The Third Party
A tax avoidance scandal in Argentina could have ramifications across the globe
To most in the football world, the news that some Argentinian clubs have been engaged in a form of tax avoidance will be greeted with a shrug, but this is a scandal that potentially involves some of the biggest clubs in Europe, South America, Mexico and Asia.
The Argentinian judge Norberto Oyarbide is studying 444 transfers of Argentinian players — both those who have moved to foreign clubs or those who have returned from abroad in recent years — as part of an investigation into a system of tax evasion known as 'triangulations'.
In a 'triangulation', the player being transferred passes through an intermediary club for whom he never plays. Typically that intermediary will be in a country in which the tax paid on transfers is much lower than in either Argentina or the country of the club the player is leaving or joining.
Ricardo Etchegaray, the head of AFIP, the Argentinian tax authority, has denounced those third-party clubs as "sporting tax havens" and in many cases those clubs have admitted receiving a fee, often as little as US$10,000, to be used to reduce the tax. In Argentina, 24.5% of any transfer is paid out in fees — 15% to the player, 2% for the Argentinian Football Association (AFA), 0.5% to the players union and 7% to AFIP. In Chile, that percentage goes down to 19. In Uruguay, it is as low as 2%.
There's nothing casual about the way Argentinian clubs have been cooperating with small clubs such as Sudamérica, Fénix, Progreso, Bella Vista, Cerro, Boston, River and Rampla Juniors (Uruguay), Unión San Felipe and Rangers (Chile) and Locarno (Switzerland). Between the end of August and the beginning of September 2012, AFIP suspended 151 of the 210 agents registered with AFA on suspicion of avoiding taxes through the use of intermediary clubs.
The case of the former Everton forward Denis Stracqualursi provides a case study. He joined San Lorenzo from Everton but the records show that he passed through Fénix of Uruguay. Fénix was also the (very) temporary home of the defender Facundo Roncaglia as he made his way from Boca Juniors to Fiorentina, while the midfielder Ignacio Piatti was briefly registered at Sud América of Uruguay as he moved from Lecce to San Lorenzo.
The secretary of Fénix, Alvaro Chijane, makes no secret of the practice, "It's no crime," he said. "We have the federation licences of the players that we register at the club and pay the corresponding taxes. We agree a percentage in negotiations with the executives of the Argentinian clubs and the business is so good that what we earn on one deal can pay our players' salaries for a month." What Chijane does not say is that the taxes paid by Fénix and the Argentinian clubs are not those that would be paid if the player actually joined the club.
Two cases illustrate the point: those of Jonathan Botinelli and Gonzalo Higuaín. Botinelli, the former Sampdoria defender, joined River Plate from San Lorenzo before the start of this season. On the way across Buenos Aires, he was briefly registered at the small Chilean club Unión San Felipe — for whom, of course, he never played. His contract stipulated that if Botinelli played more than five official matches for River — which he has already done — River would pay the Chilean club an additional US$550,000. That aroused AFIP's suspicions.
Their investigations found that the football section of Unión San Felipe is owned by Old Oask Invest which is managed by the Argentinian Raúl Delgado, a former journalist who was secretary of media communications for the government of Carlos Menem between 1995 and 1999. Old Oask Invest is based in the Virgin Islands. Delgado had a similar position in Argentina with Brown of Arrecifes, a club in the National B (the second division) that ended up suffering three straight relegations without winning a single game. In 2003, a Brown player, Walter Chazarreta, said that the club was being "emptied".
Something similar has been going on at Sud América of Uruguay, who are run by the Argentinian Vicente Celio, a former vice-president of Chacarita Juniors. He arrived at Chacarita with the backing of the AFA president and Fifa vice-president Julio Grondona. In his time at the club, Chacarita sold such players as Facundo Parra (to Larissa of Greece) and Ignacio Piatti (to Saint-Étienne of France) and were relegated from second to third flight.
But the most startling case is that of Higuaín and his move from River Plate to Real Madrid in December 2006. River sold Higuaín to Locarno of Switzerland for US$6million and a percentage of any future transfer fee received. A few days later, Locarno sold Higuaín to Real Madrid for $18 million. Of that $18 million (effectively the 'real' fee, what Real Madrid were prepared to pay), US$2.7m went to Higuain, US$360.000 to AFA, US$ 4.4m to River Plate and US$ 10.5m to Locarno.
Locarno are owned by HAZ Football World Wide Limited, which has its headquarters in Gibraltar and derives its name from the first letter of the surnames of its three owners — (Fernando) Hidalgo, (Gustavo) Arribas and (Pinjas) Zahavi. The first two are Argentinian executives; Zahavi is a well-known Israeli agent.
Many have asked about Grondona's role in the triangulations scandal. The master politician, who has been president of AFA since 1979 while climbing the greasy pole at Fifa, has been publicly indignant about the tax avoidance. "AFA is happy to review everything, but this is a very difficult structure to clear up and it's impossible to do it ourselves," he said. "I've talked with Etchegaray, telling him the names of the people who have dedicated themselves to the buying and selling of players."
He seems not to recall that in 1997, AFA came close to establishing a business to produce television game shows with Alejandro Mascardi, the brother of Gustavo, one of those agents blocked by AFIP.
Grondona has made himself one of the main collaborators of the government of Cristina Fernández de Kirchner, helping in 2009 to break the contract for television rights that AFA had with TRISA to establish the Fútbol para todos programme. It ensures all top-flight Argentinian games are shown on public television and represent a de facto state subsidy for football. It is, of course pure coincidence that TRISA is 50% owned by Grupo Clarín, the main media opponents of Kirchner.
AFIP's activity, few doubt, is motivated by the need to increase revenues and to prevent money leaving Argentina for abroad. Etchegaray has said that if debts are paid, the issue will not be taken further. But very few are paying and that could mean consequences not only for Argentinian agents, clubs and players, but also for clubs in the rest of the world. Among the 444 transfers being investigated by Oyarbide are those involving Sergio Agüero, Ever Banega, Martín Palermo and Gabriel Heinze (to Spain), Martín Demichelis and Andrés D'Alessandro (to Germany), Javier Mascherano (to Brazil), Mariano Andújar (Italy), Gonzalo Bergesio (to France), (Spain) and Diego Forlán (to England).
Etchegaray has already contacted the tax agencies of many countries to collate data. What began as an Argentinian scandal threatens to spread across the globe.