Lionel Messi, one of soccer's biggest stars, has gotten rich by avoiding tackles on the field - and taxes off it.
On a recent evening in Mestalla Stadium in Valencia, Spain, Messi scored the first goal for European powerhouse Barcelona with a feint that left the goalie sprawling. The Argentina native added two more goals in the first half, leading his team to victory over Valencia. High in the stands, a radio commentator shouted, "Leo, Leo, Leo Messi: the king of football!"
As athletic royalty, Messi makes an estimated $41 million a year, about half from sponsors. His endorsement income has drawn the attention of Spanish tax authorities. (Not quite cricket: Taxing controversies in India around sports)
The government is pursuing the case even after the Messis paid euro 5 million - the amount prosecutors say they evaded, plus interest - on August 15. The hearing on Friday is to determine whether to charge them with criminal tax evasion. If charged and convicted, they could be fined as much as euro 21 million and given a 1-year suspended prison sentence.
Tackling evasion
The case against Messi, who holds dual citizenship in Argentina and Spain, is part of an aggressive push by Spain, UK and other deficit-ridden governments to tackle tax evasion in Europe's euro 19.4-billion soccer industry. After decades of coddling Europe's most popular - and politically influential - sport, authorities are pursuing players and teams that collectively owe billions of euros in unpaid taxes.
The European Union estimates that 1 trillion euros are lost annually to all types of tax avoidance and evasion. Just as European governments are proposing rules to prevent multinational corporations from shifting income to offshore tax havens, they're also going after top international soccer players.
Professional athletes such as Messi employ the same strategies to shelter fortunes, and tap into the same network of wealth managers and advisers, as other global elites.
'Nasty regulations'
The Messi case "is definitely a statement of Spain today," said Alistair Spence Clarke, a British accountant who works in Marbella, Spain. "Spain has introduced some pretty nasty tax avoidance regulations. It's really becoming very aggressive."
Tax lawyers in Spain expressed surprise that Messi would be drawn into a criminal court. Rodrigo Garcia, a Spanish attorney who represents other soccer players, said that, normally, the revenue service begins with a civil inquiry and offers the accused an opportunity to settle.
Messi denied any wrongdoing in a June 12 post on his Facebook page.
"It's something that we are surprised about because we have never committed any infraction," he said. "We have always fulfilled our tax obligations following the advice of our tax consultants who will take care of clarifying this situation."
Messi's father, Jorge, placed the blame on Rodolfo Schinocca, a sports agent hired by the family in 2005.
Financial advisor
"Lionel was 15 years at the time; he didn't have anything to do with this," the elder Messi said in a phone interview. "He is a footballer and that's it. If there was an error, it was by our financial advisor. He created the company. My mistake was to have trusted the advisor.
I'm going to take the blame for that. I had confidence in someone I shouldn't have had."
In an e-mail from Argentina, Schinocca said he had nothing to do with Messi's taxes and was asked instead to help secure sponsorship deals. Schinocca said he hasn't been contacted by prosecutors in the Messi case.
"I never employed this structure for any soccer player," Schinocca wrote. "It wasn't my job. I was a commercial partner."
Soccer teams, like players, have an incentive to minimise taxes. They compete globally for talent in soccer by making salary offers based on net pay after taxes, so the less a player gives the government, the less the team has to compensate him. They also avoid payroll taxes by paying standouts and scrubs alike through what are known as image-rights companies.
Image rights
Through image-rights companies, teams or corporate sponsors pay players for using their names and pictures in promotions and advertisements and on products such as sneakers and soft drinks. Players, who own the image-rights companies, can borrow or invest the money, or take it as a dividend at a lower tax rate than if it were paid as salary. Much of the tax avoidance in soccer, including Messi's, involves these companies, which are often established in tax havens.
In Spain, players can legally receive 15 per cent of their pay from teams through image-rights companies to compensate them for using their likenesses in promotions.
In some cases, players with no marketable image have received as much as 50 per cent of their total compensation in payments to their image-rights companies, said Dan Clay, a UK-based tax adviser who works with soccer players.
"It's been abused," Clay said. "In a lot of cases the boundaries have been pushed and no real commercial justification has been given."
David Beckham
For a player like David Beckham, the former English national team captain who played four seasons with Real Madrid, "the club finds it very easy to justify it," Clay said. "The club can exploit his image and earn 10 times what they've paid him. The problem comes when there is a player no one's heard of."
As the money in soccer -- called football in Europe -- has soared with its global popularity and the signing of lucrative television deals, team owners have become more secretive about their finances, and compensation packages for players have become more complex, creating more opportunities for avoiding taxes, said Alex Cobham, a research fellow who studies taxation and inequality at the Center for Global Development in London. Tax avoidance in the sport has probably reached billions of euros, he said.
"The history of football, particularly in the last 30 or 40 years, is one, at best, of financial opacity and dubious dealings," Cobham said. "Clubs have been increasingly aggressive in looking for ways to find an advantage."
Bread, Circuses
Clubs in La Liga, the Spanish league, owed 690 million euros in back taxes as of March. Atletico Madrid's unpaid taxes built up over 13 years to 115 million euros last year, Chief Executive Officer Miguel Angel Gil said.
Soccer's popularity has long protected the clubs, said Pablo Alarcon, a tax attorney in Madrid who teaches at IE Law School. "Every government knows it needs to have football supporting them," he said. "It's like the old Roman times, with bread and circuses. Give the people circuses and you can handle them."
The government's tolerance of the tax delinquency is a disgrace, said Ada Colau, a Barcelona-based spokeswoman for Platform for Mortgage Victims, a lobbying group that aims to defend families at risk of having their homes repossessed.
"These clubs are often controlled by businessmen who move among the social elite and get privileges that normal people don't," she said. "They have contacts in high places."
Patience Wanes
As it struggles to escape a six-year slump and 26 percent unemployment, Spain's patience has worn thin. One of the Spanish tax agency's priorities is investigating the illegal use of tax strategies like image-rights companies by executives, artists and athletes, a spokesman said.
Last year, Spain set a deadline of 2020 for clubs to pay their back taxes. It has also tightened one of the biggest tax breaks for international soccer players, known as the Beckham Law, after one of its most high-profile beneficiaries. Adopted in 2005, the law was back dated to apply to players such as Beckham, who had transferred to Real Madrid from Manchester United in July 2003. Messi was already a resident of Spain, so he didn't qualify.
Under the law, foreign employees of Spanish companies paid income tax at a rate of 25 percent for their first six years in the country, instead of the 52 to 56 percent now paid by the highest earners. They were not taxed at all on non-Spanish income.
Law Amended
At the end of 2009, Spain amended the law so it applied only to employees making less than 600,000 euros a year. After lobbying from soccer teams, players who arrived before 2010 remained covered under the old law, exempting some of the highest paid players in Spain.
Cristiano Ronaldo, a Portuguese forward for Real Madrid who signed a contract Sept. 15 worth 21 million euros a year according to the newspaper El Pais, is among those who qualified for the exemption.
Messi isn't the only Barcelona icon ensnared in a tax case. Former Barcelona stars Rivaldo and Luis Figo were ordered to pay civil penalties of 2.8 million euros and 2.5 million euros, respectively, for violating Spain's tax code by receiving more than 15 percent of their income from the team through image rights from 1997 through 1999. Rivaldo, who routed most of the money offshore to Gibraltar via the Netherlands, lost an appeal in February, while Figo's appeal was denied last year.
Barcelona Icons
Barcelona "rigorously" complies with the 15 percent cap for image-rights compensation, said a club spokesman, who asked not to be identified. He declined to comment on the cases of Messi, Rivaldo and Figo.
Rivaldo and Figo denied the prosecutors' claim that money they received for their image rights should have been treated as salary for tax purposes, according to court papers.
Figo didn't respond to a request for comment via his Lisbon-based foundation. Rivaldo's current club, Brazil's Sao Caetano, didn't respond to a request to speak with him.
Britain is getting tough on soccer, too. The English Premier League negotiated settlements in 2011 and 2012 with the U.K. government on behalf of most of the league's teams to pay years of back taxes. The teams had avoided millions of pounds in payroll and health insurance taxes by paying players' salaries through image-rights companies, Clay said.
British tax authorities also went after Glasgow Rangers of the Scottish Premier League, which avoided the same taxes by paying players through employee benefit trusts. Under side agreements not disclosed to the league, players could borrow from the trusts without paying interest and with no expectation of repayment, according to a report by a U.K. tax tribunal, which gathered evidence from 2010 to 2012. The club maintained that it didn't owe taxes because the payments were loans.
Well Oiled
"The machinery was pretty well oiled," testified one former player whose identity was kept secret by the tribunal.
Rangers, which won the Scottish league a record 54 times, declared bankruptcy in February 2012, owing more than 93 million pounds ($149 million) to HMRC, the U.K. tax agency. Its ownership company was liquidated, and the team was relegated to Scotland's third division last season.
In November, the tax tribunal, in a split decision, sided with Rangers' position that the trust payments weren't taxable. An HMRC appeal is pending.
Since prosecutors filed a complaint against Messi in June, his case has rocked the world of international soccer, where he is revered as a once-in-a-generation talent. The only four-time winner of the Ballon d'Or, awarded to the world's best player, Messi was named this year to World Soccer Magazine's all-time football team, joining legends such as Pele and Diego Maradona.
Soccer Prodigy
Messi, his girlfriend and his infant son live in a duplex in Pedralbes, one of Barcelona's most exclusive neighborhoods, where the younger daughter and son-in-law of Spain's King Juan Carlos recently put their mansion up for sale for 9.8 million euros. Messi's fleet of cars includes a 150,000-euro Maserati Gran Turismo MC Stradale. The 10th-highest paid athlete in the world, Messi earns $20 million in salary and prize money and $21 million in endorsements, Forbes.com estimated this year.
Messi has been a soccer prodigy since he started playing for Newell's Old Boys in Rosario, Argentina, as an 8-year-old. Diagnosed with a growth hormone deficiency, Messi moved to Spain with his father at 13 after Barcelona offered to pay for his hormone treatment. At 5-foot-7, Messi is shorter than most soccer players and is nicknamed La Pulga, or The Flea.
Tax Shelter
By 2004, Barcelona was paying the 16-year-old more than 15,000 euros a month. His family contracted with Schinocca, 51, to sell his image rights, according to court documents.
A former professional player in Argentina for Boca Juniors, whose career was cut short by an eye injury, Schinocca was a partner in a sports marketing firm in Buenos Aires. It also represented Diego Forlan, a Uruguayan star who played for Manchester United.
Messi's parents -- acting for him because he was still a minor -- asked Schinocca to set up a tax structure to shelter his future earnings, according to Spanish prosecutors.
Schinocca and Jorge Messi contacted Sovereign Group, a Gibraltar-based management company, Schinocca said. The Sovereign Group specializes in helping the wealthy avoid taxes by setting up corporations and trusts, including offshore corporations, according to its website. Founded in 1987, it has offices in 24 countries and jurisdictions that manage more than 7,000 client "structures."
Sovereign didn't respond to requests for comment.
Following Sovereign Group's advice, Messi sold the rights to market his image in 2005 for $50,000 over 10 years to Sport Consultants Ltd., a company in Belize owned by Celia Cuccittini, his mother, according to the prosecutor's complaint.
After turning 18, Messi himself ratified the sale of his image rights to Sport Consultants in 2006.
Adidas Deal
Four days later, a separate U.K. company owned by Messi's father and Schinocca, and acting on behalf of Sport Consultants, signed Messi to a sponsorship deal with Adidas worth 9 million euros over six years. At Adidas's request, Messi and his mother confirmed in a notarized document that its payments were going to Sport Consultants in Belize, Schinocca said.
The mismatch between Messi's sale of the rights for $5,000 a year and their resale for 1.5 million euros a year to Adidas is a red flag for tax authorities, said Garcia, the Spanish attorney for soccer players.
"When the players sell their rights to the image-rights company, it has to be on a market value," he said.
After a falling out with Schinocca, the Messis transferred the image rights in 2007 from Sport Consultants to Jenbril SA, a company in Uruguay owned by Messi.
Belize, Uruguay
Neither Sport Consultants nor Jenbril contracted directly with sponsors. Instead, they licensed Messi's image rights to companies in the U.K. and Switzerland, which in turn sold the rights to corporate sponsors and to Messi's Barcelona team. Payments to Messi under these deals were funneled back to the Belize and Uruguay companies.
According to the prosecutor's complaint, these intricate arrangements concealed the link between Messi and his sponsorship revenue. Belize and Uruguay were chosen because they are "de facto tax havens" where money made outside their territory is not taxed, prosecutors say. The U.K. and Switzerland are considered "jurisdictions of convenience" by the Spanish authorities, and allow money to be transferred offshore with almost no taxation.
'Completely Opaque'
The setup was designed to be "completely opaque to the Spanish Public Treasury, which could not associate the companies in the structure with the defendant Lionel Andres Messi," according to the complaint.
Angel Juarez, a lawyer representing the Messis in the case, didn't return an e-mail seeking comment.
Adidas declined to comment on Messi's tax case.
"Adidas is aware of the potential Spanish tax case against Leo and his father," spokesman Alan McGarrie said in an e-mailed statement. "However, anything to do with an individual's tax affairs is solely a matter for them and their management."
Messi's other corporate sponsors have included PepsiCo, which first signed him in 2007, and Gillette, a unit of Procter & Gamble. PepsiCo spokesman Jeff Dahncke declined to comment. Procter & Gamble didn't respond to a request for comment.
Adidas continues to use Messi to promote its sneakers. This year, the company unveiled the latest in the Messi Collection, his signature line of shoes and clothing. Adidas also featured him in a "Team Messi" online campaign that urges young people to "Play the Messi Way."
Messi Values
The campaign includes a video intended to highlight "the attributes, behavior and values that make Messi the most admired and inspiring football player in the world."
Messi's tax troubles haven't marred his appeal to Barcelona fans. Eduardo Amador, who attended the Valencia game clutching a scarlet-and-blue scarf with Messi's name on it, said he sympathizes with the star.
"I've got a personal tax adviser and I trust him," Amador, a 39-year-old floor-layer, said. "I'm sure Messi is the same."
Daniel Gonzalez, though, is disillusioned. Outside the stadium, the 54-year-old father of three -- and, like Messi, an Argentine -- is selling water, candy and sunflower seeds at a makeshift stall. Gonzalez makes 60 euros on match days and earns extra money parking cars, he said. He pays 180 euros a month in taxes.
"Messi is a cheat," said Gonzalez. "It's his fault as well as his father and tax adviser. He's not stupid; he knows how much he earns. He's my compatriot, but he's a cheat."
On a recent evening in Mestalla Stadium in Valencia, Spain, Messi scored the first goal for European powerhouse Barcelona with a feint that left the goalie sprawling. The Argentina native added two more goals in the first half, leading his team to victory over Valencia. High in the stands, a radio commentator shouted, "Leo, Leo, Leo Messi: the king of football!"
As athletic royalty, Messi makes an estimated $41 million a year, about half from sponsors. His endorsement income has drawn the attention of Spanish tax authorities. (Not quite cricket: Taxing controversies in India around sports)
Also Read
Messi, 26, the four-time global player of the year, and his father are due in a Barcelona court on Friday to face a complaint that they evaded euro 4.2 million ($5.7 million) in taxes on payments from Adidas AG, PepsiCo Inc, Procter & Gamble Co and other companies. According to court documents, the Messis diverted euro 10 million to tax havens Belize and Uruguay from 2007 through 2009.
The government is pursuing the case even after the Messis paid euro 5 million - the amount prosecutors say they evaded, plus interest - on August 15. The hearing on Friday is to determine whether to charge them with criminal tax evasion. If charged and convicted, they could be fined as much as euro 21 million and given a 1-year suspended prison sentence.
Tackling evasion
The case against Messi, who holds dual citizenship in Argentina and Spain, is part of an aggressive push by Spain, UK and other deficit-ridden governments to tackle tax evasion in Europe's euro 19.4-billion soccer industry. After decades of coddling Europe's most popular - and politically influential - sport, authorities are pursuing players and teams that collectively owe billions of euros in unpaid taxes.
The European Union estimates that 1 trillion euros are lost annually to all types of tax avoidance and evasion. Just as European governments are proposing rules to prevent multinational corporations from shifting income to offshore tax havens, they're also going after top international soccer players.
Professional athletes such as Messi employ the same strategies to shelter fortunes, and tap into the same network of wealth managers and advisers, as other global elites.
'Nasty regulations'
The Messi case "is definitely a statement of Spain today," said Alistair Spence Clarke, a British accountant who works in Marbella, Spain. "Spain has introduced some pretty nasty tax avoidance regulations. It's really becoming very aggressive."
Tax lawyers in Spain expressed surprise that Messi would be drawn into a criminal court. Rodrigo Garcia, a Spanish attorney who represents other soccer players, said that, normally, the revenue service begins with a civil inquiry and offers the accused an opportunity to settle.
Messi denied any wrongdoing in a June 12 post on his Facebook page.
"It's something that we are surprised about because we have never committed any infraction," he said. "We have always fulfilled our tax obligations following the advice of our tax consultants who will take care of clarifying this situation."
Messi's father, Jorge, placed the blame on Rodolfo Schinocca, a sports agent hired by the family in 2005.
Financial advisor
"Lionel was 15 years at the time; he didn't have anything to do with this," the elder Messi said in a phone interview. "He is a footballer and that's it. If there was an error, it was by our financial advisor. He created the company. My mistake was to have trusted the advisor.
I'm going to take the blame for that. I had confidence in someone I shouldn't have had."
In an e-mail from Argentina, Schinocca said he had nothing to do with Messi's taxes and was asked instead to help secure sponsorship deals. Schinocca said he hasn't been contacted by prosecutors in the Messi case.
"I never employed this structure for any soccer player," Schinocca wrote. "It wasn't my job. I was a commercial partner."
Soccer teams, like players, have an incentive to minimise taxes. They compete globally for talent in soccer by making salary offers based on net pay after taxes, so the less a player gives the government, the less the team has to compensate him. They also avoid payroll taxes by paying standouts and scrubs alike through what are known as image-rights companies.
Image rights
Through image-rights companies, teams or corporate sponsors pay players for using their names and pictures in promotions and advertisements and on products such as sneakers and soft drinks. Players, who own the image-rights companies, can borrow or invest the money, or take it as a dividend at a lower tax rate than if it were paid as salary. Much of the tax avoidance in soccer, including Messi's, involves these companies, which are often established in tax havens.
In Spain, players can legally receive 15 per cent of their pay from teams through image-rights companies to compensate them for using their likenesses in promotions.
In some cases, players with no marketable image have received as much as 50 per cent of their total compensation in payments to their image-rights companies, said Dan Clay, a UK-based tax adviser who works with soccer players.
"It's been abused," Clay said. "In a lot of cases the boundaries have been pushed and no real commercial justification has been given."
David Beckham
For a player like David Beckham, the former English national team captain who played four seasons with Real Madrid, "the club finds it very easy to justify it," Clay said. "The club can exploit his image and earn 10 times what they've paid him. The problem comes when there is a player no one's heard of."
As the money in soccer -- called football in Europe -- has soared with its global popularity and the signing of lucrative television deals, team owners have become more secretive about their finances, and compensation packages for players have become more complex, creating more opportunities for avoiding taxes, said Alex Cobham, a research fellow who studies taxation and inequality at the Center for Global Development in London. Tax avoidance in the sport has probably reached billions of euros, he said.
"The history of football, particularly in the last 30 or 40 years, is one, at best, of financial opacity and dubious dealings," Cobham said. "Clubs have been increasingly aggressive in looking for ways to find an advantage."
Bread, Circuses
Clubs in La Liga, the Spanish league, owed 690 million euros in back taxes as of March. Atletico Madrid's unpaid taxes built up over 13 years to 115 million euros last year, Chief Executive Officer Miguel Angel Gil said.
Soccer's popularity has long protected the clubs, said Pablo Alarcon, a tax attorney in Madrid who teaches at IE Law School. "Every government knows it needs to have football supporting them," he said. "It's like the old Roman times, with bread and circuses. Give the people circuses and you can handle them."
The government's tolerance of the tax delinquency is a disgrace, said Ada Colau, a Barcelona-based spokeswoman for Platform for Mortgage Victims, a lobbying group that aims to defend families at risk of having their homes repossessed.
"These clubs are often controlled by businessmen who move among the social elite and get privileges that normal people don't," she said. "They have contacts in high places."
Patience Wanes
As it struggles to escape a six-year slump and 26 percent unemployment, Spain's patience has worn thin. One of the Spanish tax agency's priorities is investigating the illegal use of tax strategies like image-rights companies by executives, artists and athletes, a spokesman said.
Last year, Spain set a deadline of 2020 for clubs to pay their back taxes. It has also tightened one of the biggest tax breaks for international soccer players, known as the Beckham Law, after one of its most high-profile beneficiaries. Adopted in 2005, the law was back dated to apply to players such as Beckham, who had transferred to Real Madrid from Manchester United in July 2003. Messi was already a resident of Spain, so he didn't qualify.
Under the law, foreign employees of Spanish companies paid income tax at a rate of 25 percent for their first six years in the country, instead of the 52 to 56 percent now paid by the highest earners. They were not taxed at all on non-Spanish income.
Law Amended
At the end of 2009, Spain amended the law so it applied only to employees making less than 600,000 euros a year. After lobbying from soccer teams, players who arrived before 2010 remained covered under the old law, exempting some of the highest paid players in Spain.
Cristiano Ronaldo, a Portuguese forward for Real Madrid who signed a contract Sept. 15 worth 21 million euros a year according to the newspaper El Pais, is among those who qualified for the exemption.
Messi isn't the only Barcelona icon ensnared in a tax case. Former Barcelona stars Rivaldo and Luis Figo were ordered to pay civil penalties of 2.8 million euros and 2.5 million euros, respectively, for violating Spain's tax code by receiving more than 15 percent of their income from the team through image rights from 1997 through 1999. Rivaldo, who routed most of the money offshore to Gibraltar via the Netherlands, lost an appeal in February, while Figo's appeal was denied last year.
Barcelona Icons
Barcelona "rigorously" complies with the 15 percent cap for image-rights compensation, said a club spokesman, who asked not to be identified. He declined to comment on the cases of Messi, Rivaldo and Figo.
Rivaldo and Figo denied the prosecutors' claim that money they received for their image rights should have been treated as salary for tax purposes, according to court papers.
Figo didn't respond to a request for comment via his Lisbon-based foundation. Rivaldo's current club, Brazil's Sao Caetano, didn't respond to a request to speak with him.
Britain is getting tough on soccer, too. The English Premier League negotiated settlements in 2011 and 2012 with the U.K. government on behalf of most of the league's teams to pay years of back taxes. The teams had avoided millions of pounds in payroll and health insurance taxes by paying players' salaries through image-rights companies, Clay said.
British tax authorities also went after Glasgow Rangers of the Scottish Premier League, which avoided the same taxes by paying players through employee benefit trusts. Under side agreements not disclosed to the league, players could borrow from the trusts without paying interest and with no expectation of repayment, according to a report by a U.K. tax tribunal, which gathered evidence from 2010 to 2012. The club maintained that it didn't owe taxes because the payments were loans.
Well Oiled
"The machinery was pretty well oiled," testified one former player whose identity was kept secret by the tribunal.
Rangers, which won the Scottish league a record 54 times, declared bankruptcy in February 2012, owing more than 93 million pounds ($149 million) to HMRC, the U.K. tax agency. Its ownership company was liquidated, and the team was relegated to Scotland's third division last season.
In November, the tax tribunal, in a split decision, sided with Rangers' position that the trust payments weren't taxable. An HMRC appeal is pending.
Since prosecutors filed a complaint against Messi in June, his case has rocked the world of international soccer, where he is revered as a once-in-a-generation talent. The only four-time winner of the Ballon d'Or, awarded to the world's best player, Messi was named this year to World Soccer Magazine's all-time football team, joining legends such as Pele and Diego Maradona.
Soccer Prodigy
Messi, his girlfriend and his infant son live in a duplex in Pedralbes, one of Barcelona's most exclusive neighborhoods, where the younger daughter and son-in-law of Spain's King Juan Carlos recently put their mansion up for sale for 9.8 million euros. Messi's fleet of cars includes a 150,000-euro Maserati Gran Turismo MC Stradale. The 10th-highest paid athlete in the world, Messi earns $20 million in salary and prize money and $21 million in endorsements, Forbes.com estimated this year.
Messi has been a soccer prodigy since he started playing for Newell's Old Boys in Rosario, Argentina, as an 8-year-old. Diagnosed with a growth hormone deficiency, Messi moved to Spain with his father at 13 after Barcelona offered to pay for his hormone treatment. At 5-foot-7, Messi is shorter than most soccer players and is nicknamed La Pulga, or The Flea.
Tax Shelter
By 2004, Barcelona was paying the 16-year-old more than 15,000 euros a month. His family contracted with Schinocca, 51, to sell his image rights, according to court documents.
A former professional player in Argentina for Boca Juniors, whose career was cut short by an eye injury, Schinocca was a partner in a sports marketing firm in Buenos Aires. It also represented Diego Forlan, a Uruguayan star who played for Manchester United.
Messi's parents -- acting for him because he was still a minor -- asked Schinocca to set up a tax structure to shelter his future earnings, according to Spanish prosecutors.
Schinocca and Jorge Messi contacted Sovereign Group, a Gibraltar-based management company, Schinocca said. The Sovereign Group specializes in helping the wealthy avoid taxes by setting up corporations and trusts, including offshore corporations, according to its website. Founded in 1987, it has offices in 24 countries and jurisdictions that manage more than 7,000 client "structures."
Sovereign didn't respond to requests for comment.
Following Sovereign Group's advice, Messi sold the rights to market his image in 2005 for $50,000 over 10 years to Sport Consultants Ltd., a company in Belize owned by Celia Cuccittini, his mother, according to the prosecutor's complaint.
After turning 18, Messi himself ratified the sale of his image rights to Sport Consultants in 2006.
Adidas Deal
Four days later, a separate U.K. company owned by Messi's father and Schinocca, and acting on behalf of Sport Consultants, signed Messi to a sponsorship deal with Adidas worth 9 million euros over six years. At Adidas's request, Messi and his mother confirmed in a notarized document that its payments were going to Sport Consultants in Belize, Schinocca said.
The mismatch between Messi's sale of the rights for $5,000 a year and their resale for 1.5 million euros a year to Adidas is a red flag for tax authorities, said Garcia, the Spanish attorney for soccer players.
"When the players sell their rights to the image-rights company, it has to be on a market value," he said.
After a falling out with Schinocca, the Messis transferred the image rights in 2007 from Sport Consultants to Jenbril SA, a company in Uruguay owned by Messi.
Belize, Uruguay
Neither Sport Consultants nor Jenbril contracted directly with sponsors. Instead, they licensed Messi's image rights to companies in the U.K. and Switzerland, which in turn sold the rights to corporate sponsors and to Messi's Barcelona team. Payments to Messi under these deals were funneled back to the Belize and Uruguay companies.
According to the prosecutor's complaint, these intricate arrangements concealed the link between Messi and his sponsorship revenue. Belize and Uruguay were chosen because they are "de facto tax havens" where money made outside their territory is not taxed, prosecutors say. The U.K. and Switzerland are considered "jurisdictions of convenience" by the Spanish authorities, and allow money to be transferred offshore with almost no taxation.
'Completely Opaque'
The setup was designed to be "completely opaque to the Spanish Public Treasury, which could not associate the companies in the structure with the defendant Lionel Andres Messi," according to the complaint.
Angel Juarez, a lawyer representing the Messis in the case, didn't return an e-mail seeking comment.
Adidas declined to comment on Messi's tax case.
"Adidas is aware of the potential Spanish tax case against Leo and his father," spokesman Alan McGarrie said in an e-mailed statement. "However, anything to do with an individual's tax affairs is solely a matter for them and their management."
Messi's other corporate sponsors have included PepsiCo, which first signed him in 2007, and Gillette, a unit of Procter & Gamble. PepsiCo spokesman Jeff Dahncke declined to comment. Procter & Gamble didn't respond to a request for comment.
Adidas continues to use Messi to promote its sneakers. This year, the company unveiled the latest in the Messi Collection, his signature line of shoes and clothing. Adidas also featured him in a "Team Messi" online campaign that urges young people to "Play the Messi Way."
Messi Values
The campaign includes a video intended to highlight "the attributes, behavior and values that make Messi the most admired and inspiring football player in the world."
Messi's tax troubles haven't marred his appeal to Barcelona fans. Eduardo Amador, who attended the Valencia game clutching a scarlet-and-blue scarf with Messi's name on it, said he sympathizes with the star.
"I've got a personal tax adviser and I trust him," Amador, a 39-year-old floor-layer, said. "I'm sure Messi is the same."
Daniel Gonzalez, though, is disillusioned. Outside the stadium, the 54-year-old father of three -- and, like Messi, an Argentine -- is selling water, candy and sunflower seeds at a makeshift stall. Gonzalez makes 60 euros on match days and earns extra money parking cars, he said. He pays 180 euros a month in taxes.
"Messi is a cheat," said Gonzalez. "It's his fault as well as his father and tax adviser. He's not stupid; he knows how much he earns. He's my compatriot, but he's a cheat."