Behind most millionaire soccer stars stands a successful soccer agent. Except when it comes to filling out a tax return.

Take Manchester City and the French player Gael Clichy, recruited by the club in 2011 for more than 4 million pounds ($5.2 million) a year. Man City recorded that soccer agent Darren Dein represented it in the negotiations.

Yet British press reports identified Dein as Clichy’s agent starting in 2010. And in two emails to officials at a European club in 2013, Dein said he acted for Clichy.

Who Dein represented became the subject of inquiry by UK tax inspectors. It is not the only instance to attract the attention of Her Majesty’s Revenue and Customs (HMRC).

An examination of thousands of documents relating to some of the world’s richest soccer clubs shows how clubs and players have repeatedly clashed with the tax authority over the role and pay of agents. At stake are hundreds of millions of pounds in tax revenue.

The “Football Leaks” documents, which include emails and contracts, were obtained by the German publication Der Spiegel and reviewed by Reuters in partnership with European Investigative Collaborations, a consortium of international media.

Agents typically take a cut of at least five percent of a player’s wage for negotiating on the player’s behalf. In many cases, the club pays, treating this sum as part of the player’s overall remuneration package. Under UK law, this is a taxable “benefit in kind” to the player. The player becomes liable for income tax and sales tax, and the club becomes liable for social security payments. If the player has negotiated a salary net of tax, the club ends up paying all of it.

But if the parties can show that the agent worked for the club, not the player, none of these taxes are due and the agent’s fee is treated as a regular business expense. In such cases, clubs benefit, and the tax authorities are the losers.

In the instance of Man City and Dein, tax inspectors challenged the club’s account of Dein’s role in negotiating that 2011 contract with Clichy, the documents show.

In 2013, the tax authority wrote to Man City about a 1.2 million pound payment it made to Dein in 2011 and asked why the club hadn’t reported a “benefit” to Clichy. It noted that “all the information in the public domain shows that Dein is the player’s agent.” In November 2015, after a meeting with the club, the tax authority wrote, “As stated during our meeting, we do not accept that Darren Dein doesn’t act for the player.”

Later the same month, Man City’s head of finance, Andrew Widdowson, acknowledged in a letter to the tax authority that while Man City had paid Dein “to influence the player into joining us” in 2011, the club also accepted that “as you point out, Darren Dein is the player’s agent and with that in mind we accept that a proportion of the fee should be apportioned as Dein acting for the player.”

Man City sought to reach a deal with HMRC over the unpaid tax, exchanges between the club and the tax authority show. Reuters was unable to determine the outcome. Based on the sum involved and the tax rate at the time, the total bill was likely to have been at least one million pounds, if Dein was deemed to have represented Clichy alone, Reuters has calculated.

Man City said it would not comment on “out of context materials purported to have been hacked or stolen from City Football Group and Manchester City personnel and associated people. The attempt to damage the Club’s reputation is organized and clear.”

A law firm representing Dein and Clichy declined to answer questions about their relationship.

The tax authority said it would not comment on individual cases, but added, “HMRC works closely with football clubs to ensure payments made to their agents during the renegotiation of a contract or club transfer are taxed correctly. We actively challenge any payments we consider not to be realistic and ask for evidence to prove legitimacy of any arrangement.”

In recent years, the UK tax authority has increased its scrutiny of clubs, including those in the world’s richest soccer league, the English Premier League. As of November 2018, the tax authority was investigating 171 players, 44 clubs and 31 agents about agents’ fees and other tax issues and had recouped 332 million pounds, it said, without naming the agents, clubs or players concerned.

But in the documents examined by Reuters, the tax authority didn’t impose any punishment. Instead it offered to settle back-tax claims without a penalty. And, the documents show, it allowed clubs to say agents jointly represented a club and a player. The tax authority declined to answer questions about this arrangement and why it hadn’t imposed penalties.

“All the information in the public domain shows that Dein is the player’s agent.”

Between May 2015 and January 2018, agents were involved in around 1,400 contract negotiations between Premier League clubs and players, according to player transfer data gathered by English soccer’s governing body the Football Association. In over 80 percent of these negotiations, the Football Association recorded that the club and the player used the same agent, a Reuters analysis of the publicly available data found.

But public statements by some agents suggest that in many instances the agent was only working for the player.

Some club officials have expressed concern that they are pushing the boundaries of what is permissible. Following inquiries by the UK tax authority about how Man City reported player benefits, club finance head Widdowson in July 2015 emailed the chief financial officer of Man City’s parent company and noted agents’ fees were sometimes an area “where we are sailing close to the wind.”

Man City declined to answer questions about how it reported its relationship with football agents. Widdowson did not respond to requests for comment.





THE FATHER AGENT

Soccer players rely on agents to help them negotiate contracts, choose clubs and maximise their earnings off the field, from activities such as advertising. For many years it was routine for clubs to pay agent fees on behalf of players without reporting these payments as a “benefit in kind,” and for the UK tax authority to let the practice go unchallenged.

By the early 2000s, with the value of player contracts soaring, the tax authority began to look more closely at this arrangement. One of the people that caught its attention was Vincent Kompany, captain of Man City and then captain of Belgium’s national team.

In November 2014, Belgian agent Jacques Lichtenstein told Dutch magazine Sports Football that Kompany had been a client for years. In June that year, an executive at Lichtenstein’s firm, Eleven Management, wrote to a potential business partner listing several of Eleven’s clients. Vincent Kompany was the first name on the list drawn up by the executive, Peter Verplancke.

Yet in July 2012, when Kompany agreed a new 6 million-pounds-a-year contract with Man City, the club recorded in a submission to the Football Association that Kompany was advised not by Lichtenstein, but by someone with no apparent experience of the high rolling English Premier League - his father, Pierre. Pierre Kompany’s name does not appear on Belgian or English lists of registered agents. His website says he has worked as a taxi driver, engineering lecturer and municipal politician.

For its part, Manchester City signed a contract with Lichtenstein and his firm Eleven Management. The tax authority wrote to Man City asking it to clarify Lichtenstein’s role in the negotiations. Man City finance head Widdowson replied in November 2012 that the club had retained Lichtenstein to “help negotiate with his (Kompany’s) father.”

Kompany did not have an agent, Widdowson said in the letter. “As far as we are aware there is no signed agreement between Jacques Lichtenstein and Vincent Kompany.” As late as October 2015, Widdowson was maintaining in an email to the tax authority that “Vincent Kompany’s father actually represents him in all of his negotiations.”

“Lichtenstein to all intents and purposes acts and behaves like he is the player’s agent.”

If the tax authority accepted Man City’s account that Lichtenstein worked for the club, and not the player, payments to the agent wouldn’t be considered a taxable “benefit in kind” to Kompany. The authority wouldn’t levy sales tax or social security. If it considered that Lichtenstein solely represented Kompany, however, the total tax bill would have been at least 2.3 million pounds, according to Reuters calculations based on the agreed fee and prevailing tax rates.

The authority’s review of the matter found that “Lichtenstein to all intents and purposes acts and behaves like he is the player’s agent,” a tax official wrote to Man City in November 2015.

Documents appear to show Man City considered settling with tax authorities. Reuters was unable to determine whether Man City ultimately accepted that Lichtenstein represented Kompany or paid back taxes.

The tax authority, Man City and Pierre Kompany declined to comment. Lichtenstein and Verplancke did not respond to requests for comment. Vincent Kompany’s lawyer said “my Client’s case has been investigated by the Authorities thoroughly in the recent past and he has answered all their questions satisfactorily, which was confirmed in writing.” He said Reuters calculations “can only be based on incorrect facts and/or guesses” but declined to identify inaccuracies or answer detailed questions.

In 2014, the tax authority challenged Man City about another deal involving a Belgian player, Dedryck Boyata.

Boyata had signed a contract with the club in 2010 and negotiated a new deal in 2011. Man City recorded for tax purposes that in both deals, Boyata relied on the advice of his father, Bienvenu, a former soccer player who ran a van rental business. Bienvenu Boyata does not appear on Belgian or English lists of registered agents.

Man City again retained Lichtenstein as its agent, contracts and other files show. The club told the tax authority it felt the need to retain an agent because Boyata, advised by his father, had demands the club found unrealistic.

“DB’s father was asking for too much money and JL was used to try to get DB’s father to see sense & reduce his demands,” according to club minutes of a February 2015 meeting between Man City and tax officials.

Man City had hired Lichtenstein after club official Brian Marwood met him at a Boyata family event, where the agent was present “as a family friend,” the club told tax officials at that same meeting.

Yet Man City documents referred to Lichtenstein as Boyata’s agent. These include a 2012 spreadsheet that listed Man City players and their representatives and other communications. In an interview with Belgium newspaper DH in August this year, Boyata said Lichtenstein had represented him “for a long time.”

Reuters could not determine the outcome of the tax authority’s inquiry or whether Man City agreed to pay any back tax for the Boyata deals.

The tax authority and Man City declined to comment. Marwood, Lichtenstein and Dedryck Boyata did not respond to requests for comment. Bienvenu Boyata replied in a text message that “for good growing of the player you need both the father and best agent’s service.”





A NEAT STEPOVER

From around 2010 clubs, managers and soccer players were increasingly adopting a different approach to recording agent fees. They recorded in their tax filings that an agent worked for both a club and a player or manager. They didn’t split the agent’s fee evenly. Instead, they attributed only a small share of the fee to the player or manager. That gave some ground to the tax authorities, but limited the tax liability assumed by the player or manager.

For example, in 2013, Jose Mourinho, one of the biggest names in world soccer, returned to Chelsea Football Club as manager. Public statements and documents reviewed by Reuters show Mourinho has used an agent named Jorge Mendes since at least 2004. When Chelsea sent a draft contract to Mendes’ firm, Gestifute, in June 2013, it proposed paying Mendes’s fee and recording that 90 percent of the total was in recompense for his work for Chelsea.

UK tax rules state that the breakdown of fees must reflect the true nature of the business relationship. If the club pays almost all the fee on its own account, rather than on behalf of the manager or player, then the agent must have acted overwhelmingly to represent the club’s interests.

Emails between Chelsea and Gestifute show Mendes acted diligently in Mourinho’s interest, not the club’s. For example, when Gestifute lawyer Carlos Osorio de Castro returned a draft contract to Chelsea, he omitted a clause inserted by the club that 10 percent of Mendes’s fee would be reported as a benefit to Mourinho. The clause, de Castro noted, would have made Mourinho liable for tax.

Chelsea Finance and Operations Director Chris Alexander responded that, despite the additional cost to Mourinho, the clause had to be in the contract. Because Mendes “is Jose’s agent,” Alexander wrote in an email to de Castro, “it is not credible for tax purposes that some part of the fee is not allocated to services for Jose. 10 percent is the absolute minimum we feel we can put in.”

Gestifute accepted that the clause be kept in the contract.

Chelsea declined to answer any questions about the matter. “We do not comment on speculation concerning confidential contracts or related matters,” a club spokesman said.

De Castro declined to answer questions citing confidentiality obligations to clients. The tax authority also declined to comment. Alexander, Gestifute and Mourinho did not respond to requests for comment.





NO PENALTIES

In hundreds of emails and letters between the UK tax authority and clubs and between club officials, Reuters did not come across a single proposed or threatened penalty in respect of an inaccurate filing.

Even in cases where the tax authority says it believes a club has inaccurately reported the role of an agent, it has only sought back tax in relation to half the agent’s fee, the documents show.

In October 2015, the tax authority wrote to Man City to say it believed the club had inaccurately reported who agents worked for in respect of seven players. In the case of one, it said the club “must have been aware” of the inconsistency at the time it submitted tax filings. Nonetheless, the tax authority did not threaten penalties and simply proposed that the club recalculate its past tax bills.

The tax authority and Man City declined to comment.

In the most recent deals reviewed by Reuters, the clubs and tax authorities appear to have found common ground. The tax authority has settled on an approach that accepts an agent can equally represent both sides of a negotiation, emails from the tax authority to the clubs and between clubs and their tax advisers show.

Consequently, the even splitting of agents’ fees between the two sides has become common in the top echelons of British soccer, dozens of player contracts and other emails seen by Reuters show.

Yet the documents raise questions about whether the equal sharing of fees accurately reflects the relationships between the parties.

For example, when manager Jose Mourinho went on to join Manchester United in 2016, he, the club and agent Jorge Mendes signed a contract which apportioned the agent’s fee evenly between the club and the manager.

In an email to Gestifute’s lawyer de Castro, however, Man United’s Director of Legal & Business Affairs Patrick Stewart referred to Mourinho as “your client” seven times.

And in one way at least, Gestifute appeared to be working contrary to Manchester United’s interests. At the same time as Gestifute was negotiating the terms of Mourinho’s Man United contract, the agency was in negotiations with another club to hire Mourinho. In May 2016, de Castro exchanged dozens of emails with officials of French team Paris St. Germain. A deal was never reached, but the talks progressed to the point of exchanging a Heads of Terms, or provisional contract.

Reuters couldn’t determine if the tax authority challenged the way the agent’s fee was split or how much tax was paid.

The tax authority declined to comment. Manchester United and Stewart declined to answer questions about the negotiations with Mourinho, but the club said it “operates within the rules set by football’s governing bodies and all payments and agreements are reported to HMRC in the standard way.” Gestifute, Mourinho and PSG did not respond to requests for comment. De Castro declined comment.

The tax authority’s willingness to accept split fees in the face of contrary evidence means the soccer industry gets a generous break, and the UK Treasury and millions of ordinary taxpayers lose out.

The Soccer Files By Tom Bergin and Cassell Bryan-Low Photo editing: Simon Newman Design: Pete Hausler Edited by Janet McBride and Richard Woods



This report is part of the Football Leaks project coordinated by European Investigative Collaborations