This week’s shocking news that the Premier League has charged Manchester City with 100 breaches of their financial rules led many to look to Italy, to the recent points deduction handed out to Juventus for ‘false accounting’.
Might one inform the other, they wondered, and offer clues as to what fate may ultimately befall the Citizens?
To complicate matters before they get clearer, the answer is no, but it may in due course.
It might because on March 27th a separate investigation undertaken by Turin’s Public Prosecutor office – an investigation named ‘Prisma’ – will have its preliminary hearing to determine whether Juventus are guilty of ‘market manipulation’ in paying players money that was unaccounted for.
During the pandemic it was announced that the squad would forego four months wages but instead there was only one month without any payment, with the rest allegedly paid in secret.
For a club listed on the stock exchange this would be a serious misdemeanour.
Here there is a modicum of similarity with one of the accusations Manchester City are contesting, or at least it’s in the same ballpark, with the remuneration of their former boss Roberto Mancini said to have been topped up ‘off the books’.
It is important to state though that there are no direct correlation between each club’s alleged wrongdoing, and that both clubs insist upon their innocence.
Regarding the misdeeds that led to the grand old lady of Serie A being docked 15 points last month however, instantly dropping them from third to 13th, they were very different and entirely unrelated to any charges being brought against the English champions. Indeed, in every way it was a very Italian scandal.
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— The Athletic | Football (@TheAthleticFC) February 7, 2023
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The inside story of the Juventus financial scandal...
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Why an Italian scandal and not only solely a Juventus one?
Because the investigation – that began via a report by an industry watchdog that was later passed over to the Italian Football Federation – centres on the practice of artificially inflating transfer fees in order to benefit later from ‘plusvalenza’ (capital gains).
This it transpires is a fairly common occurrence on the peninsula, or that’s a fair assumption to make given that 11 clubs were originally under suspicion.
When it ultimately proved impossible to properly determine a player’s worth the case collapsed and the clubs – along with 59 officials connected to them – were acquitted.
The only reason Juve were subsequently caught was because of an incriminating wiretap that came to light, as well as the existence of a notebook that had one Juventus director refer to another’s ‘excessive use of artificial capital gains’.
So what is capital gains, and how did it lead to a European giant’s downfall?
To understand this it is necessary to get to grips with the concept of ‘amortisation’ but before you rightfully point out that we’re not accountants, and instead we simply share a love of football and betting, don’t worry. It’s very straightforward.
Amortisation is basically the spreading out of a transfer fee, so as not to take too much of a dent out of a yearly balance sheet.
Let’s say, for example, that a player costs £80m. That fee is split into four payments of £20m, over a period of the four years of his contract. See? Straightforward.
Now let’s say that the same player is sold by the club two years later for £60m. Forty million is still owed, but there is now a £20m profit in the yearly accounts. In the era of FFP this is a boon for every club, even those as rich as Juventus.
If this feels instinctively above board it becomes a real problem when players are traded for the specific intention of benefiting from ‘plusvalenza’ (capital gains) and it should be said that in the original league-wide investigation 62 player transfers came under review, with 42 of them involving Juventus.
One such deal concerned the sale of Miralem Pjanic to Barcelona in 2020 for the sum of £53m – a surprising amount considering football was under the duress of a global pandemic - and the purchase of Arthur from the same club around the same time.
Again, the figure set was steep, a lofty £63m.
Though these transfers were not officially aligned it meant that only £10m changed hands, but each club could post huge profits in that year’s accounts. As for their outlays, these were amortized across the duration of each player’s contracts.
It is estimated that Juventus generated a plusvalenza of just shy of €42m from these dealings.
This of course is not the first time that Juventus have succumbed to infamy, with the ‘Calciopoli’ match-fixing scandal in the 2000s seeing them stripped of a Scudetto and relegated.
Here, it may be a lesser crime, with a lesser punishment, but just one month ago their Serie A odds had them primed to finish top four. Now they are closer to the bottom three than they are to sixth.
All this because of greed.
*Credit for all of the photos in this article belongs to AP Photo*
FIRST PUBLISHED: 7th February 2023
