We need to tread lightly.
Both professional golf and the United States Senate face a precarious situation with the Saudi Public Investment Fund (PIF), the sovereign wealth fund for the Kingdom of Saudi Arabia.
The PIF bankrolls LIV Golf, the circuit that has plucked so many top players from the PGA Tour, which has, in turn, created an unprecedented schism within the sport.
Then, amidst all this division, in the spring of 2023, PGA Tour brass and the PIF settled on a ‘framework agreement,’ which shocked the world. However, that ultimately only settled lawsuits between the two sides.
But that deal raised eyebrows in Washington, so much so that both the Senate’s Permanent Subcommittee on Investigations (PSI) and the Department of Justice (DOJ) have launched subpoenas and investigations. The Senate Finance Committee is also investigating the PGA Tour’s status as a 501(c)(6) entity.
The PSI aims to unearth the PIF’s intentions related to its various business deals within the United States—including LIV Golf. The DOJ is investigating whether this deal violates antitrust law and if the Foreign Agent Registration Act (FARA) applies.
And yet, the PIF has repeatedly failed to comply with the U.S. Government. They have completely ignored requests and summonses, despite their business ventures falling within the realm of U.S. law.
Meanwhile, the deal between the PIF and the tour remains at a crossroads. Even more so that the PGA Tour partnered with the Strategic Sports Group (SSG)—the consortium of American professional sports owners committed to investing $3 billion into the tour.
Things could get even murkier between the PIF and the PGA Tour, thanks to an early February hearing in the nation’s capital with more developments set to follow.
Feb. 6, 2024, Hearing in Washington
The PSI invited leaders from four U.S.-based consulting firms—Boston Consulting Group (BCG), McKinsey & Company, M. Klein and Company, and Teneo—to testify before the Senate, focusing on the PIF’s investments in American businesses.
Interestingly, McKinsey & Company helped advise the PIF with “Project Wedge,” which laid out plans for an economically viable—and competitive—golf tour.
Their consulting efforts paid off as LIV Golf has completely changed the landscape of professional golf. It also forced the PGA Tour to change how it operates.
Yet, that tidbit pales in comparison to the overarching takeaway from this hearing.
The Saudi Arabian Kingdom told these companies that their employees could face financial penalties or prison time for cooperating with U.S. Senate subpoenas.
The PIF filed an injunction against these four firms in Saudi court, simply for responding to an inquiry from the Senate’s PSI. The injunction also arose because the Kingdom views its consultants as government employees and does not want their ‘employees’ to cooperate with U.S. law.
“The PIF has been explicit that the disclosure of information relating to BCG’s work for PIF is a violation of Saudi law, which ‘imposes criminal penalties for disclosing or disseminating such information including imprisonment for a maximum of 20 years, a fine not exceeding one million riyals, or both,’” said Rich Lesser, the Chairman of the BCG, in his opening statement.
“As a firm committed to complying with the laws of every country we operate, BCG wants nothing more than to satisfy the Subcommittee’s inquiries. Unfortunately, we are in an unprecedented situation, hamstrung in our ability to do so.”
Considering the history of the Saudi Arabian Kingdom and how it restricts freedom and destroys any dissent, the shared anxiety among these firms is warranted.
The dilemma is that PIF’s investments in American companies fall under U.S. jurisdiction. Therefore, the U.S. Senate has the authority to investigate, even though the Saudi Government does not want to comply.
But why would they fail to cooperate?
Does the Saudi PIF have something to hide?
Saudi Crown Prince Mohammed bin Salman has absolute power within his Kingdom and does not want to relinquish it to a foreign institution—in this case, the U.S. Senate. The Saudi Government likely feels this subpoena could expose more skeletons in its closet, too.
“I really think this is a strategic blunder for them,” said Ben Freeman, the Director of the Democratizing Foreign Policy Program at the Quincy Institute, in an exclusive interview with Playing Through.
“If you comply with this inquiry, you adhere to the subpoenas, you provide the documents and everything… I don’t think people would care as much. Nor would they have as many questions as they do now. The fact that they want to obfuscate so much, it really, really looks like they have something to hide now.”
As the world knows, this Government controls all media and restricts any freedoms within its press and among its citizens. Plus, the Saudi Kingdom has a terrible history of human rights abuses, has subjugated women, facilitated a civil war in Yemen, and murdered Washington Post reporter Jamal Khashoggi.
Oh, and 15 of the 19 hijackers who killed thousands of innocent American lives on Sept. 11, 2001, were Saudi citizens. Even further, the Biden Administration recently released de-classified documents that indicate Saudi government employees aided the attackers in the months and years leading up to that horrific day.
“The real danger here that I don’t think enough folks are grasping yet, is the precedent that this could set,” Freeman added.
“If the United States sits right now idly for a while and lets the sovereign wealth fund of a foreign government dictate congressional investigation and congressional oversight, if we let this happen, and there are no repercussions for the PIF because of this, then this becomes a blueprint for authoritarian regimes just to come in and just walk all over U.S. law…
“All they have to say is that anybody who’s working for you can say they’re employees of our government because our government employees don’t have to comply with any of your laws in the U.S. They’re going to be completely immune from it.”
The Saudi PIF has acted as if they are untouchable, or dare I say, above U.S. law.
Indeed, the U.S. Senate will not want a foreign sovereign wealth fund to embarrass its power on the global stage.
Hence, this bi-partisan probe is marching on.
Sen. Richard Blumenthal (D-CT) and Sen. Ron Johnson (R-WI) have championed this effort since the announcement of the framework agreement in June 2023.
“Any foreign entity wishing to do business in the U.S. must comply with U.S. law and be responsive to Congressional subpoenas,” Johnson said during the hearing.
“That is why I chose to join Chairman Blumenthal on follow-up letters to the consultants calling for full compliance with the Subcommittee’s subpoenas… I am supportive of preserving PSI’s oversight prerogatives and responsibilities.”
Concerns from the Senate arose because a foreign government has never invested substantial capital into an American sports league, let alone ‘sportswash,’ which Bin Salman has said he will continue to do.
“Senators are starting to pay attention to the massive problem of Saudi foreign influence that we have in this country,” 9/11 Justice President Brett Eagleson told Playing Through.
“If you are one of these consultants, a lobbying firm, a banking firm, or an APR firm engaged in business with Saudi Arabia, you need to think long and hard about whether or not you want to continue to have that client…
“That goes for the LIV golfers, too. This should be a strong signal that if you disagree with your employer or the person writing you the check, they’re threatening to put you in jail.”
But money talks.
The PIF reportedly has over $700 billion in assets, allowing it to invest in multiple Fortune 500 companies, Newcastle United in the English Premier League, LIV Golf, F1 racing and now, possibly, the sport of tennis.
At this rate, investments in an NBA or NFL team could soon follow.
Still, Sen. Blumenthal expressed agitation and frustration during this hearing, sensing that neither the PIF nor these four consulting firms duly complied.
Heck, one of the enduring spectacles was Blumenthal holding up a set of entirely redacted documents. Other evidence provided for this hearing included mundane emails and calendar invites—a far cry from the proof requested.
“The position that I’ve heard expressed today is essentially that you will comply with the subpoena but only and solely so far as Saudi Arabia allows you to do so, which is not compliance with this subpoena,” Blumenthal said.
“It’s simply staggering to me that American companies are not only willing to accept this claim, allowing the Saudi government to determine what is permitted to provide this subcommittee.”
As such, Blumenthal, sensing the undermining of his institution by the Saudi Government, called for his fellow lawmakers to strengthen the Foreign Agent Registration Act (FARA).
Strengthening FARA
Congress signed FARA into law in 1938 to promote transparency of foreign agents. At that time, Nazi Germany was becoming a global power, and Congress wanted German individuals and entities working in the United States to show their true objectives and denounce Nazi propaganda.
But FARA has become outdated thanks to globalization, technology, and social media. It has had some tweaks since it was first introduced, but nothing substantial.
“FARA is woefully unequipped for the technological era we’re in,” Freeman explained.
“The administrative language is vague at best, and the DOJ has not done an adequate job of filling in the blanks there.”
FARA requires individuals and organizations representing a foreign principal to file important information such as income, money, spending, oral agreements, and the nature of its business to the United States.
According to the Congressional Research Service, foreign principals include:
(1) A government of a foreign country and foreign political party;
(2) A person outside of the United States, unless it is established that such person is an individual and a citizen and domiciled within the United States, or is organized under or created by the law of the United States… and has its principal place of business within the United States;
(3) A partnership, association, corporation, organization, or other combination of persons organized under the law or having its principal place of business in a foreign country.
Surely, this would apply to the Saudi PIF, a foreign sovereign wealth fund that has invested billions of dollars into the American economy.
Yet, last June, LIV Golf insisted that they are advocating for golf, not for Saudi Arabian political interests, and therefore feels it does not need to file as a foreign principal or agent.
“I think we need language in the statute to clear this up to know when the statute applies and when it doesn’t,” Freeman explained.
“This sportswashing case raises a whole other element of concern. When do sporting events or teams owned by a foreign owner trigger FARA? And does it trigger FARA? Should that be a FARA issue?”
If LIV Golf consisted of purely foreign investors looking to make money as a private business within the United States, it would fall under the so-called “commercial exemption” within FARA.
Should a foreign business have this exemption, it would need to register through the Lobbying Disclosure Act (LDA) instead of FARA. LDA is aimed at providing transparency for lobbying practices within Congress.
But obviously, the benefactors of LIV Golf are not private businessmen.
“Where it gets tricky is we are talking about a foreign government financing these operations,” Freeman further explained.
“Because of who is in charge of the Saudi Kingdom, Bin Salman can veto anything or make anything happen at the top, and the de facto ruler of a foreign government has a yes or no vote on the activities.”
The DOJ enforces FARA against foreign government actors much more than private businesses.
And with the Saudi Government blatantly disregarding the PSI’s subpoena, as well as ignoring FARA, the scrutiny directed towards the PIF is warranted.
Meanwhile, this past year, Congress re-introduced the Foreign Agents Disclosure and Enhancement Act, which would essentially strengthen FARA, per Wiley Rein LLP, a transactional law firm based in Washington. This bill would provide the DOJ the tools it needs to investigate violaters of the law further. It would also increase the penalties against foreign actors should they fail to comply.
Plus, the Foreign Agents Disclosure and Enhancement Act bill has received bi-partisan support, paving the way for the law to be strengthened at some point in 2024.
Ramifications Regarding LIV Golf
With LIV Golf being owned and operated by the Saudi Public Investment, would the Saudi Kingdom view them as employees of the Government?
It’s an authoritative regime that craves absolute power, so it’s not a far-fetched question to ponder and be concerned about. They have already shown the propensity for that line of thinking.
These golfers have been adequately paid to join its upstart golf league to play worldwide, including in Saudi Arabia, which has dedicated millions of dollars to golf tourism within its country.
Yes, LIV golfers have not consulted the PIF like BCG, McKinsey, M. Klein Company, and Teneo have. But if the Saudi Government views these golfers like they do their consultants—as employees—then they, too, could find themselves in a precarious position, similar to the one the executives of these firms are in now.
Especially considering that it looks like FARA will be strengthened, the U.S. Senate and the DOJ will want more answers and evidence instead of simple calendar invites.
“Perhaps that strengthening includes calling on all these LIV golfers to register as agents for the Kingdom of Saudi Arabia,” Eagleson said.
“And what will happen when the Kingdom tells them not to register? Are they going to threaten to put the golfers in jail?”
What happens if Phil Mickelson has to file as a foreign agent?
After all, without Mickelson’s efforts throughout the spring of 2022, LIV Golf likely would not exist. Without him, the idea of LIV likely folds like Greg Norman’s vision of a global golf tour in the 1990s.
Nevertheless, Mickelson—and other golfers—registering as foreign agents could become a reality in the coming months.
If that were to happen, who would Mickelson listen to, as an American citizen?
Would the Saudi Government threaten him for complying with Congress, just as they have with these four U.S. consulting firms?
If he listened to the Saudis, then he would be in contempt of U.S. law and violate FARA. He would find himself in a completely strained position.
The Saudi Kingdom has imprisoned dissidents before and will silence critics again, so what would stop the Kingdom from this?
Yes, understandably, at this stage, these are all just possibilities. But these are very real possibilities, now that Congress is clamping down on FARA.
Just think, in February 2023, the golfing world was celebrating Jon Rahm winning on the West Coast on the PGA Tour while LIV Golf launched its first full season.
Five months after that, Jimmy Dunne and Ed Herlihy, two PGA Tour policy board members, found themselves in a U.S. Senate hearing explaining how the PGA’s deal with the PIF came to be.
And now, barely eight months later, the Saudi Kingdom has threatened its clients with jail time in Saudi Arabia simply for complying with U.S. law.
Knowing how quickly tensions have escalated and how fragile global politics are at the moment, we nervously have to consider these possibilities and ask ourselves, what could happen next?
Jack Milko is a golf staff writer for SB Nation’s Playing Through. Be sure to check out @_PlayingThrough for more golf coverage. You can follow him on Twitter @jack_milko as well.
By Isabel Baldwin For Dailymail.Com and Reuters
22:12 07 Feb 2024, updated 22:15 07 Feb 2024
- The US senate is carrying out a probe into the PGA Tour and LIV Golf’s merger
- Bankers and consultants who advise PIF have testified that they face ‘penalties’
- DailyMail.com provides all the latest international sports news
Saudi Arabia has reportedly threatened to imprison bankers and consultants it works with if they cooperate with the US Senate‘s probe into the proposed merger of the PGA Tour and LIV Golf.
As negotiations between the Tour and LIV’s financiers, Saudi Arabia’s Public Investment Fund, continue, the US senate committee is continuing to carry out its investigation into the merger of golf’s two previously warring factions.
However, as the committee carries out its probe, bankers and consultants who advise PIF have testified that they face ‘criminal and financial penalties’ if they cooperate.
According to a report by Bloomberg News, the PIF sued its advisers in a Saudi court last November preventing them from sharing information with the US Senate committee on homeland security and governmental affairs.
In Washington this week, banker Michael Klein and representatives of consulting firms McKinsey, Boston Consulting Group (BCG) and Teneo Strategy faced lawmakers and pled their case for not cooperating.
‘The PIF has been explicit that the disclosure of information relating to BCG’s work for PIF is a violation of Saudi law, which “imposes criminal penalties for disclosing or disseminating such information including imprisonment for a maximum of 20 years,”’ BCG’s Rich Lesser said in prepared testimony. ‘We risk criminal and financial penalties for the firm and for individuals working or living in Saudi Arabia.’
That includes 20-year prison sentences for executives and staff working in Saudi Arabia, Klein said.
‘This represents aberrant behavior for a client, and, quite frankly, for the PIF, who has historically been a client that has operated with best practices of governance with us,’ Klein said at a hearing.
The executives added that they are fighting the PIF’s lawsuit, Bloomberg reported. They claimed they are attempting to reduce the number of redactions in their documents submitted to the Senate panel. Most of BCG’s 91-page document submission, for example, was calendar invitations with every attendee’s name redacted.
Last June the PGA Tour announced the ‘framework agreement’ for a shock merger with the PIF, which funds new rival league LIV Golf, as well as with the DP World Tour.
While the PGA Tour has taken on a news investment partner made up of US-based sports ownership groups, called Strategic Sports Group, it is said to still be in negotiations with the PIF.
It remains to be seen if the PGA merging with its only rival will be allowed under federal antitrust law.
The consulting groups’ hesitance to work with the panel upset Sen. Richard Blumenthal (D-Conn.).
‘It’s simply staggering to me that American companies are not only willing to accept this claim, allowing the Saudi government to determine what is permitted to provide this subcommittee — but also that they would use it to justify their refusal to comply with a duly issued congressional subpoena,’ Blumenthal said.
In a statement to Bloomberg, the PIF said it was making ‘significant efforts to facilitate the production of requested information from our advisers consistent with the laws of Saudi Arabia, which should be recognized like those of any other country.’
A congressional committee led by Sen. Blumenthal last week sent a letter to Al-Rumayyan asking that he cooperate in allowing the committee to subpoena four US consulting firms working for PIF.
The US lawmakers have been vocal in their opposition to LIV Golf and the PGA Tour opened considerations to US investors and insisted that PIF would only be a minority investor in an attempt to ease the political resistance.
Last week, the PGA Tour closed on an investment of up to $3billion with Strategic Sports Group, a consortium led by Fenway Sports Group – the owners of Premier League club Liverpool and MLB franchise Boston Red Sox.
Negotiations between the PGA Tour and Public Investment Fund are ongoing after the initial December 31 deadline was missed and LIV Golf’s financiers were not included as part of the transaction with SSG.
But the Tour’s memo confirmed that a future co-investment from the Saudi Arabian fund was still on the table, subject to regulatory approval.
The tour said it was making progress in its negotiations with the Saudi national wealth fund on future investments and an ultimate agreement. Under the original framework agreement, Al-Rumayyan, the PIF governor, was to be chairman of PGA Tour Enterprises. It was not clear how the partnership with SSG affects that.
The tour said SSG has agreed to any investment by PIF, subject to the necessary review and approval.
Rory McIlroy has revealed he had “a frank discussion” with Jordan Spieth after the American declared the PGA Tour no longer needed to strike a deal with the Saudis.
Spieth’s comments in the wake of a £2.4 billion investment in the Tour by a US consortium led by the owners of Liverpool disappointed McIlroy so much that he quit a group chat featuring the circuit’s best players.
Once LIV’s biggest critic, McIlroy, who three months ago resigned from the Tour’s policy board after “feeling like I was just banging my head against the wall” has recently been adamant that without the £700 billion Public Investment Fund as a partner, there will be no unity in the professional male game.
And Spieth’s flippant dismissal clearly worried the world No 2 in this regard. “The short answer is we don’t have to [bring them on board],” Spieth said, when asked about the necessity to strike peace with PIF.
That does not sit well with McIlroy, as he explained to Sports Illustrated. “Having PIF as your partner as opposed to not having them as your partner, I don’t think is an option for the game of golf,” McIlroy said. “I think they’re committed to investing in golf and in the wider world of sport and if you can get them to invest their money the right way to unify the game of golf.”
Negotiations are ongoing between the Tour and PIF, although after last Tuesday’s announcement of the partnership with the Strategic Sports Group, the ball is plainly in the Saudis’ court.
“If I were PIF hearing that, it wouldn’t have made me too happy”
Yasir Al-Rumayyan, the governor of PIF, has assured the LIV golfers the breakaway league will continue and could well decide to abandon the “framework agreement” signed alongside the Tour and the DP World Tour last summer.
Having spent more than £500 million in the last month on new captures – including Ryder Cup heroes Jon Rahm and Tyrrell Hatton – Al-Rumayyan has signalled his intention to keep strengthening the LIV roster and if he does choose to keep going it alone, the sport will obviously remain fractured.
McIlroy believes that Spieth’s statements risk forcing Al-Rumayyan’s hand. “I talked to him [Spieth] about his comments, and we had a pretty frank discussion,” McIlroy said. “My thing was if I’m the original investor that thought that they were going to get this deal done back in July, and I’m hearing a board member say that, you know, we don’t really need them, now, how are they going to think about that, what are they gonna feel about that?
“They are still sitting out there with hundreds of billions of dollars, if not trillions, that they’re gonna pour it into sport, and I know what Jordan was saying… but if I were PIF and I was hearing that, the day after doing this SSG deal, it wouldn’t have made me too happy.”