Title: Real Madrid Faces Allegations of Financial Irregularities, Following in the Footsteps of Other European Giants
By Federico Hernandez
Redactor egresado de Deportea como Técnico Superior en Periodismo con orientación en Deportes
In the wake of the Juventus scandal that resulted in a 10-point deduction, the ongoing investigation into Manchester City for alleged financial infringements, and the Negreira Case at FC Barcelona, it is now Real Madrid’s turn to be embroiled in controversy over a potential breach of financial fair play during the 2021/22 season.
According to an investigation published by British newspaper The Telegraph, Real Madrid has refused to provide explanations for 20% of its expenses, amounting to €135 million, which were not accounted for in the club’s financial report published in October 2022. These payments were included under the category of “other operating expenses.”
“The Madrid club has refused to answer specific questions about the nature of these €135 million (except for a €13.6 million payment to La Liga, which all 20 clubs are required to make) in payments made through its ‘other operating expenses’ subcategory in the club’s financial results for the year ending June 30, 2022,” The Telegraph reported.
To make matters more concerning, the newspaper revealed that out of the €135 million spent by Real Madrid, €122 million lacked any explanation as to why they were included under “other operating expenses.”
Furthermore, The Telegraph questioned whether this financial maneuver complies with UEFA’s financial fair play rules, stating that “there are serious doubts as to whether clubs should be allowed to record the sale of future income as marketing revenue rather than debt.” However, the legality of the action was not called into question. “There is no suggestion that the deal is illegal,” it added.
“The sums obtained from the sale of an unspecified percentage of future sponsorship income, which the club says were renewed in 2019-2020, were recorded in Real Madrid’s accounts as revenue rather than debt. The club has never explained in detail how that commitment is repaid to Providence and how much is paid each year,” the article stated.
In 2017, Real Madrid signed an agreement with the American investment fund Providence, which saw the club receive €50 million per season between 2018 and 2021. The contract was extended until 2027, as reported by El Economista.
Regarding the club’s relationship with Providence, The Telegraph revealed that Real Madrid had incurred debts to cover salaries in the 2014/15, 2015/16, and 2016/17 seasons, ranging from €72 million to €82 million per year. However, after signing the contract with the American company, the need for indebtedness “has not been necessary,” according to The Telegraph.
As the investigation into Real Madrid’s financial practices unfolds, it remains to be seen how the club will respond to these allegations and whether any further action will be taken by UEFA or other governing bodies.Real Madrid Accused of Failing to Explain €135 Million in Expenses
By Federico Hernandez
After the scandal involving Juventus and the deduction of 10 points, the ongoing investigation into Manchester City for alleged financial infringements, and the Negreira Case at FC Barcelona, it is now Real Madrid’s turn to face controversy over a potential breach of financial fair play during the 2021/22 season. The club, led by President Florentino Perez, has been accused of failing to provide explanations for 20% of its expenses, totaling €135 million, which were not accounted for in the financial report published in October 2022. These payments were included under the category of “other operating expenses.”
According to an investigation published by British newspaper The Telegraph, Real Madrid has refused to answer specific questions regarding the nature of these €135 million payments, except for a €13.6 million allocation to La Liga, which all 20 clubs are obligated to pay. The Telegraph reported, “Real Madrid has declined to answer specific questions about the nature of those €135 million (except for a €13.6 million allocation to La Liga that all 20 clubs are obliged to pay) in payments made through its ‘other operating expenses’ sub-category in the club’s financial results for the year ending June 30, 2022.”
The newspaper also revealed that out of the €135 million in payments, €122 million were classified as “other operating expenses” without any explanation from the club. The article raised doubts about whether this financial maneuver complies with UEFA’s financial fair play rules, stating, “There are serious doubts as to whether clubs should be allowed to record the sale of future income as marketing income rather than debt.” However, the legality of the action was not questioned. The article added, “There is no suggestion that the arrangement is illegal.”
The Telegraph further reported, “The sums obtained from the sale of an unspecified percentage of future sponsorship income, which the club says were renewed in 2019-2020, were recorded in Real Madrid’s accounts as income rather than debt. The club has never explained in detail how that commitment is repaid to Providence and how much is paid each year.”
Providence, the American investment fund that invests in Real Madrid, has been linked to the club since 2017. The club signed an agreement with Providence to receive €50 million per season between 2018 and 2021, which was later extended until 2027, according to El Economista. The Telegraph revealed that after signing the contract with the American company, Real Madrid no longer needed to incur debts to cover player salaries for the 2014/15, 2015/16, and 2016/17 seasons, which ranged from €72 million to €82 million per year.
The allegations against Real Madrid raise concerns about the club’s compliance with financial fair play regulations and the transparency of its financial operations. The club has yet to respond to these accusations, leaving fans and football authorities eagerly awaiting an explanation.
[Image: Providence, the society that invests in Real Madrid. Image: Provequity.com]
[Image: The accounts of Real Madrid don’t add up, according to The Telegraph]
[Image: Latest news from Real Madrid]
What are the implications of including €122 million under “other operating expenses” without providing any explanation in terms of UEFA’s financial fair play rules?
Yments, €122 million lacked any explanation as to why they were included under “other operating expenses.” The Telegraph questioned whether this financial maneuver complies with UEFA’s financial fair play rules, noting that there are doubts as to whether clubs should be allowed to record the sale of future income as marketing revenue instead of debt. However, it clarified that there is no suggestion that the deal is illegal.
The investigation also shed light on Real Madrid’s relationship with the American investment fund Providence. In 2017, the club signed an agreement with Providence, receiving €50 million per season between 2018 and 2021. The contract was extended until 2027. The Telegraph reported that Real Madrid had previously incurred debts to cover salaries in the 2014/15, 2015/16, and 2016/17 seasons, ranging from €72 million to €82 million per year. However, after signing the contract with Providence, the need for indebtedness “has not been necessary.”
As the probe into Real Madrid’s financial practices continues, it remains to be seen how the club will address these allegations and whether UEFA or other governing bodies will take any further action.
This investigation into Real Madrid’s alleged Financial Fair Play violations raises concerns about their financial management and adherence to UEFA regulations. It will be interesting to see the outcome and what implications it may have for the club’s future.