How Athletics Kenya duped Chinese company into signing a six year contract then terminated 10 months later
SPORTS By Kiprotich Chepkoit | June 10th 2015
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 already signed with a Chinese company which only lasted for 10 months.
In documents in our possession, it shows a cunning body exploiting the other in disregard to ethics.
Even after signing an agreement with Li-Ning and remitting receiving USD200,000 signing fee, AK was engaged in negotiations with Nike where USD500,000 code-named honorarium was remitted to its accounts and from this, a refund to Li-Ning was done by AK and the remaining money were withdrawn in cash not to be traced.
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 accusing AK for loss of millions of dollars in the deal.
Pamodzi Sports Marketing CEO Papa Massata Diack while responding to an expose carried by the Standard on Sunday on the rot in the Kenya's athletics body said the company lost over USD10m after AK unilaterally terminated six year contract it had signed with it in 2010.
"If there is one party that has lost in mentioned transaction, it is Pamodzi who were duly mandated in March 2010 during the IAAF Council in Doha by Isaiah Kiplagat, AK President to source for an Equipment Supplier, as they were close to terminating their agreement with 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.
And in documents in possession by the Standard, it shows that AK in a letter dated January 8, 2010, signed by Kiplagat and marked "strictly confidential", Pamodzi was appointed exclusive marketing agent.
"We the Athletics Kenya (AK), hereby confirms that Pamodzi Sports Consulting is our exclusive marketing agent to look for sponsorship opportunities in Asia and has been duly mandated to secure a official clothing supplier/sponsor in Sporting goods category in the territories of People's Republic of China, Japan, South Korea, Singapore and Malaysia for the period of 2011 to 2016," reads the letter.
AK in the letter gave a nod to Pamodzi to enter into negotiations on its behalf.
"This mandate is effective from date of its signature and expires on 31st December 2016. Pamodzi Sports Consulting is fully entitled to directly enter into negotiations with any potential sponsor/supplier, sign any legal binding agreement on our behalf and present it to AK General Secretary for review and approval by AK President," adds the letter.
And it is by the strength of this letter that Diack says they were able to sign a deal with Li-Ning (China) Sports Goods Ltd for a deal of over USD10m 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 (China) Sports Goods Ltd for a deal over 10 million US Dollars 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 (China).
"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 (China) Sports Goods Ltd and Pamodzi Sports Consulting in July 2010," reads the letter signed by Kiplagat.
Kiplagat in the letter asks Pamodzi for the signing fee of USD200,000.
"Please find attached the invoice for the signing on fee of USD200,000 and our bank account details in which LI-Ning (China) Sports Goods Ltd/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," says Kiplagat in the letter.
Li-Ning in the documents wired the signing fee one month later on September 3, 2010 through AK's dollar account number 1109163886 in 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 transactions in our possession.
But the deal was not to last long as Diack said Athletics Kenya terminated causing them the losses.
"Athletics Kenya decided to terminate the agreement unilaterally and a letter of apology was sent to Pamodzi Sports Marketing on November 4, 2010," said Diack.
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 factors 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 10 years deal," said Diack.
A week later on November 12, Kiplagat wrote a letter to the manager KCB asking the bank to transfer USD200,000 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 USD200,000 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 Kinyua. It is however signed by Kiplagat alone.
The refund, the documents shows was from the USD500,000 Nike had transferred to the athletics body accounts on November 8, 2010.
Diack said it was a complete breach of contract and Pamodzi Sports Marketing could have taken Athletics Kenya to court to seek compensation for damages caused by the credibility it caused to the company.
"I decided not disgrace such an important member of African Athletics Family and especially an IAAF Council Member thus did not move to court but for now I have to swallow my pride as a truly 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.
Diack said it was unfortunate that with the Standard on Sunday expose, they have come to understand that they were used by AK to re-negotiate the agreement with NIKE.
"And if there are problems arising from that, the only persons to be blamed are AK Officials," he said.
Detectives are investigating the AK officials for suspect dealings during the transactions. So far, Okeyo and former treasurer John Kinyua and other officials have recorded statements. Kiplagat who was to record statement this week did not after investigators were informed he was not feeling well.
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