Investigation into AK deal resumes

Nike offices Nike headquarters in Beaverton, Oregon

As police investigators renewed their probe into the money allegedly misappropriated at Athletics Kenya (AK), investigations which started last year have zeroed in on the contract between Nike and AK and the considerations involved.

At the same time, Nike has refuted claims that some items on the contract are euphemism for kickbacks to AK honchos, as was alluded to by investigators.

In a response by Nike to Kenyan investigators seen by The Standard, officials of the American sports apparel manufacturer gave detailed accounts of the transactions justifying the huge payments to AK.

Kenya Police investigators renewed investigations last month after the three former top officials of AK were suspended for 180 days by the IAAF.

AK former president, Isaiah Kiplagat, his former senior vice, David Okeyo, who was a long-serving secretary general, and former treasurer, Joseph Kinyua, were on November 1 suspended by International Association for Athletics Federations (IAAF) Ethics Commission for 180 days.
The trio face accusations that they were involved in “the potential improper diversion from Athletics Kenya of funds received from Nike”.

The IAAF also said a prima facie case had “also been found to exist in respect of Mr Kiplagat in relation to receipt, personally or by Athletics Kenya, of an apparent gift of two motor vehicles” from the Qatar Athletics Federation in 2014-15.

The ethics commission stressed that the suspensions were provisional and “in no way” prejudged the outcome of the investigation to be carried out by world renowned barrister Sharad Rao.

The trio would remain presumed innocent until the outcome of the investigation, it added. Officers from the Directorate of Criminal Investigations (DCI) resumed investigations into the matter last month.

The new AK President Lt gen (rtd) Jack Tuwei confirmed that Police recently carted along more documents for further inquiries.

“We don’t know how far they have gone with their investigations nor when they will complete them,” said the retired Army commander.

Nike had been paying the three top officials an amount of money known as Honororia, which started with $60,000 per official per year, and was increased to $ 100,000 sometime in 2010 when AK threatened to “go East’ and started negotiations with Chinese apparel, Li Ning.

In an earlier email to AK, Nike’s Mark Mastalir explained that Honororia “is an annual payment that Nike makes directly to the Federation in order to ensure that certain Federationmemebers will provide, and will have adequate funding for, certain servbices that Nike considers critical to maximizing our value from the agreement and our investment.”

Nike explained to investigators that the sponsorship fee is paid in quarterly installments each year for the rights granted under the contract, but a service fee paid one time each year.

In direct response to Kenyan investigators on ther nature of the contract, Robert Leinwand, Nike Vice President, Global Litigation and Employment Counsel, said:

“A service fee paid one time each year, to cover Federation costs in performing the following services necessary for Nike to receive the full value of rights and benefits under agreement:

“scouting/selection of athletes; organisation/operation of domestic competitions; organisation/operation of federation-controlled international competitions; operation of federation’s athlete agent certification programme; administration/distribution to athletes of all Nike products provided under the agreement; preparation of customs documents for Nike product shipments, ensuring athletes wear/use Nike products at competitions and during federation activities; and co-ordinating with the Kenya National Olympic Committee on necessary team administration matters.”

He explained that the payment is “a yearly reimbursement of limited, preapproved, properly documented travel by the federation representatives to meet with Nike Inc to discuss product design, ordering, shipping.

Nike also pays for what Mr Leinwand describes as “reimbursement of limited transportation allowance for vehicle purchase by federation to transport athletes and team delegation members to and from competitions and training (allowance applied to years 2005, 2010, 2011 and 2012, with the final allowance due in 2016).”

Also included in the perk is “performance bonuses, based on athlete performance, paid within 60 days of date such bonuses are achieved.”

Nike confirmed that in November 2010, they paid AK $485,000 (Sh45m), a one-time commitment bonus, less tax withholding, paid to the federation as consideration for extension of the agreement through 2020.

In January 2011 and January 2012, Nike also paid AK a further $412,250 (Sh42m), a payment they described as sponsorship fee plus the annual servicing fee...” They denied these were paid for personal use by certain Federation chiefs.

“Nike at all times conducts business with integrity and sincerity and expect our partners to have the same values,” said Mr Leinwand.

Seruscka Naidoo, Communications Manager for Nike Africa, said they are co-operating with locals agencies in the investigations.

“Nike’s expectation and understand of our sponsorship agreement with Athletics Kenya has always been that funds are to be used to support and service the teams and athletes. We are cooperating with the local authorities in their investigation. Nike conducts business with integrity and expects that our partners do the same,” said Naidoo.

To continue tomorrow