Football's Secret Trade. Panja Tariq
of what we are calling football's secret trade, and what happened next.
CHAPTER 1
THE SON OF JESÚS
On a winter morning at Atlético Madrid's Vicente Calderón stadium, receptionists wear overcoats indoors as portable heaters struggle to provide a modicum of warmth. Madrid, which is on a plateau 600 metres above sea level and surrounded by a snow-capped mountain range, gets cold in the winter and Atlético's offices are not centrally heated.
The 55,000-seat ground is in a nondescript district south of Madrid, wedged between a six-lane ring road and a brewery. When Atlético is playing at home in the depths of winter, fans sitting in the uncovered stands are exposed to the chill wind and rain.
Atlético is the antithesis of its flashier rival Real Madrid: a working-class commoner to Real's nobility. Formed by three students, Atlético became known as “Los Colchoneros”, the mattress makers, in the 1940s because their red and white shirts looked like the mattress covers that were common at the time.
When the team moved to its present stadium after the Second World War, it struggled to raise enough money to complete the arena. The arena's last major refit was in 1972, in the final years of General Francisco Franco's 36-year dictatorship.
Real Madrid (which means Royal Madrid in Spanish) is based in a stadium on the city's tree-lined main boulevard, Paseo de la Castellana. It's the equivalent of Paris having a football club on the Champs Élysées. On the club's premises you can order sushi, jamón iberico or barbecued meat in one of three restaurants.
Team president Florentino Pérez, who is chairman of Spain's biggest building company Actividades de Construcción y Servicios, has plans to build an adjoining five-star hotel with funding from the United Arab Emirates. Real started to leave its cross-town rival in the dust in the 1950s, becoming the star of Spanish football. Then, led by the Argentine forward Alfredo di Stefano, it won five straight European Cup titles.
More recently, its model of hiring star players like David Beckham has drawn admiring write-ups in Harvard University studies that have described it as using the same model as Hollywood studios to create revenue.
On this January morning in 2013, a secretary ushering in visitors to the Calderón stadium blames the cold on the damp air blown from the nearby River Manzanares. Through a series of doors, deep inside the bowels of the old arena, Miguel Ángel Gil sits in a windowless office. Beneath black-and-white photographs of his father Jesús and mother María Ángeles, Atlético's chief executive officer is trying to keep the team operating amid Spain's worst economic crisis.
As Gil sits at his oak desk, Atlético has won only one league title since 1977. Its boardroom down the corridor is in a cramped wood-panelled space that looks like part of a 1970s suburban home and is filled with odd-looking cups and trophies from obscure competitions.
A few miles away, at Santiago Bernabéu stadium by the city's business district, Real Madrid's directors meet in a boardroom displaying replicas of a record nine identical, highly polished silver European Cups. The boardroom was redecorated as part of a €150 million refurbishment of the stadium. While Atlético doesn't have central heating, Real Madrid has fitted overhead heating outdoors to keep fans warm during games.
In Spain, the period following the two weeks of Christmas festivities is known as the “cuesta de enero”, or the January hill. It's a difficult time for personal finance, when families have to pay credit card bills after extra spending on food and gifts at the same time as coping with a rise in bills from fuel and transport.
In 2013, this incline was becoming never ending for many families. The country was in the sixth year of an economic crisis, with an unemployment rate of 26 %. Families were losing their homes because they could not pay the mortgage. Businesses were going to the wall at an alarming rate.
Atlético Madrid was also suffering. It was stuck with €120 million of tax debt, more than any other team in the world. No wonder it could not afford to redecorate its offices that dated back to the Franco era or install central heating. Atlético would have folded in another industry, or if it was a football club in another country.
In Scotland, Glasgow Rangers had recently been placed in administration after a claim by the UK tax authorities for six times less than what Atlético owed the Spanish treasury. Rangers, the record 54-time champion, had racked up an average annual loss of £13 million over the previous 11 years, trying to keep pace with arch rival Celtic.
Like Atlético, Rangers had sought to offset losses and pay down debt with prize money from the UEFA Champions League or the second-tier Europa League. The model collapsed when the UK tax authorities objected to a scheme to pay players via an offshore trust and ordered it to pay £21 million in back taxes. Rangers eventually went out of business as a result of the claim and was revived as a new company in the third division. Its former owner, Gil's counterpart, was banned for life from Scottish football.
Yet Atlético, fondly known as Atléti, received much more favourable treatment in Spain. It was part of Spain's social fabric: the hopeless but loveable member of the family.
Many people had a soft spot for the stoicism of its supporters. It's easy to be a fan of Real Madrid but being an Atlético fan, well that requires dedication. The club even counted the odd member of the establishment as fans, including the soon-to-be-king Prince Felipe and Economy Minister Luis de Guindos.
No government wanted to be responsible for making the club disappear. That could have been a monumental vote loser at the next polls. In 1995, a previous government had already got a taste of that when it relegated two other teams, Sevilla and Celta de Vigo, because of financial irregularities. When thousands of fans took to the streets to protest, the government hastily reversed its decision.
Apparently to avoid such a situation, the Treasury had struck a deal with Gil to pay the €120 million of back taxes by 2020 along with interest payments fixed at the modest annual rate of 4.5 %. It looked like a remarkably cosy arrangement.
Gil, who controls 64 % of Atlético, is a boyish-looking 50-year-old with a crooked nose and white flecks in his black curly hair. Lounging on his chair behind a mountain of papers and books on his grand oak desk, he wears his top shirt button undone and his tie askew like a naughty schoolboy. He shrugs when asked about the team's enormous tax debt. “Other teams have bank debt,” he says. “We have tax debt.” Politicians from the main parties were unsurprisingly slow to attack Atlético's tax situation, even as the government froze pensions and scrapped subsidies for new mothers.
We asked Miguel Cardenal, Spain's Secretary of State for Sport, about the tax deal with Atlético. Cardenal, who was new to the job, was the government official in charge of monitoring football club finances. He told us that it was normal for businesses to restructure tax debt. “It's not special treatment,” he said.
It fell to an obscure regional party from Galicia, one of the country's least-populated regions, to take umbrage. “There is a dynamic in football that is totally irrational and it contaminates the public sector,” Francisco Jorquera, the Galician party's parliamentary spokesman, said. “Many Spanish football clubs are technically bankrupt.”
Atlético's woeful financial situation was a legacy of his late father, Jesús Gil. He was the most flamboyant club owner Spain has ever known. A construction magnate turned mayor of the upmarket seaside resort of Marbella, he rode into Madrid on a white horse and bathed in champagne when Atlético won the domestic league and cup double in 1996. It was a rare chance to cock a snook at Real Madrid and, well, he was not going to waste the opportunity. He never got another chance. Four years later Atlético was relegated to the second division for the first time in 65 years.
In a show of loyalty, the number of season-ticket holders almost doubled to 40,000. But fans paid less than they had a year earlier and the club had to grapple with a dramatic plunge in television income. Gil negotiated a tax moratorium with the government for two years.
More than a decade later, in 2013, Atlético still owed €46 million in back taxes from then, another €50 million following subsequent tax reviews, plus the odd €25 million it had accumulated since then.
For all that accumulated debt, Gil had just the