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Once-cash-strapped IOC turns Olympic rings to gold

SHARE Once-cash-strapped IOC turns Olympic rings to gold

LAUSANNE, Switzerland -- At the moment of its greatest peril, the International Olympic Committee is on the verge of finally seeing its financial dreams come true.

When the Sydney Games close next year, the IOC will enjoy its largest payday ever, an estimated $180 million tax-free from its cut of broadcast rights and royalties from the 2000 Games.Added to the IOC's share of worldwide marketing rights plus its take from the 1998 Nagano Games, the nonprofit organization will make an estimated $330 million in the four-year period since the 1996 Atlanta Olympics -- a far cry from the $5.1 million the IOC took in during the 1972-76 period.

This would eclipse by $100 million the IOC's record income for the period that ended with Atlanta, which alone generated nearly $120 million for the IOC despite a harrowing financial ride that nearly left 1996 Olympics organizers with a deficit.

The financial information, most of which has not been made public before, was provided to the Cox News Service by Olympics officials during interviews at IOC headquarters here in Lausanne.

The embattled IOC long has been reluctant to discuss its own finances but is under increasing pressure to become more open because of the embarrassing Salt Lake City bid scandal.

For two decades, IOC President Juan Antonio Samaranch, who inherited a nearly bankrupt organization when he assumed power in 1980, has placed Olympic finances among his most urgent priorities, always searching for new ways to generate huge sums of money by trading on the Olympic rings.

Much of the money is needed to stage the Games, which now cost cities upwards of $2 billion for the two-week event. But Samaranch also has been intent on using the money to enhance the prestige and power of the IOC.

A river of money

Olympics officials now acknowledge privately that at least some of the underlying cause of the Salt Lake crisis can be attributed to Samaranch's focus on finances. Indeed, until the current crisis erupted in December, the committee under his leadership failed to recognize the potential consequences of introducing so much money so quickly into an environment that was so unprepared to handle it.

Samaranch had done virtually nothing in response to the prospect that the IOC's 100 or so volunteer members -- many from poor, developing nations -- might be tempted by the fresh river of money, or that the practice of bidding cities spending so much money to secure the Games could lead to corruption.

In January, Dick Pound, the Canadian IOC member leading the inquiry into the scandal and the architect of the committee's financial revolution, acknowledged that the committee had been slow to react to the new reality.

"The economics of the Games changed so much from how much pain was a city willing to endure to host them to an economic benefit of $2 billion," he said. "We just hadn't caught up to that."

A profitable evolution

The numbers provided by the IOC trace the organization's 20-year evolution from a staff of 19 operating modestly out of the elegant old Chateau de Vidy on the banks of Lake Geneva to a thriving business with 100 workers in a modern office complex, complete with polished white marble walls and floors and a donated fleet of Mercedes-Benz company cars. Samaranch and the members aren't paid, but many of their expenses are covered either by the IOC or the dozen or so cities that at any given time are vying for summer and winter Games.

As the IOC gathers this week in Lausanne to confront the Salt Lake City crisis, the members are expected to get the news about the committee's sunny financial outlook.

Yet, their collective attention almost certainly will be diverted by a wrenching debate over expelling as many as six of their colleagues accused of accepting bribes from the Salt Lake committee that led the successful bid for the 2002 Winter Games.

They also will face demands for a wholesale restructuring of the host city selection process to reduce the opportunities for corruption and calls for revolutionary change to the IOC itself.

Not so triumphant

Consequently, what would have been triumphant news of Samaranch's victory in his long financial struggle will be lost in the sound and fury of the scandal.

The disclosures may raise new and thorny questions about the IOC's management of such vast sums and its status as a nonprofit organization that makes so much money from the commercial marketplace.

The reality of the committee's wealth also may increase the pressure to disclose even more, a level of openness that would be new to an organization uncomfortable with sharing its secrets.

IOC executives say the committee's reluctance to open its books has been grounded in a fear that the organization's success would be used against it by the other groups that compete for shares of the Olympic wealth -- the always-hungry sports federations and national Olympic committees.

Bob Helmick, a former IOC member from the United States and former member of the committee's executive board, said financial details have never even been shared freely among the committee's leadership.

"We never saw much of anything," Helmick said, who attributed the committee's penchant for secrecy in part to Samaranch's Old World style of keeping important information close to the vest.

That may no longer be possible. Last week, a key sponsor suggested that his company's decision to continue its support would be contingent on the IOC's becoming open and accountable.

Mattius Kleinart, a senior vice president at DaimlerChrysler, said he has made his company's desire for openness clear to the IOC. "We have said to the IOC that our continued support is conditional on you making a clear plan for creating complete transparency in your finances so everyone can see the money that goes in and the money that goes out," Kleinart told the Sydney Morning Herald.

Also prompted by the Salt Lake scandal, U.S. politicians are considering whether to strip the IOC of its special tax status that allows a U.S. sponsor to write off the entire cost of its sponsorship. The resulting blow to the Olympics would be tremendous, given that nine of the 11 top IOC corporate sponsors are based in the United States. Each pays about $10 million a year -- all of which is now tax deductible.

Money: root of evil?

The IOC has come a long way from the days leading up to the 1984 Los Angeles Games when the committee was nearly broke, a common condition back when the Games were essentially an amateur event whose leaders considered the idea of making money vulgar.

Avery Brundage, the American and longtime IOC president who retired in 1975, believed with nearly religious fervor in the gospel and purity of amateurism and danger of money.

In words that seem almost prophetic today, he once said, "The minute we handle money, even if we only distribute it, there will be trouble."

When Samaranch took office, he made building the IOC's financial profile a consuming priority. In those days, the Games were in such a disastrous state that the only serious bidder for the 1984 Games was Los Angeles.

Because the IOC was financially weak and unsophisticated, Peter Ueberroth, head of the L.A. organizing committee, dictated the terms of the business deals to the IOC. He then reinvented the Olympics as a marketing extravaganza, creating a surplus of more than $225 million.

At the close of the Games, Samaranch went to Ueberroth hat in hand asking for a share of the surplus to assist his struggling IOC.

Ueberroth said no. That memory has remained with Samaranch, who said nearly a decade later, "From Los Angeles we learned a little lesson."

Awash with liquidity

Nearly 20 years after his rise to power, Samaranch's quest for financial stability is nearing success. The IOC now is awash with liquidity.

Combined with its income from the 1994 Winter Games in Lillehammer and worldwide marketing rights for the four-year period, the IOC closed the Atlanta Olympics with revenues of more than $230 million and cash-on-hand of more than $121 million. The committee pays no taxes under a special status awarded by the Swiss government in 1981 and renewed last autumn before the Salt Lake crisis erupted.

The figures do not reflect the IOC-controlled Olympic Solidarity program, which provides money to national Olympic committees, particularly those in developing countries.

Funded entirely from a percentage of broadcast rights fees, the program is dispersing $120 million between 1996 and 2000. Officials estimate that Olympic Solidarity will have an estimated $200 million at its disposal after the Sydney Olympics.

IOC leaders privately have a goal of placing $100 million in savings to provide a measure of independence and to assure that the IOC would survive a catastrophe such as the cancellation of an Olympics. So far, the IOC has about $65 million stashed in its Olympic Foundation -- which is governed by the committee's executive board -- with every prospect of meeting its goal at the end of the Sydney Olympics.