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Third-Party Ownership: Plenty of loopholes (Piece for Dotted.Mag)


August 2006 provided one of the most unusual and controversial double-transfers in recent memory. Carlos Tevez and Javier Mascherano arrived at Upton Park in a major coup for Alan Pardew’s West Ham side. Both players went on to achieve great careers in some of England, and later Europe’s, biggest teams.


However, the controversy wasn’t the talent that both players possessed and signing for a West Ham side that would only avoid relegation thanks to a final day Tevez goal.


The tale of the agreement between Media Sports Investments and Brazilian side Corinthians led to a confusing and murky transfer saga. This was concluded with Sheffield United reportedly receiving £25 million in 2009 as compensation for the illegality of the transfer.


Perhaps alarm bells should have started ringing when West Ham released the following statement shortly after securing the two Argentine stars:


‘The pair have been signed for an undisclosed fee and put pen-to-paper on permanent contracts with the club this afternoon. All other aspects of the transfers will remain confidential and undisclosed.’


Looking back at some of the quotes from the time does make great reading: Tevez on Pardew and West Ham:


'Other clubs in the Premier League and Europe were interested in us but when we met Alan Pardew he made us both really feel wanted.

I know of Anton Ferdinand - he is talked about a lot in Argentina as a great player of future, while I also like Nigel Reo-Coker, who is a very dynamic captain and displays the work ethic that is clearly in place here.’


Pardew on securing both players:


‘I’ve no doubt this will give us a real chance to compete with the very best teams in the Premiership and in Europe. I didn’t have to sell West Ham to them. They knew all about our success last season and our style of play.’

Although comical when looking back (and very favourable for Anton Ferdinand), this transfer really sparked a debate over the legality and morality of third-party ownership of players in football. As aforementioned, the legalities were most argued by Sheffield United. The team from Brammall Lane, needing only a draw at home to relegation rivals Wigan on the final day, lost and were relegated following Tevez’s Old Trafford winner.


However, when West Ham were found guilty in 2007 of acting improperly and withholding vital documentation, The Blades pushed for a points deduction for West Ham which would relegate them from the Premier League in Sheffield United’s place. This was ultimately rebuked by the FA and was later settled out of court, following years of legal battles. What it did do was make third-party ownership appear corrupt and immoral to the public.


This wasn’t the first example of third-party ownership in England either. Amid Leeds United’s financial meltdown which saw them spiral from Champions League semi-finalists to the third tier of English football in 6 years, they too were involved in third-party ownership. In a way to earn some much-needed revenue, they resorted to leasing out several players in a way to earn extra funds. One of the players leased to American finance company Registered European Football Finance Ltd (“REFF”), was Dominic Matteo.


#4 | Dominic Matteo

[Undr The Cosh Podcast]


‘We [Dominic Matteo and Mark Viduka] were leased out to an American finance company, they owned us for a certain period of time until Leeds paid the loan back. We had to agree to it, which I did. I was thinking, whatever, it won’t affect my game, won’t affect my wages. But then I started thinking, hold on a minute, we’re in trouble here. Apparently when we sold Rio Ferdinand (in 2002), they paid their debts off to the finance company. If you think we signed Rio for £18 million and sell him for £30 million, you think you’ve made £12 million profit, but they weren’t, they were just paying me and Viduka off, and the interest. I knew there was really big problems when that was happening.’

This provides the insight to what a player would be thinking when these deals are drawn up. Matteo was loyal to Leeds and wanted to help the club as best he could. As he said, his wages were remaining the same and it wouldn’t affect his performance on the pitch and so you can understand why a player would agree to such a deal. However, for a supporter or outside observer, this again feels disreputable.


This financial meltdown came following the club’s transfer extravagancy, which saw their debt continuously rise following their league title victory in 1992. The club were desperately chasing silverware and European qualification as a method to justify and fund their financial improvidence. Their failure to qualify for the Champions League following the 2002-03 season coincided with the debt levels reaching over £100 million.


The club continued to chase their losses whilst also selling some key players. This method of leasing out key players such as Matteo and Viduka demonstrates this best. They wanted to keep a good team together so that they could recoup their losses through strong league positions and competing in the Champions League. However, this did not work and when they were ultimately relegated in 2004, player sales were inevitable but not enough to cover the ever-growing debt.


The club continued to spiral out of control and by 2007 they were in the third tier. They finally regained their place at the top tier last year under the charismatic Marcelo Bielsa and will be keen to ensure they have a sustainable stay in the Premier League and achieve a more gradual rise to the heights they want to club to reach.

Following the Tevez and Mascherano deal, the FA clamped down on third-party ownership. As the third-party owners had the ability to decide where the players could be transferred to, and the fees involved, this could damage the integrity of the league if these decisions were not being made by the clubs themselves. The Premier League banned third-party ownership from the start of the 2008-09 campaign.


As highlighted with Dominic Matteo, this form of ownership can provide cash strapped clubs an opportunity to hold on to their best players. A very popular strategy in South America as well, they often needed help funding the best young talent which they could then sell on to richer European clubs. However, UEFA and FIFA later followed the FA and the Premier League’s lead also banning third-party ownership.


Then comes one man who further muddied the third-party ownership waters, Sam Allardyce. Following sixty-seven short lived days as the England manager in 2016, Allardyce ultimately lost his job after being secretly recorded providing advice on third-party ownership.


Following the eradication of the third-party ownership, several loopholes were discovered. These included companies buying shares in a club, and then taking a cut of any fee that is later received for their player through their shares agreement. Another loophole is to loan money to a club and then receive the money back with ‘interest’ when a player is sold on. Big Sam’s big ideas saw him lose his dream job as he too was aware of some of the loopholes that had been discovered.


These underhand dealings were thrust into the limelight following the then England manager’s comments. He was recorded saying that he would go and provide a keynote speech in the Far East to instruct on the ways around third-party ownership. He was clearly aware of the legalities, stating that:


‘You can’t pay a player, you can’t pay a manager, you can’t pay a CEO. It used to happen 20-odd years ago, 30 years ago... You can’t do it now, you can’t do it now, don’t ever go there’.


Allardyce was outlining the possibility of owning a player through their agent by saying:


‘So they own the agent, the agent works for them, as well. ‘Cause then the agent, if he gets sold on again, the agent will get more money if he gets sold on again.

You get a percentage of the player’s agent’s fee, that the agent pays to you, the company, because he’s done that new deal at that club again, or, they sell him on and you’re not getting a part of the transfer fee any more, ‘cause you can’t do that. But ... but you get - because of the size of the contracts now, the contract’ll be worth 30, 40 million, at 10%.

And you get, you get, you’ve done a deal with the agent where you’re getting 5% of the agent’s fee. Which is massive for doing about two hours work, like.’

What Allardyce did was help to illustrate that people will always be out to manipulate the rules in a way to financially benefit themselves. Even someone who has just landed a £3 million annual contract to be the England manager, their dream job. Through owning an agent, rather than a player, these organisations could still have control over the player, their transfers and the transfer fees. These rule bending techniques illustrates the darker side of football.


Some would think that as Allardyce had already been caught out before with undercover recording, he would have learned his lesson. In 2013, former West Ham player under Big Sam, Ravel Morrison recorded his manager following a disagreement over wages and finances. Morrison has accused that Allardyce was refusing to select him as he would not change his agent to Allardyce’s agent, Mark Curtis. It has been alleged that, if the tapes were to be released, it would get Allardyce into further trouble. Morrison also tweeted no 1 listened to a word I said’ following Allardyce’s sacking.

Whether this was true or not, this further supports the feeling that Allardyce was wise to the importance of agents and the potential financial gain for him through his actions. He was aware of loopholes and ways to make money and not afraid of mixing financial gain and footballing decisions in search for personal financial gain.


Third-party ownership can give smaller teams the opportunity to fund a purchase of a player that they may not be able to afford or at a skill level above theirs. The media furore that surrounded Tevez and Mascherano illustrated this best. However, the more disparate the quality of the player and the team, would probably mean the greater the influence of the third-party owners.


Because of this, you can see why the footballing governing bodies have stepped in to stop this happening. The moves around loopholes since the abolition of third-party ownership illustrates further why it must be banned. Put simply, greedy people cannot be trusted and people like Allardyce are examples of dishonesty in football.


The Dominic Matteo example shows that it does not affect players and it could be a way to help those in financially struggling clubs. There are many examples of players not being paid wages and this system offers them stability. Nevertheless, the long-term effects would just see the club get into more economic trouble and the spiral would continue to worsen. Those clubs who cannot afford a player should not buy them or just sell them.


Unfortunately, it appears that third-party ownership would never work. There are too many individuals who would try to twist it for financial gain, and too many struggling clubs who would probably just end up struggling further by using it. It appears to be a strategy that can pluck up some fun and interesting stories and highlight some of football’s villains. Overall, it probably belongs in football’s history even if only for the benefit of those at Brammall Lane.


PETER KENNY JONES

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Peter Kenny Jones

@PeterKennyJones

https://peterkj.wixsite.com/football-historian


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