“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.
Monaco's private agency
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.
Gazprom's generous activity
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.
Gazprom and thus Putin's government appears set on investing and sponsoring football clubs across Europe. Already Gazprom has invested £100m in Schalke in Germany since it “sponsored” them in 2006. It is believed that Gasprom’s deal with the club was heavily political in order to buy friendship with Germany. The company recently prolonged its deal Schalke until 2017, continuing it's position in German affairs.
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.