Does Arsenal shareholder Usmanov own Everton too?

This past weekend, 13.4 million documents concerning the financial dealings of the über-wealthy (no Travis Kalanick, though) were leaked to the public. These documents, dubbed the Paradise Papers because alliteration is cool, originated from an offshore law firm named Appleby. By far the most important of the revelations from this leak (and definitely not this, this, this, or even this) was that Arsenal minority shareholder Alisher Usmanov may also have his fingers in Everton.

The story, as we were initially told, goes like this. In August 2007, Usmanov and his business partner, Farhad Moshiri, purchased David Dein’s 14.58% interest in Arsenal through an aptly-named holding company, Red & White Holdings. That ownership stake quickly grew by about 10% more, which caused the prior Arsenal board and ownership group to react and lead the club down a non-Red & White path to one Enos Stanley Kroenke. Fast-forward to 2016. Moshiri, always the background figure in Red & White up until this point, sells his stake in the holding company so he can become the owner of Everton. This move, as well as a lucrative sponsorship deal for Everton’s training ground by a company in which Usmanov owns a controlling interest, lead to speculation that the Uzbeki businessman was going to join his friend up in Liverpool.

The papers released this weekend show there was a lot more going on behind the scenes. While the leaks only lead to more questions than answers, one significant question raised is whether Moshiri invested his own money when purchasing his stake in Everton. I’ll do my best to distill the Guardian report into plain English in this step by step breakdown.

1. According to the former website of Usmanov’s massive mining company Metalloinvest, which is 100% owned by the company that sponsored Everton’s training ground, Moshiri was a fairly successful accountant and accounting executive throughout the 1980s and early ‘90s. Certainly doing well for himself, but not “buy your own football club to have as a toy” rich. In 1993, Moshiri began working for Usmanov.
2. Appleby, the law firm at the center of this scandal, handled Red & White’s purchase of Arsenal shares in 2007. Pursuant to documents leaked in this, the money to be paid for Moshiri’s purchase originated from a dividend paid by Usmanov’s Cyprian holding company to Usmanov that Usmanov gave to Moshiri. The terms of the document itself, much to the chagrin of my trusts and estates law professor, uses “gifts” as a verb to describe the transfer of money. Apparently this was odd enough to be flagged internally at Appleby but no further discussion of it was found in the leaked documents. Though not directly related to Arsenal, but indicative of Moshiri’s overall connection with Usmanov, Usmanov transferred about 10% of this Cyprian holding company to Moshiri in 2008, allegedly pursuant to an incentive plan as compensation for Moshiri’s work in the investments of the holding company.
3. According to Appleby’s documentation, the only infusion of cash into Red & White at its creation was a £118m loan from a company, Epion Holdings, that is wholly owned by Usmanov.
4. This is where the Guardian and Moshiri’s camp split on the sequence of events. According to Moshiri’s camp, Moshiri then paid his 50% in to Epion pursuant to a dividend received by a company wholly owned by Moshiri. The Guardian was furnished with a document, from Epion, acknowledging receipt of the funds.
5. In March 2008, Usmanov and Moshiri changed their agreement regarding Red & White, shifting from 50/50 ownership to a ownership split based on how much each continued to put into the holding company. Usmanov continued to invest more heavily and, when Moshiri was bought out by Usmanov, the Monégasque owned roughly 30% of Red & White.
6. In 2016, Moshiri sells his interest in Red & White for about £150m and uses Appleby to handle the £87.5m purchase of his 49.9% ownership interest in Everton.

So what does this all mean?

First, and most important, Usmanov and Moshiri seem to have complied with all of the Premier League’s rules for dual-ownership. The Guardian piece admits as much by stating the Premier League was walked through enough of the relevant information and were satisfied that Usmanov does not even have an indirect interest in Everton. So to answer the question posed in the headline, no, Usmanov does not technically own Everton.

Secondly, he kinda does though, doesn’t he? Countries and entities, like the Premier League, have attribution rules where the ownership of one person or entity is attributed to another related party. These rules deal with fairly obvious cases. Parent-child. Company-owner of said company. At a certain point these rules end because these government or entity agencies can only administer so much and the budget of the regulated parties to obfuscate is infinite. I have never seen the language of the Premier League’s dual-ownership rule, but I feel confident he does comply with the letter of the rule. Does he comply with the spirit of it though?

The Guardian piece contains quotes from parties that believe he does not. I agree. While Moshiri would have certainly lived a life of luxury had he not met Usmanov, he owes the majority of his current net worth, estimated at $2.4 billion, to his Uzbeki friend. Their continuing relationship and the presence of the questionable training ground sponsorship only fuel the perception that Moshiri is a front man for Usmanov.

At this point, you may be wondering why Usmanov would go to all this hassle to enrich Moshiri and why should you care? To answer the second question first: you probably shouldn’t. The dual ownership rules are in place to avoid collusion between clubs. Competitive balance, blah blah blah. As Usmanov is currently a minority owner of Arsenal without a board seat, there’s little threat of there being a collusion issue. To answer the first, there are benefits to Usmanov having a Monégaque business associate outside of just trying to own interests in Arsenal and Everton. This is a football site so no need to dive to deeply into it, but in a political climate where the only response to Russian state actions deemed harmful to the international community were financial sanctions against the nation and its citizens, it could be useful for a Russian citizen to have access to funds not connected to a Russian citizen.

Lastly, it seems possible, if not probable, that this unwanted attention may hasten the departure of Usmanov from Arsenal. The only thing the Premier League hates more than actual deception is the perception of deception. Usmanov has been reportedly willing to sell his stake in Arsenal, although not to Kroenke, and might be receptive to discreet suggestions from league officials to extricate himself from this situation. Usmanov, as is his right, has been guarded with regards to his personal dealings. He only wants to have information available about him which he, himself, issues forth. This leak is exactly the type of coverage he does not want. Undoubtedly, this peek behind the curtain will lead to more inquests, whether from the Premier League itself or independent investigative journalists. Selling his interest in Arsenal would be a quick way to cut down any such investigations before they take place.