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Economic Dysfunctions of Sport: Violating Managerial Rules and the Law

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An Economic Roadmap to the Dark Side of Sport

Part of the book series: Palgrave Pivots in Sports Economics ((PAPISE))

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Abstract

Economic dysfunctions of sport are referred to breaching managerial rules, sport regulation and financial implications of violating the law which impair the independence of sport, and sporting outcomes, from financial interests. They are often associated with big money streams flowing into elite and professional sports. This chapter covers bad management practices deriving from weak governance structure, circumventing the regulation against unfair financial strategies, financial doping, circumventing ownership rules, touting, embezzlement, slush funds, fake accounting, fictitious player transfers, bungs, third party ownership, tax evasion and money laundering.

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Notes

  1. 1.

    A study by Scelles et al. (2018) showed that in the top three divisions of French soccer, between 1970 and 2014, 79 clubs were declared insolvent. All were punished on sporting grounds with being relegated to a lower division or prohibited from recruiting players. However, no one disappeared from the market as a soccer club, i.e. no one went bankrupt with its assets and structures dismantled, which is the normal consequence of an insolvency declaration in other industries.

  2. 2.

    Forty English clubs were subject to insolvency proceedings and entered administration from 1992 to 2007. “All of these clubs owed more than they could pay, yet in every case the football club survived. Indeed, survival was never really in doubt” (Szymanski 2010) as it is used to be with soft budget constraints. Administration is a process whereby a company is placed under the management of an insolvency practitioner whose job is to reach an agreement with creditors so that the business will survive.

  3. 3.

    Though the focus here is on European soccer, some kind of rules attempting to curb deficits and debts in other European team sports have been adopted over the past decade or so. Now French professional rugby, basketball, handball and volleyball leagues are annually audited by a DNCG, just like the French soccer league.

  4. 4.

    During his ban, Courbis was recruited in 2004 as the coach of the Russian soccer club Alania Vladikavkaz.

  5. 5.

    A first emendation to FIFA’s regulation on player status and transfers, forbidding TPOs, was adopted in January 2008 but, in practice, it remained a dead letter.

  6. 6.

    Wikileaks is a NGO launched by Julian Assange in 2006 with the aim of publicising those messages issued by whistleblowers and information leaks about confidential documents. Since July 2010 Wikileaks disclosures were relayed worldwide by dozens of major newspapers. LuxLeaks corresponds to profitable agreements between audit companies and the Luxembourg fiscal administration that have been unveiled and publicised by an international consortium of journalists (Centre for Public Integrity). Panama Papers refers to a leak of 11.5 million confidential documents about 214,000 offshore companies which were kept secret by Mossak Fonseca, a Panamanian lawyers company. Football Leaks is a leak of 18.6 million documents about tax evasion in the football business which were obtained by Der Spiegel from the European Investigative Collaborations (a group of European media) and publicised on December 2016. Paradise Papers are 13.5 million confidential documents drawn from the lawyers company Appleby about offshore companies revealed by the International Consortium for Investigative Journalism in November 2017.

  7. 7.

    The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions. FATF objectives are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.

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  1. Centre d’Economie de la Sorbonne, University Paris 1 Panthéon-Sorbonne, Paris, France

    Wladimir Andreff

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Andreff, W. (2019). Economic Dysfunctions of Sport: Violating Managerial Rules and the Law. In: An Economic Roadmap to the Dark Side of Sport. Palgrave Pivots in Sports Economics. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-030-28456-5_3

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  • DOI: https://doi.org/10.1007/978-3-030-28456-5_3

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