Thursday, February 22, 2007

Sports owner bids for Knesset

I note with interest reports that Arkadi Gaidamak, whose son Alexandre owns Portsmouth FC, is to form a new right wing political party in Israel, expecting to win 20 to 25 seats in the Knesset. I have written about Gaidamak before, both in connection with his ownership of football club Beitar Jerusalem and when his son, Alexandre bought Premiership club, Portsmouth FC.

Only days after his son bought the football club, Arkadi was question by Israeli police about a money laundering scandal. According to the Israeli news organisation Guidamak withdrew all his funds just before police planned to freeze all of his accounts in Hapoalim Bank following an undercover investigation against him. The police allegedly made the request to freeze the money due to suspicions that Gaidamak's fortune may not have been made legally. In a press conference Gaidamak senior said that he was the target of improper behaviour and did not understand why he was being treated in such a manner.

The same week Alexandre bought into Portsmouth FC, Russian billionaire Lev Leviev purchased a 75% stake in rival Jerusalem team, Hapoel Tel Aviv. The blog, documented in detail the long relationship between Gaidamak and Leviev. Although they are now rivals, much of Lev Leviev’s vast wealth comes from his Angolan diamond interests, which were allegedly established with the assistance of Arkadi Gaidamak. In December I was phoned by a journalist on an Israeli newpaper following up the story abiut why these Russian businessmen are buying into football clubs.

Having led a camera-shy and reclusive past, Gaidamak has became very high profile in the last few years. Not only did he buy top Israeli club Bekar Jerusalem, has also bought the liberal and critical Russian paper Moskovskiye Novosti, which turned into a paper supporting Vladimir Putin’s government (he also purchased the English edition, Moscow News, thus silencing one of the critical voices accessible to non-Russian speakers - a considerable favour to Putin). Gaidamak also gets about a bit and allegedly has French, Canadian, Israeli and Angolan passports, as well as his original Russian citizenship. As the local newspaper of the small Israeli town where he lives commented: “in one day [he] simply moved from the crime pages to the sport pages."”

According to the Independent, During the Lebanon war last summer Arkadi Gaidamak paid about £7m to house northerners seeking refuge from the Katyusha rockets in two "tent cities" on the Mediterranean coast. And in November he funded a week-long trip to the Red Sea resort for residents of Sderot, the Israeli town worst affected by Qassam rockets from Gaza.

Now Gaidamak senior is an interesting character. In 2000, the French put out an international warrant for his arrest in connection with the Angolan arms-for-oil scandal, for which the son of former French President Francois Mitterrand was briefly jailed on charges of receiving kickbacks from Gaidamak business partner Pierre Falcone. Gaidamak and Falcone allegedly arranged for shipments of Russian arms that were to have been paid for with Angolan oil contracts. There was an international ban on weapon sales to Angola at the time. In fact Gaidamak has always maintained that the oil-for-arms deal and his involvement in it was a legitimate transaction between the governments of Angola and Russia. Maybe it was.

The Angolan connection is very strong. Lev Leviev overturned De Beer’s monopoly in Angola, and according to the Economist this connection made Leviev an estimated $850 million per year. Today, Gaidamak seems to be involved with Angola’s Sunland Mining, also one of the official buyers of rough diamonds from Angolan state company Sodiam.

There is no suggestion that either Leviev’s or Gaidamak’s diamond trading in Angola are illegal. However, in a report for BBC’s “Focus on Africa”, Lara Pawson exposed how some of Leviev’s employees freely admitted to buying diamonds from UNITA – Dr Jonas Savimbi’s fascist rebel army.

But the biggest scandal is that these vast fortunes are being extracted from Angola, which remains one of the world’s poorest nations. According to the United Nations: One in three children in Angola dies before age 5. Half the children are underweight. Fewer than half have ever been in school, and the majority of the adult population are illiterate. The vast majority of Angolans face a critical shortage of healthcare. But Leviev has no ethical objection to making money out of human misery, and has recently been awarded a contract to build and run Israel’s first private prison near Be'er Sheva.

So why is there this interest in sports ownership?

When Roman Abramovich bought into Chelsea in 2003 he paid out a mere £140 million. Given that Abramovich recently sold his share of Sibneft to Gazprom for $13 billion, his investments in Chelsea are not a significant part of his fortune. Yet through his football investment he has become a household name in Britain, and has been able to draw a line under the controversy of how he made his fortune. All he needed to do was pass the Premiership's fit and proper person test: little more than a self declaration that he has never been convicted of fraud and theft.
Given the enormous status and interest in football, the current obsession with celebrity culture, and the precarious financial position of many cubs, a relatively small investment can purchase a reputation that could later be invaluable in building a business empire in the West with money plundered during the rape of the Soviet Union, or in the case of Gaidmak, alledgedly dodgy deals in Angola. What is more the fan base of the individual clubs concerned may prove a valuable asset – as they invariably react favourably to large cash injections whatever the source.

Newspaper and TV companies with an eye to their readerships amongst fans are less likely to probe deeply and critically into these businessmen than they would have been if they had attempted to buy a bank or manufacturing company.

Football has become a huge industry – it needs to be careful it doesn’t present itself as a money laundering operation.


ejh said...

Football has become a huge industry

As I recall Simon Kuper used to get very annoyed about people saying things like this - observing, with some justice, that the turnover of football compared to any genuinely sizeable industry was microscopic.

AN said...

Unfortunately I have packed away most of my books at the moment, due to planned house move shortly, but in Dave Zirin's brillinat work "What's My name Fool", he quotes the turnover of American Sports as being larger than the car industry, and indeed bigger than the illegal narcotics industry.

You have ti include the turnover froom betting, and while i don't have the enegery to check the turnove of football, I previoulsy reseearched this for a (rather good I thoght) article I wrote about horse racing - "Racing is the 8th largest industry in the UK, with an annual turnover of £6 billion, a roughly similar turnover to the steel industry"