U.S. Consultants threatened with Saudi prison time; could LIV Golfers be next?

U.S. consultants have advised the Saudi Public Investment Fund on numerous deals, and now they face threats after complying with U.S. law.

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.