What do so many top money transfers turn out to be flops?

 

 

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By Tony Attwood

I recently read a piece which opens “Many Americans—of both parties—have become untethered from reality.”   And it struck me that this is exactly the situation relating to football in England.

For I started to think about the way some transfers that really don’t work out are reported; those multi-multi-million pound transfers for players who actually turn out to be worth a fraction of the money spent and who are sold a few years later for a fraction of the price originally paid.   Fans blame idiots within the club for wasting €50m, but it may not always be as simple as that.  The player could of course simply be a flop but also the player could be incidental to the whole scheme – merely a pawn used to move criminal money from A to B.

Indeed some sources are quietly suggesting that football is being used as a major hub for money laundering.  And before proceeding I must stress this article is mere speculation nothing more.  I have no evidence beyond commentaries made elsewhere.

At heart, money laundering is the concealment of the origins of illegally obtained money, by moving the money around through legitimate businesses.   And of course, this can readily be done by football agents dealing with compliant loss making football clubs.    The person with money from illicit sources hands some of it to a friend who is a director of a football club, who hands it over to the club which uses the money to pay for a couple of year’s instalment payments on an overpriced transfer.  In return the donor of the illegally obtained money gets something back – such as a few shares in the club, with the promise that he can sell these back in three years.   True he only gets a fraction of the money he’s hidden, but the shares are clean and he can sell them for clean money.

So the club buys a player for £50m – a price that raises eyebrows.  But £30m of this comes from a friend of the club in return for a sponsorship deal (which really is only worth about £5m – but of course sponsorship deals come in all sorts of shapes and sizes and who can say what each one is worth?)    A clause in the sponsorship deal says that if the company involved sees an increase of less than 5% in its sales it can have £10m back.   The crook has lost £20m but he’s happy because he’s moved on money that he does not want traced back to him, and is still £10m better off.  The club has paid £10m of its own money to the crook, but if it can sell the unwanted player for £20m they have made a profit – although the media report this as a £30m loss.  Since (in this argument) all the clubs know what is going on, even if they don’t engage in this process themselves, it doesn’t affect the dealing club’s reputation.

Now that example above is very simple – most money laundering goes through multiple channels but the effect is the same – the authorities can no longer be quite sure where the money came from and which part of any deal was crooked.  The club will take a profit and use it to reduce some of its debts, putting that money in the books as sponsorship.

As a result money moves around, the club benefits and the cook benefits and all links with the original stolen £60m are hidden.

It is argued that the only reason clubs have got away with it for so long is because so many of the top clubs are in fact owned by overseas operators whose detailed money arrangements are a) obscure and b) not investigated by the media, as the clubs warn the media off such topics.  Those who don’t accept the warning, lose all co-operation with the club in terms of seats in the journalists’ enclosure, interviews with players, inside information and the like.

As for the start of the procedure, smaller clubs benefit by putting a huge price on a player’s head, then finding to their amazement that the price is accepted, are hardly likely to turn the money down.   The figure quoted in the ever-compliant media is not the figure paid for the player, but rather the fee agreed as the “pubic figure” which is then used by the club in its accounts, to help show that the club made far less profit (or indeed a far greater loss) than it actually made.  Hence less tax is paid.

To be quite clear I have no proof of any of this; it is merely an explanation as to why some high profile transfers fail.   And I have been told that a number of countries seem to have rather weak money laundering regulations – although I stress I am no expert in such matters.

But if for a moment we do accept that this sort of thing does go on, once a club has paid over the odds for a player it will be able to put leverage on the next club in the chain, by way of match-fixing, transfers in which the actual price of the player is nothing like that released to the media, and so on.

You must decide if it is likely that some multi-billionaires spending fortunes on players are doing so not because they have more money than sense but because they are eager to move some money without revealing exactly how much is being moved and its source.

It is also interesting that senior bodies representing national governments are deadlocked over this issue, in part because some countries are resisting the inclusion of football in the legislation.   And there all we have to do is ask why?   Why are some countries so against legislating against fake football club finances?   And why are the media so complicit in keeping this issue out of the media?

The EU has been trying to stop this trade for several years only to find the mega rich club owners putting pressure on their own governments by making donations to party funds.   As Leonie Cater points out “in 2015, U.S. authorities indicted nine officials from Fifa…”, while “Europol and the European Commission have highlighted the industry risks in reports in recent years.”

As Carême put it, “football is a key sector for money laundering,…As far as football is concerned, a common technique is to inflate the price of a player transfer and then pass the additional proceeds back to the underworld.” And it is not that this has only just been discovered.  “Operation Zero”  found huge money laundering activities in Belgian football clubs five years ago.  Belgium’s regulations changed, although according to one report from Niels Appermont, professor of economic law at Hasselt University, not very effectively.

This does not mean that when we see Chelsea spending vast amounts of money year by year and yet failing to move out of mid-table we must conclude that they are engaging in money laundering rather than serious transferring, nor that the funding of any other specific club is suspect.  Rather we may note that it is widely agreed that the current regulations in football are woefully inadequate to stop money laundering, and we certainly are in a world in which ludicrous amounts of money are spent each year by certain clubs on players who fail to raise the position of the clubs.

If there is another explanation as to why certain clubs spend so much on so many players and yet fail to progress up the league, then of course that is fine, but if the explanation is that the transfer team within a specific club is simply “no good at its job” that really won’t do, since the club could obviously afford to bring in a better group of transfer experts.

It remains, as they say, something of a puzzle.