Inside IOC’s Books: A Tangled Web of Wealth, Mystery

Greats of Games past--Jesse Owens, Jean-Claude Killy, Wilma Rudolph--are celebrated in the Olympic Museum.

But the central place of tribute is reserved for a wall bathed in spotlights in the foyer.

There, five dozen heroes of another sort--NBC, Coca-Cola, Samsung among them--have paid $1 million apiece to have their names chiseled in granite and highlighted in gold leaf. Each stone on the wall of honor bears silent testimony to the singular influence that has made the Olympic movement what it is today: money.

With Olympic revenue now exceeding $900 million each year, money also is one of the greatest mysteries surrounding the International Olympic Committee.

It is not supposed to be this way. In response to the Salt Lake City bidding scandal, IOC officials pledged to conduct their business in a more open or, as they say, “transparent” fashion.

When The Times sought to follow the money, those officials said they would open their books and provided unprecedented access. “There are no secrets,” IOC President Juan Antonio Samaranch said.

But the records do not show where all the money goes. For instance, the IOC cannot be sure how many of the millions of dollars it distributes each year ultimately reach athletes to pay for equipment, travel and other needs.

And the IOC’s finances are tangled in a latticework of deals with allies and the politically powerful, raising questions about whether the Olympics really are a level playing field:

* The richest nations, especially the United States, get the largest share of television and corporate sponsorship revenue.

* The most influential sports federations, such as the one that oversees track and field events worldwide, receive millions more than those governing smaller or less-popular sports.

* Without giving other networks a chance to bid, the IOC cut a $3.5-billion broadcast deal with NBC that extends from the Sydney Games in September through 2008.

The committee, which started more than a century ago as a fraternity of sportsmen, has not shed some of its old ways of doing business. The world’s most powerful sports organization has struggled to adapt to unimagined wealth that emerged from the 1984 Los Angeles Games.

Even the man who headed those Games, Southern California businessman Peter Ueberroth, sees the IOC as “an enormous international economic and sports endeavor” that generally has not been “up to the task of managing this global enterprise.”

The Bucks Start Here

To look at photos from the L.A. Games is to see how much time has passed since 1984.

One picture, taken near the end of the Olympic torch relay, shows a beaming runner carrying the flame high as he sprints up the California Incline in Santa Monica, past balloons and a jubilant crowd.

The proud torchbearer: O.J. Simpson.

The Olympic movement was different then.

Los Angeles was the only city in the world that sought the 1984 Games.

Why was the Olympic movement foundering?

The 1972 Munich Games had been stained by a deadly terrorist attack on Israeli athletes and coaches. The 1976 Montreal Games sustained a $981-million deficit and were boycotted by 27 African nations. And the United States led a boycott of the 1980 Moscow Games.

When Samaranch was elected president in 1980, he said that the financing of the IOC was “a matter of some urgency.”

Enter Los Angeles, and Ueberroth, a hard-edged entrepreneur who made his fortune in the travel business. He viewed television rights as the financial linchpin to a successful Olympiad.

In TV matters, Ueberroth was good and lucky.

Good, because he recognized an incredible opportunity to play the networks against one another. ABC was so eager to get the 1984 Games that it paid $225 million for the U.S. rights--nearly 10 times what it paid for the Montreal Games eight years earlier.

Good, too, because Ueberroth insisted that much of the network’s money be paid up front--providing the Los Angeles organizing committee with much-needed working capital.

Lucky, because Ueberroth was dealing with an IOC that seemed remarkably generous, even naive, when it came to sophisticated money management.

In negotiations with Ueberroth, Samaranch’s predecessor, the late Lord Killanin, settled for a modest $33 million of the $225-million TV deal.

And, as Ueberroth tells it, an IOC employee carried the first installment check--for $25 million--with him for 20 days to India and elsewhere. All the while, the IOC was losing bank interest.

This amazed Ueberroth because he was a fanatic for detail.

In marketing the Olympic rings, he limited the number of companies who could become sponsors, creating three categories of corporate support.

At the top were multinational corporations. For a minimum pledge of $4 million, they got exclusivity. Coca-Cola paid $12 million to be the official soft drink of the Games.

Ueberroth turned to Fuji, the Japanese film company, when it agreed to pay $7 million--even though Kodak had long been affiliated with the Olympics.

Ultimately, the L.A. organizing committee generated $126.7 million from sponsorships and licensing revenue--almost 10 times as much as Montreal did. The local committee turned an overall $232.5-million profit.

Samaranch calls the L.A. Games a “turning point” and says Ueberroth “saved the Olympic movement.”

A Money Mystery

The IOC learned from the Los Angeles Games that TV rights and marketing fees were the answer to its financial woes. Those Games set in motion years of soaring prosperity and expansion.

But the IOC came crashing to Earth last year with the corruption scandal that followed Salt Lake City’s winning bid for the 2002 Winter Games.

During congressional hearings, IOC officials faced tough questions about a culture of entitlement that led members to take more than $1 million in gifts and favors. They also were asked a question that goes to the heart of the Olympics: How much IOC money goes to programs that provide “direct support” to athletes?

Three times, Sen. John McCain (R-Ariz.) put the question to Anita DeFrantz of Los Angeles, an IOC vice president.

Three times, DeFrantz said she didn’t know.

During its review of the IOC’s books, The Times sought to answer McCain’s question but could not--not even with the help of officials at IOC headquarters.

The IOC acknowledges that it never has tracked the money it gives to sports organizations around the world to see how much reaches athletes.

After several months of trying, the IOC also struggled to answer two basic questions: How much comes in? And what happens to the money after it goes out?

Franklin Servan-Schreiber, IOC spokesman, attributed the difficulties to “bad organization” and the novelty of disclosing details of the organization’s finances.

Other IOC officials offered other explanations:

The bookkeeping runs on a four-year cycle, unusual for a billion-dollar entity. Many numbers fluctuate with currency exchange rates. Calculations vary wildly for the value of goods and services provided to the IOC by its corporate sponsors.

In addition, records show that some income is not even included in the IOC’s projected revenue of $3.6 billion for the four years. An example: $57 million in interest.

The world’s few experts familiar with IOC finances say the peculiarities and inconsistencies do not necessarily translate into impropriety.

“I have yet to see matters of corruption in the IOC,” said Bob Barney, director emeritus of the Center for Olympic Studies at Canada’s University of Western Ontario. “I have seen matters of unaccountability.”

Paul Allaire, the chairman and chief executive of Xerox, who reviewed the committee’s books last year as part of the IOC’s response to the Salt Lake City scandal, said he found no hint of malfeasance.

But his findings led the IOC in December to adopt as one of its reforms a measure calling for the tracking of every dollar.

Officials said it will take several more months--if not years--to fully implement the financial reforms.

“No one’s stealing funds,” said Allaire, whose company is a longtime IOC sponsor. “But you don’t get any idea of how the IOC operates.”

Peddling the Rings

Despite fears that the Salt Lake City fiasco would hit the IOC in its Swiss bank accounts, the committee’s marketing research last fall indicated that the “true impact . . . has been marginal,” according to a report obtained by The Times.

Even a longtime IOC critic, John Hoberman, a historian at the University of Texas, marvels: “There is a kind of Teflon-coated appeal to the Games.”

The five Olympic rings--representing Africa, the Americas, Asia, Oceania and Europe--remain one of the world’s most marketable symbols. Corporations pay handsomely to attach themselves and their products to a highly popular and esteemed sporting event.

Taking lessons from the 1984 Games, Samaranch exploited marketing and television to fuel the committee’s emergence in the last two decades as an economic powerhouse.

When the IOC signed up a marketing firm in 1985, it chose ISL, a Swiss company established by an old Samaranch ally. The late Horst Dassler, who also was the head of Adidas, had used his influence in international sports to help Samaranch get elected president of the IOC.

From the outset, The Olympic Partner program has proved highly successful.

About 10 major corporations were offered rights to the rings. Household names such as Coke and Visa quickly signed on. The goal for 1985 through 1988 was $80 million; the program generated $95 million.

Revenue grew ever larger, particularly after the committee shifted marketing four years ago to a company it partly owns, Meridian Management. Marketing now is expected to bring in about $579 million--about 16% of total revenue--through the Sydney Games.

Local marketing programs run by each organizing committee--such as Sydney’s--bring in hundreds of millions more.

When it comes to fetching dollars, however, television is king. Half of the IOC’s $3.6 billion in projected revenue from 1997 through 2000 comes from broadcast rights, and the bulk of that from the U.S.

In their most recent TV deal with a U.S. network, IOC officials in 1995 privately awarded NBC the rights to all the Summer and Winter Games through 2008. They already had a friendly relationship with NBC and its executives, one of whom sits on the IOC.

Although the price tag was a record $3.5 billion, some industry experts said the IOC might have negotiated an even richer deal if it had sought competitive bids. And officials from other networks cried foul.

The IOC says nothing requires it to solicit bids. It defends the NBC deal as a good one.

Said Rick Burton, director of the University of Oregon’s Warsaw Sports Marketing Center, “The Olympics are intended to be about fair play for athletes, but they are a business machine.”

Buying a Lot of Unity

Athletes in even the smallest and most remote countries do benefit from the IOC’s billions.

“We rely on them,” said Mary Mahuk, sports development officer in the small South Pacific island nation of Vanuatu, which records show received about $84,000 in IOC assistance last year. “Without those funds, we cannot help our sportsmen and sportswomen.”

But some countries benefit far more than others.

The United States Olympic Committee wrangled particularly good deals from the IOC, because U.S. networks and corporations put so much into IOC coffers. The USOC gets nearly half the $406 million that the IOC funnels to nations, leaving other countries to jockey for the rest.

Even low-profile U.S. sports such as wrestling have profited. A top wrestler can bring in more than Vanuatu.

Wrestlers can receive $30,000 a year in stipends from USA Wrestling and $20,000 more in bonuses and grants from the USOC. Many also strike deals with corporate sponsors.

“I love what I’m doing--I’d be doing it anyway--but I can make a living at it, and my family can be comfortable, which makes it a lot more fun,” said Lincoln McIlravy, a 26-year-old freestyle champion who can train full time while supporting a wife and two sons in Iowa.

Inequity arises everywhere, whether the money goes to local committees that organize the Games or to the 35 international federations that govern each sport.

The organizing committees require the most, and get the most. For example, Sydney will receive roughly $1.8 billion. Such payments are largely a matter of record.

By contrast, the amounts of payments to the federations and the national Olympic committees traditionally have been kept under wraps, although that is changing under reforms.

The welter of formulas used to disburse funds speaks to Samaranch’s political priorities and the nature of IOC relations.

For years, Samaranch has preached the sanctity of “unity” in the movement. As the books reveal, a lot of cash buys a lot of unity.

For instance, the 28 federations for summer sports get portions of the television money. Each starts with a $3.17-million share, then gets a “special marketing remuneration.”

To determine how special, each is put into one of five categories, A through E.

There’s only one sport in the A category: the track and field federation.

For years, it was run by the late Primo Nebiolo of Italy, who knew he had the marquee sport at the Summer Games and used that leverage and his own heavy hand to broker lucrative deals with the IOC. Even when he got $8.67 million from the Atlanta Games, Nebiolo complained that it was “peanuts.”

“Always, this man wants more money,” Samaranch later commented.

This summer, being the only A sport at the Sydney Games is worth $14.5 million extra--for a grand total of more than $17 million.

At the other extreme is taekwondo, one of two E-category sports that get only $3.7 million apiece.

Taekwondo is run by South Korean IOC member Kim Un Yong. A talented player of piano and politics, Kim not only is a close ally of Samaranch but also has wooed the support of committee members in Africa and Asia. He has long been involved in channeling money and equipment to developing nations.

Despite being reprimanded in the Salt Lake City scandal, Kim is mentioned as a possible successor to Samaranch, who retires next year.

Taekwondo is expected to get more for the Athens Games in 2004.

As Ueberroth noted in a book he wrote after the Los Angeles Games: “Not all sports federations . . . are created equal.”

The Bigger Fare Better

National Olympic committees are not created equal either.

For most countries, the primary source of funding is TV money routed through the IOC’s Olympic Solidarity program, created to help underprivileged athletes.

The IOC directs as much as $90,000 in annual subsidies to every country, but it also reimburses nations for each athlete they send to the Games. The larger countries can afford to send larger teams and, thus, benefit more from this bonus.

The USOC took home $523,200 from Atlanta, while many of the world’s poorest nations received bonuses of less than $50,000.

The inequity is even greater when it comes to the corporate sponsorship program.

The USOC alone gets $80 million over four years, while the other Olympic nations must share roughly the same amount.

For 140 “small” nations, such as Cambodia and Mongolia, the IOC provides $40,000 each. Of the “big” countries, 56 get between $50,000 and $5 million; the two nations hosting the Games get a special share.

In explaining the disparity, IOC Vice President Dick Pound of Canada noted that the United States has “enormous clout” and a market that is attractive to all sponsors. But, he said, “Whether it ought to be equal to all the other countries in the world is another question.”

Despite their announced policy of openness, IOC officials decline to disclose how much sponsorship money each of the “big” nations receives. They cite contract provisions and concerns about envy among countries.

Although glaring inequities persist, IOC officials--bitten by the Salt Lake City scandal--say they are taking the first tentative steps to account for the money they disburse.

Samaranch recently started supplying computers to African national committees. But the IOC will not pay the $1,600 reimbursement until it receives an e-mail via the new computer.

As Samaranch conceded in a speech in December, the IOC has been slow to grasp the problems and responsibilities of its sudden wealth: “We were wrong not to see that our organization had to adjust itself to a new world . . . in which money has penetrated all aspects of human and social activities--including all forms of sport.”

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On the Web: This series is available on The Times’ Web site: https://www.latimes.com/ioc.

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Million-Dollar Stones, Billion-Dollar Businessusiness

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Olympic benefactors pay $1 million per stone for a place on the wall of honor at the Olympic Museum in Lausanne, Switzerland. Since the 1984 Games in Los Angeles, the Olympic movement has grown bigger and more commercialized:

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* Television money: Has more than quadrupled.n The corporate sponsorship program: Nonexistent 16 years ago, it now generates almost $150 million a year.n IOC revenue share: Has increased fivefold.

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Source: IOC

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Turning Point

The Los Angeles Games in 1984 revitalized an Olympic movement that had been flagging financially. Here are some key indicators of the change.

Countries in the Olympic movement

1984: 154

2000: 199

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Television contracts

1981-1984: $390 million

1997-2000: $1.8 billion

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IOC corporate sponsorship

1981-1984: $0

1997-2000: $579 million

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IOC share of revenue

1981-84: $61.5 million

1997-2000: $302 million*

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IOC employees

1984: 76

2000: 191

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Events in Summer Games

1984: 221

2000: 300

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Events in Winter Games

1984: 39

2002: 78

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Tickets available for Summer Games

1984: 7.8 million

2000: 9.2 million

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Volunteers at Summer Games

1984: 32,000

2000: 50,000

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Journalists at Summer Games

1984: 8,700

2000: 21,000

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Sources: IOC, Amateur Athletic Foundation, L.A. ’84 Report, Salt Lake City Organizing Committee, Sydney Organizing Committee.

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Note: IOC share of revenue and corporate sponsorship figures for 1997-2000 are estimates.

* Does not include interest.

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Rules of the Rings

The International Olympic Committee carefully controls use of the familiar five rings that form the Olympic symbol. The colors that may be used, the spacing of the rings and even the amount of space that must be left around the rings have been specified by the committee. Some of the rules include:

* Border: A minimum amount of space is required around the Olympic symbol.

* Shape: The rings may not appear as hollow shapes.

* Background: The symbol should not be placed on any background that causes the rings to disappear.

* Position: The rings must interlock in the prescribed manner.

* Color: The rings may not be produced in yellow on a white background, or in color on a black background, or in various shades of gray.

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Source: IOC

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All in the ‘Family’

More than $3.6 billion is projected to flow through the International Olympic Committee from 1997 through 2000--most of it broadcast and corporate sponsorship revenue. The IOC keeps 8.4% for its own operations and distributes the rest to the “Olympic Family.”

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Olympic Revenue: 1997-2000

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Broadcast rights fees, $1.844 billion: 51.2%

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IOC corporate sponsorship program, $579 million: 16.1%

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Ticketing, $455 million 12.6%

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Local sponsorship, $630 million: 17.5%

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Licensing, $62 million: 1.7%

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Other, $33 million: 0.9%

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Total $3.603 billion

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Where the Dollars Go:

Nagano, Sydney organizing committees, $2.639 billion: 73.2%

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National Olympic committees, $406 million: 11.3%

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IOC, $302 million: 8.4%

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International sports federations, $256 million: 7.1%

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Total, $3.603 billion

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Note: All figures are estimates. Share kept by IOC does not include interest.

Source: IOC

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Two Wrestlers, Then and Now

The United States Olympic Committeee gets a disproportionate share of television and corporate dollars that flow through the Olympic movement. This inequity--dating back to the successful 1984 Los Angeles Games--has provided a boon to U.S. athletes.

* Jim Scherr

Jim Scherr tells young wrestlers about the old days, about working nights as a bouncer and summers as a coach, anything to keep wrestling. He tells about quitting work to train for the 1988 Seoul Games and going broke.

Not a penny for rent or food.

“You’re so wrapped up in your goals,” Scherr recalled. “You stretch yourself so thin.”

Just when he hit bottom, the financial windfall of the 1984 Los Angeles Games began filtering down to American athletes. The USOC gave Scherr $2,500 to keep him going until Seoul, where he finished fifth in his class.

These days, as executive director of USA Wrestling, Scherr cuts checks to amateur wrestlers who can make as much as $100,000 a year in grants and sponsorship deals.

“It’s not quite pro sports,” the 38-year-old said. “But it’s a way for athletes to live and compete.”

* Lincoln McIlravy

No one has to tell Lincoln McIlravy that he’s lucky.

A national freestyle champion, McIlravy received more than $40,000 in grants last year, plus an undisclosed amount from a sponsorship deal with a computer company. He also got a car from an auto manufacturer.

That’s enough for the 26-year-old to train full-time while comfortably supporting a wife and two sons in Iowa.

“If you win, you can pay the bills,” said McIlravy, who will compete in the Sydney Games in September. “It makes a big difference.”

Though McIlravy was only nine years old during the 1984 Olympics, he remembers how wrestlers had to struggle to pursue their sport--and he remembers Scherr, because they’re both South Dakotans.

“I kind of know what those guys went through,” McIlravy said. But, he adds, “We’re in an era when a lot of athletes think the world owes them a living.”

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Compiled by DAVID WHARTON / Los Angeles Times