At his ongoing fraud trial, former football executive Canover Watson claimed that two controversial US$600,000 sponsorship payments to the Cayman Islands Football Association (CIFA) in 2013 were, in fact, loans from his own personal companies.
CIFA used the US$1.2 million to pay down a loan the association had with Fidelity Bank. That loan was ultimately personally guaranteed by Watson and his associate, CIFA President, Jeffrey Webb, who was also the president of regional football body CONCACAF at the time.
CIFA had presented the payments first as sponsorship and then as loans from football manufacturer Forward Sports in Pakistan and US travel company Cartan Global.
The football association’s auditors, Rankin Berkower, reported the payments as suspicious to the Anti-Corruption Commission after Cartan confirmed the payment but said it was a gift – and never intended to be a loan.
A representative for Forward Sports contacted by the auditors denied the company had made any payment to CIFA.
Alleged false invoices
The prosecution alleges that half of the funds were criminal proceeds from fake invoices issued to CONCACAF by Forward Sports International Management Inc, a Panama company that Watson controlled.
The invoices for $1.54 million ostensibly paid for football equipment for CONCACAF’s grassroots programme to support and promote the sport among disadvantaged youths in the region.
CONCACAF officials testified that none of the goods in the invoices were ever received.
Watson asserts the money was legitimate business income and points to email correspondence and shipping documents as proof that some of the goods were ordered, produced and shipped.
Panamanian joint venture
The other $600,000 payment, Watson said, came out of a profit share in a Panamanian joint venture between himself and iSportsMarketing LLC (ISM), a subsidiary of the US-based travel and event organiser Cartan Global, which itself belonged to the Elmore Sports Group.
Email correspondence presented to the court shows that while Cartan was in the process of negotiating a lucrative contract with CONCACAF to arrange the organisation’s congress, football tournaments and travel needs in late 2012, the company discussed with both Watson and CIFA executive Bruce Blake setting up a joint venture in the Cayman Islands.
According to a memorandum of understanding floated in the email correspondence, the proposed joint company ISM Global was to collaborate and pursue opportunities on selected projects with a target group of sporting organisations.
They included the Caribbean Football Union (CFU), CONCACAF, world football governing body FIFA and their affiliates.
The company was to be owned equally by ISM and Starfish Management, a Cayman company for which Watson told the court, he had lined up a nominee director and nominee shareholder to represent himself.
That company was to act as liaison and representation of ISM with “the target group” and provide technical and administrative support staff. Starfish was also to provide legal and tax advice and any other services as required.
In an email, Watson told Daniel Gamba, the vice president of business development, at Cartan Global, that CONCACAF was in the process of setting up a Cayman office and had reserved two units for ISM Global.
Emails between Gamba and Watson showed that Cartan was eager to be awarded the CONCACAF contract before concluding the joint venture with Watson.
The proposed arrangement was established six months later in May 2013 but using what Watson called a “more sophisticated” company structure in Panama.
It involved two companies: Cartan International Management Inc, 100%-owned by Green Day Foundation, a Panamanian foundation controlled solely by Watson; and Cartan International Inc, a company co-owned by ISM and Cartan International Management.
The jury was shown a financial statement produced by Gamba for ISM which highlighted that the company had generated gross revenue of US$13.9 million from CONCACAF in 2013, resulting in a gross profit of $1.8 million and a net profit of $792,000.
This profit was shared, Watson claimed, in the Panama partnership. However, an erroneously named “Cayman Islands Foundation Payment” of $600,000 was deducted from his profit share of $396,000, leaving his profit share balance at – $204,000 for the following year.
Asked whether his value to the partnership, amounting to almost US$400,000 in 2013 alone, was that he could bring in contracts from CONCACAF, as he did for Forward Sports, Watson said he had transferable business skills and contacts all over the football fraternity “and through those relationships I could assist them”.
“You also did have Jeffrey Webb in CONCACAF,” Crown counsel Eloise Marshall said, noting that all of the partnership’s business in 2013 had come from CONCACAF.
Watson said he provided advisory services, dealt and negotiated with some clients and set up meetings with CONCACAF and the CFU.
Sponsorship converted to loans
Watson told the court that Cartan had made the $600,000 sponsorship payment to CIFA at his request because of his personal business relationship with the group.
When CIFA’s auditors contacted the owner of Cartan Global, David Elmore, he confirmed the payment but denied it was a loan. Through his lawyer, he also denied the existence of any Panama entity belonging to his group, emails presented at the trial show.
Watson said, when he realised that Cartan Global docked the money from his profit share in the Panama joint venture, he decided to transform the sponsorship payment into a loan from Cartan International Management Inc, the Panamanian company he controlled.
At the same time, he had made the “business decision” to also convert the $600,000 payment made by his other Panama company Forward Sports International Management Inc into a loan.
Watson and Blake discussed the conversion with Webb in February 2014 at a meeting Blake denies he participated in.
The prosecution alleges Watson and Blake created and backdated fake loan agreements to disguise the payments as loans.
The loan agreements were then presented to the auditors. The documents form the basis of false accounting charges against Watson and Blake, who signed the loan agreements as general secretary of CIFA.
The other signature on the loans belonged to the same Panamanian nominee director, Irina Abrego de Espinosa, who worked for corporate services provider Asiaciti.
Watson admitted that, before sending the loan agreements to the auditors, he recreated the documents in the middle of the night and copied and pasted Blake’s and Espinosa’s signatures onto to loans, because he did not have access to the originals.
Watson said the loans were just one of many documents the auditors had needed, to finalise their audit of CIFA the following day.
Watson claimed he had the right to use Watson’s and Espinosa’s signatures, who had purportedly signed the originals earlier that year.
The Crown asserts no such original loan documents existed.
Convoluted business structure
Watson said he did not disclose his beneficial interest in Cartan’s multimillion dollar contract with CONCACAF to the organisation’s finance committee, of which he was a member, because there was no requirement to do so.
The Crown contends that Watson used a deliberately convoluted business structure for his Forward Sports and Cartan companies to hide his involvement in their activities.
Watson’s Green Day Foundation, which did not need to publicly disclose its beneficial owner, was the legal owner of the companies. And the use of nominees in all business activities was designed to avoid any public reference of Watson in relation to the businesses, it was claimed.
Watson said they were common and perfectly legal structures that he adopted on the advice of his attorneys.
He claimed that he initially used a nominee for a Forward Sports company in Cayman because the company he worked for as managing director, Admiral Administration, was in merger negotiations at the time.
As part of the due diligence carried out on the company’s senior executives, Watson said he had already submitted information on his company ownerships and amending that information with a new company would have just added “another layer of delay”.
Traffic Sports payment
Watson denied that the $600,000 payment from Forward Sports International Management to CIFA necessarily included money from the three allegedly false invoices as the company’s Panama bank account received other funds as well.
This included a $1.1 million payment in December 2013 from Traffic Sports, a sports marketing and TV rights company, which Watson claimed was for equipment sponsorship to assist football associations in the region.
The order of that equipment had been deferred, he maintained.
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