Soccer, the world’s largest game is often the world’s largest joke. From governing bodies rigging World Cup locations to blatant corruption, soccer fans and other sports fans alike are rightfully skeptical of the actions of those with power in the sport.
Recently however, things changed. The Union of European Football Associations (UEFA), the governing body for soccer in Europe actually did its job – they cracked down on Premier League powerhouse team Manchester City’s financial corruption.
In 2010, UEFA created the Financial Fair Play Act. It was an attempt (albeit lazy) to create a more equal opportunity for all teams to attract the best players to their organizations and have a chance to compete for each league’s respective championship trophy. Unlike the NHL, for example, which has hard salary cap of how much teams can spend on their entire rosters, or even a soft cap with a hefty tax if you exceed the threshold, known to be effective in the NBA. UEFA, as any international soccer organization would, had to do things differently.
UEFA’s act prohibits teams from spending on their players and staff in excess of the team’s earnings. Therefore, no net losses are permitted due to salary expenses. This means a team with larger earnings can afford to pay players more, attracting better players, thus having a greater chance of winning and further earning more. It’s nice – if you’re a wealthy team – but puts every other team in survival mode; “fair” as UEFA calls it.
Manchester City is one of those wealthy teams. It was purchased by the Abu Dhabi ruling family member Sheikh Mansour for 1.3 billion British pounds with a humble personal net worth of $30 billion USD in 2008. City then became one of the wealthiest sport franchises in the world.
Mansour didn’t stop investing in the team beyond the initial acquisition. In an attempt to avoid UEFA rules, Mansour persisted to increase City’s cash flow from operations by funnelling more money into the team, termed “commercial and sponsorship revenue” in amounts beyond those agreed respective arrangements. It wouldn’t surprise you to know that cash came from the team’s sponsorship deals with Etihad, United Arab Emirates and, you guessed it, Abu Dhabi – all of which Mansour has a stake and influence in. The additional cash in excess of the agreed deals inflated City’s net income, allowing Mansour and team management to recruit better coaches, managers and players in a shameless case of fraud and corruption.
Due to these actions, City was able to recruit established winning manager Pep Guardiola in 2016 and star players such as Sergio Aguero and David Silva among many more. This propelled them into a championship team this past season. Mansour’s scheme worked, up until now.
UEFA caught on, which isn’t surprising. Fraudulent financial statements, inflated working capital, and recruiting team personnel beyond their means isn’t something only the resources of a Big Four accounting firm can detect. What is surprising however, is what UEFA did.
Once uncovered by UEFA, City who was expecting a slap on the wrist in typical soccer corruption fashion, was handed a two-year ban from the Champions League. In a remarkable and unprecedented outcome, the main governing body of club soccer finally gave itself some credibly.
While a lengthy court battle is likely to emerge as a result of this ruling, nonetheless, UEFA did its job – and the right thing. It enforced what it should have enforced. Although it will take time for the financial statements and ultra-rich owners of wealthy soccer teams to gain credibility, it is a step in the right direction. International financial reporting standards, rules, and ultimately soccer fans deserve to be respected and followed. Plus, it’s nice to see the governing bodies of soccer getting their act together.