Here’s why ‘double contracts’ could be a problem for Liga MX

Liga MX and its clubs could be facing some serious legal trouble from the Mexican government over the issue of double-contracts. Mexico’s SAT (Servicio de Administración Tributaria, also known as Hacienda) announced it is investigating the practice in Mexican soccer.

The Hacienda is analogous to the American Internal Revenue Service or Canada’s Canadian Revenue Agency. It’s a government organization that collects taxes and enforces tax laws, and according to their press release it believes that these double-contacts were circumventing tax law.

How it worked

A double-contract is where a person (manager, player, etc.) is just what it sounds like. A person (most often referred to as a manager, but potentially anyone could have this) has two contracts with the club. One contract is for a nominal amount and is reported to the FMF (Federación de Fútbol Mexicana - Mexico’s governing body of the sport). The other contract is for a larger amount and is not reported to the FMF. These are usually not official signed contracts, rather handshake agreements.

How this came to light

Veracruz manager Guillermo “Memo” Vázquez resigned on Monday, accusing his former employer of not living up to the agreement to pay him what he alleges was owed to him in such a verbal agreement. Veracruz vice president Mario Trejo confirmed this in an interview with ESPN. Veracruz owner Fidel Kuri, not one to shy away from controversy, said that Vázquez wasn’t even under contract this season.

Why it’s a problem

Handshake agreements aren’t typically reported to the government to pay taxes on. Remember, Al Capone wasn’t brought down for all of the murder and trafficking committed by him and his gang, he was brought down on tax evasion charges. The SAT knows that the Mexican government wouldn’t have been paid on any of these agreements, and will investigate to possibly recoup any taxes owed.

As referenced by ESPN’s Tom Marshall in his article linked above, the FMF had to know this practice was taking place. Vázquez’ contract was obtained by ESPN and shows he was paid Mex$50,000 (roughly USD$2,600) per month, which Marshall points out is “a lot less than would be expected for a Liga MX manager.”

Who could be affected

While it’s unknown at this point just who took part in these double-contracts, Trejo insinuated that Veracruz isn’t the only club that had these in place by saying that Veracruz wasn’t the worst offender.

The Hacienda could conceivably investigate every club to look for anomalies (such as a manger making just Mex$600,000 a year). Memo Vázquez’ statement could be just the start of a very long investigation into just about every facet of the Mexican game, scrutinizing everything - and everyone.