My question is, of course, prompted by the "independent" commission appointed by the Premier League ruling that Everton had broken the Profit and Sustainability Rules (PSR) and should have 10 points deducted, a matter on which I have chosen to stay quiet until I had read and reflected on the commission's 41 page report.
The Everton fans think they know the answer, singing "the Premier League, corrupt as f*ck" at recent games (to the tune of the Piranhas Tom Hark if you fancy joining in). Along, inevitably, with "you can stick your points deduction up your arse" (to the tune of She'll Be Coming Round the Mountain, itself based on an older 19th century spiritual). I can hear you all joining in...
Which I thought when I heard it at a recent match was just ribald anger, frustration and, yes, typical scouse victimhood. But then I thought a bit longer. What if, as most football followers think, Manchester City did exaggerate sponsorship payments to conceal money coming direct from its owners, as well as making under the table payments to managers, all over many years? I've been telling anyone who'll listen for a long time now that I think most of the 115 charges made against City by the Premier League are unproveable. City's expensive lawyers (is that cost FFP/PSR deductable I wonder?) will surely say that the club cannot be expected to respond to documents illegally obtained by hacking. And the club has had plenty of time to make sure any such evidence has long since been shredded and deleted. "We cannot identify any such documents and therefore assume they are forgeries" would appear to be a solid defence to me.
A small number of the 115 charges relate to breaching UEFA's Financial Fair Play rules. I thought the Premier League had got City on these as they were found guilty of several such charges and only got off the bulk of them on appeal to the Court of Arbitration for Sport (CAS) on the technicality that they were time barred. The Premier League has no such time bar. (As an aside here I'm glad to see some mainstream media journalists have joined with me in wondering why Arsenal's dodgy promotion to the top flight in 1919 isn't therefore being investigated).
The fine print of the CAS's decision will matter here. From newspaper reports it seems City were found guilty of dressing up £15M payments in each of 2012 and 2013 from its owners as sponsorships. The CAS decided these charges were time barred. Whether they said City were otherwise guilty or whether they didn't consider that given the time bar isn't clear to me. If CAS said City were guilty but no sanction could be levied because of the time bar then they have breached the Premier League rules and automatically guilty. But maybe not.
Otherwise City were found guilty of not co-operating with UEFA's inquiry and were fined. That means they also broke Premier League rules - so why wasn't this actioned back in 2020, I wonder? However, I suspect the Premier League would go for a fine rather than a points deduction for that offence, as UEFA did.
We'll see. Whichever way it goes it's entirely possible the City case won't be resolved this decade. If the charges are well founded but happen to be unproveable that doesn't make it any less corrupt (maybe more).
However, it's not just City. Chelsea have already admitted financial irregularities on Roman Abramovich's watch. Its new owners found some of the discrepancies at a late stage of due diligence in their acquisition process and kept £100m back from the purchase price. They fessed up to the Premier League and will expect to be treated leniently as a result - more of which later. The discrepancies appear to involve "off book" payments from Abramovich companies unrelated to Chelsea to representatives of players, managers and agents.
So this kind of cooking the books has been going on over many seasons at one club at least and most football fans would feel almost certainly at a second. Clubs with six Premier league titles and three Champions League wins between them since 2010.
Hmm, feels quite corrupt to me. Not just scouse victimhood, then.
But didn't Everton 'cheat on their financials' as well, as a Times reader commented below one of the more sympathetic articles published since the commission's report? My reply "well if you're such an expert on Financial Reporting Standard 102 obviously Everton should have been taking your advice all along" killed that particular thread and was informed by reading several paragraphs of the Commission's report, which remarked "this is a complicated case". In respect of the FRS102 element of the debate (which concerns what costs a company can capitalise and therefore take out of it's profit and loss calculation in exchange for amortisation charges in future years) the Commission recognised that there was material to support both parties' cases (i.e the Premier League's charges and Everton's defence) but it sided with the Premier League.
The Commission rejected all of Everton's mitigation pleas, which even I, with my blue tinted spectacles, think were mainly special pleading. Oh woe has befallen us, Russia invaded Ukraine pushing up the costs of our new stadium and making our financier of last resort, a friend of Putin, persona non grata. We got in a tangle over interest on the stadium loans and then Siggy, sorry player X, one of our best and most expensive players got arrested but then not charged after so long had elapsed that we'd let his contract lapse. And, having suspended him, we did the decent thing, didn't pursue a claim against him for potentially £10M (his wages I guess as we paid him until and unless he was proven guilty, which he never was). Give us a break, guv! No chance!
Where I depart from the Commission is in their assertion that events such as being unable to unload Cenk Tosun, sorry player Y, because the covid restrictions in his home country went on longer than England and the loss of the stadium naming rights deal (which hadn't actually been signed at the time) because they had to sever contacts with Usmanov are "the type of event that businesses experience". I'll take lessons on law from a lawyer but not lessons on business risk management. If all clubs had stuffed their risk registers with every kind of conceivable such event and made full allowance for them they would tie themselves in an impossible financial knot. Since they obviously don't why should Everton have done? Because they were the only club building a new stadium at the time Everton were exposed to substantial risk when covid hit. Then the Ukraine war increased energy costs by more than any reasonable business would have predicted together with the double whammy of losing the Usmanov funding lifeline. (Of course Usmanov's USM would have come through with the naming rights deal - they'd done it before sponsoring the Finch Farm training ground for exactly the amount Everton was short by to comply with PSR several years earlier. Dodgy? You bet!)
While Everton's own prediction of its league position in 2021/22 was an ambitious 6th (they finished 16th) the club's average position over the previous seven seasons was 10th and over the previous 15 was 8th. If Everton had finished a cumulative 8 places higher over the four seasons at issue the extra league position prize money would have been enough to make them compliant. Everton didn't need much to go their way to be compliant over the four years.
Nevertheless, it's also clear reading the commission's report that Everton were all over the place on many things. "You need to get some better finance people" Mrs H said when I told her some of the omissions and oversights they'd made - and she's right. The reason Everton were in detailed discussion with the Premier League about the club finances in 2021/22 was that they hadn't appeared to realise that they could not capitalise spend on the new stadium (and thereby take it out of the PSR calculation) until they got planning permission. They got a dispensation from the Premier League that they could allow for those costs in the PSR calculation but then failed to capitalise some costs once they had planning permission. They claimed these costs were substantial but the Commission blew a hole in that argument. The Commission quite reasonably wouldn't accept that interest on commercial loans taken out by the club when Moshiri's appetite for putting in money ended was related to the new stadium. The terms of one of the loans, with Metro Bank, made clear it was for working capital not the stadium! Even if it were for the stadium, Everton put all of the incoming money into one pocket out of which both the stadium and routine spend came, making it harder to make the case over what was for one and what was for the other. Everton concocted a cock and bull story that because Moshiri had written off all commercial loans when he acquired the club he would have done so again apart from the fact that it was building the stadium. The Commission saw straight through that. These financial points, some very complex some just hand waving, were why Everton accepted during the proceedings that instead of £20m to the good they were £8m over. (The Commission decided it was more like £20M).
And, materially, because Everton accepted much of the Premier League's case on the numbers during the hearing and so accepted guilt their only grounds for appeal are that their various mitigation claims should have been accepted or that the sanction was too severe.
Everton's main hope to get the points deduction reduced must be that the commission made no case whatsoever for the quantum it invoked. In particular, it ignored the precedent of points deductions for going into administration (9 points for Portsmouth in 2010, 10 for teams in the EFL in more recent years) against which the punishment looks disproportionate.
The Commission rejected the attempt by the Premier League to establish a scale for points deductions (6 for any breach of the financial limit plus one point for every £5M over it) saying that panels like itself should have the freedom to consider each case on its merits. But it then levied a 10 point deduction with no justification in one sentence in a 141 paragraph report, when the Premier League's formula would have yielded the same result (9.9 points to be precise). Bizarre.
I expect the points deduction to come down, perhaps to 6, on appeal. Jonathan Norcroft of the Times thinks it should have been more like 2 or 3.
The Commission report is also all over the place on how culpable Everton were. Their accountants were telling them they were on the right side of the limit, but those advisers also told the commission that their job was to interpret the rules to the maximum benefit of their client. The commission took a dim view of this, saying that Everton had a duty to act in "utmost good faith" and not try to bend the numbers to their benefit. But the PSR calculation itself isn't covered by the accounting standards and isn't that what every business pays its accountants to do (within the law)? The commission concluded that Everton had not been deliberately dishonest but had been less than frank. They said that, while Everton had not been compliant it was not a case of deliberately breaching the rules to try to gain a sporting advantage. On the other hand they also noted that the Premier League approved numerous transfers but warned about PSR compliance each time. That may have been specific or a standard warning but the commission concluded that for Everton to persist in player purchases in the face of such warnings was reckless. It says the club took unwise risks* mistakenly believing it would be compliant.
After all this on the one hand, on the other the commission bluntly concluded Everton found themselves in a position of their own making, it was a serious breach of the limit and required a significant penalty.
They didn't see Everton as being narrowly over the limit, saying that PSR requires clubs to balance their books. They saw the £105m loss over 3 seasons as a generous buffer, not to be exceeded in any circumstance. They seem to have ignored the fact that few clubs break even in any particular season.
Those other clubs had better watch out. First up, Chelsea. They will expect mitigation for the offences being under previous ownership and for coming clean at the first opportunity. Chelsea might have acted in good faith now but they didn't earlier (so that cancels out, perhaps). The commission report on Everton said (paragraph 135):
"We agree with the Premier League that the requirements of punishment, deterrence, vindication of compliant clubs, and the protection of the integrity of the sport demand a sporting sanction in the form of a points deduction."
If Everton have to be made an example of, surely so must Chelsea.
I won't hold my breath in case, as the banner on Gwaldys Street says alongside the Premier League logo, "where there is power, greed and money there is corruption".
* Jonathan Northcroft in the Sunday Times said these unwise risks included making new signings for Frank Lampard after being comparatively parsimonious for Rafa Benitez. Those signings were Dele Alli (no up front transfer fee but significant wages), Onana (£35M), McNeil (£20M), Maupay (£15M), Garner (£9M) and Gueye (the newspaper says the fee was £8m but the usually definitive transfermarkt.co.uk quotes €4m). I'm rather glad they signed the four of those six that have been regular starters recently under Dyche. James Garner in particular is a gem of a footballer. Northcroft also listed the "duds" that led to Everton coming unstuck: Moise Kean (£29M), Tosun (27M), Gbamin (£25M), Klassen (£25M), Bolassie (£25M), Schneiderlin (£24M). These signings were all made in the period 2016 to August 2019. Other newspaper reporters have tended to be more sympathetic, as indeed was Northcroft a week later when he reflected that his first column didn't - and should have - provided a critique of the punishment, which he found excessive comapred with the damage that the breakaway six ESL clubs could have caused. That offence could bring a 30 point deduction in the future and he clearly found it preposterous that Everton's £19.5m overspend over 4 years - allegedly five months pay for Erling Haaland - was treated as if it was a third as serious as possibly destroying the league. He noted that nobody he'd spoken to in the game, including executives of rival clubs, was saying "only ten points? I'd have expected more". Northcroft concluded that a deduction of two or three points and a warning would have sufficed. "Everton are the child who blew its school lunch money on fizzy drinks, not the prefects who plotted to burn down the gym hall".
Sources:
The Premier League announcement is at the following link, which also links to the 41 page report by the 'independent' commission: https://www.premierleague.com/news/3788486#:~:text=An%20independent%20Commission%20has%20imposed,and%20Sustainability%20Rules%20(PSRs).
Chelsea FC face new questions over how Roman Abramovich funded success. The Guardian 15 November 2023
CAS releases its reasons for overturning City's ban The Guardian 28 July 2020
'Reckless' Everton paying the price for refusing to listen to multiple warnings. Jonathan Northcroft, Sunday Times 19 November 2023
Everton points deduction a classic case of picking on the little guy. Club's punishment did not match the severity of the offence, especially when comapred to sanctions for those involved in the attempted Super League breakaway. Jonathan Northcroft. Sunday Times 26 November 2023
