The International Boxing Association (AIBA) has claimed a settlement agreement has been reached with Azerbaijani company Benkons MMC to repay a $10 million (£8 million/€8.5 million) loan following reports they are on the verge of bankruptcy.
Benkons director Hamid Hamidov had reportedly claimed there was no schedule to repay the loan that was given in 2011 and due to be repaid by 2013.
Hamidov claimed that AIBA President C K Wu had personally guaranteed the loan and warned if Baku-based Benkons do not receive immediate and full repayment they will instruct their lawyers to take legal action against AIBA and Wu for recovery in Swiss courts.
In November of last year, AIBA had announced it plans to pursue criminal charges against its former executive director Ho Kim as part of an investigation surrounding money allegedly having disappeared from their accounts.
"First of all, we would like to emphasise that AIBA's former executive director Mr. Ho Kim found the Azeri investor Benkons MMC and enjoyed wide discretion in the negotiations and implementation of the transaction," AIBA spokesman Nicolas Jomard told insidethegames.
"Mr. Ho Kim acted autonomously in the establishment of WSB (World Series of Boxing) America Operations Ltd and was the sole Board member of said company, which completely managed the World Series of Boxing in the United States and Mexico resulting in huge debts AIBA current senior management has inherited.
"In his nine years as executive director, Mr Ho Kim had full operational control of AIBA and his subsequent mis-management, which now AIBA finds itself responsible and has sought to rectify.
"Regarding the Azeri loan, Benkons MMC had never claimed any payment from AIBA nor called upon the guarantee contained in the Investment Agreement until its letter dated July 19, 2017.
"Benkons and AIBA in fact had reached an agreement in which AIBA assumes the obligation to reimburse the loan and Benkons MMC agrees to a repayment schedule.
"Benkons' lawyers reviewed this settlement agreement and expressly approved its content on all the essential features.
"AIBA was surprised at the letter and its leaking to the press, and has initiated arbitration proceedings against Benkons in Switzerland seeking a declaration that the settlement agreement is valid and binding."
According to The New York Times, a study undertaken by PricewaterhouseCoopers (PwC) could not account for almost half of a $10 million loan.
PwC's report was commissioned by Wu in June 2015 following a request from the International Olympic Committee to comply with good governance standards.
In a separate development, Wu Di has filed for the return of money he invested in Boxing Marketing Arm (BMA), set up to promote and sell rights for all AIBA products.
Wu Di, owner of the firm First Commitment International Trade Company (FCIT), invested CHF19 million (£15.5 million/$20 million/€17 million) into BMA but filed paperwork on May 31 requesting that his money be returned.
In a letter sent to AIBA Executive Committee members on June 19 he claimed that Wu had "promised me the return of my investment in several years".
He added: "However, unfortunately, there is still no executable business plans so far, no sign of internal investigation on the huge loss, and no actual improvement on BMA’s operation."
In May, AIBA signed an exclusive global marketing agreement with Alisports, the sport division of Chinese e-commerce giants Alibaba.
According to Wu Di, Alisports would take over the marketing rights previously held by BMA, which is being shut down.
"As you can see, these actions have already seriously breached all business ethics and even the Swiss law," he wrote.
"The BMA financial crisis, results from several factors and all strategic decisions were approved by all BMA Board members including Mr. Wu Di," said Jomard.
"The FCIT loan against BMA is subordinated to all unsubordinated debt of BMA and asserts that, in case of bankruptcy, the loan is waived to the extent the liquidation proceeds are not sufficient to repay it.
"We are confident of the validity of the document as discussed with our lawyers and auditors."
Internal financial records seen by The New York Times claimed that AIBA had a cash balance of more than CHF9 million (£7.3 million/$9.5 million/€8.2 million) in only one month during the past year.
The newspaper reported that AIBA official claimed the actual cash on hand is little more than $7 million (£5.5 million/€6 million).
Earlier this year, AIBA’s financial director Rob Garea resigned claiming he was not consulted on key contracts and was concerned about accounting irregularities at AIBA.
In a letter to Executive Committee members seen by The Guardian, Garea also raised worries about AIBA’s spending.
"The President’s office in Taipei is paid for - at the cost of CHF200,000 (£163,000/$212,000/€181,000) a year with another CHF120,000 (£98,000/$127,000/€109,000) of the President’s representational fees, including travels, per diems and merchandising giveaways paid for by AIBA," the letter said.
"That is more than AIBA has given to its five Confederations to help fund and promote the sport over the past 12 months."
Jomard expressed surprise at Garea's letter.
"Rob Garea had periods as finance director of BMA and AIBA from 2015 to 2017, so he was intrinsically responsible for overseeing the day-to-day financial activities of the organisation," he said.
"We are quite surprised that only after leaving AIBA he is making his thoughts on the organisation’s financial situation."
Earlier this month, Wales’ Terry Smith, an AIBA Executive Committee member who had written to Wu and other senior members of AIBA to request answers to some of the concerns raised by Garea, was removed.
"The content of the finance director’s letter to EC members have given me great concern for the future of AIBA because it implies there may be serious deficiencies or irregularities in finance and governance," he wrote in a letter last month.
Wu responded by claiming he had commissioned a review to improve AIBA’s corporate governance.
He promised that a full financial report would be provided to Executive Committee members when they meet in Russia’s capital Moscow on Monday and Tuesday (July 24 and 25).
Wu claimed Smith was removed from his position because he was no longer an honorary member of Welsh Boxing.
Smith took AIBA to a Swiss court and overturned the decision earlier this week.
"Terry Smith’s role on the AIBA Executive Committee was concluded due to the non-renewal of his elected position for the Welsh Amateur Boxing Association according to AIBA by-laws," Jomard said.
"This is when he starts to publicly criticise the Association and accusing AIBA President with groundless allegations instead of keeping a loyalty to boxing.
"AIBA today is about boxers not about the personal interests and privileges of those in positions of authority within it.
"This may explain why these ex-members are today seeking to cause prejudice to an organisation they were keen to fully support.
"To conclude, we would like to emphasise that the information and documents several media refer to are confidential information, been provided without our permission and in breach of confidential obligations.
"AIBA will take all legal appropriate measures in this regard in order to protect its interest."
AIBA has been at the centre of much controversy in recent times.
All 36 referees and judges who officiated at the Olympic Games in Rio de Janeiro last year were suspended pending the results of the probe by an AIBA Special Investigation Committee.
Bantamweight world champion Michael Conlan of Ireland, meanwhile, claimed amateur boxing "stinks from the core to the very top" after losing a quarter-final bout he appeared to have dominated against Russia's Vladimir Nikitin.