Southampton mystified by £100,000 that went missing

A major South American club has admitted to The Independent that it received £100,000 from Southampton for a player who was actually available for nothing, in a transfer that has been reported to the Premier League's ongoing "bungs" inquiry as "suspicious".

The whereabouts of the money remains unclear, and disputed, but the cash was paid by Southampton for the hire of a Uruguayan player who ended up never playing a first-team game. The revelation comes three days before a television investigation into irregular payments in football by the Panorama programme.

Following our own extensive investigation, The Independent has established that Southampton paid £100,000 to the Montevideo-based club Peñarol in August last year for a 32-year-old midfielder, Marcelo Tejera. He was signed by the then manager, Harry Redknapp, who had steered the club towards Tejera's middlemen to negotiate the actual transaction.

Southampton were told by Tejera's main representative and translator, Pablo Forlan - the brother of the Uruguayan international Diego - that the cash was due as a loan fee.

Forlan says he acted on Tejera's instructions and Tejera himself says he believed that it was necessary for a loan fee to be paid to Peñarol to secure his release. In fact, the player was available as a free agent because of a release clause in his contract that meant he could have moved for nothing. This vital fact was never communicated to Southampton, who were led to believe that a fee was a mandatory condition of the move, imposed by Peñarol.

Southampton's chairman at the time was Rupert Lowe, who is no longer with the club, but when contacted by The Independent Lowe confirmed he was told a loan payment was necessary. "Harry Redknapp called me before a reserve game against Chelsea, the day before transfer window closed, and asked me to see Tejera and his agents," Lowe said. Lowe met the player and the representatives. "It was a loan deal," Lowe said.

Lee Hoos, Southampton's operations director, has confirmed to The Independent that the paperwork for the transfer shows that Peñarol and Southampton struck a loan deal. "It was a loan agreement between the two clubs. I can tell you that absolutely," he said. Hoos added that Southampton will study the detail of The Independent's investigation before deciding what action they might take to discover what happened to the money.

Peñarol have admitted they sent Tejera's registration documentation to Southampton to complete the move, and they accepted the money into their bank account. But they don't see that they themselves played a part in any misrepresentation during negotiations because they themselves were not involved in those. Rather, they say, Tejera was free to negotiate the terms of his release, and they subsequently paid him 90 per cent of the amount he secured. According to Rafael Valdes, who is Peñarol's equivalent of their chief executive and personally handles all transfer dealings: "It [the £100,000] was not the club's money. The player had the right to negotiate his own departure. Peñarol got the money, via the English FA. What we did with it next is an internal matter. It is normal and legal in Uruguay."

Tejera denies he got any money from the £100,000. He said it was " unbelievable" for Valdes to claim he did, and added: "I do not wish to comment on anything those people have said."

Valdes responded that he was "absolutely adamant" that £90,000 of the cash went to Tejera. "I personally paid 90 per cent of it [the money] into a bank account for Tejera." He added that Peñarol kept 10 per cent.

Victor Cabrera, a Peñarol director, said Tejera was free to leave for nothing as long as Tejera paid back to Peñarol any wages Peñarol had paid him during his time there. It is understood that the 10 per cent of the fee Peñarol retained (£10,000) was equivalent to the money earned by Tejera under his contract with Peñarol between January and August 2005. He only had a one-year contract with Peñarol, expiring on 31 December 2005, so Southampton should never have been liable to pay more than a five-month loan fee, or one-off release fee, in the first place.

Southampton officials highlighted the case as part of their testimony to the bungs inquiry when inquiry officials visited St Mary's as part of their investigation into alleged corruption in top-flight moves since January 2004. While Southampton were not a Premier League club when the deal was done - they had been relegated three months before - they were still within the League's auspices, receiving parachute payments. The case may act as a barometer of the seriousness and scope of the £500,000 inquiry, which is being carried out by investigators Quest under the leadership of Lord Stevens, the former Metropolitan Police Commissioner. The investigation is chasing up numerous allegations of malpractice, and it is understood that several high-profile multimillion-pound deals are also under scrutiny, as are certain individuals and clubs who could be linked in patterns of irregular activity.

There is a clear paper trail in the Tejera case that any of Quest's forensic accountants should be able to follow easily, starting at Southampton, and going via the Football Association, to Peñarol and to the ultimate destination of the cash.

Redknapp has told The Independent that the League's inquiry is a "good thing for football, they should investigate every deal", a sentiment echoed by Chris McMenemy, the agent who recommended the player to Redknapp. The inquiry team has yet to talk to either Redknapp or McMenemy about the deal, and it is believed they have not spoken to Forlan. Quest will not comment on its inquiry. Redknapp, as a Premiership manager,has been interviewed by Quest, as has every other manager, but he said the investigators had "not mentioned a word" about Tejera.

Quest is due to hand its interim findings to the Premier League next month. When or whether they will be fully released to the public is unclear. The League is a private client and the League alone will decide how, when or even if to make public any details of cases that were pursued.