Malaga: Scapegoat Or First FFP Trophy

Malaga winger Joaquin believes that his club are being made the scapegoat for UEFA and their first roll out of Financial Fair Play sanctions, with the club in essence agreeing by stating that they feel the measures are “disproportionate” and “unjustified”.  That assessment may sound like the bleating of UEFA’s first sacrifice to the financial soccer gods to some who feel that the heavy spending of clubs is irresponsible and untenable in the current financial climate.  Malaga CF, for those of the romantic inclination, could be a good first success for UEFA should their ban be upheld.  However, is it possible that Malaga are correct in the proportionality of the measures?

In order to fully asses, it should be understood that this started back in September of last year when UEFA withheld prize money distributions to 23 clubs who were believed to have been delinquent on payments through any combination of taxes, player transfers, and player wages.  Malaga CF, who were taken over by a Qatari royal family member in 2010, was among the list of clubs who were denied their distributions.

The next development came in the end of December when UEFA further banned Malaga from European competition in the next season they qualify for (up until the 2015/16 season).  Beyond this they were fined €300,000 and told that if their financial indiscretions were not settled by March of 2013 then there would be a second year added on to their European competition ban.  Shortly after this announcement in January the club went ahead and appealed to the Court of Arbitration of Sport to argue their case that they are in line with Financial Fair Play guidelines

Most recently, it was announced that Malaga met the requirements set before them in December and were not given the second year long ban.  All that remains now is for the CAS to rule on the case, which should occur in early June.

At first glance it would be easy to throw Malaga under the bus and make the presumption that given their free-spending owner and the severity of having unpaid taxes, wages and player transfer payments, that a European competition ban seems quite fair and that Malaga are simply grasping at any straws they see to try and get out of this predicament.  The only way to fully know is to look at the various forms of money that are potentially owed.  The lack of payments aren’t described but a statement from Malaga’s Club Director Vicente Casado reveals that the club owes €10 million in Spanish taxes.

As far as payments to other clubs goes, the only club being rumored to have issues with payments is Osasuna.  Since 2009, the only business that Osasuna and Malaga have done, in terms of player transfers, was in 2011 for the purchase of Nacho Monreal.  Unlike most player transfers, the fee was actually disclosed and to the sum of €6 million.

As far as player wages go, it is incredibly difficult to tell since we aren’t told the amount of time for which the wages are delinquent, nor are we aware of the number of players who haven’t been paid, or what wages they’re on.  Al Jazeera reported that the  unpaid wages amount to roughly €9 million.  These figures are unconfirmed but as a source of news that doesn’t simply run with any piece of information given, it seems to be a decent tentative estimate to base an assessment on.

Malaga CLMalaga claim that their ban was disproportionate and unfair.  There is in fact the possibility that frameworks were in place to payoff their debts.  The prize money withheld by UEFA was for 2012/13 competition, which means it was for Malaga’s participation in the Champions League.  Since they qualified for the group stage and at the time of the withholding had maintained a group stage record of 2 wins and 1 tie, the club was owed around €11 million (€8.5 mil for qualifying, €1 mil for wins , €500,000 for ties).  Though this amount is not nearly enough to pay off what would be at least €20 million without knowing what was left on the Osasuna payments, it does seem that these unpaid debts could be a bit structural, with the players wages the most important, and able for the most part to be paid off first and a repayment plan possible on the tax dues.

Since sanctions like these have not been set down before it is hard to say whether these are harsh or not.  Regardless of the amount, being delinquent on players’ wages isn’t acceptable and neither is not paying taxes.  With fines shown to not have much of a deterring effect on certain behavior, the ban without ejection from current competition seems to be pretty fair.  The only thing that needs to truly be determined is the truth behind the statements that the assessment of delinquency by the CFCB was based on out of date data and the claims that they were in fact out of the player debts.  If this is true, then the prize money almost covers their debts.  Beyond that I feel it’s important to note that in 2010 Barcelona in fact sought a €150 million loan to pay unpaid players and coaching wages to absolutely no repercussion.

Precedent on actual punishments may not technically be in existence here but the potential earning for Malaga, even in the Europa League next year, is far higher than what they owe or owed.  For some, this is just punishment and finally a proper dealing with clubs who skirt the rules of financial stability, and for others it’s simply an opportunity for UEFA to finally punish somebody for FFP, and they’re being over zealous.  It’s difficult to say whats going on with so little financial data being made public about the situation, but it would appear that in June we will all find out.

Reporting on the business side of the world's game.