OWN GOAL: Donna Shalala fighting personal lawsuit over US Soccer independent Director job
Former Clinton Administration HHS Secretary Donna Shalala became a high-powered board member in numerous publicly traded companies and organizations.
Shalala’s role as an independent director of the US Soccer Federation (USSF) from 2008–2017 landed her in personally the middle of a New York officers and directors lawsuit for breach of fiduciary duty (embedded below), self-dealing and failure to manage conflicts of interest, as well as a likely witness in a multi-million dollar federal anti-trust action filed earlier this year. That case is currently in discovery.
It is a fight over the future direction in America of the world’s most popular sport.
If Shalala hadn’t posted this celebratory Tweet about North America landing the World Cup in 2026, I might never have investigated the swirling legal controversies surrounding her nearly ten year tenure at US Soccer Federation.
“No other soccer federation has independent directors,” says UCLA Law Professor Steve Bank, “which makes their role unique.”
Professor Bank is an expert in taxation, and also soccer law. He discussed both cases against US Soccer with a minute grasp of the details of the story, and also expert knowledge about the laws governing each case, as well the unusual governance structure of the US Soccer Federation.
Corporations take extensive precautions to mitigate conflicting financial interests, but Shalala chose to re-write USSF’s rules, present them and adopt them on the same day of a crucial decision against one of America’s top three soccer leagues.
Donna Shalala’s decision last year as an independent director caused the national eight team Division II North American Soccer League (NASL) to cancel their 2018 season, including a franchise playing in her hometown’s Florida International University since 2015, while Miami residents still wait for the launch of a much hyped MLS franchise owned by soccer legend, David Beckham in which she became personally involved.
Shalala’s main role with the US Soccer Federation was to evaluate and mitigate conflicts of interest in business dealings with Major League Soccer, but instead, she tried very publicly to get into business with the league.
A tangled web of private interest from MLS and US Soccer decisions led to the NASL filing a federal anti-trust lawsuit last year.
The soccer league’s federal complaint alleges that US Soccer and MLS colluded to determine winners and losers in the lower division leagues, and also using the powers delegated to the USSF from the world governing body FIFA to keep the NASL from ever attaining Division I status.
Donna Shalala became a personal defendant in an ensuing New York Supreme Court officers and directors liability lawsuit against the US Soccer Board members individually after the voted to remove official sanction from the NASL as a Division II league.
At the same time, USSF encouraged a Board Member from the NASL to switch leagues into the MLS and also awarded Division II approval — with lenient conditions — to the United Soccer League.
The United Soccer League is a partner of MLS, and Sports Illustrated reports that nearly 2/3rds of the league was not compliant with the same standards that US Soccer revoked the NASL’s sanction for failing to meet.
The NASL alleges that the driving force behind the US Soccer decisions is an unusual TV deal that lets a private, for-profit entity controlled by MLS, to monetize the MLS soccer league.
The league and the federation bundle their national television rights, delegating the sales work exclusively to a company called Soccer United Marketing (SUM).
The US Women’s team investigated SUM when they filed an EEOC complaint and lawsuit over a gender based bonus system that paid the world champion ladies less than the men’s team, who embarrassingly failed to qualify for this year’s World Cup.
Even the US Senate wants to know what’s in the SUM contract and they demanded financial information about US Soccer’s TV deals on behalf of the fight for equal pay for the Women’s team, but the private arrangements are still a mystery.
Soccer United Marketing is a private venture controlled by MLS Commissioner Don Garber which sells the combined television rights giving the preferences of its members considerable weight.
“The North American Soccer League’s strongest case is going to be against breach of fiduciary or duty of loyalty or prohibitions against self-dealing,” Professor Bank explained about the grounds of the case which allow the league to sue US Soccer directors, like Donna Shalala, personally, because the NASL is a member of the federation.
“The NASL argues that the conflict of interest generated by SUM was not properly managed by the Board of USSF as it should have been,” says Banks, “one alternative could’ve been not dealing with a MLS-affiliated entity, or putting the TV deal out to bid.”
Shalala is one of fifteen defendants in the case, including the head of Major League Soccer Don Garber and the past-President of US Soccer Sanil K. Gulati.
But she will face maximum scrutiny because her job as an independent Director was specifically to serve as a safeguard against self-dealing and conflicting financial interests. It cannot help that US Soccer’s president was allowed to moonlight, holding a job with New England Revolution MLS team owner (and NFL Patriots owner) the Kraft Group through 2013, under her watch. In this case, it also means to make sure those guiding US Soccer Federation consider the interests of growing the sport of soccer for all stakeholders.
“A self-dealing or conflict of interest isn’t a red light for a deal. You can get outside experts like an investment banker to give you a fairness opinion or hire a disinterested independent director, in the sense that they have no MLS connections,” said Professor Bank in his steady, rapid-fire manner:
“It’s one way to “clean the taint” and make sure that it’s still a good deal, regardless of the USSF’s conflicts or involvement by the MLS.”
But Donna Shalala was anything but a dispassionate, disinterested party seeking investment bankers opinions to alleviate conflicts of interest.
Instead, she entered into a series of high-profile public meetings to lobby top public officials in her adopted hometown of Miami, in order to prop up David Beckham’s high-profile, but at the time flailing MLS franchise bid.
She even used her primary employment as school President to offer University of Miami’s school colors to the MLS franchise, in her desperate bid make the deal happen, quickly.
The appearance of conflict was all over her dealings with MLS in her role leading a non-profit University and on the board of the US Soccer Federation in a role where she should’ve been keeping the for-profit soccer league’s interests independently monitored, not closely discussed in a deal of her own.
Donna Shalala’s emergency soccer lobbying mania in Miami
Donna Shalala signed a 25-year lease for the UM football team in 2008, which all reported stories called “cost prohibitive” to exit, rendering the chances of them leaving their Hard Rock Stadium tenancy slim at the outset of discussions.
That obstacle didn’t stop Donna Shalala from holding a very high profile series of business meetings in 2015 with MLS Commissioner Don Garber, and Miami franchisee and David Beckham in the month before she left her role as President of the University of Miami (UM) on June 1st, 2015 to become a professor emeritus.
“I would love to do something before I leave,” she told Tim Reynolds of the Associated Press on April 30th, 2015.
“I’m not sure I’m going to be able to,“ Shalala said, “but I’m putting in everybody’s head that we’ve got to figure this one out.”
Three weeks later, Shalala used her local clout as UM President to convene meetings between MLS’ Garber, Beckham and along with the Miami-Dade County Mayor Carlos Gimenez and Tomas Regalado, Mayor of the City of Miami.
The two men happen to have a long running political grudge, so engaging both couldn’t have been easy.
The Miami Herald’s Michelle Kaufman wrote a story entitled, “David Beckham, Donna Shalala to discuss partnering on football-soccer stadium” on May 21st, 2015.
On May 22nd, 2015 the Miami Herald’s Doug Hanks reported about Shalala’s sudden push to secure a University of Miami football stadium on City of Miami property next to the county’s Marlins Park.
He wrote a story entitled, “Gimenez and Regalado embrace UM joining Beckham in stadium”:
Gimenez and Regalado said they both spoke with University of Miami President Donna Shalala about the potential for a soccer-and-football stadium on Thursday. Gimenez headed to UM Friday afternoon to meet with Beckham, Claure and fellow partner Simon Fuller, and Major League Soccer Commissioner Don Garber.
The meeting followed a session with Beckham’s team and Shalala as she winds down her tenure as UM president before taking over the Clinton Foundation in New York.
The timing of the visit by Beckham, which generated a media frenzy, brought some wrinkles. Shalala only has one more week on the job. And while UM never held the kind of high-profile meeting scheduled for Friday, last year there was about the school’s interest in a Beckham stadium allowing UM football to move to downtown Miami.
Beckham’s bids for a downtown waterfront location failed, and now a stadium next to Marlins Park is considered the preferred choice by Beckham’s group and the university. Much of the land by Marlins Park is controlled by Miami, but Regalado was not on Beckham’s itinerary.
A city official had said the soccer star’s organization had not been in touch. Mayor Regalado said Shalala met with him at City Hall on Thursday, and that a university official put him on the phone with Claure and Garber on Friday afternoon. “They said it was a very rushed meeting,” Regalado said.
Five days after the meetings, the Department of Justice announced the first arrests in an international racketeering scheme based in Miami involving CONCACAF — US Soccer’s regional sanctioning body — and the World Cup and television rights schemes FIFA used to enrich global executives and Directors.
Regardless, Donna Shalala’s rushed lobbying of the two Mayors, led to rapid progress.
In just under two months, Donna Shalala’s emergency soccer stadium talks — which explicitly involved co-branding the Beckham MLS franchise with the University of Miami’s trademark orange-and-green colors — appeared to bear fruit for the professional soccer league.
Miami’s Mayor Regalado and MLS held a press conference at City Hall to announce a deal for the soccer stadium site on Friday afternoon, July 17th, 2015.
Experienced local pundits were skeptical that UM would play in a 30,000 seat stadium. The Sun Sentinel’s David Hyde wrote:
University of Miami football allegedly even gets an option to move closer to campus and possibly to stadium-share its orange-and-green colors with the new soccer team, if it wants to take that lifeline.
Pardon the overuse of “allegedly” in the writing, but when it comes to Miami politicians and sports deals it’s the necessary immunization toward how the deal can change. And this one already might be.
Hyde’s apprehension would prove prophetic, the MLS deal to build a stadium on the City of Miami’s land crumbled, replaced by a deal to build on a site about one mile east.
Non-profits typically enjoy exemptions from lobbying laws, but that’s from paying the fees, and they’re still required to register appropriately with local authorities.
Shalala’s hard work to bring together two of Miami’s top elected officials and the MLS to cut a deal doesn’t seem to align with any mission of the University.
It does seem highly correlated with her role on the USSF board, and the increased prestige and TV revenues which a Miami franchise would supply to Major League Soccer.
Donna Shalala changed US Soccer’s conflicts policy at a key moment
US Soccer Federation minutes of meetings don’t show that Shalala took any steps whatsoever towards risk management before December 2016.
That was Donna Shalala’s primary job as an independent Director of USSF.
Shalala was named to the Board in Los Angeles during the June 15th, 2008 meeting.
A review of ten years worth of US Soccer’s meeting minutes and teleconference records yielded one intriguing finding.
Until December 2016, Shalala’s sole personal mention in the minutes consisted of attendance matters and in one early 2010 New Orleans meeting, delivering premature congratulations the 2010 American World Cup bid team
They ultimately lost to out to both this year’s World Cup to Russia and 2022’s event to Qatar.
Then, during the December 6th, 2016 meeting in New York City, Shalala was noted in the minutes having “updated the Board on the Risk, Audit and Compliance Committee’s meeting with the U.S. Soccer auditors.”
It was more than eighteen months after the FIFA scandal over the same mix of non-profit service and huge dollar tv deals when she took action on US Soccer’s board over the federation’s conflicts of interest policy.
In a June 8th meeting last year held in Denver, Donna Shalala “updated the Board on the proposed revision the conflict of interest policy. She noted that the proposal needed revision before it could be presented to the Board.” (emphasis by author) By then, the minutes indicate US Soccer’s president was looking for a new independent director, most likely as her replacement.
By September 1st, 2017 while Donna Shalala’s term as independent director drew to a close, she undertook a major action at the US Soccer Board Meeting in Jersey City, Jersey when she, “updated the Board on the revised Conflicts of Interest Policy approve by the Risk, Audit and Compliance Committee. There were a couple of minor clean up amendments to the policy as approved by the Committee. It was MOVED to adopt the Conflicts of Interest Policy as amended. The motion PASSED.”
Shalala finished a new conflicts of interest policy, on the first day it was presented to the board for a vote, it was adopted.
Professor Banks pointed out that Shalala’s new conflict policy document is still not shared publicly.
On the very day that the USSF adopted a new conflicts policy, that’s when the Board decided to remove their sanction from the NASL, leaving the league in disarray.
“The NASL argues that the conflict of interest generated by SUM was not properly managed by the Board of USSF,” says Professor Bank “one solution of which could’ve been not dealing with a MLS-affiliated entity or putting it out to bid.”
“But the USSF recused the interested directors, so Don Garber didn’t vote on it.” says Professor Bank about the penultimate vote to summarily end a six-year-old Division II soccer league, without appeal. “The Board’s argument is that we brought in independent directors and recused those who are interested even in a technical way, like Carlos Bocanegra. The NASL disagrees.”
Professor Bank says that “The NASL argues that none of that was enough because the MLS had an overwhelming influence over the other directors, but it’s hard to win a case on the innuendo of influence.”
“It’s better to have to have something where members feel they have no other choice, then you have a better case,” Bank says, and he indicated that league’s case will hinge on one key legal factor, “Judges like to defer to business decisions when a conflict of interest is properly managed, but they won’t if it is not.”
Logically, it seems very difficult, if not impossible to manage business conflicts of interest properly, when a major vote is taken on the very same day that the Board of Directors approves a new conflict policy, on the first day it has been presented.
That is precisely what Donna Shalala engineered as the head of US Soccer’s Compliance Committee.
Arguments on US Soccer’s motion to dismiss the case against Shalala and the other Directors were just heard last week, but judge Andrea Masley hasn’t ruled if the case can proceed yet.
Conclusion
Donna Shalala is currently running for Congress in Florida’s 27th district covering Miami with the slogan “ready from day one.”
The emerging string of serious conflicts of interest belie her readiness to perform the high-paying white collar Board of Directors jobs she worked for years.
Donna Shalala presided over the US Soccer Federation during a time period where championship winning women were given unequal pay based on their gender, and they had to threaten a very high profile strike just to get closer to pay equality. On top of low pay, the USSF historically doesn’t mind sending the women’s team out to substandard facilities either.
US Soccer fans and media have grown deeply dissatisfied with the direction of the sport in America, which a Quartz columnist complained that the rot in the USSF is deep and “leadership of US Soccer is deeply entrenched and highly allergic to criticism.”
American soccer fans are justly upset about the men’s team missing this year’s World Cup — a sad fate 2006 champion Italy is also enduring this year — most observers agree that the problems holding back the world’s most popular sport from US audiences go far deeper than the performance on the field.
Donna Shalala also served on the Board of NYSE-listed companies like media conglomerate Gannett from 2001–2011, simultaneously as a Director in and also as a Director of NYSE-listed heath insurer UnitedHealth Group from 2001 until recently, and on the Board of homebuilder Lennar from 2001–2011 before resigning citing a conflict of interest.
Shalala is facing another personal lawsuit in her former role as a UnitedHealth Group Director and head of their Compliance Committee, after the company ran a billion dollar Medicare overbilling scheme.
A pension fund filed a shareholder’s derivative lawsuit last July against UnitedHealth Group and its Board.
Donna Shalala is also named as a key figure in that suit for failing to detect the massive Medicare fraud. UnitedHealth Group is facing a $3 billion lawsuit by the federal government over a compliance breakdown, which could result in its failure to continue as a going concern.
That matter is also ongoing.
University of Miami is also tied up in litigation linked to Shalala’s tenure as a Director of Lennar, whose CEO was on the UM Board of Trustees, where Stuart Miller rose to be the Chairman in 2014 after ten years of her oversight on his Board.
Shalala has been under fire since 2014 for the University’s decision to secretly shepherd a massive mixed-use Walmart development on top of an endangered forest, which was pushed through the Miami-Dade County zoning process without proper notice to residents. UM’s buyer for the endangered Miami Pine Rocklands forest is Ram Realty is an investor into Lennar’s projects.
A Florida state judge just denied the University’s motion to dismiss litigation against them and Miami-Dade County, which was filed by a non-profit with angry nearby residents’, which is throwing the school’s Walmart project in the otherwise protected natural forest into doubt.
Donna Shalala’s main claim to fame is her role as a Cabinet member in the Clinton Administration, but since then her professional work has resulted an stream of personal lawsuits alleging major corporate governance misconduct in her roles at the top of public companies and charities.
It’s very difficult for the officer or director of a corporation to face personal liability, but Shalala is facing two major lawsuits as a Board Member.
Yet, Donna Shalala probably won’t pay, since most corporations and non-profits maintain insurance to insulate their Board Members from the financial consequences when they breach their fiduciary duties, engage in self-dealing or fail to manage conflicts of interest leading to litigation or losses.
The publicly traded corporations, non-profits and school who paid Donna Shalala to guide them as an executive or a Board member will All get stuck with the large legal fees and their insurers will likely pay for her damages, while she uses the name recognition, goodwill and public relations generated from those jobs in order to advance her own goal, to elect herself to Congress.
Here is the NASL’s lawsuit against Donna Shalala and the USSF Board members:
