Thursday, May 30

Everton, 777 and the Business of Premier League Soccer

The acquisitions came so quickly that it was hard to keep up. An agreement to buy the oldest soccer team in Italy. An investment in one of the most popular teams in Brazil. Stakes in well-known clubs in Belgium and France, Germany and Australia.

Each new deal was trumpeted by the Miami-based investment company, 777 Partners, that was hurriedly snapping them up.

Then, in September, the investment group revealed its biggest deal yet: an agreement to acquire a controlling stake in Everton F.C., a founding member of the Premier League and one of the oldest soccer clubs in England.

Suddenly, everyone in soccer had heard of 777 Partners. Beyond its name, though, little was known about the company. It said it had $10 billion in assets, but was so closely held that verifying that claim was difficult. Lawsuits against the firm raised concerns for potential partners. A string of unpaid bills, some as recent as this month, raised more.

Now, in bidding for a place in the Premier League, 777 Partners faces something it had previously avoided: a forensic review of its holdings, its finances and its brash American co-owner, Josh Wander, who in one recent interview said he was “more serious about investing” in soccer than anyone in history.

His company’s bid for control of Everton, an acquisition that would eventually require hundreds of millions of dollars in assumed debt and other obligations, is by no means a sure thing. The Premier League, England’s Football Association and an independent British government regulator, the Financial Control Authority, all must approve the proposed deal, a process that is likely to take months.

What they discover could have implications not only for the future of Everton, a fallen, money-losing giant, but also for rest of the financially troubled teams in the 777 network.

The stakes are just as high for the Premier League, which is trying to prove it can oversee its clubs’ finances amid talk of government regulation, and for an interconnected global soccer economy reliant on the simple premise that teams can and will pay their bills.

None of the soccer or public agencies currently assessing 777 Partners would discuss their review or a timetable for its conclusion.

Mr. Wander, the co-founder and public face of the company, declined multiple requests to be interviewed for this article, though he published a long letter to fans on Everton’s website on Saturday in which he acknowledged fans had been discomfited by media reports about the company’s businesses. But those reports, he said, were “misleading.”

“The truth is far more boring than the fiction,” he wrote.

“We are not asset strippers nor speculative investors. We build and hold businesses, and intend to hold the football clubs in our portfolio for a long term,” a spokesman for 777 wrote in an emailed statement. In the letter to fans, Mr. Wander wrote that he would share “player recruitment, data analytics and commercial development resources,” with the other teams in the group.

More than a dozen current or former employees, club officials and others who have done business with 777, however, revealed new details and questions about the sources of its financing. The people asked not to be named because of relationships with the company.

In interviews, they also shared details about unmet obligations and unpaid bills, and wondered if the company has the resources to manage a global network of clubs carrying hundreds of millions of dollars in debts and obligations.

A successful takeover of Everton would bring the number of clubs in 777’s portfolio to eight. The teams in its existing stable are well known: Genoa in Italy, Hertha Berlin in Germany, Vasco da Gama in Brazil. All are different in size and ambition but shared a common theme before attracting the interest of 777: They were all in financial crisis.

Mr. Wander, 42, and his co-founder Steve Pasko, a Wall Street veteran two decades his senior, would not have been seen as a typical sports team investors when they started 777 Partners in 2015. At the time, the company’s core investments were related to the world of structured settlements, an opaque industry in which recipients of long-term annuities, typically the result of compensation claims, cash them out for lump sums of immediate cash.

The firm quickly branched out into other sectors, including low-cost airlines and litigation financing, according to Gary Chodes, who served as a board member of a 777 subsidiary until 2017. He said he parted on good terms, but that the firm he left had few profitable businesses. So he noticed when 777 started collecting soccer teams and committing to assume their sizable debts through loans and other upfront payments.

“If I was to ask, ‘Is there a little bit of mystery as to how Josh would generate three quarters of a billion dollars to buy a sports team from the businesses he owns in 777?’ — I would say that’s somewhat of a mystery,” he said.

In past interviews, Mr. Wander has painted a picture of a sprawling and successful business, one that manages $10 billion in assets, counts 60 subsidiaries across a range of industries: sports, insurance, aviation, media. Many of the company’s financial details are difficult to verify since the business is private and its financial structure, current and former staff members said, is closely controlled by Mr. Wander and Mr. Pasko. Last weekend, for example, it announced the sale of one of its insurance businesses without identifying the buyers or the price.

The company relies on loans to operate many of its businesses, according to the current and former employees. One of the biggest lenders to 777 is A-Cap, a private company operating in the insurance and investment business, three people said. A-Cap did not respond to a request for comment.

“Not all of our 60 businesses will be profitable at any one time, but the fundamental underlying business performance of the 777 Group is strong,” Mr. Wander wrote in Saturday’s letter to fans, adding the company was not a “typical private equity firm.”

Yet as 777 executives have spoken of their ambition and the scale of their operations, some of the businesses they run, including their sports teams, have reported missed payments related to agreed-upon funding schedules and even routine operating expenses.

In England, for example, the chairman of the British Basketball League, in which 777 owns a 45 percent share, wrote to its founders on Sept. 6 warning that the league was at risk of bankruptcy unless the firm delivered a late payment of about $1 million. Those funds eventually arrived.

In Belgium, according to reporting by the soccer magazine Josimar, the lack of clarity around 777’s finances spooked Belgian soccer’s licensing officials enough that they considered refusing to allow the company to continue operating the 125-year-old club it owns, Standard Liège. Eventually a compromise was found, and the team was granted a license.

In Brazil, Vasco da Gama had been anxiously awaiting a scheduled payment of about $23 million due the same week as the basketball league was expecting its funds. Without the money, Vasco has been unable to make outstanding payments to its suppliers and to rival teams owed in past deals for players. When it missed some of the payments, soccer’s governing body prohibited the club from signing new players until its debts were paid.

Through its spokesman, 777 said it had already delivered much of the money required in its payment schedule with Vasco. It also said it was ahead of “ahead of schedule” and “beyond our original commitment” to the British Basketball League. But to some outsiders, the repeated issues involving money suggested an exercise in financial plate-spinning rather than the kind of healthy, well-capitalized owner a Premier League team requires.

Away from the soccer field, its co-founder, Mr. Wander, built an image of a risk taker with a knack for making money.

One former associate, Rhonda Bentzen, recalled how Mr. Wander would request loans from colleagues at a structured settlements business he had set up with the promise of profits in a matter of days. “I did it with him a few times and he absolutely doubled the money every single time,” Ms. Bentzen said. But once, she said, she watched Mr. Wander drop about $5,000 in a Las Vegas slot machine, lose it all in less than a minute and “not bat an eye.”

In the early years of his business career, Mr. Wander was shadowed by a cocaine-trafficking charge from his college days at the University of Miami. After he pleaded no contest in 2003, he spent more than a decade on probation. A spokesman for the company said his plea, and the successful completion of his probation, meant he “was not convicted of anything.”

Court records reveal other details about Mr. Wander, his company and money. In 2012, the Bellagio casino sued Mr. Wander for failing to pay back a $54,500 cash advance. In March, American Express went to court seeking $324,000.89 that had been charged to a 777 Partners credit card. The spokesman for 777 said both matters were resolved. Court documents show the Bellagio repayment remained outstanding for at least six years.

Just last week, a former business partner in 777’s airline business made an allegation of fraud against the company in the Court of Chancery in Delaware. The filing said the firm and a subsidiary, Phoenicia L.L.C., “are part of a web of companies 777 uses to move around money and assets to operate and conceal a sprawling fraudulent enterprise.” A 777 spokesman declined to respond to the accusation, citing a company policy not to comment on litigation.

The pattern of late and delayed payments, rather than any lawsuits, raises the biggest doubts about 777’s suitability to run Everton, said Keiron Maguire, a lecturer in the management school at the University of Liverpool and a specialist in soccer finance. “It’s a red flag to a potentially more significant cash-flow issue, or incompetent management,” he said.

Money is of paramount concern at Everton at the moment. The club’s current owner, Farhad Moshiri, has spent close to $1 billion on Everton since purchasing the team in 2016, and the club’s immediate financial needs are so acute that 777 has already lent the team more than 20 million pounds, or almost $25 million, just so it can continue to operate.

By agreeing to take on its ballooning debts, as well as a Premier League wage bill and a half-finished stadium on the Liverpool waterfront, 777 Partners has essentially committed to injecting hundreds of millions of dollars into the club. Last weekend, they saw the job ahead first hand, taking in an Everton match from seats in the front row of the director’s box.

Executives at Vasco da Gama in Brazil were watching. It had not escaped their attention that the $25 million loan that 777 Partners gave Everton last month was similar to an amount that was, at that moment, still owed to Vasco.

On Thursday, a month after it was due, part of the payment arrived, with a promise that the balance would be paid on Friday morning. But it was not paid. The holdup, 777 Partners said, was a bank holiday in the United States.

The missing $7 million, the company assured Vasco, would be there this week.