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SPECIAL INVESTIGATIVE REPORT: Ethicist Criticizes 49er Five’s Sole-Source Contract with Fanatics Amid Conflict of Interest Discovery

By Robert Haugh

On Tuesday, Fanatics Retail Group was given a sole-source contract for merchandise concessions at non-NFL events at Levi’s Stadium.  The 49ers lobbied the City Council, acting as the Stadium Authority Board, to approve the contract.

Santa Clara News Online has discovered the NFL owns part of Fanatics. The league invested $320 million in the company in 2022.   The NFL was the single biggest investor in Fanatics’ latest fundraising round.

The 49ers never revealed this fact during the discussion about the contract. The team will be financial beneficiaries of the sole-source contract.

Dr. Tom Shanks, a renowned ethicist and former Executive Director of the Markkula Center for Applied Ethics at Santa Clara University, was critical of the City Council acting as the Stadium Authority Board for approving the sole-source contract.

“Whenever I watch the Santa Clara Stadium Authority deal with a SF 49er-related issue, I expect to see the Authority explain how their votes are in the best interests of the people of Santa Clara,” Shanks said. 

“Once again, this past Tuesday with the Fanatics merchandising decision, the Authority majority and City Staff acted more like SF 49er employees.”

“After three Civil Grand Jury reports, especially the ‘Outplayed’ report about unfair contracts between the 49ers and the City, what Council member, Staff, or resident would simply accept whatever the 49ers told them?” said Shanks.

Shanks’ primary criticism is about the undisclosed conflict of interest related to Fanatics. This means the 49ers, as an NFL team, indirectly benefit from the contract.  To Shanks, this raises significant ethical and legal concerns.

“The Mayor (Lisa Gillmor) asked City Staff whether they had looked into the potential conflict of interest,” Shanks pointed out. “They hadn’t. They left it to the 49ers, who insisted there were no personal or organizational conflicts of interest.” 

Shanks was particularly critical of how the 49ers’ general counsel Jihad Beauchman responded. 

“The 49ers representative (Beauchman) appears to have been deceptive by denying any conflict existed.” According to Shanks, ethical practice requires full disclosure of all material relationships that could affect decision-making. By failing to fully disclose the NFL’s stake in Fanatics, the 49ers missed the mark on basic ethical standards and possibly legally required disclosures.

Shanks didn’t hold back in his criticism of City Staff. He pointed out that the staff failed in their due diligence. 

“City Staff failed to research Fanatics’ ownership structure before the contract vote,” Shanks said. He argued that had the staff done their homework, they would have uncovered the conflict of interest beforehand.

“Now that this information is known, Staff should document the undisclosed conflict, review whether the contract approval process was compromised, and recommend appropriate remedial actions,” Shanks said. “They must also implement stronger vendor vetting procedures for the stadium moving forward.”

11 comments

  5. Nother new here folks. Just move along, please. Just the 49er Five continuing to sell out our city.

    Reply

  6. Sounds like there should at the very least be a council reconsideration of a party action. It allows for something that was decided to “reconsidered” if new facts or data emerge that could have influenced the decision.

    At the very least, they should have staff get the complete information, share it during the reconsideration request, and then call the item back to be voted on with the all current data provided. Then the council members that are comfortable with the conditions, whatever they are, can cast their vote in favor or against the contract. It won’t necessarily charge the outcome, but it will make the outcome robust and free from undisclosed conflict of interest questions.

    Reply

  7. Cpra filed for Beauchman correspondence with Jain and Park.

    US Senate asked DOJ to investigate Fanatics

    3 anti trust lawsuits are in play

    Turns out Fanatics wants to expand into online betting in Korea.

    Hmm, who travels there 4 times a year?

    Reply

    • Why stop there? Why not CPRA for correspondence with the other 49er 5? Hardy, Chahal and Gonzalez?

      File CPRA on Korea Kevin’s travel to Korea and all expenses and Form 700s.

      Reply

  8. I find this a big nothing burger. Fanatics does all the merchandise for all other sports leagues…..

    Reply

  9. In addition to the “indirect” financial benefit identified by Dr. Shanks in the fact that the NFL has an ownership interest in Fanatics, there is a significant possibility that Mr. Beauchman violated state conflict of interest law as the result of his status as a designated consultant under the Stadium Authority’s conflict of interest code. The staff report clearly identifies a 49er financial interest in their contract with Fanatics, and therefore a potential impact in Mr. Beachman’s financial interest as an officer. Under state law Mr. Beauchman was required to disclose any reasonably foreseeable potential impact that the Stadium Authority entering into a contract with Fanatics could have on the 49ers’ contract with Fanatics. It seems entirely foreseeable that there could be such an impact if Fanatics will pay an increase to them due to, for example, sales of NFL merch during non-NFL events. Even a reasonably foreseeable impact disqualifies Mr. Beauchman from participating in the decision to recommend the contract to the Stadium Authority Board.

    City staff utterly failed in their duty to analyze the conflict of interest issues raised by their recommendation. Not only did they fail to inquire sufficiently into the nature of the financial relationship between the NFL and the 49ers and Fanatics, they appeared to have done no legal analysis of any of the conflict issues in order to competently advise the Board before they voted on the decision.

    Reply

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