Shell Game Ronaldo, Mourinho and the Paper Trail to the Caribbean
They are at the pinnacle of the sport, but Cristiano Ronaldo and José Mourinho have also proven to be magicians off the pitch as well -- when it comes to their dealings with tax authorities. They both used shell companies in the Caribbean to collect their marketing earnings. By SPIEGEL Staff
Football's Dark Side
What would happen if people found out how much teams really pay their professional players, calculated precisely down to the last euro and cent? And what would happen if people knew the size of the commissions earned by agents with each transfer or contract extension? If people were to start to question whether their football heroes are as clean as their marketers like to make them out to be? If you could peer behind the glossy facade of global football and take a closer look at the contracts, bank accounts and the exchange of letters between pro players and their advisers? The whistleblowing platform Football Leaks makes all this possible. They provided DER SPIEGEL with access to around 18.6 million documents -- the biggest leak in the history of professional sports. Together with the investigative network EIC and additional partners, we have explored the inner workings of the multi-billion-euro football business. The first installment in the series delves into the ethics of taxation and the tax tricks used by stars like Cristiano Ronaldo and Mesut Özil.
Messi. Forget Messi. There are people who still consider Messi to be the best in the world. Clueless people. Just because Lionel Messi was football's World Player of the Year five times to Cristiano Ronaldo's three. Just because Messi has won the Champions League four times and Ronaldo three. Just because Messi scored a fantastic 50 league goals in a single season to Ronaldo's phenomenal 48. All of that is true, but what does that matter? Except on the pitch. But if you are looking for the truth in football on the pitch, then you are, in fact, clueless.
The truth is: Lionel Messi got caught. This summer, he was forced to appear before a district court in Barcelona, where he was slapped with a suspended jail sentence of 21 months for tax fraud. The court also ordered him to pay a fine of 2 million euros because he and his father had avoided paying 4.1 million euros in taxes.
And Ronaldo? Or, more precisely, Mr. Cristiano Ronaldo dos Santos Aveiro, as he is named in his Spanish tax return? At the end of 2014, he discreetly pocketed 63.5 million euros, but apparently didn't pay a single euro in taxes on that money. And he might even get away with it. It might even have been legal. Some 63.5 million euros, before and after taxes, with no court case, no criminal offense and presumably not even a guilty conscience.
So who is the best at football? Ronaldo! Unless, after this article appears, a Spanish tax investigator decides that such a thing can't possibly be legal: two shell companies in the British Virgin Islands; an additional shell company that bunkered Ronaldo's millions for years; an account with a private Swiss bank; a tax declaration that doesn't make any mention of the 63.5 million euros and all of the foreign accounts.
What is it that Ronaldo said about himself? "I'm a smart guy," and "it doesn't matter if you play good or you play bad -- most important is to win." In football, that sentence applies to the pitch, but for top players, it also applies to their bank accounts. Those who haven't yet found the loopholes to reduce their taxes count among the industry's losers.
Indeed, Ronaldo is no exception when it comes to his desire to save on taxes. But his name, like Messi's, is the most famous. He is the most valuable brand and the biggest star. He's the icon, the man who represents the gloss and sordidness of modern football in this story of professionals and their profits. The gloss of a global religion with 1.6 billion followers -- fans consumed with their teams and enchanted by their demigods and by the seemingly supernatural tricks of a player like Ronaldo, which can often only be understood when seen in slow motion. But that sordidness is also named Ronaldo: that only the result counts, the ego, the success. That everything will somehow work out and that nothing really matters, at least as long as tax authorities keep playing along or can be deceived. And as long as the fans, who pay millions to finance these stars, don't find out.
On His Trail
But now the entire world knows. The whistleblowing platform Football Leaks provided DER SPIEGEL with hard drives containing 1.9 terabytes of information -- the biggest trove of data in the history of sports. The dataset is so massive and so significant to so many countries that SPIEGEL shared the material with its partners in the European Investigative Collaborations (EIC) consortium months ago. Since then, 60 journalists from 12 different media organizations in Europe have collaborated in their analysis of the mostly confidential documents.
They reveal how millions of euros earned by Ronaldo in marketing deals were funneled to a shell company in the Caribbean until 2014. He hardly paid any taxes on that money. And as if that wasn't enough, at the end of 2014 he sold his marketing rights for the years 2015 to 2020 for an additional 75 million euros. He quickly collected the money at the end of the 2014 tax year. That, after all, was the last year that he could take advantage of a minimal tax rate in Spain. He apparently paid no taxes on 63.5 million euros of that sum. Now, tax investigators are on his trail.
The documents also expose a second football superstar who plays the concealment game: José Mourinho, an internationally renowned manager who has made successful stops at Porto, Chelsea, Inter Milan and Real Madrid. He has referred to himself as "The Special One" -- and he is undisputedly the most eccentric man sitting on the manager's bench. But he's proven just as eccentric when it comes to his money, keeping it parked not close to home, but in Swiss bank accounts belonging to a Caribbean shell company which is bound together with a foundation in New Zealand, on the other side of the world. Mourinho, the documents show, has since been ordered to pay millions in back taxes.
Other professional footballers also set up repositories for their money in exotic countries. They include Pepe and Ricardo Carvalho, both of whom played on the Portuguese national team that won the European Championship this summer. James Rodríguez, top goal scorer at the World Cup in Brazil, is also on the list. All three play or played for Real Madrid, the world's richest club, where it's not just the player salaries that are extremely big, but also the chutzpah when it comes to taxes. The group of Real players who tried to be more clever than Spanish tax law apparently allows also includes a member of the world-champion German national team: Mesut Özil, who today plays for FC Arsenal in London. He did not funnel his money to a tax haven, but a few months ago he received a tax bill from his previous stop in Spain. Özil has been told to pay 2 million euros in back taxes in addition to an almost 790,000 euro penalty, as the Football Leaks documents show.
The list goes on and on.
Professional football today is show business -- the greatest show on earth. The measure of the biggest stars in this show is money, either in euros or dollars. The transfer sums are growing, as are salaries and advertising revenues. Ronaldo earns 38,181,818 euros a year at Real and his transfer fee -- the amount another team would have to pay to buy him away from Real -- is 1 billion euros. Player salaries have become so astronomical that megalomania has become inherent to the sport. Why share those millions? Why give anything away?
Too Weak for Success
Football Leaks is now exposing the uglier side of these success stories: These stars apparently want to give back as little to society as possible -- none at all if they can get away with it. To do so, they and their advisers walk the tightrope of tax law. Those who don't play this game -- because they still feel a sense of responsibility to society -- are likely seen as being too weak for success.
- FAQ: Everything You Need to Know about DER SPIEGEL
- Six Decades of Quality Journalism: The History of DER SPIEGEL
- Reprints: How To License SPIEGEL Articles
One sentence stands out in the mountain of data full of greed and megalomania. It was written by Hans Erik Odegaard of Norway in December 2015, after Real Madrid signed his 16-year-old son to the team, hailing him as one of Europe's most talented players. Spanish lawyers had calculated the effect a tax-saving image rights company might have on the player's revenues.
But Odegaard's father had some concerns and wrote: "He will anyway earn a lot of money, so it's also a moral question about how much effort he shall do, trying to save some tax money when other people are struggling much more to pay their bills." The Football Leaks data contains several million documents, and it takes a lot of searching to find one like that.
Martin Odegaard also isn't so easy to find these days. He currently plays mostly on Real's reserve team and has only played for the main team twice. He is reportedly unhappy in Madrid.
2 Million Dollars for Six Hours of Work
So what's a day in the life of Cristiano Ronaldo worth? That's difficult to say, but there are some clues: 1.9 million dollars for six hours and 45 minutes worth of work. That's $4,691 a minute, as revealed in a contract Ronaldo's marketing agents signed with Toyota in June 2013. Toyota covered Ronaldo's first-class airfare to the filming site where he stood in front of the cameras for three-and-a-half hours before lunch and three hours and 15 minutes afterward -- everything was precisely detailed. The carmaker was then able to use the images in its advertisements for 13 months.
For $1.9 million, however, you won't get the world from Ronaldo. Toyota had merely secured the rights for ads in the Middle East, plus Algeria, Morocco and Afghanistan. The company would have had to pay more for global rights. Honda featured Ronaldo in its advertisements in China at the same time. According to the contract, it brought in an additional 2 million euros for a one-year run-time and a maximum of six hours of work in front of the camera. Additional camera time in China, had it become necessary, would have cost 600,000 euros more -- a bargain by Ronaldo's standards.
Football is global, which makes Ronaldo not only a sports star around the world, but also an advertising star. He earns far more than just his premium salary at Real Madrid. In recent years, he has sold himself from head to toe: to the shampoo brand Clear, to watchmaker TAG Heuer, to the fashion label Armani and to sportswear giant Nike. Nike continually releases new football shoe models bearing the legendary CR7 logo, the seven standing for Ronaldo's jersey number.
If one can believe the contracts, the money pours in: According to the documents, US food giant Herbalife paid more than $16 million over a five-year period. Some 2.25 million euros came from Portugal's Banco Espírito Santo for three years and 300,000 euros from a single television appearance in Rome. One-million-one-hundred-thousand euros came from the airline Emirates for a little more than a year of advertising -- along with 15 first-class tickets to Dubai from anywhere in the world.
For every pair of briefs with the CR7 logo on the waistline, Danish underwear company JBS hands over 13 percent of the revenues. At Nike, it's 5 percent of CR7 shoe sales. The American company brought in 51 million euros in global revenues with CR7-branded apparel between September 2010 and August 2011, with just under 2.6 million euros of that money going to the company that collects Ronaldo's fees. In addition to that, Nike pays a base salary of 1.6 million euros a year, plus the industry-standard premium payments for particularly successful seasons. When, for example, he became the top scorer in the Spanish league, they paid an additional 250,000 euros.
The State Wants a Cut
In return for this generosity, Ronaldo is subject to Nike's conditions. If he is injured and can't play for more than 90 days, Nike is entitled to cut the base salary in half for the time missed. The same holds true if Ronaldo plays in more than 20 but fewer than 30 matches a year for his club. And when, in 2014, he traveled to the World Cup despite suffering from a chronic injury and not playing up to his usual standards, he was of course driven by his ambition to always play, to always win and to always be the greatest. But beyond that: If he hadn't played in the tournament, it could have cost him half of his annual earnings from his revenue-sharing agreement with Nike.
Ronaldo, though, almost always delivers. During the past eight years, he has only missed 32 Real matches as a result of injury. And advertising customers continue to pay and pay. This creates the same conundrum for Ronaldo that all of the world's superrich face: What to do with the money that is constantly flooding into their accounts? To be sure, for every euro he earned with his image rights above 15 million per year, he was required to pay 40 cents to his employer Real Madrid. That's what it says in one contract. But he only has to step out of his door for a few hours and say something to the camera -- and someone will wire him a couple hundred thousand or million euros. It's as easy as that. Ultimately, though, it does become complicated. Because the state also wants a cut.
But there are advisers -- specialists for image-rights revenues -- to take care of that, and not just for Ronaldo. The lawyers take care of everything professional football players earn with their name, face, image and autograph. Most of that revenue comes from advertising, but there are other sources too, like the player stickers children collect inside their Panini albums.
It's difficult to reduce taxes on salaries paid by the club. The rules in place are quite clear, the paths for the money obvious and the tax authorities tough. Image rights, though, are an altogether different matter, and tax lawyers have become true artists when it comes to creating the artistic and artificial mazes through which the money flows. Tax authorities are always trying to play catch-up and are often either overwhelmed by the complexity or thwarted by laws in some countries that have been made so friendly to football that the hunt ends before it has truly begun. If things go well for the player, the tax authorities are satisfied with a small payment. And if things go really well, the players pay nothing at all.
The model works more or less like this: Professional salaries fall into the highest tax bracket, which is around 50 percent in many European countries. It can be painful. Revenues generated via image rights, by contrast, aren't taxed at nearly as high a rate, if one sets up the necessary structures. To do so, players transfer their image rights to a company working on their behalf. Fees generated by those rights -- standing in front of the cameras for a granola bar or deodorant brand, for example -- are then paid to that company, which only owes corporate taxes on those earnings, just like any normal company. In Ireland, a popular location for such image-rights firms, the corporate tax rate is only 12.5 percent.