ATR First: Olympic Boxing Federation Crisis Grows

(ATR) A letter from the auditing firm KPMG warned more than two months ago that Olympic boxing federation AIBA is "close to insolvency".

The Aug. 5 letter was sent to now-suspended president C.K. Wu and describes the perilous state of AIBA finances, the result of a $10 million loan from an Azerbaijan business. The money was to finance the US operations of the World Series of Boxing, a professional boxing circuit organized by AIBA under Wu.

Wu professes to Around the Rings that he has never seen the KPMG letter.

"I am very surprised to learn the existence of such a letter because I had no previous knowledge about it," he says. The letter indicates it was sent by registered mail to the AIBA headquarters in Lausanne.

The date of the letter is two weeks after a fractious meeting of the federation Executive Committee in Moscow July 24-25. Nearly all of the dozen and a half committee members present signed a statement that they were assuming control of AIBA. The EC members said they were unhappy with the explanations provided by Wu about the federation finances.

In the aftermath of the EC meeting, Wu refused to recognize the actions being taken to wrest control of AIBA, which he has led since 2006.

Wu also insisted in several interviews with Around the Rings during the past two months that the finances of the federation were in good shape and that concerns about insolvency were misplaced.

Wu has now been suspended by AIBA by order of the federation disciplinary commission earlier this month. Franco Falcinelli, the most senior VP, has been appointed interim president. Wu, who worked nearly every day at the Lausanne headquarters, has not been there in weeks, now back in his hometown of Taipei.

Executive Director William Louis-Marie resigned two weeks ago. He had been a key Wu loyalist.

Falcinelli and colleagues from the EC are now filling in at the headquarters, preparing for a meeting of their committee November 3-4 in Dubai. It’s the first meeting since the one held in Moscow in July. One that was to take place in Lausanne in September was canceled by Wu. That action helped trigger the AIBA Disciplinary Commission decision to suspend Wu

Among the discoveries made by Falcinelli as he took over the presidential office was the Aug. 5 letter from KPMG. This week Falcinelli circulated the two-page letter to the 205 national federations as well as other key members of the AIBA family.

The KPMG letter admonishes Wu for supplying "misleading" information about the financial review in the press release issued by AIBA after the Moscow EC meeting.

"Our presentation clearly emphasized that the Association is over-indebted as of 30 June 2017 and that the Executive Committee should inform the members of the Association accordingly," says the letter from KPMG.

The letter chastises Wu for failing to disclose "critical statements made by KPMG….which is not acceptable".

"We insist that AIBA obtained our prior written consent before using our name or making any reference to AIBA’s auditors in any future press releases."

The letter goes on to confirm KPMG’s concern for the solvency of the federation and requests additional information to be submitted by Aug. 31.

"With the current available information only, we would have to consider the Association to be insolvent," warns KPMG.

The auditors say they want confirmation that AIBA has disclosed its financial position to the national federations, "sound evidence of short-term measures taken or plan to restructure the Association's finances and to restore its funds".

The letter also says a "full analysis" of the circumstances of the $10 million loan from Azerbaijan is needed, including a cash flow projection of how the Federation will continue to operate "should this loan need to be repaid immediately".

Wu tells Around the Rings that he is "very surprised to learn the existence of such a letter because I had no previous knowledge about it."

In written comments to ATR, Wu reiterates his belief that he considers the $10 million a direct loan to a previous AIBA executive director who had absolute control over the money.

"For AIBA financial situation, I guarantee it is sound and healthy," writes Wu.

"With the current balance of more than CHF 5 million in its accounts, AIBA will expect more revenues to add the total amount to CHF nine point 5 million by the end of the year."

"AIBA is never close to "insolvency" as claimed in KPMG’s letter," Wu maintains. "In addition, the IOC will allocate to AIBA USD 17 million from the revenues broadcasting rights of the Tokyo 2020 Olympic Games."

That IOC money could be at risk for the Federation if the leadership crisis persists. A year ago the IOC put a halt to its next payments to AIBA as this controversy began brewing with the first reports about the loan and issues involving governance of the international federation.

Wu, 72, an IOC member in Chinese Taipei since 1988, may also find his status under question as a result of the controversy. The IOC Ethics Commission is said to have begun a file, but no word of any actions against Wu. His membership is not tied to his federation leadership, so technically he could step down as AIBA president without sacrificing his IOC membership.

But Wu does hold a seat on the IOC Executive Board as a representative of the Association of Summer Olympic International Federations. With his status as a federation president under assault, the situation becomes a delicate one for the Association, representing the 28 sports on the summer Olympic program. While Wu is the group's designate, he is actually elected by the full IOC membership which votes during the session.

While perhaps not as scandalous as the allegations lodged against ex-IOC member Carlos Nuzman over vote buying to secure the 2016 Olympics, the IOC can ill afford the tarnish of a governance struggle in a prominent Olympic sport.

ATR has been told that Wu is under pressure to take some sort of action from IOC President Thomas Bach and ASOIF President Francesco Ricci Bitti. The next meeting of the Executive Board is set for December in Lausanne. Most of the IOC membership will be in Lausanne in early November for a week of commission meetings, on some of which Wu holds a seat.

The AIBA Executive Committee meeting next week in Dubai will begin to sort out the financial and governance questions facing the federation. The agenda for the two day meeting is said to be lengthy. Suspended from office, Wu will not be permitted to attend.

An extraordinary general assembly is planned for January where Wu would have the chance to present his case prior to a confidence vote by the national federations. Wu is in the final year of his third term, the last allowed under AIBA statutes.

Reported by Ed Hula.