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Conflict of interest doubts raised over Infront-DFB investigation process

DFB Pokal logo on LED board prior to quarter final between Bayer Leverkusen and Union Berlin on March 4, 2020 (Photo by Jörg Schüler/Getty Images)

Questions over a potential conflict of interest have been raised with regards to the findings gathered by a Berlin-based investigative firm that has levelled various corruption allegations against the Infront agency in its business dealings with the German Football Federation (DFB).

The DFB last week moved to terminate its contracts with the international sports marketing agency in the wake of an investigation into corruption allegations and after details of the Esecon investigative firm’s commissioned report emerged in the German media.

The allegations pertain in part to a contract awarded to Infront in 2013 to sell perimeter advertising for Germany’s national team matches, along with a deal to sell sponsorship and advertising rights at matches of the DFB Pokal, Germany’s national knockout club tournament.

It is alleged that Infront was awarded the national teams contract despite a competitor having offered €18m ($20.2m) more and that the DFB Pokal pitchside advertising sales contract was awarded under questionable circumstances. Infront is contesting the contract terminations by the DFB and said it “firmly rejects” the corruption allegations.

The move by the DFB to end the contracts came after a report in German magazine Der Spiegel claimed the Esecon findings unearthed a cost to the federation of around €40m as a result of the alleged corruption.

The Hamburg-based UFA Sports agency is said to have offered the significantly higher sum, which has raised questions as to why the DFB opted to award the rights to Infront, with whom it had worked for decades.

The potential conflict of interest now reported by Germany’s Süddeutsche Zeitung relates to an advisory role carried out by Stefan Felsing during the investigation. Felsing was previously co-managing director at UFA Sports and at the agency at the time of the 2013 tender. He is now chief executive at the Sportfive agency, Infront’s main competitor in the German football pitchside advertising and sponsorship sales sector.

Felsing told the German newspaper that, in his position as an independent consultant, he had provided information to Esecon in 2019. He also said that he has since been relieved of his “duty of confidentiality” by the DFB and the investigative firm.

UFA Sports was taken over by Lagardère in 2015 and Felsing went on to take a leading global media rights sales position at the conglomerate’s sports division, before leaving at the start of 2018 to set up his consultancy (although retaining an involvement as a consultant to Lagardère Sports).

Felsing was named chief executive of the agency now rebranded as Sportfive in February this year following the acquisition of the Lagardère Sports business by private equity firm H.I.G. Europe.

He was questioned by Esecon in the summer of 2019 as part of its probe and later, he said, gave “information at irregular intervals on selected technical questions”. He added: “In essence, these were general and specific issues relating to the marketing of sports rights and the DFB’s various business relationships.”

Felsing stressed that his contribution to the process was “completely independent” of his previous positions in the sports business sector. His last “active participation” in the investigation was in October 2019, it is reported.

It has also emerged that the rival offer from UFA Sports did not make a three-company shortlist for the national team rights contract with Infront joining heavyweight rivals IMG and Lagardère in the mix amid questions raised over UFA’s refinancing concept.

Denni Strich, the former commercial director at the DFB, told Süddeutsche Zeitung that the offers between Infront, IMG and Lagardère were close, which is why loyalty to Infront proved to be the decisive factor. Strich, who left the DFB last year “to seek new professional challenges”, claims that he would have made this clear during Esecon’s probe if the protocol process had allowed it.

The absence of interview transcripts or recordings during the investigation process has also been flagged up by the latest German media reports.

Both Esecon and the DFB have refrained from commenting on the investigation process.

The DFB’s relationship with Infront has been under the microscope since details of an ‘LED scam’ conducted by a former executive at the agency first emerged in May 2019.

The executive in question faces a criminal investigation in Switzerland and the case has been the subject of an investigation by Infront with the agency having commissioned external lawyers.

Infront’s “severe doubts about Esecon’s methods and motives”

Infront responded to the initial report in Der Spiegel by saying that Esecon’s reported allegations are “not only highly construed but are above all unsubstantiated through any evidence” and represent “purely allegations for which Esecon provides no reliable evidence”.

Among other allegations recently levelled are that the son of then DFB secretary general Helmut Sandrock was given a job at Infront at the same time that the agency was granted the national teams contract.

In announcing its decision to terminate the Infront contracts, the national federation said: “The DFB, which had obtained evidence of possible damaging actions of Infront towards the DFB in May 2019, is now presented with the results of an investigation by the Berlin-based consulting firm Esecon. This has resulted in various acts in recent years which, for the DFB, constitute clear irregularities in connection with the realisation and delivery of Infront’s contractual services, as well as unlawful influence on DFB representatives.”

In response, Infront said that it has “severe doubts about the methods and motives of the investigative agency Esecon, on whose interim report the DFB is basing this proposed cancellation”.

The Zug-based agency continued: “The DFB said it based its decision on allegations of ‘potentially damaging activities’. The interim report of Esecon – which Infront has not been given access to – apparently accuses Infront of gaining undue benefits from improper gifts to DFB employees.

“Infront firmly rejects these allegations of ‘potentially damaging activities’ and will do everything it can to combat them…

“…the extensive and exhaustive investigation commissioned by Infront with external lawyers on this matter concluded that Esecon’s allegations which go beyond the already known and addressed issues are either demonstrably incorrect or not verifiable and thus are ultimately invalid.”

Infront went on to say that it has “considerable doubts” about Esecon’s “methods and motivation”, including the “reversal of the burden of proof and the use of dubious sources of information, including demonstrably falsified documents”.

With regards to the initial LED case that emerged in May 2019, Infront stated at the time that it had “discovered fraudulent activities that are presumed to have been committed by one of its former senior employees” as the agency “applied to constitute itself as a victim” in criminal proceedings undertaken in Switzerland.

The scam related to the sale of reduced minutes to DFB sponsors and advertisers with the time freed up then sold to other brands with the unnamed executive allegedly diverting the funds into a private account.

In addition to the LED scam, Infront said at the time that it had learned that “gifts, at Infront’s cost, were provided by the former employee to employees of at least one of Infront’s clients that exceeded reasonable and customary values”. On June 7 last year, the prospectus for the Nasdaq IPO of Wanda Sports revealed Infront had offered to repay clients a total of €6m.

DFB’s in-house move

The latest developments come as the DFB said today (Friday) that it would market the pitchside advertising rights to the DFB Pokal itself in the future.

Stephan Osnabrügge, the DFB treasurer, said that the DFB would take on the rights sales itself with the contract due to expire in any case on July 31, reports SID, the German news agency.

Infront no longer sells perimeter advertising at Germany’s national team matches but has still held the contract to sell pitchside advertising at DFB Pokal matches.

The DFB has now moved to discontinue this contract and cancel Infront’s services contract for the delivery of the LED boards. Infront is also the long-standing international media rights adviser for the DFB Pokal.

Read this: LED advertising | Why it took just one second to damage Infront’s reputation