How athletics chiefs took millions given by Nike to help poor runners

The Kenyan running association, while it receives some government money, is not a government agency.

Monday March 7 2016

Athletes compete in the 10 km National Cross Country Championships at Uhuru Gardens in Nairobi on February 13, 2016. Kenyans hold world records in the 800 meters, 1,000 meters, 3,000 meters, 20,000 meters, 25,000 meters, 30,000 meters, half-marathon, marathon — the list goes on. PHOTO | MARTIN MUKANGU | NATION MEDIA GROUP

Athletes compete in the 10km National Cross Country Championships at Uhuru Gardens in Nairobi on February 13, 2016. Kenyans hold world records in the 800 meters, 1,000 meters, 3,000 meters, 20,000 meters, 25,000 meters, 30,000 meters, half-marathon, marathon — the list goes on. PHOTO | MARTIN MUKANGU | NATION MEDIA GROUP 

When a Chinese clothing company swooped in and offered to sponsor Kenya’s famed runners, Nike panicked, Kenyan officials say.

“Can we talk about the situation?” a Nike executive wrote to a Kenyan official after hearing the news that the Kenyans wanted to end their deal with Nike. “You and I go back a long way.”

What followed — according to email exchanges, letters, bank records and invoices, provided by a former employee of Kenya’s athletics federation — has led to a major scandal in Kenya, a country in the midst of its biggest war against corruption in years.

In a contract signed several years ago, Nike agreed to pay hundreds of thousands of dollars in honorariums and a one-time $500,000 (about Sh50 million) “commitment bonus,” which the former employee called a bribe.

The money was supposed to be used to help train and support poor Kenyan athletes who dream of running their way out of poverty.

Instead, it was immediately sucked out of the federation’s bank account by a handful of Kenyan officials and kept off the books.

Nike has denied any wrongdoing, saying in a statement that its payments were intended to help athletes and it does not appear to be under investigation by US authorities.

But Kenyan authorities are suspicious. They have opened an extensive investigation and all three Kenyan athletics officials accused of taking money from Nike have been suspended.

Investigators with the Directorate of Criminal Investigations said they had asked Nike repeatedly to provide more information. So far, they say, Nike has refused.

“Why was such a huge sum of money paid as commitment?” said one of the detectives, who spoke on condition of anonymity because he was not authorised to speak publicly. “It’s only Nike who can tell us.”

Mr John Githongo, a leading voice against corruption, said the US government should pick up this case and “run with it”.

For more than 20 years, Nike Inc has been paying the Kenyan national runners’ association millions of dollars in exchange for the Kenyans wearing Nike’s signature swoosh, superb advertising in the running world.

CORRUPTION
Kenyans hold world records in the 800 meters, 1,000 meters, 3,000 meters, 20,000 meters, 25,000 meters, 30,000 meters, half-marathon, marathon — the list goes on.

Professional runners from other countries say they feel a sense of dread every time Kenyans show up at a track meet in their red, green and black uniforms and start doing their toe-touches.

Ethiopian runners, who also excel at middle- and long-distance races, have a sponsorship agreement with Adidas, but an official there said their contract contained no commitment bonus.

Several professional runners said they had heard of signing bonuses for individual athletes, but never such a large one-time bonus for a national federation.

Kenyan athletes were so outraged when they learned in November that hundreds of thousands of dollars from Nike had been stolen by their bigwigs that they staged a protest at their headquarters in Nairobi, with elite athletes camped out in the grass and holding up signs that read “blood sucers”. (Some of the runners never finished school.)

Now, one question the Kenyan detectives are trying to answer is whether Nike intentionally made it easy for the officials to pocket the money.

The fallout from the Nike deal hit just as Western embassies were coming down hard on Kenya for corruption.

Nearly every day there seems to be allegations of some new scandal: a government ministry buying plastic pens for $85 apiece, a Supreme Court judge taking a $2 million bribe, questions about what exactly happened to the proceeds of a multibillion-dollar Eurobond deal.

Athletes participate in the women's 8km Discovery Cross Country race on January 31, 2016 at Eldoret Sports Club. For more than 20 years, Nike Inc has been paying the Kenyan national runners’ association millions of dollars in exchange for the Kenyans wearing Nike’s signature swoosh. PHOTO | COPPERFIELD LAGAT | NATION MEDIA GROUP

Athletes participate in the women's 8km Discovery Cross Country race on January 31, 2016 at Eldoret Sports Club. For more than 20 years, Nike Inc has been paying the Kenyan national runners’ association millions of dollars in exchange for the Kenyans wearing Nike’s signature swoosh. PHOTO | COPPERFIELD LAGAT | NATION MEDIA GROUP

Western nations have threatened sanctions, and the US government has been especially vocal about corruption, with White House officials unveiling a 29-point plan to root it out.

LIFE BAN
So it would be “hypocritical,” Mr Githongo said, for the US government to “bang on” about Kenya without being willing to look into allegations against an iconic US company such as Nike.

US diplomats in Nairobi said that their government would be willing to investigate any credible allegations of corruption by US companies but that they had no specific knowledge of the Nike deal beyond what had been reported in the Kenyan and international press.

The allegations go back to 2009, when Kenyan officials, according to the email chain, accused Nike of treating Kenya as a “dumping ground” for substandard Nike clothing.

But those complaints may have been a ruse by Kenyan officials to get out of the Nike contract so they could receive a bribe from another company, said a member of the executive board of Kenya’s track and field federation, known as Athletics Kenya.

Soon after complaining to Nike, officials at Kenya’s running federation struck a new sponsorship deal with the Li-Ning Co, a Chinese sports empire founded by a famous gymnast, Li Ning.

A marketing agent, working as a middleman between the Chinese company and the Kenyan federation, then sent nearly $200,000 (about Sh20 million) to Athletics Kenya, money that a top official quickly withdrew.

The sports-marketing agent who made the payment, Papa Massata Diack, was recently banned for life by the International Association of Athletics Federations, a global governing body for track and field.

Both he and his father, Lamine Diack, a former head of the international athletics association, are under investigation by French authorities in connection with several allegations, including blackmail and bribery.

IMPORTANT DEAL
The Kenyan officials even began talking about designing new Li-Ning uniforms but they soon learned that shaking off the Nike sponsorship deal was harder than they thought.

After they received a letter from a Nike lawyer saying there were no legal grounds to terminate the contract, the Kenyan officials abruptly changed course.

Inuka Trust CEO John Githongo speaks at a press conference on emerging devolution issues on March 20, 2015 at Hilton Hotel. Mr Githongo, a leading voice against corruption, said the US Government should pick up the Nike case and “run with it”. FILE PHOTO | JENNIFER MUIRURI | NATION MEDIA GROUP

Inuka Trust CEO John Githongo speaks at a press conference on emerging devolution issues on March 20, 2015 at the Hilton Hotel. Mr Githongo, a leading voice against corruption, said the US government should pick up the Nike case and “run with it”. FILE PHOTO | JENNIFER MUIRURI | NATION MEDIA GROUP

They negotiated a new contract in which Nike agreed to pay Athletics Kenya an annual sponsorship fee of $1.3 million to $1.5 million — plus $100,000 honorariums each year and a one-time $500,000 “commitment bonus”.

“Whenever I see the words ‘commitment fees,’ ‘commitment bonuses,’ ‘access fees,’ ‘access bonuses,’ that for me raises a red flag,” said Mr Githongo, a consultant who once headed an anti-corruption unit within the Kenyan government but quit — and fled the country for several years — after death threats. “It’s language used to dress up bribes traditionally.”

Nike executives refused to discuss the contract, issuing a short statement that the money paid to Athletics Kenya was supposed to support the athletes.

It said Nike conducted business with integrity and that “we are cooperating with the local authorities in their investigation,” a point the Kenyan detectives dispute.

Several analysts said Nike could not afford to lose the Kenyans. Running is integral to Nike’s brand — Nike’s founders made some of their first running shoe treads on waffle irons in the 1970s. And Kenyans are integral to running.

In the documents, Nike provided detailed instructions on how the $100,000 yearly honorarium was to be used (to cover travel costs and phone bills, among other things).

No details were provided for the commitment bonus, though, even after the former employee, who worked as an administrative assistant and in other jobs at Athletics Kenya for more than 10 years, wrote to a Nike executive asking him.

DEATH THREATS
In a sworn statement provided to Kenyan investigators, the former assistant said the $500,000 commitment bonus was “bribe money from Nike” so that the top officials could pay back the $200,000 from the scuttled deal with the Chinese company and then make even more by agreeing to sign up again with Nike.

The former administrative assistant requested that his name not be revealed, saying it was extremely dangerous to expose high-level corruption in Kenya — a sentiment shared by others.

“Put that away! You could get killed for that!” exclaimed a member of Athletics Kenya’s board, his eyes widening when a reporter pulled out the amended contract from Nike listing the $500,000 commitment bonus during an interview at a quiet Nairobi restaurant.

Nike shoes. Nike has denied any wrongdoing, saying in a statement that its payments were intended to help athletes and it does not appear to be under investigation by US authorities. PHOTO | COURTESY

Nike shoes. Nike has denied any wrongdoing, saying in a statement that its payments were intended to help athletes and it does not appear to be under investigation by US authorities. PHOTO | COURTESY

The board member said he, too, had received death threats for speaking out about corruption and asked that his name not be used.

He said corruption in the athletics federation was so ingrained and so brazen that officials routinely extorted money from athletes who failed drug tests.

He also said the organisation’s chairman, Isaiah Kiplagat, had asked Nike to wire the bonus directly to his personal account, a request that Nike refused.

Nike wired the money into the federation’s account instead. But before that, the chairman emailed a Nike executive, Robert Lotwis, with “invoice” in the subject line.

“Urgent!!” the message said. “Dear Robert, US500,000 being commitment bonus. Regards, Isaiah Kiplagat, chairman.”

According to the documents, the response from Nike came 10 hours later. “Got it,” Lotwis responded. “I will submit right away. Thanks.”

Within days, according to bank records, the $500,000 was withdrawn by Athletics Kenya’s top officials.

VERY LUCKY

There were no major track and field activities going on at the time, and the board member and the former administrative assistant said just about all of the money had been concealed from Athletics Kenya’s executive committee, including $200,000 sent to a bank account in Hong Kong.

Several analysts said the chairman’s asking for the money to be wired to his personal account and then sending a follow-up email labelled “Urgent!!” should have been a tip-off to Nike that something was untoward.

Mr Kiplagat and two of the other implicated officials have denied any wrongdoing.

A federal prosecutor consulted for his opinion on these allegations said that in many corruption cases, concealment was an indicator of criminal intent and that in this case, there was no obvious concealment by Nike — the commitment bonus was explicitly laid out in the contract.

(Read: AK chief Isaiah Kiplagat fails in IAAF VP bid)

The prosecutor, who spoke on the condition he would not be identified, also said it would be very difficult to prove that Nike executives knew that the Kenyan officials were going to steal the bonus.

The former administrator, however, has little doubt.

“Because of Nike’s secretive meetings with the top three AK officials,” he said in his affidavit to investigators, “it is my opinion that Nike officials have always been aware that the payments in question are improper.”

Suspended Athletics Kenya president Isaiah Kiplagat addresses the press at his home in Eldoret on September 5, 2015. Mr Kiplagat has denied any wrongdoing in the Nike saga. FILE PHOTO | JARED NYATAYA | NATION MEDIA GROUP

Suspended Athletics Kenya president Isaiah Kiplagat addresses the press at his home in Eldoret on September 5, 2015. Mr Kiplagat has denied any wrongdoing in the Nike saga. FILE PHOTO | JARED NYATAYA | NATION MEDIA GROUP

SURVIVAL RULES
Analysts said this case was especially tricky because it did not appear to fall under the Foreign Corrupt Practices Act, the US law that covers crimes involving US companies and foreign government officials.

The Kenyan running association, while it receives some government money, is not a government agency.

“The world of sports has evolved in a governance hole,” said Roger Pielke Jr., a political scientist at the University of Colorado.

He noted that sports federations, such as Athletics Kenya and Fifa, international soccer’s governing body, which is embroiled in its own corruption saga, often fell between the cracks of the rules that governed businesses, public agencies and traditional non-profit organisations, even though sports federations have qualities of all three.

“I hear it all the time from sporting officials,” he said. “‘To survive in this world, these are the rules of the game.’”

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