Real Madrid facing tough questions over irregular financial activities

Spain’s leading football clubs, Real Madrid is under the radar after irregular financial activities were reported in their recent financial results, reported The Telegraph on Wednesday.

As per Sam Wallace — a journalist at The Telegraph — the Los Blancos have declined to elaborate on why 20% of the club’s costs are unaccounted for.

In the most recent results, approximately €135 million in payments went into a subcategory of "other operating expenses,” out of which €122 million remains unexplained.

The club has refused to answer on a deal that was signed in the 2017-18 financial year with the private equity group called “Providence,” which gave the club money in exchange for the sale of future income streams, and the deal has since been lengthened and increased in value.

However, the sums that the club earned from the unspecified percentage of the future sponsorship — the deal was renewed in 2019-20 — were titled as revenue rather than debt in Madrid’s books.

It must be noted that there is no guarantee or any kind of suggestion that indicates that the deal with Providence was illegal in any way, but it is only questioned whether it is compliant with UEFA financial controls or not.

The question that arises is whether clubs should be allowed to sell future revenues as marketing income rather than debt or not while we’re living in a state-owned clubs era where clubs like Manchester City are under heavy scrutiny over breach of financial fair play rules.

It has to be mentioned that the Spanish tax authorities consider these kinds of payments as debt, not revenue.

This irregularity has raised genuine questions in football as the Whites were one of the only few clubs who remained stable even in the Covid-19 era.

Earlier, Real Madrid announced the signing of Turkish prodigy Arda Guler, closing the deal for a fee of €18m plus add-ons, with a sell-on clause also included.

The Whites have already signed four players in the summer transfer window. Fran Garcia, Brahim Diaz, Jude Bellingham and Joselu were the first four signings done by Los Blancos.

Garcia was bought from Rayo Vallecano for €3m, Brahim returned from his three-year loan spell at AC Milan while Bellingham was bought for a record fee of €103m from the German club Borussia Dortmund and Joselu was brought on loan from Espanyol on a one-year deal.