Third Party Ownership

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Huge issue at the moment. The Guardian are running a serious of articles this week on it.
First this exclusive

http://www.theguardian.com/football/2014/sep/23/uefa-third-party-ownership-champions-league

Uefa plans rule change to clamp down on third-party player ownership

Uefa is poised to introduce new rules to tackle urgently what it sees as the scourge of third-party ownership of players in Europe as early as next season. Transgressors ultimately face the possibility of transfer bans or having players excluded from the Champions League.

A Guardian investigation on Monday revealed that Jorge Mendes, regarded as the most powerful football agent in Europe, is serially involved in third-party ownership and Uefa, increasingly frustrated by Fifa’s inaction on the issue despite repeated vows to tackle the problem, is now drawing up new rules that could be introduced for its next three-year cycle of competition from 2015-16.

As with the introduction of its financial fair play, there would be a transition period to allow clubs to comply with the new rules but the aim would be to clamp down on third-party ownership among clubs competing in the Champions League or Europa League.

A study for KPMG last year put the overall value of players owned under TPO schemes, where third parties invest in up to 50% of a player or loan the equivalent value, at €1.1bn.

In Portugal, Spain and Eastern Europe where the practice has proliferated since it was imported from South America in the last decade, large numbers of players are now owned in part by third parties.

A new joint study commissioned by Fifa from the Centre de Droit et d’Economie du Sport and the Centre International d’Etude du Sport, which has been seen by the Guardian, has warned of mushrooming integrity concerns.

Supporters of TPO insist it allows clubs to buy players they would not otherwise be able to afford but the study says that, on the contrary, it locks them in a “cycle of debt and dependence”. It also raises a string of integrity concerns stemming from a lack of transparency among those investing in the funds and the possibility of them exerting pressure on players, coaches and club owners. Even more seriously, the practice has been linked to match-fixing.

The Fifa president, Sepp Blatter, first vowed to take action on third party ownership in 2007, shortly after the Premier League had banned it in the wake of the Carlos Tevez affair.

A Fifa spokeswoman said it had been “challenging” to get a true picture of the scale and scope of third party ownership and that a new working group led by the former FA chairman Geoff Thompson was continuing to assess the problem.

It has said its executive committee would decide on the next steps and remains “fully committed to reaching a solution that best protects football”. But the issue is not even on the agenda at this week’s Fifa executive committee meeting and the widespread use of TPO in Brazil and Argentina makes it difficult to act at a global level.

Now, the Uefa general secretary, Gianni Infantino, has told the Guardian that if Fifa fails to act then Uefa will take its own steps.

“It threatens the integrity of sporting competition, it damages contractual stability, it undermines the relationship of trust that should exist between a player and the club that employs him, it creates conflicts of interests, it means that players have less control over the development of their own careers, it keeps clubs in a vicious cycle of debt and dependence and damages the overall image of football,” he said.

“Furthermore, there is little doubt that third-party investors do influence the transfer policies of clubs even though Fifa rules expressly forbid this. These are actually the findings of Fifa’s own – detailed – research into this subject. So, it’s now time to act, and if Fifa does not address the problem, then Uefa will.”

The practicalities of any new rules are still being worked through by Uefa’s lawyers but one option would be to set up a new body to assess the ownership of players, alongside its existing disciplinary committee and Financial Control Body (which assesses FFP).

Clubs would be required to prove that their players were wholly owned and could ultimately be subject to transfer bans or face having to leave players partially owned by third parties out of their European squads.

The hope, as with its controversial FFP rules, is that over time the regulations will influence the behaviour of clubs where TPO is rife. It would hit clubs in Portugal, Spain and some parts of Eastern Europe hard but Uefa is determined to act.

As well as England, third-party ownership is banned in France and Poland. Four major deals by Premier League clubs this summer, including Emirates Marketing Project’s £32m capture of Eliaquim Mangala from Porto, involved third-party shares being bought out.

“Premier League rules prohibit Third Party Ownership as we believe that it threatens the integrity of competitions, reduces the flow of transfer revenue contained within the game, and has the potential to exert external influences on players’ transfer decisions,” said a Premier League spokesman.

 

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http://www.theguardian.com/football/2014/sep/22/-sp-jorge-mendes-agent-third-party-ownership-players

Jorge Mendes: the most powerful man in football?

Jorge Mendes, the Portuguese agent who has conducted many of the biggest transfers in European football, is serially involved in the third‑party ownership of players in apparent breach of Fifa regulations, a Guardian investigation can reveal.

Mendes, who brokered the year’s biggest deals, including Ángel di María’s £59.7m move to Manchester United and Diego Costa’s £32m purchase by Chelsea, was seeking to attract €85m (£67m) from undeclared investors via offshore companies to buy stakes in players at clubs in Spain and Portugal, according to a document seen by the Guardian. The prospectus and further inquiries have shown that:

• Mendes and the former Manchester United and Chelsea chief executive Peter Kenyon advise five Jersey-based funds on more than £100m to be invested in buying “economic rights” in players.

• Mendes admits he has a conflict of interest, because he acts as the agent to players whose economic rights have been bought by the funds he advises; this appears to contravene Fifa regulations on agents.

• Sporting Lisbon say the funds that Mendes and Kenyon advise sought to buy stakes in players as a condition of players, advised by Mendes, renewing their contracts.

• Mendes claims to have conducted 68% of all player transactions at Portugal’s great clubs, Sporting Lisbon, Benfica and Porto, in the decade 2001-10.

The 20-year ascent of Mendes from Porto nightclub owner and friend of footballers to the beaming broker of the game’s most lucrative transfers has tracked the sport’s pay-TV-fuelled inflation itself, and Portugal’s status as a habitual exporter of players. Mendes built his name and the operation of his company, Gestifute, on attaining a remarkable dominance over the deals done by Portugal’s top three clubs, and he took several of these players on multimillion-pound moves to England and Spain. There he has extended his influence, particularly after his client José Mourinho made the journey himself from Porto after 2004, to sign as the manager at Chelsea, then Internazionale and Real Madrid, now Chelsea again.

Mendes’s work reached stunning fruition this summer, when he was seen conducting the biggest moves of talent and money not only from his home country’s financially hollowed out clubs but of the whole European football player transfer market. James Rodríguez, his reputation glowing from his World Cup excellence, was signed by Real Madrid for £71m from Monaco, to where Mendes brokered his move from Porto only last year for €45m (£38.5m). Porto declared in its annual report that it paid Gestifute €4.4m (£3.6m) for “intermediation service costs” on that deal; the amount paid by Real this year has not been disclosed.

Di María, deemed surplus stock at Real Madrid, came to Old Trafford for almost £60m in Manchester United’s post-Sir Alex Ferguson and David Moyes splash-out; a grinning Mendes was seen with Louis van Gaal in the 4x4 at United’s Carrington training ground. Radamel Falcao, whose €40m (£32m) sale by Porto to Atlético Madrid in 2011 was brokered by Mendes – Gestifute shared €3.7m (£3m) “intermediation service costs” with another company, Orel – moved to Monaco last year for £50m, then Mendes brought him to United this summer on an extraordinarily costly loan. Eliaquim Mangala, for whom Emirates Marketing Project paid £32m to Porto – 33% of Mangala’s “economic rights” had been owned by the Malta-based third-party ownership fund Doyen – was another Mendes move.

Costa brought his goalscoring eye from Atlético Madrid, where Mendes boasts of powerful influence, to Mourinho at Chelsea, who paid £32m. Reports have stated that 30% of Costa’s “economic rights” were owned by an offshore fund but sources close to the signing say in fact there was no third‑party ownership of Costa.

Unquestionably true, however, is that Mendes, as well as acting as an agent for these and many other players, and being paid by clubs as a transfer “intermediary”, is serially involved with Kenyon in advising on the third‑party ownership of economic rights in players.
The Guardian has seen a document, a prospectus from 2012 seeking to raise €85m (£67m) to buy stakes in footballers via Gibraltar, a tax haven, for a fund named Quality Sports V Investments LP, registered in Jersey, another tax haven. Mendes’s Gestifute agency and Kenyon’s company, Opto, are described as advisers to the fund, helping to identify players, make “partnerships” with “development clubs” in Spain and Portugal, and using their “relationships” with clubs in the “Big 10” – Europe’s and the world’s richest – who will then buy the players.

The prospectus boasts of Mendes’s dominance in Portugal, and his and Kenyon’s connections in football, including Mourinho. The document describes the great clubs of Portugal – Porto, Benfica and Sporting Lisbon – the smaller Portuguese club Braga and last season’s La Liga winners and Champions League finalists Atlético Madrid as “partner clubs”. It suggests the fund will do substantial business with them, buying stakes in players who will then be sold on, at a substantial profit to the investors.

The standard justification by funds and clubs for third-party ownership, which is condemned by Uefa and banned by the Premier League, is that such funds provide clubs with money they need to buy or keep players. That rationale – which Uefa and the Premier League rejects, arguing that third‑party ownership undermines clubs’ and the game’s financial health and integrity – is not mentioned anywhere in the 225‑page prospectus. It focuses firmly on the money investors can make from a “unique opportunity to invest in football”.

With graphs showing the exponential financial growth of the modern transfer market, the prospectus says it is aiming for a startling annual profit: 32%. The fund will “execute the Investment Strategy”, the document promises, through “the expertise of the Investment Advisors, [companies] represented by Peter Kenyon and Jorge Mendes”, who “have extensive experience working within the football industry”. Mendes and Kenyon have “extensive relationships with clubs in the Big 10 that have the financial capacity and incentive to invest in the most talented, high-value football players”.

The plan is for the fund to advance the money to an Irish-registered company, Quality Football Ireland IV Limited, which will buy the stakes in players. The document says of Mendes and Kenyon that they have “developed many relationships throughout the football community. By leveraging these relationships, Peter Kenyon and Jorge Mendes have demonstrated a proven track record in brokering football Transfers [sic].”

There is no explanation of what is meant by Kenyon and Mendes “leveraging relationships” within football clubs to make transfers happen.

The document makes clear that Mendes remains a players’ agent – stating that he represents “several of the world’s top coaches and footballers”, including Mourinho and Cristiano Ronaldo. Several transfers are cited in evidence for the track record of Mendes and Kenyon, including Ronaldo’s €15m (£12m) move to Manchester United in 2003 from Sporting Lisbon, when Kenyon was United’s chief executive and Mendes was Ronaldo’s agent; and Tiago Mendes’s 2004 move from Benfica to join Mourinho at Chelsea, where Kenyon had moved to become chief executive after Roman Abramovich bought the club in 2003.

The document lists four other funds investing in third-party ownership of players which it says Kenyon and Mendes have advised. These are all Jersey-listed partnerships, as outlined by the Guardian earlier this year when we revealed that Chelsea strongly appear to be involved in the third of these funds, Quality Sports III Investments (since renamed Burnaby). Altogether, the four funds have raised £46.8m, have fully spent that money buying player stakes, and “are on track to achieve the target returns”.

A report on third-party ownership prepared for Fifa earlier this month by the research organisations Centre de Droit et d’Economie du Sport (CDES) and Centre International d’Etude Du Sport (CIES), which the Guardian has seen, emphasises there is a conflict of interest: where an agent whose prime duty should be to act in the best interests of his client, the player, in fact owns a stake in him and so has a financial interest in having him sold.

Third-party ownership, the report concludes, cements a system in which players must be sold before their contracts are served, so that their clubs, and the funds that have advanced the clubs money, can cash in. Some of football’s most powerful agents have become involved in third-party ownership, the researchers found, as a means of extending their influence, and gaining access to more players.

The Quality Sports V Investment prospectus deals with Mendes and the question of conflicts of interest. It says: “The Fund is subject to a number of actual and potential conflicts of interest.” These include “inherent conflicts” in the way Gestifute will “provide services” to the fund and to the company investing the money, Quality Football Ireland IV Ltd based in Dublin, and the “services” and “sub‑advisory services” Kenyon’s company Opto will provide to the fund, QFI IV, and Gestifute. Gestifute and Opto “may carry on activities for other investment funds or entities”, with different “investment programmes”, the document says, and “provide advisory services” to other funds established since 2010 which have “equivalent investment objectives” to the fund.

“There could be actual or potential conflicts of interest between those funds and [this Quality Sports V Investments] fund,” the prospectus says. Under the general heading “Conflicts of Interest”, the document declares that Mendes will act as the agent for players in whom stakes are bought by the fund.

“Jorge Mendes (either directly or through his corporate vehicles) acts or may act as agent for, or otherwise represents or may represent, certain of the Investee Players or potential Investee Players, and may be remunerated independently in that capacity.”

This appears to make the world’s most celebrated football intermediary “super‑agent” in breach of Fifa’s agents regulations, which remain in force. Regulation 19.8 states: “Players’ agents shall avoid all conflicts of interest in the course of their activity.”

Regulation 29.1 imposes an obligation on clubs not to pay any part of a transfer fee to a player’s agent, and specifically prohibits the agent “owning any interest in any transfer compensation or future transfer value of a player”.

Mel Stein, chairman of the Association of Football Agents in England, argues that agents can represent a player and be a broker in his transfer, if efforts are made to avoid a conflict. However, he says: “What is not acceptable is seeking to earn money from both ends of a transfer without ensuring that there is no conflict. I believe that third-party ownership makes that impossible to achieve.”

Mendes and Gestifute declined requests for an interview and did not respond to specific questions about his involvement in the third-party ownership funds and the apparent conflict of interest with his duties as an agent. Fifa would not provide an answer to whether an agent such as Mendes, who is also involved in third‑party ownership, is by definition acting in breach of their regulations.

A spokeswoman for Fifa said in response to that question: “We cannot provide comments based on a hypothetical situation. The disciplinary committee decides on a matter after analysis of all the specific circumstances pertaining to a case.”

World football’s governing body is believed never to have brought any proceedings against any club or person in relation to third-party ownership funds, which clubs are prohibited from allowing to “influence” them, and there is not understood to be any investigation into the activities of Mendes.

The prospectus seen by the Guardian illustrates, with coloured pie charts, Mendes’s startling dominance of Portuguese football. Famously, he is always said to have brokered his first significant deal in 1997, the move from Portugal’s Primeira Liga club Vitória Guimarães to Spain’s Deportivo La Coruña for the goalkeeper Nuno Espirito Santo.

Mendes, seen smiling by players’ sides ever since, has always been said to have accumulated a huge share of deals, and this document sets it out explicitly, that from 2001-2010, Mendes had “unparalleled success in the Portuguese transfer market”.

Mendes, it says, conducted transfers worth 78% of Sporting Lisbon’s total earnings of €88m (£70m) in that decade. At Benfica, the figure is cited as 51% of €107m (£85m) in transfer deals. Porto exported most of Mourinho’s 2004 Champions League-winning squad – including Paulo Ferreira (£13.2m) and Ricardo Carvalho (£19.85m) – to Chelsea, whom Mourinho had joined as manager with Kenyon as chief executive. Further deals included Pedro Mendes (£2m), who went to Tottenham Hotspur; Deco, sold to Barcelona in a €21m (£17m) swap deal with the midfielder Ricardo Quaresma; then Maniche to Dinamo Moscow and the 31-year-old Nuno Valente, who joined Everton for £1.5m. Mendes is stated to have conducted 70% by value of Porto’s transfers between 2001-10 – €238.4m (£189m) worth of deals, out of €340m (£270m).

In total, Mendes is said to have conducted 68% by financial value of all the deals done in the whole decade by Portugal’s top three clubs: €362.2m (£287m) of players sold, out of €535m (£425m) “transactions” concluded in total by the clubs.

There are some in Portuguese football who see this dominance by one agent as unhealthy, reflecting concern expressed in the CIES/CDES report to Fifa of the transfer market’s “oligopolisation” by a few powerful intermediaries. Mendes represented or brokered the transfers of most of Portugal’s national team, and acted for Carlos Queiroz, who was the side’s coach from 2008 to 2010.

The Guardian asked Portugal’s football association, the FPF, whether Mendes’s dominance as illustrated by the document and his representation of so many players and coaches gave any cause for concern. A spokesman replied: “The Portuguese FA is not aware of the documents you mention and has no comments to make on this matter.”

Sporting Lisbon have recently had plenty of comments to make. The club’s new president, Bruno de Carvalho, has denounced as a “menace” and “monster” the funds to whom majority stakes in almost the club’s entire squad were sold before he was elected in March 2013 and he vowed to end the practice. Sporting’s latest annual report listed eight players, as of 30 June this year, majority or 50% owned by three of the companies in the structure advised by Kenyon and Mendes: Quality Football Ireland; Quality Football Ireland III (in which Chelsea appear to be involved), and Quality Football Fund Ireland.

Sporting have told the Guardian that some of these stakes in players were bought by the funds advised by Mendes and Kenyon when the players’ contracts with Sporting were renewed, with Mendes negotiating as their agent. The stakes appeared to De Carvalho’s regime to have been sold as a condition of the players renewing their contracts, which the club argues was a “distortion” and a conflict of interest.

A Sporting spokesman, discussing Mendes’s status as an agent and his involvement with third-party ownership funds, said: “This is a situation that Sporting does not agree with. Mainly in situations where the conditions for the renewal of the players’ contracts depended upon the grant from Sporting of those economic rights.”

Mendes and Kenyon did not respond to the Guardian’s question about whether economic rights in players were sold to the funds they advise as a condition of a player, represented by Mendes, renewing his contract. However, Sporting said they have been told by the Quality Ireland companies that Mendes does not play a role in their management.

Having risen, and moved, with football’s escalation to a business of multibillion-pound money flows and shifting centres of spending, Mendes now bestrides the game, from delivering Di María to a flapping Manchester United, to advising funds buying stakes in Portuguese players he also represents.

Mendes’s first major international deal came in 2002 when he brokered the midfielder Hugo Viana’s transfer from Sporting to Saudi Sportswashing Machine, who paid £8.5m for a 19-year-old who would start just 16 Premier League matches for them. Mendes’s break into English football was achieved in partnership with the Manchester‑based agency Formation, who then claimed Mendes broke their agreement when sealing his truly breakthrough deal the following year: Ronaldo’s move from Sporting toUnited.

Kenyon then moved to Chelsea, where he and Mendes negotiated Mourinho’s hiring as the new manager, the signings of Carvalho and Ferreira to join him from Porto, and Tiago Mendes, from Benfica. Formation sued in 2005, claiming their agreement required Gestifute to split the agents’ fees from Chelsea, of €2.9m (£2.3m). In 2011 Formation announced they had settled the case, with the payment by Gestifute, net of legal costs, of €205,000 (£163,000).

In 2007, Mendes negotiated the £27m purchase by United of Anderson, from Porto, and, for £25.5m from Sporting Lisbon, Nani, whose previous agent, Ana Almeida, complained she had been sidelined. The same summer, Mendes broke through to Real Madrid, when the Spanish giants signed the central defender Pepe for €30m (£24m) from Porto.

Mendes’s influence at Real greatly extended when he negotiated Ronaldo’s £80m move from United in 2009, then Mourinho’s arrival as the coach in 2010. Di María, signed from Benfica for £21m, and Carvalho, from Chelsea for £6.7m, were signed immediately, Fábio Coentrão, for £25m from Benfica, the following year, all deals brokered by Mendes.

In 2010 came his most enduringly curious deal: United’s signing of Bebé, from Vitória Guimarães, for £7.4m. The player, who had a troubled childhood and grew up in care, never played in any club’s academy, unlike Nani, Anderson, Ronaldo and the rest, played in the Homeless World Cup, then scored goals in one season in the Portuguese third division, before playing pre-season friendlies with Guimarães.

The club told their members that Mendes bought 30% of Bebé’s economic rights just before the move – rather undermining the argument that the sale of economic rights enables clubs to hold on to players – and, with a 10% agent’s fee, was paid €3.6m (£2.9m) of the £7.4m from United. Gonçalo Reis, Bebé’s agent, complained to the PFP and Fifa that Mendes had poached the player; later Portuguese police announced an investigation into the transfer, but no results of it are known and Mendes has faced no disciplinary charges.

Emilio Macedo, the Vitória president, said approvingly of Mendes: “This country owes him a lot because he handles large transfers and brings money into the country. This is like an export.”

Bebé, said by United to have been recommended by their scouts in Portugal but never seen by Ferguson, started not a single Premier League match, then was loaned to Besiktas, where several Mendes-represented players have gone, then the Portuguese clubs Rio Ave and Paços Ferreira, before Benfica bought him this summer, spending £2.4m.

Last year, Mendes was called to help with the new Monaco project financed by the Russian billionaire Dmitry Rybolovlev, and he organised the arrivals of Rodríguez, Falcao, Carvalho, and the midfield force João Moutinho, from Porto. This summer, Rybolovlev decided to restrain his spending and Mendes brokered the sale of Rodríguez to Real Madrid and the loan of Falcao to United on deadline day.

Mendes is said now to be involved with the Singapore businessman Peter Lim, who is buying an indebted Valencia. The club’s coach, appointed after two seasons at Rio Ave, is Nuno Espirito Santo, Mendes’s first ever client, back when, a nightclub owner, he ventured into deal-making in the beautiful game.

Football has changed vastly since, becoming an industry in which super‑rich Premier League clubs and Spain’s top two are bulk buyers of talent. Mendes, agent, transfer intermediary, adviser to anonymous investors buying stakes in players, “partner” to smaller clubs, “leverager” of relationships in rich ones, has ridden that change. He has made a huge, unthinkable amount of money, and made himself indispensable, too, as an orchestrator, an oiler of the wheels.

 

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http://www.theguardian.com/football...mier-league-high-ground-third-party-ownership

Chelsea stake in third-party ownership leaves Premier League on shaky ground

“Third-party ownership” of players sounds a creepy and disturbing enough practice before any details are illuminated.

English football, along with that in France, Poland, and, perhaps surprisingly, Colombia, has been a TPO-free haven while investors have seeped endemically into player ownership elsewhere, particularly in Portugal and Spain. It is sad to see Portugal’s legendary clubs, Benfica, Sporting Lisbon and Porto, so hocking their players, yet finding TPO no real answer to financial struggle – exporting dozens of players in the modern era has made the intermediary, the super agent Jorge Mendes, dazzlingly rich, but the clubs are still frayed.

One expert has likened the practice to payday lending, in that it seems an easy solution when debts are pressing, but only creates what the CIES/CDES report for Fifa described as “a vicious cycle of debt and dependency”. Add the other findings, from an impressively thorough study which the Guardian has seen: players are often unaware their futures have been traded; sale to a fund almost determines a player will be sold rather than stay; coaches, sporting directors and club directors collude with the funds; agents are increasingly involved and so pulling more strings. With all this in mind, it is clear why Uefa are pledging to ban TPO in Europe if Sepp Blatter’s Fifa, as seems predictable, lack the equipment to do so.

The practice has famously been banned in England since the furore over the arrival of Carlos Tevez and Javier Mascherano at West Ham United in 2006, 100% “owned” by undeclared offshore interests fronted by the intermediary Kia Joorabchian. The Guardian revealed in 2011 that the Russian and Georgian oligarchs Boris Berezovsky and Arkadi “Badri” Patarkatsishvili, both now dead, claimed ownership of the Argentinian footballers’ rights. In 2007 Harlem Springs, a company registered in the British Virgin Islands which sources said was owned by Joorabchian, bought Tevez for £24m, then loaned him to Manchester United.

Two years later, Emirates Marketing Project’s owner, Sheikh Mansour, paid £45m to Harlem Springs, according to sources close to the signing, and that purchase of an Argentinian striker by an Abu Dhabi sheikh from a BVI company was the one famously proclaimed by City on advertising billboards as Welcome to Manchester.

West Ham were fined £5.5m, but not for the TPO interest in their players, as the practice was not yet banned. Their sanction was imposed by the Premier League for a failure to abide by every club’s duty to act in good faith towards each other, the league’s chief executive, Richard Scudamore, having said he was not given all relevant documentation.

The Premier League seems to survey all this from moral high ground, yet its stance is seriously undermined by Chelsea’s apparent involvement in the third-party ownership fund Burnaby Investments, advised by Mendes and the club’s former chief executive Peter Kenyon, as revealed by the Guardian in January.

Scudamore has a mandate from the 20 clubs he represents to repeatedly emphasise his abhorrence of TPO and call for a worldwide ban, yet Chelsea have apparently invested in such a fund, which has bought players at Sporting Lisbon and no doubt other clubs too.

West Ham were sanctioned for not acting in good faith towards their fellow clubs, but since January, Chelsea have not commented, and there is no sign that the Premier League disapproves, or has investigated Chelsea’s involvement.

The league’s stance is that no rules have been broken because Burnaby does not own stakes of players in England, but Scudamore’s identified evils of third party ownership, which he argues threaten the game’s integrity, appear to be being practised by Roman Abramovich’s totemic Premier League club.

Scudamore’s league is doing its reputation no favours by staying silent and tolerant about Chelsea’s inexplicable apparent involvement in TPO, which the league, collectively, so condemns.

 

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http://www.theguardian.com/football/2014/sep/23/fifa-third-party-ownership

Fifa inactivity allows menace of third-party ownership to go unchecked

With typical insouciance, Sepp Blatter did not hesitate before tossing another unmet promise on to the tottering pile he has amassed down his scandal-hit years as Fifa president. Faced with mounting concern over third-party ownership of players in the wake of the Carlos Tevez and Javier Mascherano affair in England and growing evidence of its pernicious influence, he did not pause before vowing to ban it outright.

Announcing a clampdown on the practice of divvying up the “economic rights” in a player between various business interests and the club they play for, Blatter promised new rules by the end of the year.

That was in 2007. Seven years later, the practice has grown into what has been described by Sporting Lisbon’s president Bruno de Carvalho as a “monster” that, according to a recent study for Fifa seen by the Guardian, locks clubs in a “vicious cycle of debt and dependence”.

As the practice has mushroomed, and the weighty academic and economic studies that show it can have a negative impact not only on players but on clubs and the fabric of football have piled up, inertia at football’s global governing body has ruled.

It is a familiar story – as Fifa is besieged over everything from the voting process for the 2018 and 2022 World Cups to his own presidential ambitions, the big structural issues tend to take a back seat in favour of fire-fighting or PR initiatives such as Blatter’s recent conversion to the merits of video challenges.

However, the sheer scale of the challenge of trying to unpick third-party ownership in South America, where it is so entrenched, is a daunting one for Fifa. The practice is so deeply ingrained in Brazil and Argentina, where it took hold in the early 1990s, it is hard to know where an attempt to ban it outright would begin. Since then scores of funds have invested in hundreds of players, with Ronaldo and Neymar among their biggest paydays.

A Bloomberg investigation last year revealed one Brazilian investment group, Traffic Sports, made a 62% profit on the first 21 players it bought and sold, using $50m raised for one of its funds.

The scale of the challenges involved in turning off the tap of third-party investment in Brazil, Argentina and Portugal has caused paralysis in Zurich, despite secretary general Jérôme Valcke once labelling the practice “modern-day slavery” .

A Fifa spokeswoman told the Guardian: “Gaining a thorough understanding of this form of investment in the football market has been challenging due to the limited economic data available and the varied global relevance of third-party ownership. As that understanding develops over time, particularly through initiatives such as the two recent studies produced at the request of Fifa, as well as the ongoing consultation process, with contributions from all relevant football stakeholders, Fifa remains fully committed to reaching a solution that best protects football and that corresponds to the evolving needs of the game after hearing the positions of all members of the football community.”

Arsenal’s chief executive, Ivan Gazidis, was among those who spoke at the first meeting of yet another working party set up by Fifa to discuss the issue in Zurich earlier this month, making the case for immediate action.

His speech was remarkably similar to the presentation given by the Premier League chief executive, Richard Scudamore, in November 2012 to Fifa’s eclectic “football committee” (members range from a member of the Malaysian royal family, Tengku Abdullah, to Pelé and the former Leeds United player Harry Kewell) in the presence of Blatter.

This time around there were also presentations from Brazilian and Portuguese clubs and leagues. While there was widespread agreement that the status quo was not acceptable, an outright ban was only one option on the table, with others favouring a requirement for complete transparency or a cap on the number of funds or the amount they could invest.

Understandably, some in Europe see the stance of the English clubs as special pleading. There is also some irony in the fact it is the spiralling broadcasting income generated by the Premier League – £5.5bn over three years at the last count – that partly allows these funds to cash in their chips by selling to moneyed English clubs.

Yet as the talking goes on, the influence of third-party funds and the inherent risks associated with them is only increasing. Various studies suggest there is a clear risk of collusion between owners of the funds and the coaches and sporting directors at clubs in which their players ply their trade.

Agents provide the glue between the two, acting as advisers to the funds and sometimes receiving stakes in the players they represent in return.

Now a frustrated Uefa is understood to be willing to take action to ban any players that are owned, in full or in part, by third parties from the Champions League and Europa League – with new rules phased in from perhaps as early as next season.

Eight years ago the Tevez and Mascherano affair cost West Ham £27m in fines and compensation and brought a then obscure agent called Kia Joorabchian to prominence as the representative of those who ultimately owned the players.

Under the agreement, Tevez was brought to West Ham from Corinthians in order to put him in the shop window, and his investors could effectively decide when he was sold, where to and how much for.

It led the Premier League to ban third-party ownership outright, but its use as a means for clubs in Spain and Portugal to buy players they might not otherwise be able to afford continues to grow.

A KPMG study carried out for Fifa in August last year and seen by the Guardian found that the estimated market value of players under third-party ownership was up to €1.1bn (£860m) with the vast majority playing in eastern Europe, Portugal and Spain. In eastern Europe, the practice is widespread with whole swathes of players owned by investors.

But it is at Portuguese clubs – Benfica, Porto and Sporting Lisbon prominent among them – where third-party ownership has had the most obvious effect. In the Premier League, four eye-catching summer transfers involved the careful unpicking of third-party agreements and required top-flight English clubs to buy out investors.

Manchester United’s convoluted £16m purchase of the Argentinian Marcos Rojo and Liverpool’s capture of the Serbian international Lazar Markovic both involved buying out third parties.

Emirates Marketing Project’s £32m deal for Eliaquim Mangala and the same club’s purchase of midfielder Bruno Zuculini (immediately loaned out to Valencia) also involved third-party contracts being bought out.

Mangala’s transfer from Porto is an interesting case in point. Under the Premier League’s rules, City had to buy out two investment firms – Doyen and Robi Plus – to complete the deal. The French international last year admitted he had no idea he was part-owned by the two funds until confronted with the fact by a television documentary crew.

Third-party ownership is banned in England, France and Poland and exists at a low level in other European countries – which is not to say that it may not yet take off there too.

Meanwhile, an interminable Fifa consultation process that effectively began in 2007 is continuing, and an extensive report commissioned from Centre de Droit et d’Economie du Sport and the Centre International d’Etude du Sport, not made public but seen by the Guardian, relates in painstaking detail the negative effect on the game.

It paints a bleak picture in which clubs are held in a “vicious cycle of debt and dependence”, players are denied the ability to decide where they want to play, and the development of homegrown players is harmed.

It details the risks posed by the spread of third-party ownership, stemming from an “institutionalisation of conflicts of interests” in the relationship between the investors in a player, the owners of a club, agents and those on the coaching side.

In particular, it notes the extent to which a small number of agents increasingly control the top end of the transfer market. Their positions as advisers to companies that invest in the economic rights of players makes this worse by strengthening what it terms the “oligopolisation” of the higher regions of the transfer market.

Moreover, it says national football associations are concerned about the further damage to the image of the game and public confidence in the integrity of competitions. The rapid turnover of a large number of players also further threatens the already fraying ties that bind fans to players.

The independence of clubs could also be under threat, the report warns. “The spread of third-party ownership in the majority of cases may be closely related to a partial takeover of the clubs’ control by actors seeking primarily short term profit and speculating on the purchase and sale of economic rights, regardless of sporting concerns,” it says.

This trend, of clubs being used as virtual roulette tables by speculators more concerned with maximising profit through player trading than success on the pitch, is a clear and present danger.

“The development of third-party ownership is thus closely associated with an increasing takeover of clubs by persons motivated by the possibility of speculating on the purchase and sale of player rights,” it says. A previous CIES survey of 269 European agents estimated 15% of them owned stakes in players they represent.

And it states that third-party ownership increases the risk of favouritism towards those players who are owned by investment vehicles “especially when club officials and even coaches are personally involved in the division of possible gains linked to the payment of transfer compensation”.

In such a scenario, it can even lead to pressure being put on national team coaches to select players to increase their value or, conversely, players being leaned on to skip international duty for fear of picking up an injury and jeopardising a potential deal.

“In most cases, the player is not even aware of these financial arrangements,” the report concludes. “Indeed, from an ethical point of view, several football stakeholders from different backgrounds underlined that the fact that many players are kept out of the transactions regarding the transfer of their economic rights is also highly questionable when it comes to the issue of free movement.”

To take one extreme example from the CIES survey, in the Danish Super Liga, Midtjylland last year sold the economic rights of five players to private investors. In return, investors owned 75% of the future transfer value of the players if they were transferred before 2014. The five players were not informed by the club, nor involved in the deal.

Under a standard third-party ownership agreement, the percentage of a player that would usually be taken by an investment fund is anywhere between 10% and 50%.

The duration of the investment, and as such the time frame in which the player is projected to be sold, typically ranges from one to less than four years.

Critics argue that such deals inevitably put pressure on the club involved to increase the value of the player in that time and to sell them. Often, the contracts will include clauses to incentivise the club to sell within a time period.

The KPMG report says a key clause in most third-party ownership contracts “authorises the investor to promote the definitive transfer of the player through the corresponding Fifa agents” – in direct contravention of Fifa regulations. Uefa says there is “little doubt” the funds influence transfer policy even though third-party influence is expressly forbidden by Fifa rules.

Some of the biggest and most glossily presented funds, such as the Doyen fund that found itself at loggerheads with Sporting Lisbon over Rojo’s transfer, insists they do not exert any influence over the playing side and would welcome greater regulation.

Rather than taking a stake in a player, Doyen instead lends the club a percentage of the transfer fee required to buy the player over a fixed period. Yet the net effect is arguably the same.

One of the biggest concerns is transparency. The ultimate beneficial owners of the schemes tend to be shrouded in secrecy and, though the Premier League asks its clubs for the identity of the owners of the scheme they buy out, there is no requirement for that information to be made public.

The schemes tend to be registered offshore, enabling their investors to remain secret and leaving potential conflicts of interest unexplored. Other deals are done through so-called letterbox companies in the UK or the Netherlands, which allow investors to shield their ownership.

Worse still, there are concerns that the widespread introduction of third-party ownership schemes has coincided with a match-fixing epidemic throughout Europe.

The risks of overlap between the two are obvious, and Sporting Lisbon’s De Carvalho made the link explicit in a recent outburst. “Many times there are similar owners from the funds and gambling companies, so match-fixing is the worst fear now for football,” he said.

Much of the concern stems from the opacity of the identities of those involved. Uefa’s patience has worn thin and its general secretary, Gianni Infantino, says that it has been calling for urgent action since its executive committee decided in December 2012 that third-party ownership should be banned.

Michel Platini last month reiterated his opposition to third-party ownership. The Uefa president said: “It is not easy, it is not right. But you know there is a lot of money involved, and I think we have to fight it.” The Frenchman pointed out that he went on strike in the 1970s for the freedom of players to move clubs yet now many of them are owned by financial companies.

Infantino told the Guardian third-party ownership raises “ethical and moral questions” for the game. “It threatens the integrity of sporting competition, it damages contractual stability, it undermines the relationship of trust that should exist between a player and the club that employs him, it creates conflicts of interests, it means that players have less control over the development of their own careers, it keeps clubs in a vicious cycle of debt and dependence and damages the overall image of football,” he says. “Furthermore, there is little doubt third-party investors do influence the transfer policies of clubs even though Fifa rules expressly forbid this. These are actually the findings of Fifa’s own research into this subject. So, it’s now time to act, and if Fifa does not address the problem, then Uefa will.”

It is a battle that will bring the governing body into direct conflict with football’s kingmakers and the overlapping circles of coaches, owners and players they have built up during Fifa’s decade of inaction. In doing so, it may also bring the shadowy network of financiers who invest in the funds that increasingly shape the modern game blinking into the light.

 

[Modric THFC]

Chelsea story from January

http://www.theguardian.com/football/2014/jan/30/chelsea-links-third-party-ownership

Questions for Chelsea over links to third-party ownership of players

Chelsea Football Club appear to be involved in the funding of "third-party ownership" of players outside the Premier League, contrary to the Premier League's and Uefa's strong official condemnation of the practice. Company documents in the UK, Jersey and Ireland strongly suggest that Chelsea are working in partnership with José Mourinho's Portuguese agent Jorge Mendes, and the US company Creative Arts Agency, who buy "economic rights participation agreements" in footballers playing for other clubs outside the Premier League.

Roman Abramovich's Chelsea appear to be partners in the Quality Sports Investments and Quality Football Ireland network of companies, which operate via a complicated series of companies and several different funds in the tax haven of Jersey, to buy a percentage of players' "economic rights". The QSI funds seek to cash in by making a profit when the players are sold, operating via companies in Ireland, where corporation tax is set at 12.5%.

Peter Kenyon, the former Manchester United and Chelsea chief executive, who is now based in St Helier, Jersey, has been reported to have helped set up this Quality Sports Investments and Quality Football Ireland operation, with Mendes and CAA, shortly after he left Chelsea in 2010.

Asked by the Guardian to confirm or deny their involvement, and to explain the purpose of the Jersey investment entity the club unquestionably owns and discuss any possible conflicts of interest, Chelsea declined to discuss any aspect of it. However, Chelsea sources indicated the club considers it is not breaching any rules.

Chelsea's most recent annual accounts for 2012–13 state that the club, via one of its UK companies, Briskspring Ltd, owns a partnership registered in Jersey, Burnaby Investments LP. Until November 2012, this partnership was called Quality Sports III Investments LP. The Chelsea accounts say that the club's partner in Burnaby Investments LP is Burnaby GP Limited. Its country of registration is not specified, but there is no Burnaby GP in the UK or in Ireland. However, there is a Burnaby GP Limited registered in Jersey. Its most recent annual return, January 2013, discloses that it is jointly owned, 100 shares each, by CAA and Mendes's company, Gestifute International, which is registered in Ireland.

So, Chelsea appear to have formed a partnership with CAA and Mendes, and formed Burnaby Investments LP in Jersey, which the Chelsea accounts describe as an "investment company". The accounts do not explain the kind of investment that Burnaby Investments LP in Jersey conducts, and the club declined to explain. However, company records suggest it is linked to a company buying and selling footballers' "economic rights": Burnaby Investments Ireland Ltd. Until its name was changed in November 2012, that company was called Quality Football Ireland III Ltd.

This latter company, Burnaby Investments Ireland, stated in its financial accounts for the year to 31 December 2011 that "QSI III" had paid it a total of €10.5m. Of this money, Burnaby Investments Ireland spent €9.8m buying four "ERPAs," which are explained as players' "economic rights participation agreements", with two clubs. The accounts, stating that the money came from "QSI III", cover a period when Chelsea's partnership, Burnaby Investments LP in Jersey, was still called Quality Sports III Investments.

Burnaby Investments Ireland Ltd's financial accounts for the following year, to 31 December 2012, covering the period after Chelsea's Quality Sports III Investments LP had changed its name to Burnaby Investments LP, state that the €10.5m had been received from "the LP".

The shareholding of Burnaby Investments Ireland is held on trust "for charitable purposes" according to its accounts. Its directors are the Dublin-based accountants Rory Williams and Wendy Merrigan, who declined to answer any questions, including whether Chelsea are involved. The Quality Sports Investment and Quality Football Ireland network operates through at least 10 separate entities in Jersey: five general partnerships, GPs, and five limited partnerships, LPs. According to sources involved, QSI operates different funds, raising money separately for them. CAA, an agency which from its Los Angeles headquarters predominantly represents Hollywood actors and rock bands, is understood to have ventured into the lucrative world of football in 2010-11, and is involved with three players' "economic rights participation" funds.

One of the companies, Quality Football Ireland Ltd, is 70% owned by CAA itself, with the other 30% equally owned by senior CAA directors Michael Levine, based in New York, and David O'Connor, in Los Angeles. The most recent accounts for this Irish company show that at 31 December 2012 it had £15m worth of "economic rights participation agreements", and that money moved between companies described as "QSI" and "QSI II". CAA declined to comment on their involvement with QSI or to confirm whether Chelsea had any involvement, but the agency is understood to be now seeking to sell its interests in this "economic rights" business.

The QSI, Burnaby Investments Ireland and Quality Football Ireland operation does not publicly disclose which players' economic rights it has bought, nor the clubs they are playing for. However, the Portuguese club Sporting Lisbon does declare which of its players are owned by "third-party" funds. Sporting's most recent annual report, for the year to 30 June 2013, lists nine players whose economic rights were sold – in percentages ranging from 25% to 50% – to Quality Football Ireland Limited, Quality Football Ireland III (now renamed Burnaby Investments Ireland) Limited and Quality Football Fund Ireland Limited (which no longer exists in that name).

These players included Ricky van Wolfswinkel, the Dutch striker now playing for Norwich City in the Premier League, after Sporting sold him last summer for £8.5m. The Sporting report shows that 50% of Van Wolfswinkel's economic rights were owned by the Quality Football Ireland companies – not specifying which one – which bought the 50% share for €2.5m. The Premier League has banned third-party ownership, which means Norwich's £8.5m payment had to buy out both Sporting's and Quality Football Ireland's half shares of Van Wolfswinkel.

A Norwich City spokesman said: "We can confirm we were aware of third-party ownership of Ricky van Wolfswinkel … Accordingly we liaised with the Football Association to ensure that all third-party ownership issues were properly resolved prior to the player's transfer."

The other Sporting Lisbon players listed as owned by the three Quality Football Ireland companies were the 20-year-old attacking midfielder Carlos Chaby (50% of his economic rights bought for €1m), 19-year-old striker Cristian Ponde (25% bought for €100,000), 20-year-old striker Diego Rubio (40% bought for €1.4m), 28-year-old Brazilian midfielder Elias Trindade (50% bought for €3.85m), the 26-year-old Argentinian midfield player Fabián Rinaudo (50% bought for €1.1m), whom Sporting sold earlier this month to Italian club Catania, 21-year-old midfielder João Mário, (25% bought for €400,000) sold on January 18 to Vitória Setúbal; 30-year-old Dutch midfielder Stjin Schaars (37.5% bought for €319,000), sold last summer to PSV Eindhoven for £850,000 and 19-year-old defender Tobias Figueiredo (50% bought for €1m).

It is not possible to see from the publicly filed company documents whether Chelsea's money, or Burnaby Investments LP, its wholly owned Jersey partnership apparently with Mendes and CAA, directly funded purchasing the economic rights in these Sporting Lisbon players. Even if Chelsea did, and are indeed involved in buying and selling "economic rights participation agreements" of players at other clubs, they seem not to be breaking Premier League rules because none of their players are third-party owned.

The Premier League banned "third-party ownership" of players at its clubs after the outcry over West Ham United's signing of Carlos Tevez and Javier Mascherano in 2006 while the Argentinian stars' economic rights were still owned by two tax haven-registered companies. Richard Scudamore, the Premier League's chief executive, for whom the Tevez affair lengthened into a rocky saga of lawsuits and disciplinary proceedings – West Ham were fined £5.5m for failing to disclose all the contracts – is wholly opposed to third-party ownership. Uefa strongly agrees, and has, in alliance with Scudamore, lobbied Fifa to ban the practice.

It is unclear if the Premier League ever considered the possibility that, despite having outlawed "third-party ownership" of players in English football, its clubs could be involved in third-party ownership of players in other leagues abroad. The Premier League declined to comment on Chelsea's apparent involvement.

That Chelsea should be in partnership with Mendes and CAA in the Burnaby venture, without openly discussing it, raises many questions. One inference is that Chelsea could be seeking through this involvement to secure options over players at other clubs.

Mendes and Kenyon worked closely together when, as the chief executive of United, Kenyon signed Mendes's clients Cristiano Ronaldo, Anderson and Nani. After he moved to Chelsea to spearhead Abramovich's multimillion pound desire for football trophies, Kenyon signed Mendes's players Deco, Ricardo Carvalho and Paulo Ferreira. Mendes's Gestifute company itself is known to buy players' economic rights as well as representing players, which means it receives a portion of the transfer fee when such a player is bought by another club.

Most publicly, when Manchester United bought the Portuguese player Bébé in 2010, Gestifute had just days earlier bought 30% of the player's "economic rights" and begun representing him, Bébé having sacked his former agent Gonçalo Reis just before the United deal. Of the €9m United paid the Portuguese club Guimarães, Gestifute reportedly received €2.7m for the 30% "ownership" of Bébé, and were also paid a 10% agents fee: £3.6m in total although Mendes never confirmed these figures.

The Guardian asked detailed questions about QSI, the Jersey and Irish companies and the apparent Chelsea involvement, of Mendes's company Gestifute and Kenyon. Like Chelsea, CAA and Williams, they declined to comment.

 

[screen nayim]

Not really a surprise is it? Had to laugh at the Bebe deal though.

 

[Danners9]

The Mendes/Kenyon deal sounds incredibly smart. It's not beyond the realms of possibility that these players would move on to other clubs eventually anyway but having buyers lined up already, if the player becomes good, is not too dissimilar to how Spurs acted with Modric/Bale to Real Madrid. Others came in and the bids were rejected but there was always going to be another club that would want these players (and the players themselves would want!).

These kinds of deals have allowed clubs without the funds required to purchase players that will improve them in exchange for a trade off at the end. I'm glad it isn't allowed in England but it will mean Spurs will miss out on some players (as do the WP rules) to other clubs - Musacchio being an example this summer. Not all of the leagues are flush with money so clubs need to be creative in order to stop the flow of players and remain competitive. It does also allow talented players from poor backgrounds to gain exposure they may have missed out on - similar to record labels in the music business.

If these agents are moving to clubs on purpose, against their current club's wishes, then that's obviously an issue, but otherwise it seems like a win-win deal for all. Players should be aware of it and should also have to give their permission if there is a change in the initial agreement. There are also clubs that are partly or completely owned by agencies. Their squads are transient and merely serve a purpose of holding the registration - Desportivo Brasil for example - while most of the players go off on loan elsewhere then get signed.

 

[metalgear]

Glad to see some action, I suspect UEFA wants a slice of the pie, but have no issues if it is done with transparency and prioritizes t players interests first.