'The House Is Burning'
Ronaldo's Tax Tricks Hit the Entire Football Industry
Football players with Real Madrid have a pretty good idea about where the best place to live in Madrid is: The La Finca luxury residential complex in the northwestern part of the Spanish city. The development, a 30-minute drive from the training grounds, consists of virtually identical, bunker-like luxury homes with landscaped gardens and pools. There is tight security at the entrance to the community, and there are small parks and ponds. The development is relatively shuttered from the outside world, except for those residents who jog on a path along the perimeter.
Real Madrid stars Gareth Bale and Toni Kroos live in La Finca. Cristiano Ronaldo has been a resident for eight years, and his agent Jorge Mendes also owns a house there. The two men, who are good friends, met when Ronaldo was still an up-and-coming talent with Sporting Lisbon.
Mendes owned a popular nightclub at the time, which gave him access to many professional football players. Ronaldo was looking for an agent. They formed a relationship and, in the coming years, conquered the world with football. One man shot the goals while the other handled the money. Today, neither man knows what to do with all his millions. When Mendes was married in the northern Portuguese city of Porto two years ago, Ronaldo, his best man, gave him a Greek island as a wedding gift.
But now their journey could come to an end.
The La Finca luxury development is in the town of Pozuelo de Alarcón, where the Ronaldo tax case will be heard in court on July 31, at 11 a.m. After the hearing, Judge Mónica Gómez Ferrer will decide whether the striker should go on trial. Spanish authorities accuse Ronaldo of evading 14.7 million euros ($17.1 million) in tax payments from 2011 to 2014. The top player could potentially face prison time if the case goes to trial.
Reputations On the Line
The place where Ronaldo's future will be decided stands in absurd contrast to the colorful life of the four-time winner of the Ballon d'Or, awarded annually to the world's best male player. The court building is next to a highway, the room where the hearing will take place is less than 30 square meters (about 300 square feet) and Ronaldo will have to sit on wooden chairs without cushions.
Ronaldo's reputation is on the line in Pozuelo de Alarcón, as is that of the entire world of professional football. Lionel Messi and Neymar were already convicted of tax evasion. Is a third superstar next? It would mark a turning point if he was. What will people think of a sport whose biggest idol is lining his pockets at society's expense?
DER SPIEGEL exposed Ronaldo's tax tricks last December. Clubs and football media barely acknowledged the report, which was based on documents from the whistleblower platform Football Leaks. When Ronaldo was officially under investigation by the public prosecutor's office seven months later, they pretended to be surprised and feigned incredulity. Why him? Could it be possible?
Yes, it could!
Football ceased being the world's favorite pastime quite some time ago. In its most-extreme form, the world of professional football, the sport has become its own sector of the economy. The value added in the German national league, the Bundesliga, exceeds 8 billion euros ($9.3 billion), and 53,000 people make a living, directly or indirectly, through professional football.
A Swamp of Dubious Agents
An entertainment industry that involves such large sums of money ought to be subject to greater scrutiny, and yet it isn't. Instead, a swamp has emerged in which dubious agents are able to go about their business undisturbed.
The players benefit from the system, as their salaries keep going up and up. Cristiano Ronaldo was the greatest beneficiary in recent years. He is one of the world's highest paid athletes, earning about 40 million euros a year at Real Madrid. There are several luxury cars parked in his garage at La Finca, and he owns a private jet.
But all of this was apparently not enough for him. There is no other way to explain why Ronaldo agreed to a tax savings model years ago to ensure he would have a few more millions for himself.
This is how the construct worked: Two Irish companies, MIM and Polaris, collected the revenues from advertising and image rights. Mendes and Ronaldo were part owners of Polaris. The money was then transferred to an offshore company in the British Virgin Islands with a Swiss bank account. In the end, Ronaldo paid only 6 million euros in taxes on a total of about 150 million euros. The public prosecutor's office in Madrid views this construct as a "conscious and deliberate violation by the accused of his tax obligations in Spain."
Through his attorneys, Ronaldo stated that he had not intentionally evaded paying taxes. If the case against him is allowed to go forward, the trial will also revolve around two questions: Who devised the offshore construct? And what did Ronaldo know?
Ronaldo likes to invite friends and family members to parties at his house in La Finca, where guests play football in the yard. His agent, Mendes, sometimes makes an appearance. He isn't much of a football player, but he spends most of his time on the phone, anyway. Mendes is a workaholic and he always has several mobile phones with him, sometimes using them simultaneously. His agency, Gestifute, represents more than a dozen world-class players, and now the agent behaves like a star himself.
Four weeks ago, when Mendes was summoned to testify in court in Pozuelo de Alarcón in the case against professional player Radamel Falcao, he arrived in a black, chauffeured limousine. Mendes is an impulsive man, but when the judge began peppering him with questions, he became increasingly restless in his seat.
His agency, Gestifute, has its offices in Ulysses House, an expensive office complex in Dublin. Polaris and MIM, the two companies that have played a key role in the offshore construct, have their registered offices on the same floor. One of the managing directors of Polaris and Gestifute is Mendes' nephew Luis Correia. Another one, Irish national Andy Quinn, represents all three companies at Ulysses House. As a shareholder, Mendes has collected a total of 6 million euros in dividends from Polaris.
Millions in Tax Payments
Several Mendes players were summoned to appear at the court in Pozuelo de Alarcón in recent months. Colombian striker Radamel Falcao was questioned, and he has since paid the Spanish tax authorities 8.2 million euros. Portugal player Pepe has paid 1.8 million euros, Ángel Di María 1.3 million euros, Fabio Coentrão 1.3 million euros and Ricardo Carvalho 500,000 euros. The tax authorities' investigations of other players are still underway.
Authorities are also investigating James Rodríguez, the Real Madrid player who moved to FC Bayern Munich on a two-year loan deal last week. As with the other Mendes players, his advertising revenues were also handled by Polaris and MIM. A company in the British Virgin Islands, Kenalton Assets, is also involved in the Rodríguez case. In late 2014, 12 million euros was paid into his account with St. Galler Kantonalbank.
It is quite possible that FC Bayern will have to release its new player for a few days for his court appearances. Rodríguez did not comment on the proceedings when contacted by DER SPIEGEL.
During his hearing at the court in Pozuelo de Alarcón, Mendes insisted that he had nothing to do with the networks of companies used by his clients. He said he had no understanding of such matters, and that he only deals with the processing of transfers.
It is hard to imagine that the judge will believe him. Portugal national player Carvalho testified that he had always heeded the advice of Mendes and his attorney, Carlos Osório de Castro, in connection with his image rights deals, a claim the attorney denies. Falcao also provided information about the players' agent in his testimony. Many Mendes clients work with the same individuals or companies. They include attorney Osório de Castro, Miguel Marques, a banker with the Portugal branch of St. Galler Kantonalbank, and marketing agencies Polaris and MIM. Almost all the stars also use the same law firms to handle their tax problems. Is it all just a coincidence?
Mendes' attorneys are apparently aware of how serious the situation is. The documents from Football Leaks include a memo with the headline "Gestifute Meeting." It reads: "Tax authorities versus Jorge campaign. Risk of being treated as a Cooperador Necesario. Criminal offense." In Spanish criminal law, it is possible to sue a person whose assistance facilitated a crime, as a "Cooperador Necesario." If the court in Pozuelo de Alarcón recognizes a Mendes system behind the players' tax evasion schemes, it could lead to the agent's downfall and the criminal prosecution of him and his close associates.
No names are mentioned in the office of Aleksander Ceferin in Nyon, on Lake Geneva, including those of Ronaldo and agent Mendes. Still, it is obvious that the president of UEFA, European football's governing body, is furious. "It really isn't necessary to evade taxes when you make so much money," says Ceferin.
Ceferin, a Slovenian who has been in office since September 2016, is keeping a close eye on the hearings in Pozuelo de Alarcón. As a lawyer, he believes that football players generally have no exact understanding of their finances. "Legally speaking, of course, they are responsible for their tax returns. But I don't believe that they knew what was going on. They have people around them who handle their accounts, and who say: 'Don't worry, we will take care of everything!' We are talking about men here who think about nothing but football every day. I know these players. They want this and that, but they certainly don't want to deal with taxes."
Maybe Ceferin doesn't know Ronaldo well enough.
The Football Leaks documents, which DER SPIEGEL was able to inspect, include contracts with the offshore company in the British Virgin Islands, documents signed by Ronaldo. Can someone who signs these types of documents truly claim that he knew nothing?
Turmoil at La Finca
After his tax affair became public, Ronaldo published a video on Instagram. It shows him jogging around his estate in La Finca, saying various things to the camera. Some friends are cheering him on in the background. Ronaldo says that he has a message for all those who are working against him, his "haters." They should carry on, he says, because it only encourages him. Then he jumps into his pool.
But his relaxed mood was an act. In fact, La Finca has been in turmoil for months over the Football Leaks revelations.
Last winter, DER SPIEGEL reported on the offshore activities of trainer José Mourinho. The neurotic top coach at Manchester United is also a longstanding Mendes client. After the publication of the exposé, attorney Osório de Castro wrote the following words to Mourinho's London PR firm: "The house is burning."
Mourinho also once lived in La Finca. During his tenure as trainer at Real Madrid, from 2010 to 2013, he rented a villa for 20,000 euros a month. Mourinho had also had a tax model similar to that of the other Mendes clients developed for himself. The money -- about 6 million euros in 2011 and 2012 alone, was transferred from the Irish firms MIM and Polaris to an offshore company in the Caribbean, to which the trainer had relinquished his marketing rights.
Since Mourinho was audited by the Spanish tax authorities in July 2014, the construct was discovered and the top trainer was ordered to pay a fine of 1.15 million euros a year later. He had gotten off lightly, and the case appeared to be resolved for Mourinho. But then DER SPIEGEL and its partners at European Investigative Collaborations, a research network, published details about his Caribbean company, which was backed by a trust in New Zealand. Ten days later, the New Zealand tax authority, Inland Revenue, contacted the trust in Auckland and demanded records.
Mourinho and his associates were in turmoil. In an email, an attorney wrote that he was "certain" that the British tax authorities would now review Mourinho's tax position, as well. For this reason, the attorney advised against bringing any documents into the UK. Mourinho, who has been working for Manchester United since the summer of 2016, had had enough. The star trainer's banker informed his attorney: "To avoid any surprise or any media issue for the future," the coach had "decided to liquidate all structures that he owns."
This realization comes too late to fend off the investigations by the Spanish tax authorities. They have taken Mourinho's Irish-Caribbean-New Zealand network of companies to task a second time and are now accusing him of not having paid taxes on more than 7 million euros in advertising revenues for 2011 and 2012, leading to an estimated tax loss of 3.3 million euros. The case could acquire criminal relevance, now that it has been taken up by the white-collar crime division of the Madrid public prosecutor's office. Mourinho claims he is unaware of any wrongdoing.
The Real Madrid stadium is located in downtown Madrid, surrounded by office buildings. The Bernabéu Building is a cathedral to the business of football. Almost no other club in Europe spends as much money on players and trainers as Real Madrid.
When the Ronaldo tax scandal boiled over in June, Real employees called the newspapers to ask that they no longer show any images of the striker wearing the club's jersey. The record-setting striker is still revered in the fan shop, however, where his jersey is displayed in the front of the shop. A poster of a smiling Ronaldo hangs on the wall behind the register where tickets are sold for stadium tours. A Real mascot wearing Ronaldo's jersey stands next to the register.
Boundless Love for an Idol
José Luis Pardo Boal hasn't missed a Real home match in 22 years. He is one of the heads of La Coma, one of the oldest fan clubs, founded in 1973. The 51-year-old works as a security guard in an underground garage in downtown Madrid. He pays for season passes for himself, his son, his daughter and his niece. "Four thousand euros a year!" he says.
The tax scandal? "We are interested in Ronaldo as a player. We don't care about the rest. If he has made a mistake, he will pay a fine. End of story," says Boal. He attributes the reporting on Ronaldo's tax offenses to the fact that everyone outside Madrid is envious of Real. "We are the best, which is why they are always looking for something bad." A petition was recently created on the internet, calling upon the government to forgive Ronaldo his tax debt, to deter him from moving to a club abroad. It sounds crazy, and yet more than 2,200 people have already signed the petition.
The fans' love for their idols is sometimes boundless. The ironic turn of events in the Ronaldo case is that he owes all his tax troubles to a man who is in fact one of his biggest supporters.
The initiator of Football Leaks is sitting in a park in an Eastern European city, wearing shorts, a T-shirt and sandals. He calls himself John. Like Ronaldo, he's from Portugal. "I love football," he says. "And I hate what these greedy men are doing to it. It has to end."
DER SPIEGEL has been in contact with the whistleblower, who unleashed the earthquake in La Finca with his documents, for almost two years now. Ronaldo, Mourinho, Mendes. "Because of us, the authorities began taking a closer look at the corruption, the tax fraud and the money laundering in football," says John, adding that there are more revelations on the way.
The U.S. sports network ESPN named John one of the 20 most influential figures in global football for 2017. But many club managers and agents hate him. Some call him a criminal, while others want to see him burn in hell, so that all the turmoil can finally come to an end, normalcy can return to the sport and everyone can go back to engaging in their dirty deals without scrutiny.
UEFA President Ceferin is one of the few major voices in football who do not condemn John, Football Leaks and DER SPIEGEL. "The scope of the revelations surprised me. It isn't good for the sport's reputation at all," says Ceferin, "but it is a good thing that these things are coming to light, because it means that they will stop taking place -- or at least will happen only rarely."
He suggests that footballers rely only on government-registered tax accountants for their tax returns and financial dealings in the future. "We need to develop a system that helps the players," says Ceferin.
Translated from the German by Christopher Sultan