PSG mega-deals trigger UEFA inquiry

• by Ridge Mahoney  @ridgemax, Sep 2, 2017

Having done its utmost to tilt the playing field competitively by signing Neymar and Kylian Mbappe, Paris St. Germain will be investigated for perhaps moving the goalposts financially as well.

Staggering outlays for Neymar ($256 million) and Mbappé ($216 million) have prompted UEFA to launch a formal inquiry as to whether the club can abide by the break-even rules specified in its Financial Fair Play (FFP) policies, which limit clubs to losses of $6.5 million per 12-month fiscal cycle, or $39 million for the same period if a team owner is entirely covering the additional $32.5 million.

Tracing who that owner might be in the case of PSG could be tricky, since it is owned by Qatari sovereign wealth fund QSI, which has already run afoul of UEFA fairly recently.

In 2014, it was docked $92 million in prize money and required to reduce its roster size after an investigation determined it had improperly increased its reported revenues by attaching an inflated figure to a sponsorship deal with state-owned Qatar Tourism Authority.

The value of that sponsorship was documented as $300 million per year. UEFA didn’t accept that valuation and publicly said only it had used a figure “significantly below that submitted by the club.” In that case PSG didn’t break the rules by spending too much or not earning enough, which will be the figures closely scrutinized in the wake of its latest blockbuster deals.

Assuming it has straightened out its financial reporting procedures, PSG -- no matter how much it spends -- can stay within the FFP guidelines generating an income within $39 million of its spending for the current (2017-18) season, assuming ownership can pay the additional freight. That calculation could be complicated if the club uses a loan period to delay the actual payment to Monaco for Mbappe into the next financial year.

In a statement, UEFA said: “The Investigatory Chamber of the UEFA Club Financial Control Body has opened a formal investigation into Paris St. Germain as part of its ongoing monitoring of clubs under Financial Fair Play (FFP) regulations. The investigation will focus on the compliance of the club with the break-even requirement, particularly in light of its recent transfer activity.”

Just how well FFP is holding big-spending teams in check is one of the game’s ongoing debates, and it’s intriguing that the recent PSG blockbusters have sparked complaints from Spanish giants Real Madrid and Barcelona, as well as La Liga president Javier Tebas. Those complaints apparently encouraged UEFA to start its inquiry now, rather than in March, the normal starting point for financial reviews of fiscal years that close in June upon conclusion of league and European play.

Clubs can also offset some of their expenses that count as investments, such as expenditures for academy programs, and stadium improvements and infrastructure. Since those are normally direct costs that can be well-documented, they provide clubs additional wiggle room to comply with FFP rules.

PSG replied with its own statement, which said it was “very confident in its ability to demonstrate that it will fully comply with Financial Fair Play rules for the fiscal year 2017/2018.” It also stated it expects revenues to increase by 20 to 40 percent and additional funds could be generated by selling players for lucrative transfer fees.

By making this announcement just after the close of a wild-spending transfer window, UEFA is serving early notice that this upcoming season will be the most examined in the short history of FFP, at least theoretically. PSG is hardly the only major European club suspected of flaunting the rules of UEFA along with those of smart business.

The European governing body does have allies amongst the rich clubs, most notably Bayern Munich, which doesn’t always spend wisely but for the most part adheres to the strict financial decrees mandated by Bundesliga regulations.

Punishments can include deduction of Champions League prize money and reduction of roster size, as were imposed three years ago on PSG. A club could be excluded from participating in the Champions League.

Many involved in the game -- former players, managers, executives, journalists, broadcast commentators -- are skeptical that FFP can significantly change operations at the top club level. Yet by going so public so early, UEFA has pushed itself into the spotlight alongside PSG.

The Uefa statement said its investigatory chamber “will regularly meet in order to carefully evaluate all documentation pertaining to this case.”

Translation: “Get your books in order sooner rather than later. See you.”