Juventus and the Next Big Scandal in International Soccer: Explained
Juventus have long been regarded as one of the biggest soccer teams in the world. Juventus have won the Italian soccer league, or Serie A, a whopping thirty-six times and won two Champions Leagues.[1] Moreover, Juventus boast the largest fanbase in Italy with over eight million domestic fans.[2]
However, not everything has been rosy for the Turin-based club. Juventus have repeatedly been embroiled in high-profile controversies. In the past thirty years the club has been stripped of two separate titles over their involvement in a match-fixing scandal known as calciopoli,[3] had the team medic criminally convicted––although later controversially absolved––for providing performance-enhancing drugs to players in the late 1990s,[4] and have recently controversially supported the attempted breakaway league known as the European Super League.[5] Yet, the worst may still be to come for the Bianconeri–as they are commonly referred to.
The most recent scandal that has rocked Juventus headquarters has seen Juventus docked fifteen points from this year’s Serie A standings by the Italian Soccer Federation (“FIGC”) over fraudulent behavior involving false financial records.[6] For many years, Juventus and other teams had been investigated by the FIGC in Italy over suspicious transfer fees paid by clubs in exchange for new players.[7] Nevertheless, in early 2022, Juventus and the other clubs were cleared of any wrongdoing in that sporting investigation because of lack of convincing evidence.[8] However, Juventus are a publicly traded entity on the Italian stock exchange.[9] As such, their financial dealings fall under the guise of government investigators and oversight agencies, which resulted in Italy’s military police that reports directly to the Minister of Economy and Finance––the Guardia di Finanza––raiding Juventus headquarters in November 2021.[10] The raid resulted in the uncovering of new evidence in the form of financial documents and records that led to the FIGC reopening the sporting investigation against Juventus. This ultimately led to the fifteen point deduction, but more importantly the raid has led to a criminal investigation surrounding Juventus’ affairs and bookkeeping.[11] The criminal investigation is centered around two main allegations against Juventus.
The first is that Juventus were engaged in false accounting practices through the exchange and sale of players with other clubs. Specifically, the club would amortize the cost of a player that they purchased over the life of that player’s contract.[12] For example, if Juventus bought a player from another team for fifty million euros and then handed that player a five-year contract they then would have been able to spread out the initial cost of fifty million euros over the five years of the contract. This means that on their accounting books the transfer would only be represented as ten million euros for five years––thus significantly lowering the book value of a purchase on the front end. Meanwhile, should a player be sold, that sale fee would count in full towards that year’s financial records.[13] In short, the ability to spread out costs over a long period of time while accounting for revenues immediately allows entities to distort their financial health. While this type of behavior is not in itself illegal, the prosecution believes that Juventus entered into certain transactions whereby they exchanged players with another club at artificially inflated values.[14] This artificial inflation of player values would then allegedly allow Juventus to report a significant and immediate influx of money when in reality no money was exchanged between clubs because the exchange was largely a player-for-player exchange. Relatedly, as part of the false accounting practices, the prosecutors are investigating the possible use of fake invoices by Juventus to help prove fake income, which would further sink Juventus into hot water.[15]
The second main allegation against Juventus has to do with their announcement that the club’s players had agreed to forego several months’ worth of their salary at the height of the COVID-19 pandemic––which should have represented about 90 million euros in savings––but in reality the club allegedly had secret deals with the players to pay them most of their salaries with money under the table, thus only saving the club around twenty million euros from the player’s “foregoing” their salary.[16] This allegation, if proven, would be an illegal manipulation of the market because of the misreporting of financial data.[17]
If found guilty, the investigation could potentially lead to multiple years in jail for members of the Juventus board that engineered and/or knew about the false accounting practices and other criminally fraudulent behavior.[18] The fake accounting charge may carry with it jail time from three to eight years, whereas the penalty for fraudulent declarations through the use of fake receipts may lead to jail time of four to eight years.[19] Relatedly, UEFA––the governing body of European soccer––have opened their own investigation against Juventus to potentially uncover accounting violations that would be in contravention of UEFA’s so called “Financial Fair Play” regulations that all clubs must abide by, which are put in place to prevent clubs from falling into financial trouble that may threaten the clubs’ very existence.[20]
The relevance for the sport as a whole cannot be understated. Should Juventus be found guilty and punished for this type of behavior––either criminally, or at the sporting level––it is likely that other teams that engaged in similar ways will themselves be punished creating a domino effect where many of the biggest European teams may find being punished for similar behavior. On the other hand, should Juventus be acquitted of the criminal charges and found not guilty by UEFA, other European clubs would likely feel incentivized to engage in the similarly deceptive accounting practices to adjust their current books and records to comply with the necessary regulations while disregarding the impact that such behavior will have on their finances in the future. Concretely, Juventus is currently staring down a precipice that has the potential of completely reshaping not only Italian soccer but the entire European soccer landscape by either ushering in new and stricter regulations to help fight deceptive accounting practices if found guilty, or ushering in a new era of uncontrolled spending supported by devious financial bookkeeping. One thing is for sure, the European soccer world will clearly have its eyes firmly set on the investigations that Juventus is at the heart of and their eventual outcomes.
Footnotes
