What they did wrong and what it means

On Friday, Juventus was found guilty of transfer irregularities and awarded 15 points by the Italian Football Federation’s Sports Court, a decision that pushed them from third to middle place. Eleven current or former Juventus directors have also been banned, including former president Andrea Agnelli (two years), former chief football officer Fabio Paracci, now at Tottenham Hotspur (two and a half years) and sporting director Federico Cherubini (16 months).

It’s a big blow for the Torino club, so here’s a Q&A to get it right.

Q: What exactly were they convicted of doing?

A: Principally engineering transfers, usually swap deals, where little or no money is exchanged but the club gets an accounting benefit (on paper).

It is the magic of consumption. If you offload a player to another club for a fee of say 10m, you will get 10m in revenue. But if you spend 10 million to get a player and he signs, say, a five-year deal, you can spread that 10 million evenly over the life of the contract.

Q: If I get one man for 10 million and offload another for 10 million, you’ve made a magical profit of 8 million? Ten million in and two million out, because I’m spreading the cost of the ten million over five years?

A: On paper, yes. In real life, no. And of course, you still have to calculate 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.

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It’s not illegal and it’s pretty much how every club in Europe does their math. The problem arises when two teams plan 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 since there is no money to change hands, you can put whatever rating you want on a player.

So in the example above, if you get a player for 100m and transfer a player to the same club for 100m then – presto! – I won 80 million (so did the other club).

Q: Wasn’t Juventus already accused of this and acquitted?

A: Yes, they and eight other clubs (Genoa, Sampdoria, Empoli, Pro Vercelli, Novara, Pescara, Parma and Pisa) were charged and eventually acquitted. They have 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 accurately, the valuation you put on a player in a swap – is overrated. In other words, the player deserves what the market will play, and the court agreed with them.

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Q: Why was the case reopened? It feels like double jeopardy, being tried twice for the same crime…

A: Prosecutors have successfully agreed to reopen the case because they say new evidence has come to light. This evidence comes from a separate criminal investigation known as Prisma, and the allegation is that not only did they create these fraudulent swap 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 wasn’t above board.

It is a criminal investigation because Juventus is listed on the Italian Stock Exchange and has strict reporting requirements – according to investigators, this amounts to accounting fraud. The sports prosecutors did not have this evidence when they acquitted Juventus and the other clubs, which is why the case was reopened.

Q: Well, but if two clubs enter into a fraudulent exchange to cook the books, shouldn’t they both be punished?

A: That’s a fair question, and that’s another element of Juventus’ defence, besides the fact that they’ve already been cleared of this. Based on court proceedings, the difference seems to be the sheer number of these deals, and the fact that they believe they had evidence that – thanks to Prisma’s investigation – it was apparently systematic and planned, and that they knew it was a mistake.

However, there are other clubs that appear in the evidence collected by Prisma – not just the original eight who were acquitted – and could be charged. Some conversations indicate that they also knew that what they were doing was not above par.

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Q: I still don’t get it. If there is no rule forbidding this, say Juventus, why should they be penalized?

A: Well, there is no set rule in the sports field. There is a definite rule about transparency with shareholders, particularly if you are a listed club, although this is a matter of criminal investigation.

The plaintiffs also argue that they breached Article 4 of the FIGC’s rules, which cover fairness and probity, and Article 31, which covers false accounting. (Juventus would say this raises the question: If these deals weren’t illegal, how could they amount to false accounting?)

Q: So what happens next?

A: Juventus will await the “written reasons” that support the court’s argument in the ruling. Then, they will appeal to the Italian Sports Guarantee Board, which is essentially the highest court. They will not judge merit, they will simply judge whether the sports court has properly followed procedures and applied its own rules. This means that they can either confirm or reverse the sentence, and cannot, for example, award Juventus a reduced sentence.

If the ruling is upheld, Juventus will have one last chance at the Court of Arbitration for Sport in Lausanne. But it will be a busy time for their lawyers, since there are many investigations going on…

Q: Like?

A: Well, there is the Prisma investigation itself, which could theoretically lead to a prison sentence. This doesn’t just cover alleged systematic transfer infractions; It also covers miscalculations about pay cuts players have made during COVID.

Basically, the players were officially reported to have volunteered to forgo four months’ salary, when in reality, according to the allegation, most of them had side deals to recoup some of that wages. This enabled Juventus to transfer costs from one accounting period to another.

In some ways, this investigation is more serious because it is a criminal investigation and Juventus is listed on the Italian Stock Exchange, which means they have stricter reporting requirements. That’s why the Agnelli family replaced the entire board of directors in November. This is a criminal investigation, and they may also face a sports investigation for that.

Then there is the fact that they are under investigation by UEFA for possible financial fairness breaches. If they have already engaged in false accounting for meeting FFP requirements in previous years, they can be penalized for that as well.

Finally, the Prisma investigation revealed questions about swap deals with other clubs that were not covered in this investigation because they were not aware of the evidence at the time. This may result in new fees as well.

Q: The only thing I didn’t understand was why, if the prosecution requested a nine-point penalty, the court ended up with a more severe penalty, which resulted in them being discharged by 15 points…

A: Yes, that sounds a little strange to me. The explanation, it seems, 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 continued to do well and moved up the table, so the court was much harsher.

I think there is no clear precedent or jurisprudence in this regard, they just felt there was nothing stopping them from going into it even harder. But it is certainly unusual for a judge to override the plaintiffs’ request.

Q: What are the repercussions on the field?

A: Not well. Juventus posted record losses in Serie A of more than $250m last year, breaking its own record from the previous season of $210m. Some of that was obviously COVID, but keep in mind those losses come with the benefits of these questionable transactions. If the penalty means they won’t be in the Champions League next season – and 15 points on the field will be very difficult to make up for – that’s another loss of revenue.

Oh, and Juventus shareholders have already pumped around €700m in new capital in recent years.

It’s part of the reason Juventus’ new president, Gianluca Ferrero, has made it clear he will be tougher going forward. This is likely to translate into greater reliance on the youth academy and, of course, less spending.

Q: One last point for Tottenham fans: what happens to Fabio Paratici, who is now Tottenham’s managing director in charge of transfers?

A: Well, our appeals left both appeals, so you’re innocent until proven guilty. His ban is not likely to go into effect until those appeals have been exhausted. If the ban continues, it also depends on whether FIFA and UEFA decide to extend the ban worldwide, and that remains to be seen.

Of course, this whole affair is not doing him any favors so it really comes down to the club and how they feel about him, if he is acquitted.


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