How top soccer clubs clashed with rules on financial fair play
LONDON: One of the most powerful men in soccer, Gianni Infantino, has long championed fairness in the world’s most popular sport.
In public, the sports administrator has promoted rules intended to reduce debts and prevent top clubs with super-rich owners from using their wealth to dominate the game.
In private, he has sometimes taken a gentler line.
An examination of thousands of documents relating to the affairs of leading clubs shows that Infantino was involved in negotiations that led to two of the richest agreeing favourable settlements when they ran into problems over rules governing finances.
Those settlements with the Club Financial Control Body of Europe’s governing authority for soccer, the Union of European Football Associations (UEFA), enabled Manchester City of Britain and Paris St Germain of France to avoid the toughest sanctions, including potentially being banned from competitions.
Infantino, 48, is currently president of the Federation Internationale de Football Association, or FIFA, the global governing body for soccer.
Until 2016, he was general secretary of UEFA.
Since 2014, UEFA’s regulators have accepted that Paris St Germain and Man City could value sponsorship deals at levels far above those recommended by independent experts hired by UEFA’s investigators.
In the case of Paris St Germain this involved hundreds of millions of euros, and for Man City tens of millions of euros, the documents show.
The ‘Football Leaks’ documents, which include emails, contracts and presentations relating to the clubs, were obtained by the German publication Der Spiegel and reviewed by Reuters in partnership with European Investigative Collaborations, a consortium of international media.
The cache, which spans much of the past 10 years, includes previously undisclosed details of UEFA’s investigation of the two clubs’ financial affairs, the settlement terms and Infantino’s involvement in the negotiations.
Man City is part of City Football Group, which is majority owned by Sheikh Mansour Zayed Al Nahyan, half-brother of the ruler of Abu Dhabi.
The sheikh is a deputy prime minister of the United Arab Emirates and has a soccer empire that also includes clubs in the US, Australia and Uruguay.
Paris St Germain is owned by Qatar Sports Investments, a statebacked body founded by the emir of Qatar, Sheikh Tamim Hamad Al Thani.
His country is currently spending billions of dollars in preparation for hosting the next FIFA World Cup in 2022.
Under UEFA’s ‘Financial Fair Play’ rules, clubs must be transparent about revenues and broadly balance them against expenditure.
The rules are designed to encourage clubs to live within their means and prevent the sport’s richest owners from crushing their rivals, killing the vibrant competition that pulls in fans.
The regulations include a limit on the losses clubs can incur.
They are intended, among other things, to prevent clubs running up big debts or receiving unlimited amounts of money through inflated sponsorship deals with organisations related to the owners.
In short, related-party sponsors should not pay more than the market rate to support a club.
In the cases of Man City and Paris St Germain, UEFA’s Club Financial Control Body (CFCB), which oversees Financial Fair Play rules, accepted that the clubs could receive income from Emirati and Qatari sponsors that was far in excess of the market value estimated by independent experts hired by UEFA to assess the deals, according to investigatory reports, settlement agreements and other documents.
UEFA’s investigators concluded that key sponsors were related to the club owners, the documents show.
With Paris St Germain, UEFA’s Club Financial Control Body allowed the club to value its sponsorship deal with the Qatar Tourism Authority, a government agency, at 100 million euros a year.
Yet independent experts advising the CFCB told it the market value of the QTA sponsorship was only a few million euros a year or less, the documents show.
With Man City, UEFA’s control body allowed the club to book three times more income from some Abu Dhabi sponsors than independent experts deemed the sponsorship deals were worth – about an extra 20 million pounds a year.
These arrangements helped to boost the clubs’ income, enabling them to comply with UEFA rules that limit the losses clubs are allowed to incur.
That, in turn, helped the clubs to spend tens of millions more on players than they otherwise would have been able to do.
Paris St Germain said its compliance with the Financial Fair Play rules had been “exemplary.”
The club’s deputy chief executive, Jean-Claude Blanc, also said the financial regulations were misused and have “become an instrument to prevent new entrants” from winning Europe’s top soccer tournament and “to prevent shareholders from investing freely in their business”.
In a statement Man City said: “We will not be providing any comment on out of context materials purported to have been hacked or stolen from City Football Group and Manchester City personnel and associated people.
The attempt to damage the Club’s reputation is organised and clear.”
Neither Qatar’s emir nor Sheikh Mansour responded to requests for comment.
UEFA said in a statement that the organisation and its Financial Fair Play rules were there to “assist clubs to become financially sustainable and to live within their means and only to sanction them as a last resort.”
Among the most important objectives, it said, was to ensure that “European club football is viable (as a whole).”
UEFA added that the Financial Fair Play rules are relatively new and that in the early cases the decisions and sanctions took both UEFA and the clubs into uncharted territory.
It added: “UEFA is confident that any apparent inconsistencies that may seem evident to some, have been eliminated as the system has developed and become more familiar to all sides.”
FIFA, in response to questions addressed to Infantino, said the central purpose of the Financial Fair Play rules has been to “improve standards of financial management in European football, to reduce indebtedness, and to help clubs operate on the basis of their own resources, so they can be run as stable and sustainable businesses.”
It said the rules have “been an economic success story for European football.”
According to the documents, Man City and Paris St Germain rejected the assertions by UEFA’s control body that the sponsors from their owners’ home countries were related parties.
The clubs also disputed that the sponsorship valuations were inflated.
In an April 2014 response to UEFA’s investigators, Man City said an assessment by an external expert acting for UEFA’s control body that found the club was related to key sponsors contained “erroneous conclusions and assertions.”
The issues arose during UEFA’s routine monitoring of club finances.
Settlements that UEFA’s control body agreed in 2014 with the two clubs state that neither club considered itself to be in breach of UEFA’s rules, and that both clubs agreed to settle disputes over their finances to avoid potential legal costs.
UEFA said in its statement: “In cases where clubs overspend and balance their books only thanks to money injections, a settlement agreement has always been the preferred solution.
“In such cases, the focus is on limiting the revenues coming from outside football.”
The documents provide remarkable insight into the business activities of powerful individuals and state-backed enterprises in the Gulf, where media scrutiny is limited, even as their investments are growing increasingly influential in Britain, Europe and beyond.
The documents also provide evidence that could supercharge one of the biggest controversies in world soccer.
Rivals have alleged the two clubs have benefited unfairly from overvalued sponsor contracts and have urged UEFA to clamp down.
The financial firepower of Man City and Paris St Germain has helped to propel them to the top of the leagues in England and France, and to qualify for Europe’s top tournament, the UEFA Champions League.
The head of the Spanish football league, Javier Tebas, last year alleged that Man City and Paris St Germain had received ‘state aid’ that “distorts European competitions and creates an inflationary spiral that is irreparably harming the football industry.”
Last month, Tebas reiterated to Reuters that sponsorship deals from state-backed entities that were above market values were detrimental to others.
“It’s about the effect it has in distorting the market of footballers on a European level,” he said.
Man City and Paris St Germain rejected such accusations when they arose last year, saying the clubs complied with the Financial Fair Play rules.
A person familiar with UEFA’s process confirmed that independent experts had told UEFA’s control body in 2014 that the market value of key sponsorships had been far below the value the clubs ascribed to them.
Qatar’s Largesse Allowing some clubs to bend the rules, this person said, ultimately means that ordinary supporters, who pay what can be high prices for tickets, “get hurt.”
The global reach of soccer has turned the sport into a financial behemoth, with funds flooding in from TV rights as well as gate receipts and other sources.
Revenues at European clubs have tripled since 2000, according to a UEFA report published in January, and reached 18.5 billion euros in 2016.
That dwarfs America’s largest professional sport, the National Football League, which some analysts estimate has annual revenue of about US$14 billion (11 billion euros).
The European game’s popularity is increasing in the US, which is due to co-host the 2026 FIFA World Cup. But clubs also face huge outlays, particularly in acquiring star players, who can cost tens of millions of euros in transfer fees – the sum paid by one club to another to release a player from a contract so that they can change clubs.
On top of their purchase cost, star players can command wages running to hundreds of thousands of euros a week.
With many clubs racking up hefty losses, UEFA introduced its Financial Fair Play rules in 2010 and began evaluating clubs in 2013.
The rules broadly require club spending not to exceed revenue from television rights, gate receipts, competition prize money and sponsorship.
Since 2015, clubs have been allowed to lose no more than 30 million euros over three seasons, on the grounds that they should not simply be funded by big debts or super-rich owners.
Before that, when UEFA was phasing in the rules, clubs were allowed to lose up to 45 million euros over two years.
The aim is to sustain viable competition between a wide range of European clubs over the long term.
Infantino, who was born in Switzerland, speaks seven languages, including Arabic, and qualified as a lawyer. He became a key promoter of the new policy as it was being introduced.
In early 2014, he told news media the rules were designed to save European soccer from “greed, reckless spending and financial insanity,” according to UEFA’s website.
He also warned clubs that his organisation was “not afraid to take the necessary measures to protect the game and to maintain the integrity of its competitions.”
The rules required clubs wishing to participate in UEFA competitions to submit information about their finances for monitoring.
In 2013, UEFA’s investigatory arm, part of its Club Financial Control Body, began to question elements of accounts submitted by Man City and Paris St Germain.
With Paris St Germain, the key issue was its relationship with the Qatar Tourism Authority, a state agency.
According to the sponsorship contract between the authority and the club, the authority agreed to pay Paris St Germain between 700 million euros and 1.125 billion euros over five years, depending on tournament performance.
Under Financial Fair Play rules, what mattered was whether the QTA was a “related party” to the club owner.
If it was, then UEFA’s rules meant that the club could recognise only a market value for the contract in its assessment under the Financial Fair Play rules.
UEFA’s investigators concluded that the government tourism authority was a related party because the company that owned Paris St Germain, Qatar Sports Investments, was majority owned by another arm of the Qatari state – the Ministry of Finance. — Reuters