Special Report - How top soccer clubs clashed with rules on financial fair play
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LONDON (Reuters) - 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.
QATAR’S LARGESSE
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 $14 billion (11 billion euros). The European game’s popularity is increasing in the United States, 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. The investigators drew up a draft of a preliminary view report, dated April 16, 2014, prepared for the investigatory arm of the Club Financial Control Body. It said the QTA sponsorship deal appeared to be “massively inflated.” Reuters was unable to determine whether a final version was produced. The draft report said the sponsorship rights received were worth “a tiny fraction” of the 200 million euros the QTA spent on Paris St. Germain in the year to mid-2013. The draft report cited external experts who valued the sponsorship deal at that time as worth 3 million euros or less per year. One of the expert advisers was Octagon, a sports marketing and sponsorship consultancy that is headquartered in the United States and has offices worldwide. In its report for UEFA investigators, Octagon noted that the QTA contract did not entitle the tourism authority to display its brand on the players’ shirts – a right for which companies usually pay the most money. Yet the QTA arrangement was “by far the most lucrative commercial agreement in European Football,” according to Octagon’s report. Asked for comment, Octagon referred inquiries to UEFA. UEFA did not comment on Octagon’s report. UEFA investigators’ view was that Paris St. Germain should not include all the QTA sponsor money when it was assessed under Financial Fair Play rules. But without that money, the club, referred to in the documents by the initials PSG, would make losses that risked it being banned from competition. “The evidence demonstrates that the QTA-PSG Agreement aims to circumvent the objectives” of the Financial Fair Play rules, the draft report by UEFA investigators concluded. It added that while it “may have some characteristics of a sponsorship contract ... the main objective of the QTA-PSG Agreement is, nevertheless, the supplementation of PSG’s financial means by QTA so that the Club can acquire players.” According to the draft report, the sponsorship agreement appeared not to have been preceded “by any meaningful commercial negotiation (or, indeed, any negotiation at all).” The club’s deputy chief executive, Blanc, said in response to questions last month that the valuation methodology of UEFA and Octagon did not apply because the contract with the QTA was a “nation branding” agreement to promote a country, rather than a traditional sponsorship deal. The UEFA investigators’ draft report recommended that, if the investigators could not reach a settlement with the club, UEFA’s “Adjudicatory Chamber” should find Paris St. Germain in breach of the rules and impose disciplinary measures, “including the possibility of exclusion from future UEFA competitions.” Such a move would be akin in the United States to excluding one of the largest American football teams from the post-season playoffs and the Super Bowl. By early 2014, Infantino had become involved, acting as an intermediary between the club and UEFA’s Club Financial Control Body. Asked in September whether he might have taken a tougher line on clubs such as Paris St. Germain over Financial Fair Play, Infantino said he helped to introduce the rules but did not implement them. “I am happy that we introduced it,” he told Reuters. “I wasn’t ‘tough’ or ‘not tough’. We had bodies who were taking decisions ... I was involved in the concept, the rules and so on.” FIFA said in its statement that the UEFA administration - which at the time included Infantino as general secretary - can assist the Club Financial Control Body. “This may include discussions, meetings, assistance to help find solutions, and other interactions to assist the CFCB in its work,” FIFA said. It added: “Nonetheless, the CFCB is entirely responsible for their own decisions.” UEFA also said its Club Financial Control Body was responsible for overseeing Financial Fair Play rules and was “an independent entity.” It said the UEFA administration provides the CFCB with staff, infrastructure and administrative support, and “acts as a go-between among the various parties,” but that settlement agreements are the outcome of negotiations between the CFCB’s investigators and the clubs concerned. The Club Financial Control Body said it could not comment on its deliberations for reasons of confidentiality. In the final 2014 confidential settlement, UEFA’s Club Financial Control Body agreed that Paris St. Germain could include 100 million euros a year from the QTA deal in its Financial Fair Play assessment, if the contract terms were amended. Though that was less than the QTA contract had envisaged, it was still far more than the market value put on the contract by UEFA’s independent experts. Those terms were not publicly disclosed by UEFA or the club. Instead, UEFA announced that the club had agreed to limit its spending on buying players and committed to reduce its losses in order to meet UEFA’s rules by the financial year ending in 2016. UEFA’s control body also imposed a fine on the club, but said most of it would be returned if the club met certain measures, including limits on making losses and buying players. In 2017, UEFA said that Paris St. Germain had complied with the requirements and met the objectives of the settlement agreement. In the 2014 announcement, UEFA said that it had assigned the QTA contract a fair value “significantly below that submitted by the club.” But the announcement did not disclose a figure for that value. And it did not mention the extent to which independent experts had assessed the contract to be overvalued. Support for the agreement wasn’t universal inside UEFA. In the weeks before the agreement was signed, acting chief investigator Brian Quinn, a former senior official at the Bank of England and former soccer club chairman, stepped down from his role. According to the person familiar with the process, Quinn told colleagues he wasn’t able to approve the Paris St. Germain settlement because he considered it “too lenient” given the size of the breach. Instead, the settlement was approved by a new acting chief investigator; Quinn remained a member of the investigatory chamber until mid-2015.ABU DHABI FUNDS
For many years, Manchester City played in the shadow of its more successful local rival, Manchester United, and struggled to stay in Britain’s top soccer league. Then, in 2008, Sheikh Mansour of the United Arab Emirates took control of Man City and began to transform it. With expensive new star players, the club went on to top the Premier League three times over the past decade. After the Financial Fair Play rules came into effect, UEFA began routine monitoring of clubs’ finances. It chose to look more closely at Man City as well as Paris St. Germain. According to the final preliminary view report by the investigatory chamber of UEFA’s Club Financial Control Body, Sheikh Mansour had “significant influence” over two of Man City’s Abu Dhabi sponsors. The report found that the amount being paid for those sponsorships was three times their market value. UEFA’s investigatory arm determined that Man City had made losses of 233 million euros during the two-year period ended in May 31, 2013, when the club made adjustments the investigators required, including judging key sponsorship contracts at market values determined by the experts, according to the chief investigator’s report. That was 188 million of losses more than was allowable under UEFA’s rules, the report said. As with Paris St. Germain, the report recommended that the Adjudicatory Chamber, a part of UEFA’s control body, should find Man City in breach of the rules and impose disciplinary measures, including a possible ban from competitions, unless the club reached a settlement with the investigators. Man City told UEFA investigators it rejected the claims that Abu Dhabi sponsors were related parties or that those sponsors were paying over the odds. The club said in an April 2014 response to UEFA investigators that it had complied with the rules and “adopted a good faith and correct interpretation of the regulations.” Infantino was involved in brokering a settlement. He arranged to meet the club’s CEO, Ferran Soriano, on May 8, 2014, for what Soriano described in an email as “a ‘secret’ meeting in London to try to agree the final deal.” Soriano did not respond to requests for comment. It’s not clear exactly what ensued. But subsequently, UEFA’s Club Financial Control Body rejected a proposed deal for being too generous to Man City.Kenyan runners eye top prize at NYC marathon