The big bubble - the crackdown of ISL/ISMM, a marketing giant

Ladies and Gentlemen,
Dear colleagues,
Dear friends,

I think you all know the story of the ISL bankruptcy very well. I do not want to repeat all the stories I have written in my newspaper. And I do not want to recall all the stories my friends Andrew Jennings and Thomas Kistner and other\'s wrote - all these journalists who really believe in the old fashioned idea of informing and enlightening the public.

I could give you a perfectly detailed summary of ISLs, FIFAs and the Kirch Groups doings. But I would rather not. What I would like to do instead, is giving you a short version of ISL history and importance - and a short version of the collapse and connecting developments in FIFA. I will talk about reasons why this famous ISL holding sank into the mud. I will talk about some problems I believe to see within the media - over the years in the coverage of these events. And I would like to present to you some basic and not generally known information about the ISL's collapse.

(Just to clear it: ISL is the original brands. There were several ISL companies at the end and ISMM is the name of the holding ISMM Group. This holding had other names and structures before, f. i. Sporis and, at the beginning, also Rofa)

My information is based on original documents we have discovered over the years, and which were partly never published worldwide - for instance this wonderful ISMM Group Strategic Plan until the year 2006 or this ISMM Group The New Millenium Strategy Plan until 2002.

Both are originals and, of course, strictly confidential documents. And that is exactly the reason why we are talking about it now.

But, at first, please allow me to look back for a while.

I had the opportunity to speak about a closely related topic at the Play the Game conference two years ago. The title then was Politics and corruption in FIFA, the world's football governing body. I gave a report about on a very important question for the entire world of sports. The question was: Under which dubious circumstances FIFA had given its TV and marketing rights for all competitions until 2006 to the two companies Sporis/ISL and Kirch Group. These contracts are worth more than 3.5 billion Swiss francs (CHF), probably more than 4 billion - these contracts are still some of the biggest and most prestigious marketing contracts worldwide. Together with my friend Thomas Kistner I have written some chapters in our book Das Milliardenspiel about the ISL/Kirch-contracts.

In Copenhagen 2000 I quoted some of the best documents we had discovered at that time. These documents showed that in the middle of the 90ies the FIFA General Secretary, then Joseph (Sepp) Blatter, had only been dealing with ISL to secure the bid contracts for old friends and allies. And the most important question was: Why did Blatter and the then FIFA President Havelange sell the FIFA rights to their closest personal friends at ISL - again and again?

How and why could the old party overcome the opposition of some EB members like Lennart Johansson again and again?

I did not say: They were bribed. I did not say: They have got more than ten million Swiss francs each. I did not say that for juridical reasons, because I could not prove it. But two years ago I had no proof of bank accounts somewhere on a lovely island. On the other hand, everybody who was capable to think and everybody with a common sense could imagine what was going on in the so called FIFA house.

Let me therefore once more quote Eric Drossart, a chief executive from IMG, the well known marketing company. He wrote to Mr. Blatter in 1996:

Sepp, it is very difficult to conclude anything other than there being two sets of rules in operation here, one for ... ISL, and one for the rest, and your responses to our efforts are merely a cosmetic exercise designed to protect FIFA from future accusations of unfair and improper conduct.

Ooops? Unfair and improper conduct in FIFA? What\'s that? Have you ever heard about it?

I mentioned that speech in 2000 and that letter because we have all come to know strange state of affairs even better now. And why?

Only some month after the second Play the game conference we discovered hundreds of documents. Confidential documents, strongly confidential documents, secret and whatever else documents as I have shown you some minutes ago.

To be honest: It was a pleasure for us, it was absolutely funny to read and to hear that we were right from the beginning. Right in the main points we had described: the so called bidding process for the FIFA World Cup rights and the obscure joint ventures between FIFA, ISL/Sporis/ISMM and the legendary Kirch Group.

I give you just one example: In the minutes of the Board of Directors of ISL we could read that Jean-Marie Weber, the long-time collaborator of Blatter and Havelange had given the result of the FIFA vote concerning the TV and sponsoring rights - month before the voting took place in the FIFA Executive Committee. Months before members of this committee and other bidding parties had even learned when and where the decision will take place. Hadnt even got an invitation to this obscure event.

But Weber and his friends did know what was going on. To know that and to organise the suitable decisions before so called elections or other secret ballots was their very special people business in this very special sports democracy. I will come back to this point.

In spring 2001 it was fun to read all these papers and to write about it in our newspapers. To exchange information with good colleagues and friends. And to observe the developments at the media market. To see who of the well paid and prize winning journalists in England, Germany and Switzerland for instance - gave their full support to the people in the marketing business and in the FIFA office who were under big pressure. To people who are known as notorious liars.

It was, once more, unbelievable. They, I mean journalists, played down the biggest problems. They ignored figures which were based on original documents. They played once more their role as foolish supporters of the power holders. They played down the big topics of corruption, crime and mismanagement to an allegedly question of anti-sympathy between some sport officials (like Blatter and Johansson).

They have never had a clue what is going on.

To be clear: I am not talking about such dubious, untruthful, dirty insider-publications like Sport intern, I do talk about some of the biggest and most influential newspapers in Germany, Switzerland and England - just to mention some examples.

I found myself described in the heavily loss-making, right wing newspaper Die Welt as an old, never thinking Apparatschik from East Germany, and as a stupid servant of the UEFA and Lennart Johansson.

Not only the last claim was surely the prove that this so called journalist has never realised anything in this FIFA/ISL-business: A servant of UEFA? I can assure you: To get only one information from inside UEFA is much harder than getting tons of documents from FIFA insiders.

I mentioned that because it is my understanding that Play the Game is also a conference for professional journalists and therefore an opportunity to talk about the huge problems in the media business.

As I told you, we have had a lot of fun. But, on the other hand: Joseph Blatter, this incarnation of honesty, integrity, this living symbol of altruism, this modest servant on earth For the good of the game - he is still in office. He won again a so called election. He has restored his power and re-organised his FIFA house.

So we have a lot of work to do. And every journalist is invited to join us. Everybody can help, even in developing countries - especially in these countries. Andrew Jennings has talked about it on his workshop Get the story several times. I am also very interested in what, for instance, Ezequiel Moores from Argentina will tell us tonight and tomorrow. And, as I know Andrew, he will talk about the possibilities and needs of researching in journalism later on.

But now straight back to the Big bubble, the crackdown of the marketing giant ISL/ISMM.

I won't give you the names and titles of all companies in this holding which repeatedly changed structures, names, shareholder-proportions. Sometimes it seemed that the leading executives of this holding as Christoph Malms or Jean-Marie Weber had nothing else to do. On the other hand: That exactly was an important part of their business.

Simply speaking: Having a huge amount of different companies, buying and selling rights between them, founding new firms, founding fictitous firms, closing down companies, arranging several foundations, transferring money to accounts and foundations in tax paradises, giving so called adviser contracts to sports officials - everything helped them to prevent that anybody else, anybody from outside the system realised what was going on.

But whose business, exactly, was it?

I think in the case of sports marketing and TV rights, in the case of trading a common property like sports it might be a legal right of the public, of the tax payers all over the world, of the Pay-TV-costumers, to know where their money is going. Who owns the sport? Dubious officials? Marketing companies? Or the athletes? Or the public?

And who earns the money? A good question, isn't it?

In the ISMM holding the things went on in the typical way. Having secured the FIFA rights, having secured contracts worth about 4 billion Swiss francs was not enough. They wanted more. They bought whatever was on the market for fantastical amounts. They dreamed of wonderful possibilities: Internet, Pay TV, Pay per view. They wanted to become richer and richer.

Malms, Weber and most of the others on the ISMM Board of Directors looked at the stock markets nearly every hour. They looked at NASDAQ and NEMAX, they calculated day and night how much money they would be able to earn. They wanted to sell ISMM stocks. They planned the so called IPO. I have seen notes of an ISMM executive: He had calculated by hand the sum he would personally earn in case the stocks would perform well at the market - some billion Swiss francs. For one.

I would never claim that among these 60 somewhat companies in the ISMM group, among the - more or less - 600 employees, there were no experts, no hard working honest people, no one who knows his business excellently. To claim this would be stupid. On the contrary, in the ISMM holding three worked hundreds of well educated people, experts who got new jobs after the collapse, who had a positive influence in their business.

The main problems were the leaders: Old fashioned people like Jean-Marie Weber and his brother, like Malms, Woog, Schmid and others. They are dinosaurs survivals of the good old times, like Havelange, Blatter, Samaranch and all the others, their brothers and sisters in spirit.

They had many chances to reorganise the holding. They did not used one. And at the end, when the stock market came down, when the great bank syndicates cut different credit lines, when - on the other hand - their old comrades in the sport-administrations still wanted what they had been getting over decades (money, money, money) - at the end of the story there was nobody in the ISL/ISMM executive management who had the capacity and ability to clear the situation.

It was impossible. It was chaotic. Even Malms and Weber, the power-holders, did not realised what was going on and where the money went. This collapse influenced not only FIFA, but also half a dozen of the most important Olympic sports, like Athletics, Swimming and Basketball.

You all know the stories, can once again read and downloaded all the published stories in the internet and in the archives. You remember the dramatic events when FIFA tried to secure the right packages for itself in spring 2001. To make sure that these packages were not made part of the bancruptcy's estate. By the way: We observed a quite similar procedure this year with the collapse of the Kirch Group.

Once again: The Top Executives of the ISL/ISMM holding never realised the difference between appearance and reality. They were captured in their own spider\'s web. The reasons of this collapse were greed and incompetence. But until now these people don't acknowledge their own mismanagement.

(THE END)

(It follows just some examples of 20 folios)

1.ISL history

-founded by Horst Dassler (Guelfi, Beckenbauer)
-from Rofa to ISL to Sporis holding to ISMM holding
-most important role in commercialising the Olympic Games
-No. 1 marketing company worldwide in olympic sports
-longtime marketing partner of the IOC (TOP programme)
-lost IOC contract in 1995/96
-won sensationally FIFA TV contracts in 1996 under dubios circumstances
-bankcruptcy procedure since 2001

2.ISMM group rights (marketing and TV) in 2001

20061982UEFA Football20041982CAF Football20041984Flamengo Football2014/20291999Gremio Football2014/20292000ATP Tour Tennis20091998ITF Tennis FedCup20041999IAAF Athletics20091983FIBA Basketball20041990OCA Asian Games20061996CART Auto Racing20071998FINA Swimming20071997

3.LASI Latin America Soccer Investments (overview)

nplanned with 5 clubs in Argentina and Brazil
nall rights: television, sponsoring, transfers
ncontracts with Flamengo Rio de Janeiro and Gremio Porto Alegre
nprojects worked out: San Lorenzo and Boca Juniors Buenos Aires

4.LASI Flamengo project

expected revenues in USD

- TV rights1 billion
- marketing (sponsors, Umbro/Nike)928 million
- licensing & merchandising574 million
- new media (Internet)315 million
- ticketing541 million
- (others)

total: 4,6 billion, until 2029

5.ISMM strategical financial plan

n- revenues 1999 2002:4,1 billion CHF
n- net result after Tax385 mio CHF

n- revenues 2003 2006:6,4 billion CHF
n- net result after Tax832 mio CHF

6.ISMM group - the result spring 2001

-Tennis ATP- 351 mio
-LASI- 212 mio
-EURO 2000+ 29 mio
-Athletics (incl Golden League)- 32 mio
-(others)

net result- 677 mio CHF
(The bankruptcy procedure was opened)