PL charge City for alleged breaches of financial rules

[slbsn]

Fair do’s. But it is also the case that City, with what we claim is irrefutable evidence and the benefit of disclosure have said come on then let’s have it you cunts.

It appears both sides are very confident in their position.

City have remained confident even throughout the hearing. Not sure if the PL has.

 

[slbsn]

Odd isn’t it that this is the post Keith Moon hasn’t liked lol.

What Keith fails to realise is that there are no real winners either way. The rabid joy of Keith if City lost. Hot on the heels would be further litigation which could potentially involve a third of the football pyramid. It would be mayhem and very expensive.

I don’t think many have considered the fall out. Worst case scenario imho is we are found guilty and given a substantial points deduction ensuring relegation. This keeps the football pyramid intact. That wouldn’t be the end of it though. Isn’t it about £2 million a place in the Premier League? Clubs who finished 18th would be factoring in lost revenue through relegation. The Premier League will be very very busy.

I appreciate your vastly superior knowledge of the legal system but I also believe political factors will play a part. In essence this is a sleight on HRH Sheikh Mansour. There is a £22 billion trading relationship with the UAE to consider.

I wouldn’t overplay the politics. The window went for that first when they charged City and again when they commenced the hearing. Very hard to unwind the situation now purely for political reasons. City will have to win on the legal pitch.

 

[Damocles]

Thanks. But the Leicester case is not a good example. The lawyer’s advice in that case was that the PL were correct but they lost - the advice was not that they would lose but they carried on regardless. In fact, on Leicester, the PL were amazed they lost given the advice.

Of course, the whole City case could be a huge cock up or a purely vindictive pursuit of a case the PL knew with near certainty they would lose. But, take a step back - that is obviously very unlikely.

Do you think the timing with the Independent Regulator debate in Parliament was a coincidence? I believe Everton had a similar coincidence

 

[halfcenturyup]

Before Feb 2023, the PL had at least the gist of the unequivocal witness evidence at CAS. It is near certain that in correspondence City would have set out its case firmly as to why the PL should not proceed to charge. This would have included annexures of key documents from the documents disclosed in the investigation phase. I suspect City also shared the CAS expert evidence and the CAS witness statements.

There is no way the PL charged blindly without extensive pre-issue correspondence. Of course, over time the parties refine their case and the parties see that in the openings, the trial itself and then in closings. But the “charging decision” would obviously not be taken in a vacuum.

But even if you are right, if the picture changes during a formal disclosure/pre-hearing process such that the evidence no longer supports the claimants case, they’d be crazy to ignore the advice and plough on regardless. Like it or not, the PL will have gone into the hearing believing they would prove their case.

Fair enough. My hypothesis rests on the assumption that City didn't share any witness statements or third party accounting evidence with the investigation, including those given to CAS.

I am not sure the CAS information would be accepted by the PL as countering the allegations anyway, would it? Because there are different time periods involved and many more allegations. Nor, imh and probably wrong o, would it be wise from the club's point of view because, for example, the third party accounting evidence provided at CAS was criticised by UEFA's expert and the last thing the club would need is more disclosure requests from the PL on third party accounting information or witness statements having opened the third party door. Much wiser, imho, to keep the club's powder dry until the disciplinary stage, especially as the club wasn't required by the rules to provide it. Anyway, I am perfectly happy to be proven wrong. No biggie.

Just a few other things quickly to answer the other points you raised. Ignore them if you don't have the time or the inclination:

I didn't say the PL charged blindly into the disciplinary process. I said they wouldn't have had much choice.

It's also very likely that the PL's lawyers feel the allegations are strong in some areas and less strong in others. The discussion of related parties and fair values for example, on Touré, or on non-cooperation. It wouldn't have to be a yes or no from the lawyers. That is a business decision at the end of the day.

I thought it was previously discussed that once the disciplinary process was started it would be very unusual to suddenly withdraw the allegations or settle?

The PL may well be duty bound to investigate issues brought before them, but there are Investigations (for City) and investigations (for United, Liverpool and Arsenal), of course.

About the club not wanting a long-drawn out case, I maybe naively took Khaldoon at face value that he would rather spend 30 million on legal fees and tie every one up for ten years. He didn't make that up, it's not his money. Imho, that comes from Mansour. Reputation is very important in the Middle East as you know and I can fully believe Mansour would do anything in any way he can to maintain his reputation and that of Abu Dhabi.

And lastly, on Soriano you can probably tell I don't rate him much. Possibly unfairly but, nevertheless, he may well be the CEO but I doubt he is anything other than the junior partner when it comes to strategy on this case.

Just wanted to answer your other points, no need to discuss them if you have better things to do :)

 

[slbsn]

Do you think the timing with the Independent Regulator debate in Parliament was a coincidence? I believe Everton had a similar coincidence

Yes - suspect it was more driven by a statute of limitations point on one of the charges (Fordham)

 

[halfcenturyup]

I was being slightly mischievous as I know a little of Stefan's history with accountancy firms.

I'm certain he's quite correct that BDO will have been extra cautious about forming an opinion on anything that might fall within the scope of the UEFA/CAS/PL investigations. I'm also fairly confident that we won't have deliberately and knowingly misled them over anything to do with these allegations, as they'd have walked away if so. Similarly, I very much doubt they've willingly cooperated in concealing misleading or even fraudulent financial reporting.

But it isn't necessarily black and white with auditors and the work they carry out. Earlier this year, the Financial Reporting Council, which monitors the work that the larger audit firms carry out, found that only 38% of the BDO audits it sampled met an acceptable standard (either requiring no or little improvement). So nearly 2 out of 3 didn't meet that standard. It's not just about asking questions but asking the right ones and making sure you get unambiguous and full answers, and that are corroborated by evidence where possible.

Auditors carry out audits and seek any information they think they need to form their opinion. That information may be ambiguous however, meaning they have to form a conclusion from imperfect information or they may be downright negligent. You also have to know where to look. I was on the audit team that uncovered the first major insider dealing case. We'd suspected something underhand was going on for a few years but the company involved certainly weren't going to volunteer the information and we couldn't pin it down. Finally, and quite by chance, we got a lead and followed it through.

The alleged fraud at Wirecard for example, centred on a very large cash balance (nearly €2bn) the company claimed it held in the Philippines. Yet that balance appears to have been non-existent. My training and experience was that you always sought what was usually routine confirmation of any bank or other accounts from the institutions holding them. It was pretty well the first thing you did on an audit. Yet it appears that EY, a Tier 1 global firm, didn't do that basic check.

If their sales ledger said that a debtor owed them a significant amount of money, you'd generally confirm the balance with the debtor. In fact you'd usually contact several of the larger debtors. And you'd try to ensure the relevant transactions were valid ones. But that's never a complete guarantee that everything is above board.

TL:DR Yes you can mislead auditors or even be in cahoots with them but there is a middle ground where auditors can be negligent, not ask the right questions or come to the right conclusions from the evidence they have.

All true, of course.

I would just add that when risk is low, standards may be a little less rigorous, but when risk is high (and it can't be much higher than it is right now for BDO with City), then I think we can assume every partner and his dog has been involved in making sure they are squeaky clean.

 

[kippaxwarrior]

Do you think the timing with the Independent Regulator debate in Parliament was a coincidence? I believe Everton had a similar coincidence

I've always felt that timing was extremely weird.

Exactly just one day after the government announced that they were looking into having an independent regulator to govern the premier league the premier league charge us.

Now either that's an amazing coincidence or the premier league shat the bed and rushed out our charges without completing the investigation to show the government they don't need to be independently regulated

 

[Damocles]

And lastly, on Soriano you can probably tell I don't rate him much.

Never understood this. Is it a good reason?

 

[halfcenturyup]

I don’t see the point in living in a delusion that the PL have just pursued a case to the ends of the earth that they know they will lose and spent 10s of millions doing that. It’s simply not realistic. They obviously think they have a belief they can win before the hearing. Now it’s complete, that is much less clear because it May now be obvious they failed - in fact City’s confidence is that

They may have had a belief that they could likely win on some of the allegations but would be unlikely to win on some of the other serious allegations and proceeded with both "sets" of allegations. Like the APT case, it's not win all or lose all.

It's also likely, of course, they thought they couldn't win on some allegations, or that the allegations were less serious, and so discarded them. We only know the "115" they proceeded with.

All imho.

 

[mcfcphil]

They can be under pressure etc but nobody goes with a case like this where the advice is that the case is weak. Because in the end, in such a case, they are very likely to lose and that has consequences in itself. So I really don’t see it. This should be distinguished from the PR and the breadth of the charges where there is a tactical decision in play.

There must be some danger in applying the rationale you would expect a “normal” commercial organisation to follow in these circumstances to how the PL is behaving?

Sure, you wouldn’t expect a commercial organisation to go against legal recommendations given the consequences (financial and reputation) when they eventually lose.

In this case, it’s different if the pressure to go against legal advice is applied by highly-adversarial shareholders who do not burden the consequences of losing the case in the way a normal commercial organisation would do.

ie, if the PL loses the case, is there really a substantial financial or reputational impact for Daniel Levy/Spurs or Tim Lewis/Arsenal?

Do they really care about the legal costs if they’re split across all PL clubs?

Do they really care about the reputation of the PL? Given the super league debacle the answer to that is clear.

They won’t lose their jobs because Masters is the face of this (potential) failure.

Finally, all of the above is before we include the factor of football being a highly emotional environment. It’s not a normal business and I don’t believe even highly-experienced businessmen like Levy/Lewis (even Khaldoon) are immune from letting emotion influence their thinking when it comes to football matters.

 

[Damocles]

Yes - suspect it was more driven by a statute of limitations point on one of the charges (Fordham)

Presumably you can see why them releasing it the day before and then having to go back and edit mistakes seems to support the rushed out narrative?

 

[halfcenturyup]

Never understood this. Is it a good reason?

No.

I don't like management consultants :) Second only to lawyers in my hate list .....

I was going to go on a rant but I decided to leave it at that. Let's just say I don't rate him or how he is running the club, he has the easiest CEO job in football and wouldn't be here if it wasn't for Guardiola. All the problems the club is facing and has faced happened under his watch. Ah, I am ranting. Enough.

 

[Prestwich_Blue]

This is a classic straw man used by those who deny the relevance of City’s audits (I know that’s not your point but it is the effect). Nobody is suggesting audits are a guarantee a company is free of fraud or that there is not a major issue with general audit quality. Quite evidently, there is.

My point is that we aren’t talking about a normal audit. We are talking about a very high profile company with allegations of false accounting since at least 2013, actual “prosecutions”, multiple cases presented by lawyers and accountancy firms over the years, very specific (written and detailed) allegations relating to the company’s biggest commercial contract and many other matters capable of specific audit enquiry. In that context, clean audits including for the year just ended are, in my view, highly persuasive. Because, as I said above, the only 2 scenarios I see as possible are the auditors being given false reassurance or auditors involvement in wrong doing (which I don’t believe). Right or wrong, I dismiss the idea the BDO have not enquired in detail each time an investigations, charge or material allegations have been presented. So for the PL to win, City have repeatedly lied to the auditors (as well as lots of other parties). Again very unlikely

And I agree with you that it's inconceivable that, in this particular case, that BDO have just blindly ticked off the actions in their audit guide without being for more assiduous than they might otherwise have been in the absence of these charges.

But many on here don't have the knowledge and experiences that you, I and a few others on here have, and I wanted to point out that it's not always black and white. Let's take a hypothetical (but probably not far from real) scenario with CIty & BDO. As part of their audit, BDO will look at material contracts, certainly the ones with Puma & Etihad.

They'll look at the signed contracts to understand the financial responsibilities of the parties and will check those have been adhered to. If Etihad's contract says they'll pay us £60m a year, and they'll get various naming and other rights, BDO will presumably check they've been granted those rights, and have paid us correctly for them. In other words, that's it's not a sham contract. And they'll want to see the payment has been correctly accounted for in the books.

Under normal circumstances that would probably be enough but I suspect they'd also now want reassurance that the Etihad payment wasn't disguised equity funding. To get that, they'd need to get confirmation from Etihad that it's all their own funds. To do that fully they'd want more than reassurances however, they'd want access to Etihad's own books. I'm not sure Etihad has any requirement to grant that access but let's assume they do, for the sake of this scenario.

BDO then see that Etihad has paid their £60m but also that £100m has come into Etihad from the Abu Dhabi Tourist Authority. They then have to form an opinion on whether that £60m was paid fully out of Etihad's operational cashflow, fully out of the ADTA revenue or partly from both. We know from the evidence presented to CAS that it was partly from both. There may be no way of telling though, other than verbal assurances and it's those they'll need to rely on to form their opinion. They might even contact the ADTA but at the end of the day unless they have or can get evidence that someone isn't telling the truth, they'll have to accept those assurances and agree that the sponsorship was all revenue and not disguised equity funding.

However it's possible that the ADTA was later quietly reimbursed by companies controlled by Sheikh Mansour and BDO will never have been aware of this. As I said, this is hypothetical and I don't think for one moment this was the case (although we know some of it up to the use of ADTA funds for Etihad certainly was) but my point is that BDO can be as assiduous as they like but in a case like this, they could eventually run out of road and have to form an opinion based on the evidence they have.

 

[Lord Blue]

Thanks. But the Leicester case is not a good example. The lawyer’s advice in that case was that the PL were correct but they lost - the advice was not that they would lose but they carried on regardless. In fact, on Leicester, the PL were amazed they lost given the advice.

Of course, the whole City case could be a huge cock up or a purely vindictive pursuit of a case the PL knew with near certainty they would lose. But, take a step back - that is obviously very unlikely.

Yeah I know a major cock up is unlikely. I just take some comfort from the thought that it’s happened recently.
I also take comfort from our successes in the APT ruling. I know they’re not related but it’s a demonstration in competency and that we know what we’re doing.
Anyway as we move from this no man’s land between Christmas and new year where no one knows what day it is, who they are or where they’re supposed to be let me wish you a happy new year. Sock it to em Stefan.

 

[cheekybids]

No.

I don't like management consultants :) Second only to lawyers in my hate list .....

I was going to go on a rant but I decided to leave it at that. Let's just say I don't rate him or how he is running the club, he has the easiest CEO job in football and wouldn't be here if it wasn't for Guardiola. All the problems the club is facing and has faced happened under his watch. Ah, I am ranting. Enough.

I think you can turn that on its head. Guardiola wouldn’t be here without him & all the great stuff has happened on his watch ;)

That’s not defending him….. just saying.

 

[slbsn]

There must be some danger in applying the rationale you would expect a “normal” commercial organisation to follow in these circumstances to how the PL is behaving?

Sure, you wouldn’t expect a commercial organisation to go against legal recommendations given the consequences (financial and reputation) when they eventually lose.

In this case, it’s different if the pressure to go against legal advice is applied by highly-adversarial shareholders who do not burden the consequences of losing the case in the way a normal commercial organisation would do.

ie, if the PL loses the case, is there really a substantial financial or reputational impact for Daniel Levy/Spurs or Tim Lewis/Arsenal?

Do they really care about the legal costs if they’re split across all PL clubs?

Do they really care about the reputation of the PL? Given the super league debacle the answer to that is clear.

They won’t lose their jobs because Masters is the face of this (potential) failure.

Finally, all of the above is before we include the factor of football being a highly emotional environment. It’s not a normal business and I don’t believe even highly-experienced businessmen like Levy/Lewis (even Khaldoon) are immune from letting emotion influence their thinking when it comes to football matters.

These are fair comments and I often talk about how football diverges from normal business reality due to emotion. But there is a limit.

And as you infer, clearly Masters cares about the outcome and he surely must have had a key role in deciding whether to launch the charges. I agree the risk and cost of losing is far less for individuals or clubs.

Look, maybe I’m the naive one here - maybe all of these non logical factors were/are the key driver. More fool me if so for crediting these people with integrity and rationale brains!

 

[halfcenturyup]

I think you can turn that on its head. Guardiola wouldn’t be here without him & all the great stuff has happened on his watch ;)

That’s not defending him….. just saying.

Possibly. He would still be a cunting management consultant, though.

Btw, I hated the title of his book "The ball doesn't go in by chance". Arrogant bollocks. I am waiting for the sequel " The Spanish airline doesn't go bankrupt by chance".

He is one lucky fucker.

 

[mcfcphil]

These are fair comments and I often talk about how football diverges from normal business reality due to emotion. But there is a limit.

And as you infer, clearly Masters cares about the outcome and he surely must have had a key role in deciding whether to launch the charges. I agree the risk and cost of losing is far less for individuals or clubs.

Look, maybe I’m the naive one here - maybe all of these non logical factors were/are the key driver. More fool me if so for crediting these people with integrity and rationale brains!

Cheers Stefan.

I don’t think it’s a case of being naive/right/wrong because no one can know for sure, which is why this is so intriguing/terrifying!

Anyway, time for some football!

 

[Prestwich_Blue]

They can be under pressure etc but nobody goes with a case like this where the advice is that the case is weak. Because in the end, in such a case, they are very likely to lose and that has consequences in itself. So I really don’t see it. This should be distinguished from the PR and the breadth of the charges where there is a tactical decision in play.

You're assuming that the PL is acting totally rationally though. UEFA's CFCB issued a harsh sanction against us based on a selective handful of emails they drew an (incorrect) inference from. But once an independent body was involved they were not able to present any cogent evidence that their inference was correct. That wasn't a rational approach but presumably their lawyers didn't stand in their way.

From the outcome of the APT case, we know that certain clubs felt we were not being honest about related parties, even though both you and me agree there's no conceivable interpretation of IAS24 where Etihad is a related party. This is why they wanted to bring in the associated party rules, where the PL have carte blanche, rather than having to rely on existing external and accepted standards that they felt we'd ignored.

We also know that the PL will be relying heavily on the rules requiring clubs to "act in utmost good faith", whereas UEFA/CAS were focused on the Etihad & Etisalat sponsorships being disguised equity funding and against their specific rules. The PL's "acting in utmost good faith" target is a much wider and more opaque one than UEFA's.

It's pretty certain that the related party issue will be part of the PL's case, and this was never tested at CAS. There's also the Mancini contract and Fordham, which weren't part of the case brought by UEFA. If the PL feel they've a chance of landing either of those then that's justified their actions.

So the PL's target is a lot bigger than UEFA's in terms of scope and how it will judge the allegations, but it will still be about interpretation. Plus the motivation would appear to be that some clubs were determined to ensure that the PL brings this case, and it wasn't solely the desire of the PL to seek natural justice for egregious rule breaking, which probably also accounted for UEFA's actions.

 

[Pelegrinni]

Could there be any possibility of unintended consequences for other clubs that could result from the Mancini/Fordham case if the IC finds against City?
I heard that other clubs used similar arrangements before the practice was banned regarding the image rights for players and managers.