Olympic Bribery Allegations Against Azerbaijan: What Will the Investigation Discover?

Recent accusations that millions of dollars were funneled from Azerbaijan in exchange for assurances that Azerbaijani boxers would win gold medals at the London Olympic Games in 2012 have led to denials from the world’s Olympic boxing organization, indignation from Baku, and an ad hoc committee that will investigate the claims.

Since the the airing of the allegations on BBC’s Newsnight program, I’ve talked to many of the principals at the center of this story, and what follows is an examination of the more explosive components along with the unearthing of a case in a US federal court (thanks to an anonymous source) that may shed light on where the money went.

Newsnight broadcast the story just as the AIBA World Championships and Olympic qualifiers commenced in Baku, the capital of Azerbaijan. AIBA (the International Boxing Association) is Olympic boxing’s governing body, and the BBC allegations have sent shockwaves throughout the boxing world.

The BBC report alleged that, according to two sources, at least $9 million out of a total of $15 million was paid by a mysterious Azeri to a Swiss bank account held by the World Series of Boxing, an arm of AIBA, in exchange for Olympic gold for Azerbaijani boxers.

Newsnight relied heavily on charges made by two unnamed individuals as well as email correspondence between Ivan Khodabakhsh, WSB’s Chief Operating Officer, and an official in Azerbaijan’s government. A copy of an email message sent by Khodabakhsh to an official at the Ministry of Emergency Situations refers to a previous meeting between WSB chief Ho Kim and “the Minister,” who has been identified by the BBC as Kamaladdin Heydarov.

Heydarov, the Minister of Emergency Situations, is one of the three or four most powerful people in Azerbaijan. A secret US embassy cable, written last year and released by Wikileaks, details Heydarov’s political acumen and describes his family as “the second most powerful commercial family in Azerbaijan…”

It is no surprise that Heydarov, who is also president of Azerbaijan’s Boxing Federation, would have contact with AIBA or the WSB, who have asserted that the minister was merely acting on behalf of the still unidentified Azeri businessman in obtaining the investment. And no verifiable evidence has yet emerged to suggest that the money came from Heydarov personally or the Azerbaijani government.

In any case, the funds arrived just as the WSB Americas teams were tottering on the brink financial collapse. Of the original four teams in the Americas division, two remain: Mexico City and Los Angeles. The Miami and Memphis teams ceased operations earlier in 2011 after a season of poor attendance at matches and dismal revenue.

Rich Orosco, one of the current managers of the Los Angeles Matadors team insisted in a phone conversation with me that there was nothing to the charges, and blamed former Los Angeles general manager Jeff Benz for the allegations aired by the BBC: “Their source is a disgruntled former employee who was fired. He was the original general manager of Los Angeles…That’s their source, a disgruntled former manager who was fired: Jeff Benz.”

Benz, a well-known lawyer who was once general counsel for the US Olympic Committee and participated in the independent commission that investigated the 2002 Salt Lake City Olympics payoff scandal, was sacked earlier this year as manager after a dispute with Ivan Khodabakhsh concerning marketing strategy and costs.

Benz appeared in the BBC Newsnight piece, but despite what Orosco appeared to imply, Newsnight did not indicate that he was one of the confidential informants making the allegations against Khodabakhsh. In telephone and email conversations over the past several days, Benz said that he never heard Khodabakhsh talk of trading money for gold medals.

In the Newsnight piece, Benz does say that the cash infusion from the mysterious Azeri made him suspicious: “It made me wonder if what the AIBA folks had told me was true, that there were links to the Azerbaijan government, what they were expecting to receive out of this, because people, in my experience, governments or individuals, just don’t give money away, especially on the magnitude of ten to fifteen million dollars without some sort of expectation of quid pro quo or a promise.”

The most damning allegations for the Newsnight piece were made by two sources, their identities undisclosed, who charged that Khodabakhsh told them that Olympic medals for Azerbaijani boxers would be arranged in return for the money.

One of the sources, described as a boxing “insider,” told the BBC that “Ivan boasted to a few of us that there was no need to worry about WSB having the coin to pay its bills. So as long as Azerbaijan got their medals, they would get the cash…Ivan made it clear that AIBA would take care of Azerbaijan.”

Khodabakhsh told me via email that “all allegations are completely false and ridiculous. They are fabricated by individuals with an axe to grind, having worked for us in the past and who are totally discredited, because their working relationships was terminated.”

In a press statement, AIBA expressed support for Khodabakhsh and called the charges of a money-for-gold swap “preposterous” and “utterly untrue.”

“The loan was not ‘secret’…nor was there anything improper about it. It was an arms length transaction between two entities made on a commercial basis and with a view to a commercial return for the investor.”

Nevertheless, AIBA has agreed to set up an internal “Special Investigation Committee” to look into the allegations.

However, the special committee’s mandate seems somewhat compromised from the start, given the very close relationship between AIBA, the parent organization, and its offspring WSB. Both share the same address in Lausanne, and despite AIBA’s pledge of “transparency,” it’s hard to imagine that it would pursue an aggressive, thorough investigation. All five members of the committee either have very close ties to AIBA or are staffers, including AIBA’s legal counsel and Tom Vigrets, the chairman of the committee.

(Mr Vigrets did not respond to a query, nor did AIBA respond to multiple requests for information.)

The appearance, then, is that AIBA is investigating AIBA, and I for one am somewhat astonished at the attitude of the International Olympic Committee (IOC) which announced that it would wait for the conclusion of the AIBA internal investigation before launching its own inquiry.

Surely the best way for Khodabakhsh to clear his name (and for Heydarov to refute allegations that he may be complicit) is to demand a completely independent investigation comprised of people who have no ties to AIBA or WSB, ideally with the power of subpoena in Switzerland, the US, and Azerbaijan.

An investigative committee that represents AIBA, which is tightly enmeshed with the WSB, may imply to some a conflict of interest, and a “not guilty” finding will leave many unconvinced.

One issue the committee might want to look into is how much of the investment actually reached the American teams.

In April, Eric Parthen—former managing director of the Matadors—filed a lawsuit in the US District Court in Denver against the World Series of Boxing, Ho Kim (its CEO and who also happens to be AIBA Executive Director), and Ivan Khodabakhsh.

According to Parthen’s complaint, three large cash payments were promised to the teams:

Defendants KIM and KHODABAKHSH, and each of them, repeatedly represented to Plaintiff that the investor funds would be paid in three (3) installments of five million dollars (US $5,000,000) in September 2010, January 2011 and March 2011, respectively.

In an apparent reference to the mysterious Azeri investor, Parthen contends that Khodabakhsh, Kim, and the WSB withheld a large portion of the money:

Defendants…made material misrepresentations of fact, including that WSB AMERICAS

had secured fifteen million dollars from an unidentified private investor to fund the

start-up and operational costs during the inaugural 2010-2011 season.

These representations were false when made because, in fact, WSB-AMERICAS only received a

fraction of the funding it claimed to have secured from the unidentified private investor.

Orosco assured me that the WSB “is a noble mission” and that the boxers have been paid: “All I know is that we have money to fund our teams. I wasn’t involved in where the money came from, but I do know that four teams were supported last year.”

Joe Smith, the former manager of the Memphis Force, one of the two US teams that flopped this year, acknowledged that there were funding gaps during his team’s bumpy ride: “I’ve had nothing but good experiences with Ivan. When there were money problems he’d say, ‘the money isn’t in yet.’ He has been real honest about that.”

This “scandal” may be nothing more than the malicious accusations of disgruntled former employees, which is just what Khodabakhsh and Orosco have alleged. But the committee will have to operate independently in order to get to the truth.

Smith, who before his brief stint with the WSB was team manager for US boxing at the Beijing Olympic Games, had nothing but praise for Khodabakhsh: “He has been very up front with me, and in my experience, he’s been a man of integrity. I’ll be real surprised if the allegations are true.”