By Euan Rocha and John Tilak
TORONTO (Reuters) - Bank of Nova Scotia has warned regional soccer body CONCACAF, which is deeply enmeshed in the FIFA bribery scandal, that it will withhold funds from a major sponsorship deal unless the confederation cleans up its act, according to a source familiar with the bank’s position.
“The bank is deeply concerned," said the source, speaking on condition of anonymity due to the sensitivity of the matter. "It does not want to be associated with scandals like this at all."
The source said a new management team at CONCACAF led by new President Alfredo Hawit Banegas has brought in top-tier restructuring advisors and legal counsel and was starting to take the "remediation measures" that the bank, which is widely known as Scotiabank, is demanding.
Canada's No. 3 bank, which also has major operations in Mexico and the Caribbean, inked a four-year deal with CONCACAF in December to be lead sponsor on multiple tournaments through 2018, including the regional club competition – which was renamed the Scotiabank Champions League. It also became the official bank to CONCACAF, whose full name is the Confederation of North, Central America and Caribbean Association Football.
That agreement became an embarrassment to Scotiabank when U.S. authorities announced on May 27 that they had indicted nine current and former soccer officials and five executives from sports marketing and broadcasting companies on bribery, money laundering and wire fraud charges involving more than $150 million in payments.
Those indicted included then CONCACAF president Jeffrey Webb, his predecessor Jack Warner, attache to the president Costas Takkas, CONCACAF executive committee member Eduardo Li, and Julio Rocha, a FIFA development officer from Nicaragua who had been inducted into CONCACAF's Hall of Fame.
Also indicted was Aaron Davidson, the president of the sponsorship rights agency Traffic Sports USA - which worked with CONCACAF. The soccer group's former general secretary Chuck Blazer pled guilty in 2013 to various bribery and financial offences and is cooperating with authorities.
Both Webb and Davidson played prominent roles in the December Scotiabank announcement, which included a celebratory event at the Mexican Stock Exchange in Mexico City. The financial terms of the sponsorship agreement have not been disclosed.
The demands from Scotiabank include a roadmap for exactly how the soccer body will resolve the alleged corruption and the mechanisms it will install to clean up and prevent such problems in the future, a second source close to the matter said. The bank wants a guarantee that CONCACAF is putting safety mechanisms in place.
Scotiabank's contract has provisions that allow it to back out of the sponsorship deal, if CONCACAF fail to properly address the issue, both sources said.
In a statement, Scotiabank, which operates in 34 of the 41 countries that fall under CONCACAF's remit, said it is disturbed by the allegations and has "zero tolerance" for such actions by its partners.
In an emailed statement, CONCACAF said it “has acted quickly and in a serious manner to collaborate with its sponsors and other stakeholders as it works to address these issues. The Confederation continues to focus on organizing world class competitions for its fans, players, and teams as it evaluates its business operations and governance going forward.”
The sponsorship deal is not front-loaded and the bank releases funds to CONCACAF based on the near-term event schedule, the first source said. Scotiabank is paid up on events for the next two months but the bank can hold back future payments, the source added.
"The bank is absolutely expecting more finality around the remediation package before any more cheques will be cut," the source said.
The regional soccer body has committed to enacting the measures, the source said, and set timelines to deliver them. "Scotia understands that it is an evolving plan. The bank expects it to be worked on quickly, but it is also being flexible."
The source said Scotiabank would cooperate with regulators or law enforcement bodies if needed, but that none had contacted it over the CONCACAF contract.
(Reporting by Euan Rocha and John Tilak; Editing by Amran Abocar and Martin Howell)