Ukrainian Brotherhood How UEFA Payments Ended Up in the British Virgin Islands
UEFA transferred around 380 million euros intended for the Football Federation of Ukraine to a company in the British Virgin Islands without knowing who controlled the firm. It was the oligarch Igor Surkis, president of Dynamo Kyiv, who finance his club using the offshore company.
The confidential memorandum that a high-ranking UEFA employee drafted on Dec. 15, 2016 for the association's top executives carried a rather unremarkable heading: "Internal memo." Nothing in the seven points listed below was intended for outside eyes. The case was much too sensitive. The memo, after all, documented a degree of misadministration that would put UEFA on a par with the global football association. And it's hard to sink any deeper than FIFA.
The paper pertained to payments made to the Football Federation of Ukraine (FFU). UEFA had apparently spent more than 15 years paying money that was supposed to go to the FFU or to individual Ukrainian football clubs to a company based in the Caribbean tax haven of the British Virgin Islands.
The name of the company was Newport Management Limited -- and until 2016, nobody at UEFA had apparently made a serious effort to discover who was behind Newport. Or perhaps no effort was wanted. Now, though, the "internal memo" documented the unsettling suspicion that the man who controlled Newport was none other than Igor Surkis, one of the most influential oligarchs in Ukraine.
Igor Surkis has been president of the football club Dynamo Kyiv since 2002 and is the brother of Grigori Surkis, who controlled Dynamo Kyiv from 1993 to 1998 before launching into a career as a UEFA functionary. From 2000 to 2012, Grigori Surkis was president of FFU and from 2004 to 2019, he was also a member of the UEFA executive committee, at times even acting as President Michel Platini's deputy.
The "internal memo" also documented a December 2016 trip to Ukraine by a UEFA delegation with the mission of checking Dynamo Kyiv for adherence to the body's Financial Fair Play rules. When the UEFA auditors demanded access to the club's books, they found that "a third party ... incorporated in the British Virgin Islands" was providing substantial financial support to Dynamo Kyiv.
The Extent of the Cronyism
This "third party" was also Newport Management Limited. The internal report noted that all UEFA payments to the Ukrainian federation were being sent to the same offshore account "used by Newport to pay salaries and transfers on behalf of Dynamo Kyiv."
An investigation was launched at UEFA to look into the dubious payments. In the data made available to DER SPIEGEL by the whistleblowing platform Football Leaks, there are numerous documents that outline the extent of the cronyism.
One document is particularly explosive. On Jan. 11, 2017, an employee in UEFA's finance department sent an email to two lawyers who had been engaged for the purposes of the investigation. Attached to the email were three Excel tables providing details about how often and for what purpose UEFA made payments to the Football Federation of Ukraine between Sept. 26, 2002 and Dec. 2, 2016. The payments included premiums for clubs playing in European competitions and for clubs whose players had been requisitioned by the national team. They included solidarity payments and money for referee training, for anti-racism campaigns and the construction of football pitches and other sports facilities.
The documents indicate that between September 2002 and July 2008, UEFA transferred around 50 million Swiss francs intended for the FFU. Between September 2006 and December 2016, the total was 338.6 million euros. The Excel tables include nearly 400 payments during this period. And every single one of them went to Newport. Until early 2016, the transfers were made to the company's account at Coutts Bank in Zürich and, after that, to an account at the Bank of Cyprus.
There exists an "agent agreement" from April 1999 between Newport and the Football Federation of Ukraine which granted the Caribbean company full power of attorney over the FFU's financial dealings. It was a classic bit of whitewashing that said nothing about who was behind Newport, but it was sufficient for FFU functionaries to convince the UEFA finance department that the payments to the company were legitimate. "Currency exchange" was provided as the explanation for Newport's involvement.
A Secret Fund
The links between Newport and Dynamo Kyiv reach back to the early 1990s, when Grigori Surkis took over the club. In October 1992, the company was entered under the number 71912 into the commercial register in Road Town on Tortola, the main island in the British Virgin Islands. A short time later, the offshore company apparently became Dynamo Kyiv's secret slush fund, as outlined in a contract signed by the club with Newport on July 27, 1993. This agreement is apparently still valid today, because it was extended on July 28, 2010, for an additional 20 years.
The July 2010 document is six-pages long and makes the relationship clear: Dynamo Kyiv hands Newport control over the commercial use of all its business areas, including television rights, marketing rights and player transfers. In return, according to a passage in the contract, Newport possesses the "financial resources" necessary "for the Football Club's team to be competitive and be able to achieve high results in sports."
Numerous contracts between Dynamo and its football professionals, which can be found in the Football Leaks trove, make it apparent how Newport operates. One example is the Austrian national team player Aleksander Dragovic, who transferred from Kyiv to the German club Bayer Leverkusen in summer 2016. In summer 2013, he had signed a five-year contract, with the formal elements of the deal -- contract length, club obligations, player obligations -- having been hammered out between Dragovic and Dynamo Kyiv. But the financial details were included in an "agreement to the contract," a supplemental document. Here is where it was noted that the offshore company Newport would take care of salary and other payments. The numbers listed were net totals: a base salary of 1.5 million euros per season along with a signing fee of 1 million and other bonuses worth at least 300,000 euros.
Offensive specialist and Swiss national team player Admir Mehmedi, who transferred to Dynamo Kyiv from FC Zürich in January 2012, and who now plays for the German team VfL Wolfsburg, also dealt with the Caribbean company when negotiating payments for his first full season, reaching agreement on a net base salary of 850,000 euros, a signing fee of 100,000 euros and game-based bonuses worth an additional 150,000 euros. The money was paid by Newport into Mehmedi's account with UBS in Zürich.
26.08.2019, 17:13 Uhr
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It isn't clear from the 2010 contract between Newport and Dynamo Kyiv who actually owns the company in the British Virgin Islands. The preamble doesn't even mention the company address. A lawyer from Cyprus signed on behalf of Newport, but he was apparently just operating as a strawman for the company. Because in truth, Newport was under the control of Igor Surkis. That's what it says in a 2009 verdict from the High Court of Justice in London. That verdict came in response to a lawsuit filed by a former business partner -- a lawsuit that had been served to Igor Surkis when he traveled to London in November 2008 for a Champions League match between his team, Dynamo Kyiv, and FC Arsenal.
A Ready Excuse
Until the internal investigation that began in December 2016, nobody at UEFA seemed to be particularly interested in the truth behind Newport. Correspondence makes it clear that nobody at UEFA headquarters knew who controlled the company. "With hindsight, we were perhaps too easy (in) accepting these procedures," wrote a UEFA finance department employee in early 2017 to the two lawyers who were now investigating the payments. But he also had an excuse ready, writing that there had been no complaints of money going missing.
On June 12, DER SPIEGEL contacted Igor Surkis, the president of Dynamo Kyiv, for comment on Newport's financial dealings and his role in the company. The club responded with an email that was also copied to the German Press Council and the international non-governmental organization Reporters Without Borders.
The DER SPIEGEL inquiry included 22 concrete questions such as: whether Newport had forwarded the more that 380 million euros it received from UEFA to the proper recipients; whether Igor Surkis still controls Newport; whether Igor Surkis can rule out even a single cent of the UEFA money having benefited Dynamo Kyiv. But the team didn't provide an answer to any of the questions in detail. Instead, the reply mail complained that the eight-day deadline "limits our legal right to a fair comment." Furthermore, the business relationship between Dynamo Kyiv and Newport, the reply noted, "were previously the subject of numerous audits by the fiscal authorities of Ukraine, the UEFA Club Financial Control Body, independent auditors and other inspection authorities." The club insisted: "These inspections did not reveal any violations, which testifies to the legitimacy of the financial relations of these organizations."
Dynamo Kyiv accused DER SPIEGEL of violating "the basic ethical principles of journalism." Furthermore, the club complained, the questions were "obviously accusatory in nature, contain unsubstantiated statements, twisting and biased assessment of the facts." The club also accused DER SPIEGEL of being part of a "smear campaign" against Dynamo Kyiv and Newport by the Football Federation of Ukraine.
Following a second request for comment, the club responded with a second mail on June 25. In the name of Igor Surkis, Dynamo Kyiv rejected suspicions of money laundering by way of the offshore company Newport and suspicions of misappropriation of UEFA money, saying they were "unfounded" and "manipulative." Dynamo Kyiv wrote that questions as to whether the Dynamo president might be exerting influence on the UEFA finance department, either personally or through other persons such as his brother Grigori, were "based solely on speculation." The club offered DER SPIEGEL a personal meeting with Igor Surkis, but noted that such a meeting was only possible after Surkis returned from vacation.
An Unheeded Fax?
Grigori Surkis did not respond to questions sent to him by DER SPIEGEL such as: Whether he was involved in Newport; whether he used his influence as long-time member of the UEFA executive committee to ensure that payments intended for the FFU continue to be paid to Newport until 2016.
UEFA confirmed to DER SPIEGEL that its finance department had wired all payments intended for FFU between 1999 and 2016 to the offshore company Newport Management Limited. UEFA also confirmed that it only realized in December 2016 that its payments to the Ukrainian federation were being made to the identical account that Dynamo Kyiv used via its company in the British Virgin Islands. Since then, payments would have been made directly to an FFU account in Ukraine. UEFA noted that a commission investigated the procedures following until May 2017 and found that "there had been no apparent violations of the UEFA Disciplinary Regulations by FFU or UEFA officials."
Yet there is an instance from March 2015 that calls this version into question, one described by an FFU representative during the UEFA investigation. The representative claimed that the FFU had requested UEFA in writing to cease making payments via Newport. But did the fax accidentally go unheeded at UEFA? Money from UEFA continued to be sent to Newport -- fully 100 million euros by December 2016. The fax was only rediscovered during the internal investigation.
When UEFA Legal Director Alasdair Bell learned about the fax, he wrote an email to an association executive. "If this is a genuine fax that was sent by the FFU to UEFA on March 19, 2015, and which was never answered by us, then it raises some serious questions," Bell wrote. "Perhaps at that stage, somebody might have put two and two together and remembered that the President of Dynamo Kyiv is the brother of a UEFA Exco Member? Or perhaps not."
Another high-ranking UEFA functionary responded to Bell. "The question is: Was it an oversight (they lost the fax, they simply forgot to reply) or did they receive an 'order' from the hierarchy? This story is not over."
In response to a DER SPIEGEL inquiry about the fax, UEFA answered that there is no record of UEFA having received such a fax from the Ukrainian federation in March 2015 and that this fact was confirmed in the internal investigative report. In the response, UEFA noted that they did, however, receive a written request from FFU in early 2016 to continue making payments to Newport, but to an account in Cyprus instead of to an account in Switzerland.
This article is an excerpt from a new book based on data from the whistleblower platform Football Leaks. The book, "Football Leaks II: Neue Enthüllungen aus der Welt des Profifußballs," is appearing in German on Monday, September 9.