“Where money flows, corruption often follows”
Football has become very attractive to the rich and to
business men who are looking for a hobby or more importantly looking for added
exposure. These clubs give these men ‘something to enjoy’ and although fans of
clubs like Chelsea, Man City and PSG find it hard to see the issues with the
immense money that their new owners have invested in the club, it does appear
football has become a playground for the rich to have fun.
Yet is there something more going on?! This summer AS
Monaco, the newly promoted Ligue 1 side have spent £135m already on new
players. There are reports that they are willing to pay what is required to
bring Cristiano Ronaldo to France, with Hulk also being rumoured to be a target.
It is hard not to look at the situation in Monaco with a cynical eye. As this
article will address, football’s vast wealth has enticed men whose intentions
may not be football related.
We like to think football is just about what happens on the pitch. Yet the truth is it is so much more than that. In fact what happens on the pitch is meaningless to many. Modern football is big big business and there are many who are looking to get a big piece of that financial pie.
You want increased wages? A big money transfer? Jorge Mendes is your man. In the past decade one man has seemingly taken control of
the transfer market and has made him and his clients very wealthy in the game
of football. Jorge Mendes, who runs the Gestifute agency has become a
multi-millionaire due to his connections and ‘business’ acumen these past ten years.
Regarded as the world’s best super-agent, he has names like Jose
Mourinho, Cristiano Ronaldo and Falcao on his books. And many more. His
company currently have over 200 players on their books
from predominately Portugal and Brasil. At last summers Euro's,
15 of the 22 members of Portugal's squad were represented by Mendes. To say he
controls the fate of some of the world’s top players is an
understatement.
So when Monaco wanted to bring in some of Europe’s ‘top’
stars to the club Mendes was the man they called. Falcao, Moutinho and Rodriquez are all
clients of Mendes you see. As too is Ronaldo and Hulk, both of who have been linked to Monaco also. It would appear Mendes has the ear of Monaco’s owner
like he has shown with other owners around Europe.
A decade of Mendes
When Jose Mourinho won the Champions League in 2004 it was a
defining moment for the coach yet also his agent Mendes. Abramovich wanted the
best and Mendes benefited off the back of Mourinho’s superior coaching ability. For many years it appeared that Mendes was Abramovich's greatest ally
and he along with Mourinho and Scolari in particular persuaded the Russian to
sanction moves for players like Deco, Tiago, Ricardo Carvalho, Ricardo Quaresma, Paulo
Ferreira, Jose Bosingwa, Maniche and Raul Meireles.
Yet his influence did not stop there. His close ties
with Carlos Quieroz enabled the moves of Cristiano Ronaldo to United in 2003 as
well as the £35m deal of Nani and Anderson from Sporting and Porto. You see Quieroz was
another of Mendes’ men who had influence in a very rich and powerful club.
As his reputation grew so did the cost of his players and it
was Real Madrid where Mendes would make the most profit. Pepe moved
to Madrid in 2007 for roughly £12m yet the big move came when Cristiano Ronaldo
moved in 2009 for £80m. When his 'man' Mourinho arrived at the Bernabeau he
"convinced" the owners at Madrid to purchase more of Mendes' players.
The arrival of Fabio Coentrao and Angel Di Maria for a combined total of £50m as
well as Carvalho coming for £5m from Chelsea meant that Madrid have spent
almost £160m on Gestifute owned players. When you consider that Mendes company receives
a 10% fee on each transfer and you can see a handsome amount of money pocketed
this past decade.
Some may look on Mendes as a smart and opportunistic
businessman. He used men like Peter Kenyon (who has shares in the Gesitfute company as well as Mourinho to be his vessel into Europe's top clubs. Yet his original ally was Pinto Da
Costa, Porto's Chairman.
The relationship between Mendes and Da Costa goes back to
2003 and since then Mendes has garnered substantial influence on who Porto signs and ultimately how
much money the club receives when they sell them on. With his influence and
links with some of Europe's top clubs, owners and managers, he has been able to
broker massive deals for players brought to Porto for very little. For Porto it
is has proven a model which has been very successful financially for the Portuguese
club. Yet the club are still roughly £80m in debt.
Issues of corruption third party ownership
That is until you take a cynical eye at the situation. For
most Portuguese football fans, the brand "FC Porto" is a synonym of
corruption. Despite his undoubted acumen at laying the foundations and
building a structure to produce winning teams, Porto president Pinto
da Costa has received criticism for his financial handling of the club and
issues of corruption have been laid at his door.
Yet there must be a slight concern as to the excessiveness
of these transfers. The Monaco situation appears to show that on this occasion Mendes has
seemingly gone ‘too far’ and as his reputation becomes more public, so too do
questions about his dealings.
Unfortunately it would appear that corruption appears rife
across football and for men like Da Costa and Mendes they may have found ways
to make much money through the world of football. You only to have look at one of Mendes’ most public and shameful attempts at
corruption with the deal of Bebe to Man United.
Sam Eastwood wrote an article
looking at the deal of Bebe to Man United. It was a famous transfer because it appeared
so ludicrous and outlandish. £7.4 million for a player whose experience was one
year in Portugal’s third division. He was apparently recommended to Ferguson by
Carlos Quieroz (one of Mendes’ clients and aides).
The deal was made more obviously corrupt when Bebe moved to
Vitoria and then just five weeks later moved to United. Of course it was Jorge Mendes who secured the
client shortly before the transfer and was paid £2.89 million from the transfer
fee after securing 30 per cent of the player’s “economic rights”. Apparently Mendes
became Bébé’s agent only days before the transfer. Incredibly Eastwood points out that Gonçalo
Reis, Bébé’s former agent, has claimed that Dutch side PSV Eindhoven had declined
an offer to sign the player on a free transfer only three months earlier.
What Mendes has done is alerted officials and bodies to the growing
concern of third-party ownership. All of Monaco’s new players are owned by
Gesitfute. To explain this, we need to take a step back and first see how third
party ownership works.
Remember when Carlos Tevez and Javier Mascherano signed for
West Ham United. It seemed like it came out of nowhere and appeared a very strange
situation. As we know their ‘owners’ wanted them to gain more exposure in
Europe to entice big clubs to spend big money on them.
The way it works is that
investment groups will purchase the registration rights of an upcoming player.
This is sometimes done while the player is at a club, and sometimes as part of
a transfer. The player is then in the hands of the management and third party
ownership group, who manage every aspect of his career from that point on.
Tevez & Mascherano’s owners plan worked and they made significant
profit on both players. Yet this situation led the English FA to ban third
party ownership. However outside of England third party ownership is still
alive and well.
Mendes’s group has exploited the opportunity in third party
ownership and has proven very successful with it. FC Porto tend to be his
clients European desintation, of who many are young players from South America. This was the same with Falcao who arrived for £2.5m yet left for £40m to
Atletico Madrid.
Now this ‘deal’ becomes more complicated, in an article on reddit
(here)
Falcao was purchased by a third-party ownership group as part of his transfer
to Porto. They bought 55% (likely more) of his transfer rights, supplemented
his salary while he was paying at Porto and then moved him to Atletico for the
purpose of getting him more exposure (likely with an eye on moving him
eventually to Real Madrid).
The logic is simple; scout for young talent who can be
signed for cheap. Have persuasive power in Europe (Mendes with Porto) to ‘showcase’
this talent and seek to enhance his reputation and thus value. With the hope
that a rich owner will see the value in that player. The investment group makes
significant profit as too the club who were the ‘shop window’ for his talents.
Russia's growing influence
This brings us back to Monaco. The fact this this owner
appears only willing to deal with Mendes point to something more. Yet in order
for us to see what may be going on we need to look more at this owner Dmitri Rybolovlev.
Like many rich Russian’s it was about timing and
opportunity. The 90’s were a time of liberalisation as the Soviet union was
broken up. Many businessmen of the time became overnight billionaires, and Rybolovlev
was one of them. He began his career at the head of a medical company
specializing in magnetic therapy.
Yet in 1996 was sentenced to 11 months in
prison for being accused of ordering the murder of Eugenia Panteleimon, general
manager of a chemical company where Rybolovlev owns 40% of shares. A lack of
evidence meant he was acquitted. After this he decided to leave Russia for ‘safer’
land and sought to store his money in tax havens such as Switzerland and
Monaco.
In 2008 Vladimir Putin, Russia’s President sought to investigate
Rybolovlev and as a ‘settlement’ his business was bought for 4.9 billion euros.
This highlighted Putin’s willingness to privatise Russian business and increase
his control over Russian affairs. Dmitry Rybolovlev decided to leave the world of Russian business
to invest in new businesses and especially enjoy his money which is why he is
now in Monaco seemingly enjoying himself.
And who was it that bought Rybolovlev share’s? Another
Russian oligarch Suleyman Kerimov. For those who don’t recognise the name you
will realise his influence on football because this is the man who owns Anzhi Makhachkala.
This is the team who has the highest earner in world football on their books in
Samuel Eto’o.
Yet what are Russia’s intentions? Should we be worried? When Roman Abramovich
bought Chelsea in the summer of 2003 he was doing so under the instruction from
Russia’s President Vladamir Putin. Putin had informed those who
had benefited from the collapse of the Soviet Union that they must
“invest” in Russia’s future. Many were instructed that if they did not “help”
Russia then they would be accused of theft and jailed.
With Russia hosting the World Cup in 2018, all focus is on building relations, improving the countries perception and making Russia a dominant player in European football. Thus Abramovich’s role at Chelsea has been to improve the
perception of Russia and Russian business across Europe. And it was he who was 'influential' in acquiring
the World Cup in 2018. Abramovich
has “paid his dues” back to the country which gave him so much.
The same is the case with Anzhi Makhachkala who are
based in the impoverished republic of Dagestan. Putin had informed the
billionaire Kerimov to invest in the Dagestan area to improve the
quality of life for its residents. Sport was seen as a means to improve the
standards and perception of the area.
Putin therefore sought to use the men who
had profited from Russia's resources to improve the country and
importantly approve and support Putin's government.
And what about Zenit and their recent ‘splurge’? Well Putin
has his fingers in this also. Gazprom bought Zenit in 2005, and that decision
may have been influenced by the fact that Vladimir Putin and Dmitry Medvedev
were born in Leningrad. "As I grew up in St Petersburg, I love
Zenit," Medvedev has said on more than one occasion, and that is quite
natural.
Before Hulk and Witsel only one significant transfer from
Europe had occurred; Bruno Alves arrived from Porto for £18m in 2010. Many have
argued that his performances have not justified the price yet this may be just
the point. He was a client of Jorge Mendes.
Hulk has now switched to Mendes’
group and the signs are that either Chelsea or Monaco are going to pay the
funds to bring him across. Serious questions must be asked of these deals and
the not so strange link between Russia, Gazprom and Mendes.
It appears that the intention Gazprom, who are the biggest
extractor of natural gas in the world are attempting to increase their
influence across Europe. Although classed as a private company there is no
denying that Russia’s government controls the gas firm.
Gazprom belongs to the so-called national champions; a
concept advocated Putin, in which large companies in strategic sectors are
expected not only to seek profit, but also to advance Russia's national
interests.
For those who don’t know after Chelsea’s success in the
Champions League last season, Gazprom also became a sponsor to the club in a
deal worth around £100m. It is therefore not surprising that Chelsea were able
to fund such lavish spending last summer on players like Hazard and Oscar. This “sponsorship” deal allows Chelsea to avoid any issues of FFP (if there ever was any anyway). And it was Gazprom
too who Abramovich sold his company Sibneft to in 2005 for £8.4 billion.
These links and ties between these companies and men grow stronger and ultimately more worrying. The gradual investment and "aid" to some of
Europe's top sides is surely worrying for many. With any form of
"sponsorship" one intends to get something back. As Gazprom are an
extension of Putin's government, what is their intention? It is merely to
improve Gazprom's standing and reputation or is there something more?
This past season as Gazprom were announced as the sixth
“official” partner of the Champions League. Without doubt it would appear that
their influence on Europe is growing, both in terms of investing in the growth
of teams they are sponsoring and their growing political influence with some of
Europe’s big countries.
The three-year Champions League deal will see
Gazprom “cement their involvement with Europe's most prestigious club
football competition through exclusive services and products," the
UEFA website says. The deal with UEFA is seen as another step of promoting
itself worldwide.
Worries about Gazprom & therefore Russia
Although Gazprom are intending to grow their influence
across Europe, many Russians are concerned that "their" money is
going into football and not the people. Zenit are still the one true love of
people from the former Russian capital, but the club is becoming more and more
hated elsewhere. They are seen as the "government team", a club
trying to buy success with people's money.
The EU has revealed it had launched the probe over
concerns that Gazprom was hindering competition in Bulgaria, the Czech
Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia. The
investigation is focused on Gazprom's use of long-term contracts to lock in
prices that are tied to that of oil; a policy that often leaves its
supplies far more expensive than those available on the open market.
Gazprom controls assets in banking, insurance, media,
construction and agriculture.
In 2008, Gazprom's activities made up 10% of the Russian
GDP. Gazprom is Russia's largest company and produces about 15 percent of
the world's natural gas. It accounts for more than a quarter of Europe's
consumption.
European critics claim that this state-dominated corporation
is all about politics and thus the intention to invest in sport appears another
of Putin's games to influence European policy.
With the Russian world cup six years away, Russia's
government is seeking to increase its influence across Europe. In the coming
years expect to see more big names heading East with very large fees and
astronomical wages. This season expect to see more of Gazprom's logo.
Already it has been seen at Stamford Bridge and next week it will be advertised
heavily in the Champions League coverage.
A worry for football as well European politics is that as
the Euro suffers and gas prices rise, Gazprom and Putin’s Russia are
strategically using football and their "investments" to lay strong
foundations across Europe. The future of Russian football as well as its
politics appears set to increase their influence on the world.
Football fans may enjoy using their money to see their sides
improve, yet one wonders what price will come from this Russian investment?
Signs of corruption and money laundering
As Russian owners and companies seek to have more influence
in European affairs, using football as a vehicle to infiltrate further, there
must be worries regarding their reputation for corruption.
As this article
by Shaun Nicolaides on O-posts proclaims “Russia has a long and dark association
with corruption, and issue that is not showing any signs of going away. In
sporting terms, the corruption is becoming ever more and more evident.” As it
goes on, “Moscow is the corruption capital of the world, and not just in
political terms. The Russian football union is controlled by corrupt
Muscovites, and it is only becoming even worse and worse.” Issues of match fixing and corrupt
referees are the norm it seems in Russian football.
The situation only appears to get worse with the The Russian
Premier League officially nominating its chief Sergei Pryadkin for president of
the Russian FA. It is felt that this role will allow Pryadkin greater power in
the Russian game. This quote in itself highlights some serious concerns; "The
fact that all 16 Russian clubs supported this candidacy speaks volumes. It's
rare we have a unanimous opinion on any kind of issue," Babaev said.
This is not good news for Russia's footballing future as this was a man who last year was forced to fend
off corruption allegations. He was investigating over an alleged conflict of interests.
They claimed he worked as a transfer agent while holding the post as head of
the Premier League, which is prohibited under FIFA rules. And in a separate
incident, Ukrainian footballer Yevgeny Levchenko threatened to take Pryadkin to
the Court of Arbitration for Sport over an alleged $400,000 money laundering
case (the link to this article is here)
Money laundering? Interesting.
In a report by Financial Action Task Force (see here)
they found that in the world of football
with all its money “There is a higher risk of fraud and corruption given the amount
of money at stake. Sport also can be used as a channel to launder dirty money.”
Football is big business and in the report they found that “The
total size of the European football market is estimated at EUR 13.8 billion
EUR, of which EUR 4.2 billion is spent on salaries in the big five European
leagues, comprising only 98 clubs in total. This means one third of the
football money flowing into the hands of a select group of just a few thousand
star players and their managers.”
In this article we have looked at transfers which often take
place from country to country. The big money deals don’t often occur
domestically. This points towards a concern with money laundering because “Transfers
are carried out all over the world. The cross border money flows that are
involved may largely fall outside the control of national and supranational
football organisations, giving opportunities to move and launder money.”
When you look at many of these transfers, particularly when Jorge Mendes is involved they do appear outlandish and unrealistic. This once again points towards corruption and possible laundering of money. Yet football
allows this to be “acceptable” because as the report says “Sport is essentially
characterised by a high level of unpredictability over future results. This culture
of unpredictability‟, might lead to an increased tolerance towards seemingly
irrational payments."
The report also points towards football clubs ‘accepting’
possible ‘dubious parties’ to own and invest in the club because the clubs need
investment. Therefore those with money are welcomed to ‘invest’ even though
their history or intentions are not positive or aimed at helping the club. The
world of football could therefore become a vehicle for criminal activity.
Yet crime is not the only possible intention of these new rich owners. The authors of the report point towards what is a growing trend with the
rich to buy football clubs in terms of the opportunity to carry out illegal
activities yet also a chance to become a ‘celebrity’. Football appears to give
these billionaires the chance for possible corruption and fame.
"Connections that criminals seek to make with sport are
not only motivated by the desire to gain money. Social prestige is another important
factor. Popular sport can be a route for criminals to become celebrities‟ by
associating with famous people and moving upwards to powerful circles within
established society.”
Perhaps the worst ‘finding’ from the report was the
possibility that criminal activity such as money laundering is known to be
going on yet many organisations are loathed to tolerate it because exposing
these kinds of activities will be costly,
“The image of sports is very important, particularly to the sponsors. Sponsors try to buy a good image by supporting a particular sport. A rumour about money laundering will likely result in the withdrawal of the sponsor and his funds and loss of fans and the revenue they bring. This makes it less likely that money laundering or other crimes are reported by the management of football clubs.”
This is concerning
because commercial implications are taken to be more of an issue than corruption
allegations.
And when considering the impact of companies who deal in third party ownership like Gestifute
and Jorge Mendes as the report says, “The ownership structures often
involve companies in offshore jurisdictions with complex and often impenetrable
ownership structures” which means that the transactions are “opaque and often
impossible for the football organisations to establish.” It is a near perfect
tool for criminal activity.
What are FIFA or UEFA doing about it?
It appears evident
that as more investment pours into football, the threat of corruption continues
to increase as clubs and athletes attempt to compete both commercially and in
sporting terms. Yet as FIFA in particular have proven, even sports’ governing
bodies are susceptible to corruption risks.
UEFA see the global need to address issues of third party
ownership, conflict of interests, match fixing and possible criminal activity.
As they say “We have analysed the situation in Europe. However, the issue goes
beyond our continent. Since third-party player ownership appears to be a global
phenomenon, and given that FIFA is responsible for the operation of the
international player transfer system, we have asked the world body to take the
necessary steps to introduce a global prohibition.”
The situation at Monaco appears to indicate that Mendes is
becoming more powerful in the world of football and the links between his
company and Russia in particular should be very concerning.
We like to think of
football as an even playing field yet it appears that it is becoming solely
about money more than anything else. More of these new owners appear to be seeing
the opportunity in football to aid their political, business or even criminal actions and as
fans we are merely observers to this growing trend.
Financial Fair Play won’t solve the problem as there are too
many loopholes for these billionaire owners to get around. What is needed is A clamp down on
corruption and the possibility of money laundering, this should be FIFA and UEFA’s
primary aim. Yet you get the impression that some of these executives are
complicit in these happenings.
It is cynical to consider but football appears
corrupt all the way through. So much for the sanctity of the game.
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