The Toronto Star, July 21, 1999

Any IOC rule can be bent; bid cities will find their way around Olympic reforms

With the International Olympic Committee having awarded the 2006 Games to Turin, the IOC’s attention will begin to focus on the 2008 Games. Toronto, which is sending a slate of bid representatives to the Pan Am Games in Winnipeg this week, is one of the early favourites in the 2008 bidding. But there are a lot of questions to be answered on the bid. Today, in one of an occasional series of stories on bidding for the Olympics, Charles Smedmor, a Toronto chartered accountant who specializes in investigative accounting, examines how cities might try to bend the IOC’s proposed new rules.

By Charles Smedmor, Special to The Star

The International Olympic Committee has reformed itself and Olympic vote buying will not happen again. That’s what the IOC wants you to believe.

Unfortunately, it’s not necessarily true. The selection process for the 2008 Games is not yet finalized. But whatever rules are brought in could well have loopholes that eager bid cities could exploit.

How can the Olympics be bought? The best way to know would be to consider the perspective of a bid city that wants the Games "no matter what the cost". This hunger can be even bigger when a bid city is competing against a national bid, such as Beijing’s which will not face the same scrutiny as other bids.

One of the most important reasons a bid can be bought is that IOC members aren’t paid a salary. Instead they get only a small per diem allowance. To pay each IOC member an annual salary of $100,000 (US) and expenses of up to $50,000 would eliminate the need for outside money and the need to "freeload" expenses from bid cities. The annual cost would be $15 million, a small sum given the IOC’s recent investigation costs and the damage to its Olympic brand.

Expulsions and warnings to IOC members will have some effect as a stick. However, until the IOC uses the carrot of proper compensation to eliminate the need and greed elements, the opportunity still exists for a "win at all costs" bid to buy the Olympics. In other words, the IOC reforms treat the symptoms, not the disease, of corruption.

How could the Olympics be bought? If Bid X wanted the Games "at any cost" it would need two campaigns. The "surface campaign" would play strictly by the rules. A second, secret bid, a "submarine bid" could silently identify corruptible IOC members and discreetly buy enough votes to help ensure the electoral college short-lists Bid X and that the IOC members as a whole select Bid X.

What would be required?

1. Offshore offices. A submarine bid by Bid City X could be developed by having an office in an offshore location with good telecommunications, air service, and corporate and banking secrecy.
   
   
2. Leaders. A small trusted team (if necessary with dual citizenships or purchased passports) could manage the secret bid. The submarine bid leader could manage the finances, hire contractors and be the primary link with the head of the surface bid. Reporting and contact procedures could be arranged with communication codes, mail drops, scrambled telephones and e-mail in other countries.
   
   
3. Funding. Funding would require the co-operation of one or two larger donors who could send substantial funds offshore to the submarine bid. A donor could finance a submarine bid by paying consulting fee invoices from several offshore entities. Alternatively, a donor’s foreign supplier could overinvoice for imports and the supplier could pay the difference to the submarine bid.
   
   
4. Laundering donations. The submarine donations could be received by one group of companies and then immediately transferred to a separate group, each located in a different tax haven with its bank account in yet another location. This scrambling would limit any tracing of the funds.
   
   
5. Targeting the IOC. Investigators could be hired to provide the detailed files on each potential member of the IOC’s electoral college and the IOC membership. Do they need cash for their lifestyle, debts or retirement. Are they addicted to drugs, alcohol, gambling or some other vice? This sort of information is already gathered by so-called agents and others representing bid cities.
   
   
6. Contacting IOC members. In order to subvert the targeted IOC members the submarine bid would have to discreetly make contact, using another group of companies and a small contact group. For example someone from a third country could approach the targets for interviews or a survey. That person could then offer the lure of "special consulting" payments or give money for a speaking engagement. Funds could be deposited in offshore accounts.

Some of this may sound like high intrigue or 007 novel stuff. But the fact is the Olympics are a multibillion-dollar industry. The stakes are huge and we’ve already seen the lengths to which some cities have gone to get the Olympics.

The glory of hosting the Olympics means that the competition could be fierce for the votes of IOC members. The reforms to the city selection process do not eliminate corrupt vote buying, only the form it may take.

Charles Smedmor, a chartered accountant who specializes in investigative accounting, has written previously on Olympic issues.