What they did wrong and what it means

On Friday, Juventus was found guilty of transfer irregularities and docked 15 points by the sports tribunal of the Italian Football Association, a decision that pushes them from third place down to midtable. Eleven current or former Juventus directors were also banned, including former president Andrea Agnelli (two years), former chief football officer Fabio Paratici, who is now at Tottenham Hotspur (2½ years) and sporting director Federico Cherubini (16 months).

It’s a massive body blow for the Turin club, so here’s a Q&A to make sense of it.

Q: What exactly were they found guilty of doing?

A: Essentially engineering transfers, usually swap deals, where little or no money changed hands but the club made an accounting profit (on paper).

This is the magic of amortization. If you offload a player to another club for, say, a fee of 10 million, you get to record the 10 million as revenue. But if you spend 10 million to acquire a player and he sends, say, a five-year contract, you can spread the 10 million evenly over the life of the contract.

Q: If I get one guy for 10,000,000 and offload another for 10,000,000, have I magically made a profit of 8 million? Ten million in and two million out, because I spread the 10 million cost over five years?

A: On paper, yes. In real life, no. And, of course, you still have to account for 2 million every year for the life of the contract. But in the short term, in your scenario, you can show a capital gain of 8 million.

– Stream on ESPN+: LaLiga, Bundesliga, MLS, more (US)

This is not illegal and this is how almost every club in Europe does their accounting. The problem arises when two clubs engineer a swap deal and inflate the value of the players involved. Officially, they are two separate deals, but in practice, they mirror each other and because no money is changing hands, you can put whatever valuation you like on the player.

In the example above, if you acquire a player for 100 million and move a player to the same club for 100 million, then – presto! – You made 80 million (and so did the other club).

Q: Aren’t Juventus already charged with this and cleared?

A: Yes, they and eight other clubs (Genoa, Sampdoria, Empoli, Pro Vercelli, Novara, Pescara, Parma and Pisa) were charged and finally cleared. They successfully argued that no one can put an objective valuation on a player and, therefore, no one can say that a transfer fee – or, more precisely, the valuation you put on a player in a swap – is inflated. In other words, a player is worth what the market will play, and the court agrees with them.

Also Read :  Lionel Messi inspires a worldwide pilgrimage to Qatar World Cup

Q: So why was the case reopened? It sounds like double jeopardy to me, being tried twice for the same crime…

A: Prosecutors successfully agreed to reopen the case because they say new evidence has emerged. The evidence comes from a separate criminal investigation known as PRISMA, and the allegation is that not only did they create the fraudulent exchange deals at inflated valuations, but it was part of a systematic attempt to cook the books. Oh, and according to wiretaps and written evidence (including handwritten notes), they knew what they were doing was not above board.

It is a criminal investigation, because Juventus is listed on the Italian stock market and has strict reporting requirements – according to the investigators, this is accounting fraud. Sports prosecutors did not have the evidence before them when they cleared Juve and the other clubs, which is why the case was reopened.

Q: OK, but if two clubs enter into a fraudulent swap deal to cook the books, shouldn’t they both be penalized?

A: That’s a fair question, and that’s another element of Juve’s defence, along with the fact that they’ve already been cleared of that. Based on the court proceedings, it appears that the difference is the sheer number of such deals, the fact that they believe they have evidence – thanks to the Prism investigation – that it was apparently systematic and planned, and that they knew that It is wrong. .

That said, there are other clubs that appear in the evidence that Prisma collected – not just the eight original clubs that were cleared – and that could still be indicted. Some of the conversations say that they also knew that what they were doing was not above board.

Also Read :  Exclusive: Thousands of workers evicted in Qatar's capital ahead of World Cup

Q: I still don’t get it, though. If, as Juve say, there is no rule preventing this, why should they be punished?

A: Well, there is no specific rule in the sporting sphere. There is a specific rule about being transparent with shareholders, especially if you are a listed club, although this is a matter for the criminal investigation.

Prosecutors also claim they violated Article 4 of the Italian FA’s rules, which covers fairness and fairness, and Article 31, which covers false accounting. (This, Juve may say, raises the question: if the deals are not illegal, how can they be false accounting?)

Q: So what happens next?

A: Juve will wait for the “written reasons” that support the court’s argument in the sentencing. Then, they will appeal to Italy’s Sports Guarantee Board, which is basically the highest court. They will not judge on merit, they will simply judge whether the sporting court followed procedures and correctly applied its own rules. That means they can either confirm the sentence or overrule it, they can’t, say, give Juventus a reduced sentence.

If the ruling is upheld, Juve have one last shot at the Court of Arbitration for Sport in Lausanne. But it will be a busy time for their lawyers, because there are several investigations…

Q: Such as?

A: Well, it is the PRISMA investigation itself, which could theoretically lead to a custodial sentence. This does not only cover the alleged systematic transfer irregularities; It also covers incorrect accounting over the pay cuts players took during COVID.

Seriously, it was officially reported that the players volunteered to give up four months’ salary when, in fact, according to the allegation, most had side deals to get some of the salary back. This enabled Juventus to shift costs from one accounting period to the next.

In some ways, the investigation is more serious because it is a criminal investigation and Juventus are listed on the Italian stock market, which means they have stricter reporting requirements. That’s why the Agnelli family replaced their entire board in November. This is a criminal investigation, and they could also face a sporting investigation over this.

Then there is the fact that they are being investigated by UEFA for potential violations of Financial Fair Play. If they have engaged in false accounting to meet the FFP requirements in previous years, they may be sanctioned for this as well.

Finally, the Prisma investigation uncovered questions about swap deals with other clubs that were not covered in the investigation because they were unaware of evidence at the time. This may also lead to new charges.

Q: One thing I don’t get is why, if the prosecution asked for a penalty of nine points, the court ends up with an even stiffer sentence, docking them 15 points…

A: Yes, this is a little strange to me. The explanation, apparently, was that for the sentence to be meaningful, it had to have a significant impact on the club – enough to deny them, say, a place in the Champions League. When they were charged, nine points seemed enough. Then they went on a run of good results and moved up the table, so the place was even harder.

I guess because there is no clear precedent or jurisprudence to this regard, they felt there was nothing stopping them from going in harder. But it is certainly unusual for a judge to override the request of the prosecutors.

Q: And what are the implications on the field?

A: Not good. Juventus posted record Serie A losses of more than $250 million last year, breaking their own record from the previous season of $210 million. Some of this, of course, was COVID, but keep in mind that the losses come with the benefits of the allegedly dubious transactions. If the penalty means they won’t be in the Champions League next season – and it will be very difficult to make 15 points on the pitch – that’s a further loss of revenue.

Indeed, and Juve’s shareholders have already injected some €700 million in new capital in recent years.

This is part of the reason why Juve’s new president, Gianluca Ferrero, has made it clear that he will be much stricter going forward. And this will likely translate into greater confidence in the youth academy and, of course, less spending.

Q: A final point for Tottenham fans: what happens to Fabio Paratici, who is now Spurs’ managing director in charge of transfers?

A: Well, first he left the two apples, so you are innocent until proven guilty. His ban would likely not come into effect until he had exhausted the appeals. If the ban stands, it also depends on whether FIFA and UEFA decide to extend the ban worldwide and that remains to be seen.

Of course, the whole thing doesn’t do him any favors, so it really comes down to the club and how they feel about him, if he is suspended.

Source

Leave a Reply

Your email address will not be published.

Related Articles

Back to top button