How Athletics Kenya duped Chinese firm into signing six-year contract

Kenya: Athletics Kenya duped an international sports consulting company into signing a deal with it as it re-negotiated another deal with its partner - Nike, The Standard can reveal.

And as soon as AK baited Nike, whose contract was nearing expiry with a better deal, AK terminated a six-year deal it had signed with a Chinese company which only lasted for 10 months, documents in our possession show.

Even after signing an agreement with Li-Ning (China) Sports Goods Ltd and receiving the $200,000 (about Sh18.38 million according to current exchange rates) signing fee, AK was in negotiations with Nike where $500,000 (Sh45.95 million) code-named honorarium was remitted to its accounts and from this, a refund to Li-Ning was done by AK.

Now Pamodzi Sports Consulting, which signed the deal with Li-Ning on behalf of AK after it was contracted by the sports body to look for sponsorship opportunities in Asia, is blaming AK for loss of millions of dollars in the deal.

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Pamodzi Sports Marketing Chief Executive Officer Papa Massata Diack while responding to an expose carried by The Standard on Sunday on the rot in AK said the company lost over $10 million (about Sh919 million) after AK unilaterally terminated the contract which was entered into in 2010.

"If there is one party that has lost in the mentioned transaction, it is Pamodzi who were duly mandated in March 2010 during the IAAF Council in Doha by Athletics Kenya President Isaiah Kiplagat to source for an equipment supplier, as they were close to terminating their agreement with their long standing partner, Nike," said Diack.

He said in 2010, AK gave Pamodzi Sports Consulting the exclusive mandate to look for sponsorship opportunities in Asia for six years beginning 2011 to 2016. Documents in our possession show that AK in a letter dated January 8, 2010, signed by Mr Kiplagat and marked "strictly confidential", Pamodzi was appointed the exclusive marketing agent.

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"AK hereby confirms that Pamodzi Sports Consulting has been duly mandated to secure an official clothing supplier or sponsor in the sporting goods category in the territories of the People's Republic of China, Japan, South Korea, Singapore and Malaysia for the period of 2011 to 2016," reads the letter. In the letter, AK gave a nod to Pamodzi to enter into negotiations on its behalf.

"This mandate is effective from date of its signature and expires on December 31, 2016. Pamodzi Sports Consulting is fully entitled to directly enter into negotiations with any potential sponsor or supplier, sign any legally binding agreement on our behalf and present it to AK General Secretary for review and approval by AK President," adds the letter.

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It is on the strength of this letter that Diack says they were able to sign a $10 million (about Sh919 million) deal with Li-Ning to supply sporting goods to AK for six years after the approval of Kiplagat and his team at AK.

"In three months, we were successful to find an agreement with Li-Ning for a deal over $10 million for six years - 2011 to 2016 and it was fully signed by both the AK President, General Secretary and Treasurer in July 2010," says Diack.

Documents in our possession show that AK in a letter to Diack dated August 2, 2010, confirmed the acceptance of Li-Ning.

"As per the mandate given to you on January 8, 2010 for the sponsorship of the sporting goods category, we hereby confirm our acceptance to the proposed agreement signed between Li-Ning and Pamodzi in July 2010," reads the letter signed by Kiplagat.

"Please find attached the invoice for the signing on fee of $200,000 and our bank account details in which LI-Ning or Oceans Marketing should make the transfer as per the terms of the agreement. Congratulations on your successful achievement and we are looking forward to a strong and genuine partnership with Li-Ning," adds Kiplagat in the letter.

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Public debate

Li-Ning wired the signing fee one month later, on September 3, 2010 through AK's dollar account number 1109163886 at Kenya Commercial Bank Ltd, Moi Avenue.

The whole amount was withdrawn six days later by David Okeyo, who was the Secretary General, according to bank transaction records in our possession.

But the deal was not to last long as, according to Diack, Athletics Kenya terminated it, making them to incur losses.

"Athletics Kenya decided to terminate the agreement unilaterally and a letter of apology was sent to Pamodzi on November 4, 2010," said Diack.

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The reasons for the termination of the contract by AK through its President raises eyebrows on the real intention of the deal in the first place. Kiplagat in the letter in our possession alludes to the fact that the deal had become public, necessitating termination and delaying the process.

"It has become extremely difficult for us to proceed with the Li-Ning agreement because of many factors which we cannot overcome as earlier anticipated. The matter appears to have gotten into the knowledge of quite a number of people including authorities in Kenya thus raising a lot of speculations and we feel the same should hold for a while," reads the letter signed by Kiplagat.

Kiplagat in the letter suggested to Diack that they delay the process till the expiry of Nike's contract in 2012.

"This is fair as this will give us time to approach the negotiations and eventual agreements in a more conducive atmosphere without exposing our interests to public debate," said Kiplagat. This, however, did not happen as AK signed a longer deal with Nike which expires in 2020.

"We never approached AK after November 2010, as we were told that they negotiated with Nike for a 10-year deal," said Diack.

A week later on November 12, Kiplagat wrote a letter to the KCB manager asking the bank to transfer $200,000 to Oceans Holdings Company Limited in Hong Kong. This was a refund to Li-Ning for the signing fee it had earlier paid.

"Kindly arrange to transfer $200,000 from Athletics Kenya Dollar account No 702003932 to the following address: Oceans Holdings Company Limited, Standard Chartered Bank Shop 113-117, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong, Account No: 580-1-009054-7, Swift Code: SCBLHKHHXXX," reads the letter by Kiplagat and Joseph Kinyua who was Treasurer then. It is, however, signed by Kiplagat alone.

The refund, the documents show, was from the $500,000 Nike had transferred to AK accounts on November 8, 2010. Diack said it was a complete breach of contract and Pamodzi could have taken Athletics Kenya to court to seek compensation for damages caused by the credibility loss it caused the company.

"I decided not to disgrace such an important member of the African athletics family and especially an IAAF Council member thus did not move to court. For now I have to swallow my pride as a true African not to embarrass my fellow Africans and a great country of African athletics but will never let my reputation be tarnished when my company lost money and credibility over this deal," said Diack in an email to The Standard.

Record statement

Diack regretted that The Standard on Sunday expose made them realise that they were used by AK to re-negotiate a deal with Nike.

"And if there are problems arising from that, the only persons to be blamed are AK officials," he said.

Detectives are investigating AK officials for suspect dealings during the transactions. Okeyo and Kinyua have already recorded statements. Kiplagat, was yet to record a statement by the time of going to press because he was sick.

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