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Nike Tied to Three Global Controversies

Wednesday, June 17, 2015

 

Nike CEO, Phil Knight

To say Nike has had a couple of bad weeks is an understatement. It is alleged that the company is funding a team that is illegally doping, the U.S. Department of Justice is looking at the legality of a sponsorship, and one Democratic Presidential candidate is questioning Nike's ethics.

First, it is alleged that Nike-funded track program led by Alberto Salazar is doping its star runners. The allegations stem from an ongoing investigation lead by ProPublica and the BBC that unveiled that the Oregon Project pressured athletes to take prescription drugs to improve their performance even when physicians had not prescribed them.

The second damaging controversy ties Nike to a payoff to the Brazilian soccer team. The 1996 sponsorship and corresponding payments by Nike to the Brazilian national soccer team is highlighted in the U.S. Justice Department indictment of FIFA officials. The most damaging allegations came on Saturday in a Wall Street Journal article that ties Nike to the ongoing U.S. Justice Department investigation of corruption in soccer, “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 third controversy is Nike's effort to push the Obama Administration's Trans-Pacific Partnership free trade agreement. Nike CEO Phil Knight hosted President Barack Obama at a free trade agreement rally on the Nike campus which had the feel of a high school pep rally and has had a full court political press on to push the agreement. On Friday, the agreement was defeated in the House by an overwhelming vote lead by progressive Democrats. 

Kara Goucher, quit the Nike sponsored team in 2014

Illegal Doping: Oregon Project

The ProPublica and BBC investigation cites numerous former Salazar-trained runners who competed on the Oregon Project team who claim that famed runner and coach Salazar is pressuring runners to take unnecessary and illegal drugs. 

According to the Oregon Project Facebook self-description of the initiative, “Resurrection of a dwindling dynasty is never easy; such was the task of an American resurgence in distance running. Salazar was used to the challenge...famed for pushing his body to the limit as a runner, he applied that same tenacity to this goal.”

One of the star runners of Nike’s Oregon Project, Kara Goucher quit in 2014 and this year has come out publicly about the pressure the program and Salazar specifically has placed on runners in the program to take prescription drugs, even those not prescribed by physicians. 
 
“What Kara Goucher experienced—essentially Salazar's self-appointed doctoring—violates the rules of the sport, not to mention prescription drug laws, but the Gouchers readily admit they have no smoking gun testifying to the kind of doping most familiar in distance running: blood doping and testosterone use. Still, Kara is deeply suspicious. "I had a conversation with Galen in 2011 in the British training camp [at the World Championships] in Daegu," she says, "and he told me how tired he was and how exhausted he was, how he was so excited to have the season be over." Three weeks later, Rupp broke the American 10K record,” reported ProPublica.

FIFA Plague Tied to Nike

In 1996, Nike signed a landmark agreement with the Brazilian national soccer team. The agreement was orchestrated to elevate Nike’s position in global soccer. At the time Nike trailed both Adidas and Umbro as a soccer brand. Since the mid-1990s, Nike’s influence as a soccer brand has grown. 

In 1998, the Wall Street Journal outlined the aggressive Nike strategy to enter the soccer apparel world with a focus on domination. As the WSJ wrote in 1998:

In 1994, the World Cup traveled to the U.S. and Nike executives discovered the world's most popular sport. With ruthlessness, the Portland, Ore., company moved in for the kill. It began sponsoring superstar players like Italy's Paolo Maldini and Brazil's Romario. Nike even hit home at Umbro, signing up former French superstar Eric Cantona, who then played in Umbro's backyard at Manchester United. The biggest blow, though, came in 1996 when Nike snapped up Umbro's prize possession -- the sponsorship of the Brazilian national team.

The battle for soccer marketing supremacy may not have been a level playing field and Nike is facing significant scrutiny from the U.S. Justice Department tied to the FIFA investigation and indictments.  By 2007, Umbro was out of money and Nike purchased the brand (and by 2012, they spun the brand off in a sale).

The Department of Justice in their complaint against FIFA's leadership cites Nike's deal and alludes that it is tied to bribes and kickbacks. READ THE Department of Justice complaint:

165. The Brazilian national team won the 1994 World Cup, which was hosted by the United States in June and July of that year. Around the same time, a representative of a multinational sportswear company headquartered in the United States ("Sportswear Company A"), the identity of which is known to the Grand Jury, approached CBF to determine whether CBF was interested in being sponsored by Sportswear Company A. At the time, CBF already had a sponsorship agreement with another American sportswear company ("Sportswear Company B"), the identity of which is known to the Grand Jury. Thereafter CoConspirator #11, a high-ranking CONMEBOL and CBF official, and Co-Conspirator #2, on behalf of Traffic Brazil, which at the time served as CBF's marketing agent, began negotiations with representatives of Sportswear Company A.

166. The negotiations lasted into 1996. The parties ultimately agreed to a 10-year deal, which required, among other things, that Sportswear Company A compensate Sportswear Company B, which agreed to terminate its Bxisting contract with CBF.

167. On or about July 11, 1996, the parties met in New York City for the closing. The contract was signed by CoConspirator #11 on behalf of CBF, Co-Conspirator #2 on behalf of Traffic Brazil, and four representatives of Sportswear Company A. Among other terms, the contract, a 44-page Sponsorship and Endorsement Agreement (the "Agreement"), required Sportswear Company A to pay CBF $160 million over 10 years for the right to be one·of CBF's co-sponsors and to be CBF's exclusive footwear, apparel, accessories, and equipment supplier. CBF remitted a percentage of the value of the payments it received under the Agreement to Traffic Brazil.

168. Additional financial terms were not reflected in the Agreement. Sportswear Company A agreed to pay a Traffic affiliate with a Swiss bank account an additional $40 million in. base compensation on top of the $160 million it was obligated to pay to CBF pursuant to the Agreement. On July 14, 1996, three days after the Agreement was signed, a representative of Sportswear Company A and a representative of Traffic Brazil (CoConspirator #2) signed a one-page letter agreement acknowledging as follows: "CBF has authorized Traffic, or its designated banking agent, to invoice [Sportswear Company A] directly for marketing fees earned upon successful negotiation and performance of the . . . [Agreement]." Between 1996 and 1999, Traffic invoiced Sportswear Company A directly for $30 million in payments.

169. Co-Conspirator #2 agreed to pay and did pay CoConspirator #11 half of the money he made from the sponsorship 75 deal, totaling in the millions of dollars, as a bribe and kickback.

170. On or about January 25, 2002, the parties agreed to terminate the Agreement before the end of the 10-year term, ending any further obligations thereunder b~tween Sportswear Company A and CBF, and between Sportswear Company A and Traffic Brazil.

President Obama visiting Nike

Free Trade Loses Crippling Vote

Phil Knight, Nike's CEO,  promised if the Trans-Pacific Partnership free trade agreement was passed by Congress, Nike would add 10,000 US-based jobs. But, leading progressive Democrats like Senators Elizabeth Warren (D-MA) and Bernie Sanders (I-VT) have been vehemently advocating against the trade agreement. Sanders is a Socialist who is running for the Democratic nomination for President and has been drawing big crowds and support with his anti-trade agreement message.

Sanders, who is emerging as the progressive alternative to Hilary Rodham Clinton in the campaign for the Democratic Presidential nominee, wrote to Obama a blistering letter in May about his visit to Nike and the company’s history in U.S. job creation. "It is no secret why Nike is supporting the Trans-Pacific Partnership. This would increase the profits of Nike … but do nothing to encourage Nike to create one manufacturing job in this country. It would simply make Nike more money and increase the compensation packages of its executives,” Sanders wrote.

“Since 2001, the U.S. has lost 60,000 factories. When Nike was founded in 1964, just 4 percent of footwear sold in the United States was imported. Today, that number has soared to 98 percent and Nike, like many other shoe companies, produces all of its products overseas.”

On Friday, the U.S. House of Representative voted down the Trans-Pacific Partnership free trade agreement 126 to 302. Obama is working with House Democrats to resurrect the agreement and bring it back for another vote.

 

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