Premier League: Calleri’s move to West Ham highlights the use of third party owners in football

As West Ham fans scanned the club’s press release confirming the loan signing of Jonathan Calleri, they may have been curious to learn about his previous club. Buried on the second line, ‘Deportivo Maldonado’ is far from a household name, even in today’s globalised footballing culture.

Once Calleri had received his work permit, the club talked about his impressive spells with Boca Juniors and Sao Paulo, but no mention of his exploits in Uruguay Maldonado.

That’s because there are none. Calleri has never played for the team plying their trade in the Uruguayan second tier. Had he done so, he would have displayed his talent in front of around 200 fans, which is a significantly lower crowd than he will enjoy at the Olympic Stadium this season.

In terms of history the two clubs also differ significantly. From their inception in 1928 Deportivo Maldonado had operated as a member owned club. Then in 2010, Malcolm Caine and London-based lawyer Graham Shear became president and vice president. Shortly after that, a handful of South American talents began to filter through the club.

One of the first players to join Deportivo Maldonado was Brazilian defender Alex Sandro, now of Juventus. Further examples include Willian Jose da Silva, and his Real Sociedad teammate Geronimo Rulli. “We sold our sports rights to a public company.” said Federico Alvira, the club’s former president. “We’re not part of any triangulation, it’s illegal.”

From a financial perspective, trading players through Uruguay holds significant benefits. The country has a low tax rate on player transfers (it was raised from 4% to 12.5% in 2014 to try and combat questionable dealings) meaning investors can save an estimated 40% on dealings. Consequently, some South American clubs would route their players through a club like Deportivo Maldonado, who would then transfer them to Europe and then take a percentage for helping to get the deal done.

A report by Mundiario this week estimated that Deportivo had invested €32.09 million in players since 2009. That investment subsequently allowed them to sell the likes of Alex Sandro to Porto in 2011 for €9.6million, and Jose Willian to Sociedad for €5.9million. FIFA has previously issued fines to Uruguayan clubs for making transfers for ‘reasons that were not of a sporting nature’. The figure for those fines ranged between 15,000 and 50,000 Swiss francs (around £12,000 and £40,000), with Argentine clubs also coming under scrutiny in 2014.

Caine did not respond to questions posed to him by Bloomberg about Sandro and Da Silva, but insisted at the time that his investment in Deportivo Maldonado had yet to return a profit. That may have since changed, with Calleri one of two high profile deals the club struck this summer after also negotiating the sale of Rulli to Manchester City. In a complex deal, Rulli headed back to Sociedad on loan, and will be signed permanently by the Spanish club in January. However, Man City can also buy Rulli back for €14million during the next three summer transfer windows.

The notion of Third Party Ownership (TPO), while rare in Europe, is not unheard of. In Portugal, it has been fairly normal for a team to buy or sell a percentage of player’s economic rights to a third party. Players such as Jose Bosingwa, Aly Cissokho, and João Moutinho all had percentages of their economic rights owned by a third party while at FC Porto. Elsewhere, Brazilian forward Hulk had 50% of his player rights bought from Uruguayan side C.A. Rentistas when he joined the Portuguese club in 2008.

The benefit to both parties is clear. For the buying club it allows them to purchase players at a lower fee, while also limiting their investment should the player fail to reach their potential. Meanwhile, the TPO has a chance to make a significant profit on their investment by putting the player on a bigger stage in Europe. An attempt was made to outlaw the use of TPO last year, but a number of Portuguese & Spanish clubs formally challenged the FIFA rule before the EU.

Speaking in March last year, Michel Platini, then UEFA president, condemned the use of TPO: “I think we are dealing with a type of slavery that belongs in the past,” he said. ”Today it is shameful to see some players with one of their arms belonging to one person, a leg belonging to a pension fund located who knows where and a third person owning his foot.”

Mention of the term ‘Third Party Ownership’ may send a shiver down the spine of West Ham fans. The club signed Javier Mascherano and Carlos Tevez from Corinthians in 2006, despite interest from a host of Europe’s top clubs. A surprising deal, it quickly became apparent that they were not registered to West Ham, but loaned and more importantly still "owned” by offshore companies. Tevez was owned by MSI and Just Sports Inc, Mascherano by Mystere Services LTD and Global Soccer Agencies.

Tevez would prove influential on the field, scoring the only goal in a 1-0 win at against Manchester United that kept the Hammers up at the expense of Sheffield United. The Blades, understandably, were left furious by the situation. A protracted legal case ensued before West Ham were eventually fined £5.5million by a Premier League disciplinary panel for failing to disclose the, “third-party arrangements” with the league. The case also lead to the banning of TPO in England in 2008.

There is no claim that the deal for Calleri will land the Hammers in trouble, with Rulli also stating that it was ‘all legal’ during a Bloomberg interview in 2014. Rulli’s own value has increased 10 fold since his move to Deportivo Maldonado in July 2014, (according to transfermarkt.co.uk.) and highlights once again the motivation for TPO.

However, the ambiguity surrounding player ownership has stopped some English clubs doing business. Italian journalist Emanuele Giulianelli claimed Arsenal’s pursuit of Gabriel Barbosa ended when the club realised they would have to deal with a third party as well as Santos.

Describing Deportivo Maldonado as a ‘bridge club’, it remains to be seen just what FIFA will do moving forward. The club are not operating illegally, and that could make it harder for FIFA to shut down.

To add another layer of complexity, some money is also being routed through Uruguayan businesses to avoid capital-gains taxes. For comparison, in Argentina the rate sits at 35%, compared to 12% in Uruguay, making deals like this all the more appealing. “I don’t know if FIFA has the appetite to stop these transactions,” Ariel Reck, a lawyer in Buenos Aires, told Bloomberg in 2014. “If it’s difficult for the FBI to follow money around, imagine how hard it is for FIFA.”