexico’s most popular sports team, Club Deportivo Guadalajara (Chivas).
The WSJ article also stated “the USSF has collected fees since the 1980s. Last year the federation collected $2.9 million in sanctioning fees, up from $1.7 million in 2008.”
Sports Business Journal reported on Monday “the USSF required ChampionsWorld to pay between 9 percent and 20 percent of its gross earnings as a sanctioning fee, and also made the promoter pay performance bonds for each match. The payment is part of the USSF’s operating procedures for hosting domestic and international matches, and is outlined on the USSF website. According to the lawsuit, when ChampionsWorld challenged the USSF about the fees, the governing body threatened to report the promoter as a “promoter in bad standing” to FIFA.”
“They have been around as long as I can remember,” said John Guppy, former president of the MLS’s Chicago Fire. “Any promoter is well aware that a percentage of the gate needs to be paid to U.S. Soccer. That’s just part of promoting a game in the U.S.”
Champions World operated from 2002 to 2005 and was one of the first soccer marketing companies to bring marquee European clubs to the United States drawing huge crowds in it’s early years. AC Milan, Barcelona, Celtic, and Manchester United were some of the teams to play preseason exhibition games.
Charlie Stillitano who was a former general manger of the New York/New Jersey MetroStars owned Champions World and former New York Cosmos star Giorgio Chinaglia was also actively involved with the organization. Champions World filed for bankruptcy in 2005. With the ruling, Champions World may now move forward with the suit against the USSF in which they are asking for $50 million in damages.
Comments are closed.
It sounds like Champions World as an entity are only doing promotional tours for short-term profit. At least we know S.U.M. are reinvesting capital back into soccer development in some form or fashion. Where exactly do the revenue of CW go to? Chinaglia’s bank account…?
Thought this was interesting from the WSJ article:
“Jamie Brickell, a lawyer for the ChampionsWorld’s creditors, said he expects to depose USSF president Sunil Gulati in the coming weeks.”
You can only wonder how FIFA would react to this.
From the ruling: ChampionsWorld alleges that certain fraudulent actions that emanated from USSF’s office bore the signatures of MLS personnel who expressly signed in such capacities. Sunil Gulati, President of USSF and a board member of both USSF and MLS, was the alleged
architect of USSF’s sanctioning fee policy. ChampionsWorld specifically names at least five overlapping board members or officers of USSF and MLS who are alleged to have been operating USSF for MLS’s benefit by using USSF sanctioning fees to drive MLS’s competitors out of business.
This is definitely something to keep an eye on. Potentially really crappy timing with the WC decision coming up in December.
I agree with ERic. Given the timing of the WC bip ChampionsWorld is hoping that SUM & USSF (and perhaps some of the rich MLS owners) will just hand over the $50mil. I agree that the national federation should get a share of the profits from soccer games. It’s the only way that they can gain some real funds, and grow the sport at all levels. I think Chinaglia and company are fighting a lost battle, particularly since they went broke. But what I think kills Chinaglia is the fact that Gulati was in that picture with Pele and Bloomberg as they relaunched the NY Cosmos (which I believe we’ll be seeing in the MLS in 2012).
If you gentleman actually read what I have written, this suit has been out there since 2006 and US Soccer is the one who keeps making motions (If that is the correct terminology) to delay the trial. That makes it more expensive for Champions World who don’t have as deep of pockets as USSF and MLS and the later have better lawyers.
“But what I think kills Chinaglia is the fact that Gulati was in that picture with Pele and Bloomberg as they relaunched the NY Cosmos (which I believe we’ll be seeing in the MLS in 2012″ OK, unless I’m not understanding or you are not making yourself clear, what does that have to do with this trial? Nothing whatsoever that I can see.
I don’t think the law suit is related to the NY Cosmos (intentional exaggeration which was lost in written form), but this famous name is still very sought after and there have been some disagreements between MLS (which was backed by USSF) and the past ownership group of the NY Cosmos. People connected with Champions World seemed to have been in better relationships with the Cosmos. It appears that there is some old political games in this pot.
In any case, I believe USSF will come out on top, and even ChampionsWorld will be able to not just survive but do well after the final outcome, if they truly want to be part of supporting and growing soccer on this continent.
As an attorney friend who comments on this site told me today, 95% of all pieces of litigation ultimately settle. Chances are this will never get to trial. But it does bring up some of the very things that many soccer supporters in this country feel very uncomfortable with. That is the overlapping of positions between the USSF and MLS the possible conflict of interest. Even if there are no misdoings, it would give a much cleaner appearance if there were no conflicts by the President of USSF also being the president of Kraft Soccer. I believe Sunil’s intentions are good but it personally make me very uncomfortable to have him sharing both duties. I don’t think I’m alone.
With you 100% on that. In fact, I believe even this suit shed more light on the matter.
Great, we avoid 2nd tier implosion, a strike, a 3 and out at the World Cup, and now we get this. Is it just me or has 2010 been filled with attempts to seriously injure soccer in the USA.
I don’t think these are attempts to injure soccer here. It’s more like growing pains. As the sport grows more popular, people are paying more attention to the details and questions are going to be asked. It’s just part of the process
If they do get a settlement Will champions world then pay back all the money the screwed their vendors and partners out of??????????
Dig deeper into this Jamie it is a juicy story Charlie crippled companies and walked away with lots of profits and now is crying foul
Hello pot kettle I’m black too