Milan, Elliott’s (alleged) conflict of interest and the scope of the investigation

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There appears to be no proportion between the (very serious) accusation hypothesized by the Milan Prosecutor’s Office and the motive for the alleged simulation maneuver implemented by the Elliott Fund and RedBird on the occasion of the sale of Milan which took place in the summer of 2022. In the search decree issued on March 4th, prosecutors Giovanna Cavalleri and Giovanni Polizzi only suggested Elliott’s interest in hiding his actual ownership of the Rossoneri club so as not to violate article 5 of the UEFA regulation, a rule which prohibits the same person from exercising control or l influence on multiple teams registered in the same competitions.

The (alleged) conflict of interest

In the period under investigation – the two-year period 2022 and 2023 – Elliott, in addition to de facto owning Milan, would have exercised a dominant influence on Lille, a French team owned by the Merlyn fund, involved in European cups like the Rossoneri, to which the fund Singer family granted a loan of 170 million. The debt which appears to be held by the Callisto company which controls the transalpine club had been granted by Elliott to the previous owner Gerard Lopez. Therefore, to escape the timeshare ban in the event of two clubs participating in the Champions League or Europa League at the same time, Elliott would have maintained substantial control over Milan by making the RedBird Capital fund appear as the owner. As proof of this, the Milanese prosecutor’s office lists a series of anomalies resulting from the accounting and corporate documents seized during the proceedings initiated following an appeal by Blue Skye. In recent months the company led by Salvatore Cerchione and Gianluca D’Avanzo, which before the move to RedBird held just under 5% of Project Redblack, the parent company of Milan ( once morest 95% of Elliott), has promoted a series of disputes in Italy, the USA, Luxembourg and Hong Kong, reporting the violation of his rights as a minority shareholder (so far not accepted by the courts heard).

Lending and dominant influence

But can Elliott really have a conflict of interest? Elliott was crucial to the rescue of Gerard Lopez’s Lille which risked default following contracting debts of 150 million to the Singers and the investment bank JPMorgan. It was Gordon Singer, son of Elliott’s number one, who in December 2020 managed the sale of the club – surprise winner of Ligue 1 in 2021 and capable of producing repeated talent thanks to its training center – to the Merlyn Advisors fund through the latter’s branch Callisto. Merlyn Advisors was set up by two former JPMorgan bankers, the Dutch Maarten Petermann and the Italian Alessandro Barnaba. The potential conflict of interest would therefore have existed since July 2018, when the Singer family vehicle which the year before had financed the controversial Chinese entrepreneur Li Yonghong with around 300 million in the acquisition of the club from Berlusconi’s Fininvest, became the owner of the Milan by executing the pledge on the Rossoneri shares (following Li Yonghong himself had not honored his obligations). However, Elliott has never held shares in Lille. He was and is a simple creditor of the property. Is this enough to consider the existence of a dominant influence proven? No, if you look at the UEFA rules and precedents, from the Leipzig-Salzburg case (in fact both belong to Redbull, but not for UEFA) to the AC Milan-Toulouse affair.

Milan-Toulouse

In fact, when it comes to risky timeshares, RedBird found itself in a much more complex situation than Elliott and would have had little interest in placing itself in conditions of potential conflict. In the summer of 2020, Gerry Cardinale’s fund took over 85% of Toulouse in France, who were relegated following the league’s interruption caused by Covid and brought back to Ligue 1 from the 2022/23 season. And in March 2021 he invested in Fenway Sports Group, the holding company that owns the Boston Red Sox and Liverpool, paying $735 million for 10%. Here we are talking regarding actual shareholdings. In July 2023, Milan and Toulouse thus ran the risk of only one of the two teams being granted authorization to participate in the Champions League and Europa League. In the end, UEFA gave the green light as long as the two clubs do not carry out market operations between them, either definitively or temporarily, until September 2024, do not enter into technical, commercial or joint cooperation agreements and do not use scouting. or common databases. In short, exactly the kind of operations that make timeshares profitable. Why then would RedBird have agreed to incur these limits to do a favor to Elliott who also had very little chance of incurring sanctions from UEFA? And why simulate a sale with the possibility that Italy might receive heavy criminal and sporting sanctions?

The reasons for the procedure

The reasons revealed by the search decree appear weak. What can be deduced from this is that the Prosecutor’s Office is convinced that in the sale of Milan there are other problems linked to the origin of the funds. Furthermore, it is clearly stated on page 5 of the provision. After a series of assessments, in fact, the prosecutors write: “the circumstance would seem to emerge that the majority of the capital used for the sale by Milan came from a corporate vehicle not attributable to RedBird”. Is this what the prosecutors want to find out? They suspect the Elliott fund itself or some other unidentified entity.