European soccer ruling body UEFA is asking U.K. authorities to investigate two so-called letterbox companies that helped Porto fund a player transfer.
For Gool Co. and Pearl Design Holding Ltd. provided finance for the two-time European champion to sign Brazilian striker Walter da Silva for 6.2 million euros ($8.1 million) in 2010, according to Porto’s latest quarterly statement.
As banks ratchet up lending requirements, soccer clubs are seeking alternative ways to raise funds, often in return for a share of a player’s future transfer fee, said Sandalio Gomez, who teaches sports management at IESE business school in Madrid. UEFA officials said this increases the risk of money laundering because it’s unclear who owns the letterbox companies, which have mailing addresses in the U.K. and seemingly nothing else.
“We are urging state authorities to look into it,” UEFA Secretary General Gianni Infantino said. “Because we are a private company, an association, we cannot go to a company when it is a letter box saying ‘please tell us who you are and what you’re doing.’ They will tell us: ‘Who are you to ask me?’”
Rochdale-based For Gool provided a 2 million-euro loan for Porto to sign Da Silva from Uruguay’s Club Atletico Rentistas and London-based Pearl Design bought 25 percent of the 22-year-old’s future transfer rights for 2.1 million euros, according to the Porto statement. Porto spokesman Rui Cerqueira didn’t return two e-mails and two telephone calls seeking comment.
Mark Quirk, a co-owner of For Gool’s parent company Kirkdelta Ltd., didn’t respond to letters sent to three business addresses on Jan. 11. Mario Queiroz, the only listed shareholder of Pearl Design, didn’t respond to an e-mail.
U.K. law allows small businesses to “completely hide” from view what they’re doing, said Richard Murphy, director of Norfolk, England-based Tax Research LLP and co-author of 2009 book “Tax Havens: How Globalization Really Works,” which describes how some companies conceal financial transactions.
“You can form a company to do a deal, say one football transfer, and then get rid of it almost straight away and never put any information on public record,” Murphy said. “If this was taking place offshore, it would probably be condemned.”
England’s Premier League and France Ligue 1 have outlawed shared ownership of players’ transfer rights over concerns clubs won’t have total control, allowing agents and other third parties to influence when a trade is made.
A company can set up a letterbox company in less than 10 minutes with a single director, Murphy said. It can file abbreviated accounts, assuming it has annual sales of less than 6.5 million pounds ($10.2 million) and fewer than 50 staff.
Quirk is a director of 21 U.K.-based companies and has resigned from 74 since 2005, records at London-based Companies House show. Queiroz is director of 45 companies in the U.K. and 35 in Spain, including Spanish Fiscal Representation SL, according to Companies House and Madrid-based Registro Mercantil.
Nominee directors, while not approved by British regulators, would be subject to the same laws as all company directors, the U.K.’s Department for Business, Innovation and Skills said in an e-mail. All companies registered in the country are subject to the same regulatory regime, the department said.
Another U.K. company, Robi Plus Ltd., owns 10 percent of the transfer rights of two Porto players, Eliaquim Mangala and Steven Defour, the team said in a Dec. 27 statement.
Robi Plus is a so-called bearer share company whose director is Maurizio Delmenico, according to Companies House filings. The holder of the share certificate of a bearer-share company is the recognized owner. It’s a way of shielding the ownership structure, Murphy said.
Delmenico, a player agent and tax adviser, said by telephone from his office in Lugano, Switzerland, that the company is his own and he set it up in the U.K. because some of its affairs, including brokering player trades, are based there.
U.K. authorities have “several tools” for identifying the owners of bearer-share companies that they regulate, the government said in an e-mail.
Stock market-listed Porto reported a profit in each of the past five fiscal years, partly by trading players it developed to bigger clubs. It had net income of 534,000 euros on sales of 89.8 million euros in the year ended June 30, according to a financial statement.
In the last two years, Porto sold part of the transfer rights for midfielder Joao Moutinho and striker James Rodriguez to Amsterdam-based Mamers BV and Luxembourg-based Gol Football Luxembourg SARL, respectively, according to a team statement for fiscal 2011.
‘Out of Control’
Such funding deals are being sought by clubs that “need something in their coffers,” according to IESE professor Gomez, who co-wrote a 2009 study about Argentina’s River Plate selling player transfer rights to investors. “In principle this works, but you need to regulate it well or it could get out of control,” Gomez said.
Porto had bank loans of 24 million euros on June 30, the team statement said. The interest rate it paid for the loans increased to an average 7.1 percent from 6.5 percent in the six months to Sept. 30.
Letterbox companies raise the possibility of a conflict of interest, according to Andrea Traverso, UEFA’s head of club licensing. Traverso oversees so-called financial fair play rules that UEFA is introducing to stop clubs from overspending and also to increase transfer-market transparency.
“Who is actually controlling these players?” Traverso said. “Is it the club or the companies? It would be very interesting to know.”