On Monday, March 25, a New York judge ruled that Mexico’s Televisa Group will not be let off the hook for allegations of participation in a FIFA bribery scheme of over $15 million. The scheme was allegedly an attempt by the mass media company to obtain the broadcasting rights to FIFA World Cup soccer games. U.S. District Court Judge Louis L. Stanton determined that Televisa’s shareholders had described their allegations with necessary specificity, ruling that Televisa must face its investors’ claims of securities fraud.
Originally filed in March 2018, the proposed class action states accuses the mass media company of artificially inflating their U.S. shares of foreign stock due to Televisa’s involvement in the widespread FIFA corruption case. The plaintiffs’ complaint notes that the price of these depository receipts dropped by 2.4 percent in November 2017, when a witness testified that Televisa bribed a FIFA executive. Further, the price dropped by another 1.4 percent in January 2018, after the company’s internal controls came under scrutiny.
Investors allege that Televisa used its Swiss subsidiary to pay off a FIFA executive for the broadcasting rights to the 2018, 2016, 2022 and 2030 FIFA World Cup tournaments. They contend that Televisa hid its payments to FIFA from the public by way of its poorly designed reporting mechanisms to the U.S. Securities and Exchange Commission.
Judge Stanton explained his ruling to deny Televisa’s motion to dismiss, stating, “The complaint pleads with particularity facts about defendants’ false or misleading statements concerning Televisa’s World Cup rights and internal controls. The complaint also pleads with particularity facts about Televisa’s internal controls which, when viewed in the context of the complaint’s other allegations, state a claim that the weak internal controls hid the bribery scheme until PwC discovered the skimming scheme in late 2017.”
He continued, stating that the investors’ documentation of Televisa’s statements adequately shows that Televisa intentionally made false statements regarding its knowledge of and participation in the FIFA bribery scheme. Judge Stanton noted, “Engaging in deliberately illegal behavior, as well as admitting that there are material weaknesses in internal reporting, is probative of scienter.”