Chapter 3
The British Tax Exile

Stuck incongruously onto the edge of Atlético Madrid's ageing Vicente Calderón Stadium, by entrance number 48 next to the M30 ring road, is a property agency called Gilmar. It's in the wistfully named Paseo de los Melancolicos. Like the stadium, it has not been refurbished for decades. The agency is part of a network of offices clustered around Madrid and Marbella, and takes its name from the surnames of Jesús Gil and his wife, María Ángeles Marin. The business is another part of the legacy to their children; while Miguel Ángel inherited Atlético, his elder brother Jesús Jr. got the property business.

When a decade-long housing bubble burst in Spain in 2007, both parts of the family business were left reeling. Jesús Jr. could not shift any houses, and Miguel Ángel could not get rid of the outdated Vicente Calderón. He had hoped to sell it to a housing developer and collect as much as €400 million to build a new stadium. With house prices falling an average of 28% in four years, developers were going out of business as they sat on brand-new properties they could not sell. There were an estimated one million empty properties across Spain. Many Spaniards had bought second homes by the beach with credit, on the assumption that property values would carry on rising.

Nevertheless, Real Madrid came out of the crash and the ensuing financial crisis smelling of roses. Real's president Florentino Pérez had sold the club's city centre training ground for €500 million in the sweet spot of the housing boom in 2000, and used the windfall to pay off its debts and sign so-called “galácticos” such as Luis Figo, Zinedine Zidane and David Beckham. In turn, the global appeal of those players helped the club generate more money from shirt sales, sponsorship and television income, pushing Real Madrid past Manchester United to become the world's richest club by revenue. The signings were akin to a Hollywood studio signing the biggest stars to generate revenue.

The arrival of Beckham, a teenage pin-up married to one of the Spice Girls, increased shirt sales by 57% in the year after he joined. From the moment he arrived, Beckham provided a showbusiness edge to the team. He was tailed by paparazzi in Madrid. British tabloids The Sun and the Daily Mail dispatched reporters to Spain exclusively to track his moves. Before he had even played his first game at Real's Santiago Bernabéu Stadium, he was mobbed by fans on a pre-season tour of Japan.

When the league got underway, weekend flights from London to Madrid filled up with British fans wanting to see him in action with the galácticos. He might not have had the finesse on the ball of some of his teammates, but his €25 million transfer fee was “peanuts” for the financial return that Real Madrid got out of him, according to general manager Jose Ángel Sanchez.

The team's income had increased fourfold to €500 million in the last 15 years, and was now more than triple what Atlético Madrid earned. Crucially, much of the income came from outside Spain, from companies like Germany's Adidas and Audi, and so Real Madrid was buffeted from the worst of the crippling economic slump at home. There was no longer any need for Real Madrid to share transfer rights to sign players with Panama-based investment firms like Pérez's predecessor Loreno Sanz had done.

While Atlético Madrid's players train in a cramped, publicly owned sports facility, Real's website boasts that its training complex is almost three times bigger than the size of Vatican City. Built in 2005, it has a hotel and hydrotherapy centre in its grounds. Real Madrid's healthy cash flow also meant that it was able to finance the £80 million signing of Cristiano Ronaldo in 2008 with loans from Spanish banks Banco Santander and Caja Madrid. It paid the world record fee to Manchester United in a single installment.

Between 1999 and 2013, Miguel Ángel Gil's team did not win any of the 25 matches it played against Real Madrid in Spanish league and cup competitions. Not a single one in 14 years. Some teenagers had never seen Atlético Madrid beat Real Madrid. No wonder a now-famous television advertisement for Atlético showed a boy sitting in the back seat of a car asking his father: “Dad, why do we support Atlético?”

Every year, to help season ticket sales, Atlético would commission advertising agency Rushmore, owned by Martin Sorrell's WPP, to make advertisements like this, which focused on the loyalty of fans. Another ad showed Atlético's oldest season-ticket holder, 91-year-old Agustin de la Fuente Quintana, sitting in his living room in a pair of slippers. The film shows clips of a smoke-filled room, a bottle of alcohol and betting slips. “I managed to give up smoking, spirits, wine with my meals, salt, coffee, betting, cards but bloody Atléti, I can't give up,” he says.

Sometimes, Atlético's fans – who self-mockingly called their own team “El Glorioso” – could only laugh at being the perennial loser to Real Madrid. Immediately after one crushing 4-1 home defeat, in which Cristiano Ronaldo scored three goals, two men in their 30s came out of the ground at door 48 and danced in the street next to the Gilmar office, chanting “Atléti, Atléti.”

It looked like the situation was about to get worse. While Real Madrid managed to sign Ronaldo as the financial crisis was unfurling, Gil found that the same Spanish banks that had put up the finance for its neighbour were not willing to lend to Atlético Madrid any more. Between them, banks such as Banco Santander and BBVA held tens of billions of euros in business and home loans that were at risk of default, and the central bank was ordering them to rein in lending to all but the most solvent businesses. Real Madrid fell into that category; Atlético Madrid did not.

From his desk deep in the Vicente Calderón stadium, Gil was scrabbling around to find a way to carry on paying off the club's tax debt at the same time as fielding a competitive team. He turned to Peter Kenyon, the former Manchester United chief executive officer, for help.

Kenyon had been poached from United by Chelsea owner Roman Abramovich and was reportedly earning £3 million a year, the highest pay of any Premier League CEO. Together, they oversaw the appointment of Jose Mourinho as coach, along with a spending spree on talent. Wearing a Chelsea baseball cap over his bald head, Kenyon had put his arm around the oligarch in 2005 as they celebrated the team's first English league title in half a century. Four years later, Kenyon left the London club.

He resurfaced almost immediately to lead the international operations of Creative Artists Agency (CAA), a Beverly Hills-based company that represented dozens of actors including George Clooney and was moving into European sports. From a rented office amongst the unfashionable urban sprawl of Hammersmith in west London, Kenyon would be responsible for mapping the European sports strategy of the American showbusiness company.

CAA, which had recently signed a partnership to represent Real Madrid's Cristiano Ronaldo and Chelsea coach Jose Mourinho, issued a news release to announce its appointment of Kenyon, calling him “one of the most influential executives in global sports”. It said that Kenyon had brought in £303 million of new business for United over 13 years.

In one of his first moves, Kenyon decided to set up a fund on behalf of CAA that would raise money from wealthy investors to buy the transfer rights of players from cash-strapped clubs. The showbusiness agency would receive a percentage of any profit the funds generated. While American executives had trumpeted Kenyon's appointment, they did not make any public announcement about the plan, which was marketed privately among wealthy individuals.

The venture, Quality Football Ireland, was domiciled in Ireland and Jersey for tax reasons. In company filings, Gestifute, the Portuguese management agency led by Jorge Mendes that represented Ronaldo and Mourinho, was listed as owning half the equity.

After raising more than €10 million, Kenyon and Mendes looked for clubs to do deals with. Atlético Madrid was an obvious target. Mendes and the club's owner Miguel Ángel Gil would soon become neighbours in a gated enclave in Madrid's most expensive district of Pozuelo de Alarcón. The complex of modern, open-plan buildings on the western edge of the city had been completed before Spain's property boom ended and was popular with footballers because of the privacy it afforded. Ronaldo rented a €12,000/month mansion with a swimming pool in the same secluded grounds. He could leave the enormous sliding patio doors open without any concern about paparazzi photographers or overenthusiastic fans troubling him. Other residents included Real Madrid greats Zinedine Zidane and Raul Gonzalez.

Mendes, who decorated his house with oil paintings of his two daughters and expensive Italian furniture, arranged for Kenyon and himself to have a meeting with Gil to discuss how CAA could provide a solution to Atlético's financial problems. It was not a difficult sales pitch: Gil was more desperate for cash than ever.

In March 2011, Kenyon arranged for the fund managed by CAA to pay Atlético Madrid €1.5 million in return for 40% of the transfer rights of 16-year-old youth-team player Saúl Ñiguez. The agreement was approved with a stamp by Spanish league authorities on each page and the money was transferred to Atlético's account within a week of the deal being signed.

Saúl, who went by his first name, had joined Atlético's youth team from Real Madrid and was a member of Spain's Under-17 team, which had featured some of the world's best players over recent years, including Cesc Fàbregas, David Silva and Gerard Piqué. The young midfielder was so promising that he was already training on occasion with the first team, coached by Quique Sanchez Flores. Gil said that Atlético was under no obligation to trade one of its brightest promises before his contract ran out in two years.

The terms of the 10-page contract said this too: the CAA fund was not able to exert influence over Atlético Madrid in any way. If Gil chose to retain Saúl, the fund managed by Kenyon would receive an annual interest rate of 10% for the period. That was not much more than what Spanish banks had been charging Atlético before the financial crisis blew up. Atlético needed far more than 1.5 million euros to shore up its bank balance. Making matters trickier still for Gil was that a seasoned football club lender had just quit the sport.

Investec, a bank with offices in the City of London, had for years loaned money to teams in both the Premier League and Spain's La Liga in return for promissory notes for future transfer revenue or broadcast income. This method allowed football team executives to front-load spending on player transfer fees at the start of the season, before player trading was suspended. That meant they would have a better team and more chance of finishing higher up the table and reaping financial benefits, such as qualifying for the UEFA Champions League, which pumped out €1 billion in prize money to 32 teams every year.

For most of the previous decade, Investec had forged close links with football clubs, becoming a shirt sponsor of Tottenham Hotspur, but there was increasing risk in lending to clubs after Portsmouth in 2010 became the first Premier League team to file for bankruptcy.

Under what Investec called an “idiosyncratic” rule, insolvent clubs had to pay back teams and players before financial institutions. Bank lenders and even tax authorities were further down the pecking order. In Spain, if Atlético Madrid ran out of money, Investec would have to compete against creditors including the tax office, which it owed €120 million. The risk was too high, and in 2011 Investec got out of football, leaving Atlético looking for another financier.

But, like Kenyon, there was another powerful Briton on hand to help out: British tax exile Michael Tabor. Tabor, who was raised in the East End of London, had made his fortune by selling the 114-shop Arthur Price betting chain in 1995 to Coral. He had decided to quit rainy Britain after a particularly miserable day in Croydon, and now divided his time between a Monte Carlo apartment, where he lived with his wife Doreen, who he had been married to since 1975, and Barbados, where he was part of what the British media dubbed the “Sandy Lane” set, after the hotel of the same name they owned. Another member of the group was the billionaire currency trader Joe Lewis, another east Londoner who had acquired Tottenham Hotspur in 2001.

From his sun-splashed retreats, Tabor controlled business interests that included New York real estate and a stake in Coolmore Stud, the world's biggest thoroughbred breeder. The other members of the racing syndicate included JP McManus and John Magnier, who had built up a 29% stake in Manchester United before falling out with coach Alex Ferguson over a horse's breeding rights. They sold up to Malcolm Glazer in 2005.

Coolmore's horses had won blue-ribbon events such as the Epsom Derby and Prix de l'Arc Triomphe on the outskirts of London and Paris, and the Kentucky Derby in Louisville. The only time Tabor appeared in the public glare these days was in the refined surroundings of horse-racing paddocks. There, sometimes in a top hat and tailcoat, he would be photographed with Doreen patting one of his winning thoroughbreds.

Long ago, flush with his Coral fortune, Tabor had toyed with football club ownership when he made a bid to buy West Ham. In 1997, he was introduced to the club's owner Terry Brown by its then coach Harry Redknapp. Tabor, who had supported the club since his youth, was worried about being in the spotlight all the time. He told Redknapp so: “Harry, do I really need to sit up in that directors' box with all the fans chanting to put more money in? What do I need that for?” In the end, Tabor's offer was turned down and he went back to watching West Ham on satellite television.

When Investec pulled out of football lending, Tabor stepped in with his fortune to fill the gap. He advanced Atlético Madrid income from a broadcast deal with cable-television company Sogecable in the same way that the bank would have done. The owner of the Canal+ brand in turn paid Tabor's British Virgin Islands-based company Mousehole Limited a few months later, earning the British tax exile a handsome return on his money.

Tabor employed David McKnight, a soft-spoken Mancunian in his late 50s, and former Spanish television executive Pedro Caro to arrange the deals. After the two had agreed terms with Atlético, McKnight called in Graham Shear, a partner at law firm Berwin Leighton Paisner, who could put together a contract in as little as 24 hours. It became a well-honed routine and as well as Atlético Madrid, the group arranged similar deals with two other clubs, Deportivo La Coruna and Getafe.

The arrangements were different from those overseen by Kenyon for CAA because Tabor did not take a stake in the transfer rights of any players. His agreements were only loans that were not tied to the transfer market in any way. The deals were successful – none of the clubs defaulted – and in 2013 Tabor's associates began negotiations with Real Madrid for the entire signing fee for Gareth Bale from Tottenham. Known for his surging runs down the wing and match-winning goals, Bale was at the time a Premier League sensation. He had been voted the best player in the championship the previous season by his peers and football writers, and Tottenham did not release him without an arm wrestle over the fee. Real Madrid was locked in weeks of negotiations with Tottenham to bring yet another galáctico to the Santiago Bernabéu stadium.

They eventually reached a deal. The terms they agreed on said that Real Madrid would pay €87 million to Tottenham's HSBC bank account within 15 days or a total of €99.9 million in instalments over three years. That topped the record fee it had paid for Cristiano Ronaldo four years earlier.

Tabor's proposed loan and another financing offer by Deutsche Bank were among several which Real Madrid had on the table during negotiations. In the end, Real president Florentino Pérez said that he would draw most of the fee from the club's own cash reserves.

Michael Tabor had also taken over some of the business of Investec in English football, advancing money due to Everton, Southampton, Fulham and Reading before the start of each season in return for promissory notes from the Premier League. He even did a series of such deals with West Ham, which was by now owned by British businessmen David Gold and David Sullivan. The arrangements in the UK were through another company domiciled in the British Virgin Islands, called Vibrac Corporation.

While Investec was nervous of lending to clubs, Tabor apparently saw things differently. The Premier League's television income continued to rocket with every contract, and he was paid directly by the world's richest league. In Spain, he received his money back from television companies rather than the clubs.

Between 2011 and 2016, Tabor advanced as much as £100 million a year to clubs in Spain and England, earning himself an estimated return on investment of £60 million. Almost all the deals were smooth, although Tabor endured one hitch. Reading, a modest English club, had taken out a £10 million loan against so-called parachute payments from dropping out of the top division. But it ran into financial difficulty as Russian owner Anton Zingarevich froze his financial backing. As the club held drawn-out talks with prospective owners from Malaysia, the Football League began investigating whether Reading had allowed Vibrac to exert influence on the club's uncertain finances. Reading CEO Nigel Howe said that Vibrac merely sought to protect its financial interests and Reading was largely absolved, receiving a small £30,000 fine.

While the Vibrac name kept cropping up in the accounts of football teams, few knew who was behind it because it was based offshore. Journalists were both intrigued and frustrated by the secrecy. David Conn, a football reporter for the Guardian newspaper, wrote that it was “impossible” to trace the lender. Tabor, like other lenders to Premier League clubs, was entitled to keep his involvement confidential.

Fans also wanted to know more. “All I am asking for is the transparency they (the owners, Gold and Sullivan) promised when they started,” Sean Whestone wrote on the fan website West Ham Til I Die. “If they haven't got the necessary liquid funds to inject into the club to help with cash flow just say so, then we will know these loans are a necessary evil with high interest.”

In Spain, not even La Liga chief executive Javier Tebas was aware who was behind the loans. He shrugged his shoulders when we asked him about the Coolmore syndicate partner's involvement in financing Atlético Madrid. “It's the first I've heard of it,” Tebas said. The Premier League's two-man board, Richard Scudamore and David Richards, had cleared Tabor's financing deals through Vibrac Corporation. Scudamore did not see any reason to stop team owners making agreements with offshore companies as long as he knew the source of the funds, although he monitored such arrangements more closely than ever. A few years earlier, after the most stressful period in his two decades in the job, he had changed league rules to stop investors exerting influence on player transfers.

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