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Accounting Firms to Prepare

Accounting Firms to Prepare Tackle Brazilian Soccer
By Terry Wade. Wall Street Journal. (Eastern edition). New York, N.Y.: Jul 17, 2002. pg. B.9.C

Abstract (Summary)
Many critics, including soccer legend Pele, allege the trouble comes mostly from the top of the country's dozen major clubs, hundreds of minor league teams and the Brazilian Soccer Confederation. Ricardo Teixeira, the head of the confederation, was recently a subject of congressional inquires for allegedly taking part in kickback schemes, which he has denied.

Pro-reform politicians say they are now worried Brazil's latest Cup victory will hurt the push to clean up soccer. When Brazil was struggling to qualify for the latest World Cup, Brazilians were outraged and put Mr. Teixeira under intense pressure.

Mr. [Eurico Miranda] is just one in a string of politicians that worked or serve as club presidents and have come under scrutiny. The senate has asked the public prosecutor's office to take on the investigations of Mr. Miranda, along with Mr. Teixeira and 16 other club or state soccer-federation directors.

SAO PAULO, Brazil -- Undeterred by their profession's recent troubles in the U.S., the world's major accounting firms are ready to tackle a new field: the Brazilian soccer scene.

Though Brazil won an unprecedented fifth World Cup in July, the local soccer scene is in disarray, and its congress is investigating allegations of widespread corruption in the country's pro leagues.

Now, companies including the local units of KPMG and Deloitte Touche Tohmatsu are offering services to the country's professional soccer clubs after President Fernando Henrique Cardoso issued a decree last month to fight corruption by requiring clubs to reorganize themselves as corporations and start publishing financial statements.

For accountants, there is certainly plenty of work to go around. Brazil's professional soccer teams have changed little since they formed in the early 1900s as amateur associations. The reforms aren't just about improving ethics. The changes could also boost foreign investment that Brazil sorely needs.

"Some investors already have had frustrating experiences investing in soccer clubs, and now they fear losing money again in Brazil," said Andre Castelo Branco, a Sao Paolo-based partner with KPMG here. "Now we have to wait to see how the new law is implemented . . . and if club owners have the will to change things," he added.

Though soccer is the most popular spectator activity in Brazil, many clubs are bankrupt, and few people know where all the ticket revenue or television dollars go.

Many critics, including soccer legend Pele, allege the trouble comes mostly from the top of the country's dozen major clubs, hundreds of minor league teams and the Brazilian Soccer Confederation. Ricardo Teixeira, the head of the confederation, was recently a subject of congressional inquires for allegedly taking part in kickback schemes, which he has denied.

The accountants' game plans call for cleaning up the books of Brazilian soccer teams and then structuring new stadium deals that bring in foreigners with deep pockets.

If the reforms work, Alexandre da Rocha Loures, a director at Deloitte Touche Tohmatsu in Rio de Janeiro and a professor at the Fundacao Getulio Vargas business school, projects as much as $500 million in foreign capital will be invested during the next two years for stadium projects in 10 major Brazilian cities.

Services for structuring stadium deals and project finance offer higher fees than traditional accounting. And any new stadium would be well-attended, as eight Brazilian teams rank among the top 20 globally for having the largest fan clubs.

Rio de Janeiro-based club Flamengo, which is struggling to pay its 200 million reals ($70.1 million) in debt, has the world's largest fan club at 30 million and has been home to some of the world's greatest players, including Romario and Zico.

While accountants are eager to restructure Flamengo's operations, their hopes for sweeping changes in the pro leagues ultimately rely on politicians.

Though President Cardoso's decree took effect immediately, it requires congressional approval within the next two months to become permanent law.

Pro-reform politicians say they are now worried Brazil's latest Cup victory will hurt the push to clean up soccer. When Brazil was struggling to qualify for the latest World Cup, Brazilians were outraged and put Mr. Teixeira under intense pressure.

But there are some in congress who tolerate old-style soccer management.

Eurico Miranda, who has denied allegations by the media of using gate receipts from Rio de Janeiro team Vasco de Gama to fund his recent election to congress, opposes reform efforts. "As long as I'm president of Vasco, things will be kept the same," he said last week.

Mr. Miranda is just one in a string of politicians that worked or serve as club presidents and have come under scrutiny. The senate has asked the public prosecutor's office to take on the investigations of Mr. Miranda, along with Mr. Teixeira and 16 other club or state soccer-federation directors.

Luiz Estevao, who was expelled from his senate seat in 2001 for allegedly misappropriating funds for a courthouse construction project, is the owner of Brasiliense FC -- the biggest professional team in Brasilia. And former president Fernando Collor de Mello, who was impeached amid corruption allegations in 1992, launched his political career after serving as the head of the CSA soccer team in Alagoas state.

Despite Mr. Miranda's resistance, the government says it means business.

Minister of Sports Caio Luiz de Carvalho has made it clear that failing to comply with the law can result in jail time for club presidents. That tough stance has accountants preparing for a new growth industry.

2 comments:

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