City excess

London’s financial hub is not the only ‘City’ whose excess is currently upsetting the masses.

It seems that since Sheikh Mansour bin Zayed Al Nahyan took majority control of Manchester City, people have been getting in a tizz. Apparently their obscene spending is ruining the game.

For sure City has been paying premiums for players, £22m for Joleon Lescott for example. The funny thing is people were congratulating David Moyes, Everton manager, on his stand against City when the offer was £20m. What principle? The bid was raised by an extra £2m and Lescott was gone with Moyes looking at bringing in 3 new recruits, including the captain of financially struggling Portsmouth. Everton simply milked more money out of the City owners as is their right but let’s hold back on the drama.

It’s not only the little guy who is getting upset though, I was particularly impressed by the chutzpah of Chelsea owner Roman Abramovich who came out during the week in support of a UEFA floated idea to cap the amount clubs can spend.

Abramovich is known as one of the infamous Russian Oligarch’s who was friends with the right people at the right time when the countries public assets were being handed over to mates of the system. He then introduced himself to the west by buying Chelsea FC in 2003 and spent huge money buying up great talents for the team’s bench. If you told a driver the amount of salaries players were now demanding they would probably crash their car, just ask as Ashley Cole.

In reality Chelsea were not one of the ‘great’ clubs before 2003, but they somehow got acceptance to the fiefdom and want to shut the door behind them as they take their seat. Another owner making noises about spending levels is our friend Silvio Berlusconi at AC Milan. It seems it no longer suits him to flex his financial muscle either.

The foundations for the excess in football were set many years ago. Big clubs across Europe, such as Real Madrid would spend their substantial money to have brilliant players on their benches just so other clubs could not have their services.

City is playing the money game when the fiefdom is struggling financially, why is it not their right?

De Laurentiis, always good for a drama

How often do you see a player string a few decent games together only to have his agent start demanding an improved contract? It happens way too much and the player & agent usually get their way.

Film producer and Napoli president Aurelio De Laurentiis, is one guy who seems to be fighting back.

Argentinean attacker Ezequiel Lavezzi in his second season with the club, got off to an explosive start in 2008/09. And as per usual big English clubs started looking around at the talent (basically Lavezzi & Slovakian midfielder Marek Hamšík) and agents smelling blood start rumbling about improved contracts. At the time De Laurentiis had this to say:

"We made these players — two years ago nobody knew who they were,"

But the real frightener was:

"If they want to go to England then in the end they're going to go, but they need to understand this: the English live badly, eat badly and their women do not wash their genitalia. To them, a bidet is a mystery."

The players went quiet....

So this summer while Hamsik seems settled, Lavezzi started to apply the pressure again as soon as the season was over. There was talk of Liverpool being interested and so naturally, while he loves the fans, the player required improved compensation to stay. He even released a letter to the fans that I’m sure tugged at the heart strings of the population of Secondigliano.

The President initially said:

“A man who signs a contract with an agreed upon length and value, which was already improved within seven months of his arrival, cannot ask for more."

“It’s not even as if his performances warranted yet another raise throughout the season.”

“I am surprised by the immaturity of these professionals. It cannot all be based around money, there is also the value of the rapport between people.”

Kinda sounds fair enough. As the new season nears and decisions have to be made De Laurentiis, who has put together a competitive looking squad this off-season, put the matter pretty much to bed:

"Lavezzi is not Maradona,"

"He didn't even fire us into the Champions League or Europa League, so what does he expect? He only scored seven goals last season, not 27.

"He is an inconsistent player. The club is maintaining its position, we have never done anything wrong. Those who did wrong are the ones who leave the squad. If an actor did that with me I would have eaten him."

Is that clear?

Just to reinforce the point Napoli are talking to Lazio about bringing in Goran Pandev in direct challenge to Lavezzi’s spot.

99 problems

A story the comrades will love, though I will be honest, even I was touched. Cristiano Lucarelli the former Italian International is returning to play for his home town team A.S. Livorno Calcio as they return to Serie A.

The player took a massive pay cut the first time around to play for the club he has supported throughout his life. He also wears the number 99 in tribute of the club’s ultras.

But, even this fairy tale was almost butchered by a chairman & agent.

As negotiations were being completed Livorno President Aldo Spinelli cut talks and released this statement:

“A.S. Livorno Calcio informs the fans that, despite having reached an agreement with Parma F.C. with complete mutual satisfaction, and that the footballer Cristiano Lucarelli was available for the transfer, the Club Livorno regrets to consider the negotiation finished because of the continuous and unjustified demands made by the player's agent, Mr. Carlo Pallavicino,"

Lucarelli flipped: “The news came in about Pallavicino’s fee and I really cannot believe my dream of returning to the Amaranto could disappear because of £40,000.”

His long time agent Pallavicino came through with the goods: “Cristiano is like a brother to me and I will do everything I can to give him this dream with Livorno.”

The agent’s £40,000 fee was dropped and a son returns home.

Article updates

Southampton takeover complete
No Le Tiss, all Swiss. Markus Leibherr whose money comes from owning engineering firms, is the new owner. Don’t expect silly money to be thrown around though, classic Swiss pragmatism and proper long-term planning will be the go. Caretaker manager Mark Wotte has already been axed. The 10 point penalty remains in place.

I also mentioned Ken Bates of Leeds United, in the article. This old school gun slinger has just been ordered to pay £50,000 to a former Leeds Director for libelous claims. David Conn at the Guardian has been sniffing around and it makes for intriguing reading.


Arbeloa school of finance’s first graduate
Well someone was listening to Alvaro Arbeloa at Liverpool’s Melwood training centre. When I heard Jermaine Pennant was going to Real Zaragoza, it seemed a bizarre move. Pennant will have trouble finding a decent R&B club in the sleepy city that sits between Catalunya & Euskadi.

Maybe the compensation will help. Take home pay of £40,000 a week plus taxes payed for by the club. The club can do this as Spain has a top tier tax incentive for executives. It was initially Real Madrid that argued footballers deserve the same allowance, and we generally know that RM get what they want. The tax rate payable is 23% for the first five years. This is a massive competitive edge for the Spanish clubs as the UK’s top tax rate is 50%.

Legends of the Lounge – Silvio Berlusconi

Born: September 29, 1936

Died: -

Club: Associazione Calcio Milan, Italy

Making a living:
A classic entrepreneur, he started early selling all kinds of stuff while studying law. He then got into, you guessed it, construction. He eventually built a monster estate on the fringe of Milan consisting of some 4,000 residences. He then started a cable television company to service the estate, and then bought another station and another then print and other media outlets.

Assets have come and gone in industries such as Insurance and Finance, but he is smart enough to always have held a major stake in Media. He still has Mediaset that owns the 3 private national stations.


Politics?
Hell yeah. Once you build your fortune it is time to go into politics to protect it.

The guy is one of the longest serving Italian Prime Ministers of all time. Considering the usual turnover in Italy his time in charge has been very impressive. His success is very much built on his populist right wing, commie hating views and his own loud personality, as it has been achieved across different political parties and coalitions.

He admitted to, at least for a time, being a card carrying member of Propaganda Due, which had some very coulourful members.

Chairmanship:

Berlusconi bought AC Milan in 1986 and a big club went truly global in it’s appeal. The spending was on and the brilliant Dutch players Van Basten, Gullit & Rijkaard drove the team. Milan owned Seria A in the early nineties and Seria A was the place to be.

In recent times however the spending has dried up. The most significant example was the allowing of Kaka to leave this northern summer.

Maybe he is thinking of the very expensive divorce that seems to be on its way after his wife’s complaining about too much partying with teenage girlies.

Chutzpah:

Why be in politics if you can’t help yourself?

Silvio has fought many allegations regarding fraud and bribery etc. Nothing really seemed to stick, either he simply won, it was thrown out on appeal or the statute of limitations passed.

To make things les complicated he simply passed a law that that gave him and other top public post-holders immunity from prosecution while in office. Though the constitutional court threw it out.

He has also shortened the statute of limitations for most crimes and watered down white collar fraud sentences.

Administration, new owners and docked points

Slowly the inefficient crumble away. English football clubs go into administration, the Football League fines them and they get docked a truckload of competition points. Brutal stuff.

I have been reading about the recent problems with Southampton Football Club. Building a new stadium then several seasons in lower leagues after falling out of the premier league after 27 years dragged the club down. Even having the genius player contract clause that slashed wages by 50% upon on relegation from the premiership couldn’t help.

Things have come to ahead and the club is now in Administration. Several parties took an interest but exclusive negotiation rights had been given to the Pinnacle Group. This group was basically a guy called Michael Fialka, who apparently made his money in property. Saints fans seem to be cautious but the trump card for the bid was that it is fronted by the club’s greatest legend Matt Le Tissier. A man whose motives are surely beyond question.

The group has now pulled out of negotiations and one of the main stumbling blocks was the 10 competition point penalty that the Football League has imposed and does not seem to want to remove. So, staff are not getting paid, a great club may not exist and all this because the FL won’t budge on a 10 point penalty, even though the Administration happened in the previous season. The FL argue that they need to make sure that all teams starting the season end it, and that is a fair call.

Pinnacle were banking on the fact that the parent company and not the club itself went into administration, but I think it should not even come to such a technicality. If a new potential owner comes to the table and offers to save a club then surely a points deduction can be forgiven. It is fair that certain criteria are met; the owners should prove they can reasonably finance at least one season and that they have nothing to do with those that dragged the club down (assuming mismanagement was a factor).

Leeds was put into administration in 2007, one round before the end of the season. One of the biggest creditors Astor Investments, based in a tax haven, was prepared to write off it debts IF the club was sold to another tax haven domiciled company Forward Sports Fund and also only IF Ken Bates was maintained as chairman. The end owners of both of these companies was not known and Bates denied any ownership or knowledge. Yeah right are we to believe they just liked the cut of his jib? Anyway it has now come to light that Bates has ownership in Forward Sports Fund. Shock.

In the end the administrators did sell the club to Forward Sports Fund and it is true the points deduction was maintained.

I believe these two cases are vastly different.

The Leeds situation was a farce and deserved to be treated with contempt, the Saints potential buyers were clearly identifiable and not linked to previous ownership. Surely in such circumstances there is argument for relief.

Does the man who ‘saved the world’ need to save Liverpool FC?

Ok, slightly dramatic, but an interesting situation has cropped up here and if all the dominoes fall in a line could Gordon Brown end up running the Reds? I was reading the below press statement produced by the Royal Bank of Scotland (RBS) in response to questions over the club’s debt.

The bank seem to be letting it be known that everything is going smoothly and not to worry. However they are flagging if it does turn to shit then the club itself is ok and will be supported by the bank but it will be the holiday homes of George Gillett and Tom Hicks that will be under threat, not to mention their shares in the football club.

So, let’s imagine for a moment that Gillett & Hicks do crash and burn, this could then see the shareholdings in the club owned by RBS. Who said banking wasn’t sexy.

The statement goes on to remind us that things are not all that smooth in the bank’s house either. RBS have been deep in it themselves and saved from near bankruptcy by the British Government in late 2008, taxpayers own about 70% of the bank. Whilst the global markets at least have improved and people wax lyrical about green shoots, there is still a massive chance that the economy can get a whole lot worse.

Taxpayers could end up owning the whole of RBS who could own the whole of Liverpool FC. So Gordon, which players are you liking in the transfer market?

Thank you for your email expressing concern about RBS' banking arrangements with Liverpool FC and its current owners. We are aware of the strength of feeling of a number of fans on this matter and have corresponded with many during the course of the past year or so.

Perhaps I can start by putting RBS' relationship with Liverpool FC in context. RBS is the main banker to the Club including all of its operating accounts, cash management, online banking, automated payments, and credit card processing to facilitate ticket sales and retail merchandising. We also provide a credit facility to support the Club's working capital requirements and a letter of credit facility to facilitate the purchase of players from non-Premiership Clubs, along with a loan facility for design, planning and other preparatory work for the proposed new stadium at Stanley Park. We have set out to establish a long term relationship with the Club, and we look forward to this continuing for many years to come.

We also lent money to the Club's parent, Kop Football Limited, so that it could repay debt which was on the balance sheet of the Club at the time of its acquisition by George Gillett and Tom Hicks. This is the only portion of Kop Football's bank debt for which the Club is legally responsible. We took great care when making our original loan in early 2007 and when refinancing it last January to distinguish between obligations of the Club, primarily those outlined above, and obligations of its parent company, the latter being secured by personal guarantees and collateral from the owners and a pledge of the shares they own in the Club.

As a result the Club does not suffer the burden of debt implied by a lot of the recent press reports and, in our view and that of the executive management of the Club, it is financially healthy and able to service comfortably its debt obligations from cash flow generated by its playing and commercial activities. It is in our commercial interest to support the Club in the manner described above so that it can continue to perform successfully on and off the pitch.

As far as the Government is concerned, they have been very clear that they do not wish to exercise day to day control over RBS or make commercial decisions for us. Indeed they set up an independent body, UKFI, to oversee the Government's shareholding in RBS, so matters such as strategy and governance can be agreed, while they leave commercially related matters to us.

RBS attaches a great deal of value to being associated with Liverpool FC. I hope my comments reassure you as to the strength and depth of our relationship with the Club and that we will endeavour to contribute to its long term health and success.

Kind Regards,

Roger Lowry, Head of Group Public Affairs, Royal Bank of Scotland Group