PL charge City for alleged breaches of financial rules

[slbsn]

There's no doubt that deliberate false accounting, like at Wirecard who claimed a seemingly fictitious €1.9bn cash balance on their balance sheet, or at Enron, or claiming revenue or commission from contracts that aren't yet signed, is a serious, and potentially criminal, offence.

But I spent enough years in accountancy and you know, as a CEO, that you may have to choose between different interpretations of accounting standards (or other practices) on how to present figures. That's why the law uses the phrase "true and fair", rather than insisting on 100%, to-the-penny accuracy. Things like valuation of stock, WIP, goodwill, intellectual property, and other intangible assets, investments and joint ventures, etc. That's a completely different kettle of fish to deliberate, false accounting.

As you've rightly said before, City would've had to pull the wool over a lot of experienced financial professionals' eyes if they concealed the things they did, knowing they were wrong and completely misleading. Like you, I find that very difficult to believe and I absolutely agree we'd deserve everything we got if that was the case.

But if that wasn't the case, then what was? The deal with Fordham was, in my opinion, a way of getting a few million extra pounds of revenue onto the books (rather than getting expenses off the books) in an attempt to creep within what we thought would be the maximum allowable loss that would see us escape sanction. We know from the Der Spiegel emails that Jorge Chumillas signalled there was still going to be a shortfall in the 2013 financial year. In the end, UEFA's machinations over the FFP mitigation calculation of wages ended that prospect. We must assume that appropriate legal and financial advice was taken over that Fordham arrangement.

We don't know what was or wasn't reported to UEFA regarding the image rights payments. My guess is that UEFA noticed they'd gone off the FFP spreadsheet around 2015. We do know they approached us about this and the arrangement ended for good in 2018. Let's take the view that we presented our case to UEFA and they said "Yes, we understand you've acted within the letter of the law, but not the spirit. As it wouldn't have made any difference to FFP anyway, we'll call it quits as long as you report the figures properly going forward". And we did, whereupon it made no sense to continue the Fordham arrangement, and the company was liquidated.

This is why I take issue with the black-or-white view that we're either totally innocent of wrongdoing or have knowingly committed fraud on a grand scale over a number of years.

I'm not up for exchanging essays. The PL have made the massive claim around sponsors (as UEFA did) and the case is primarily about that. The IC will take a dim view of the PL not being able to make out that claim which will infect the rest. Furthermore, the other matters are not even in play unless the PL can show a level of deliberate concealment to get round the statute of limitations. I think Fordham is generally very uninteresting and far too public (Companies House etc) to be prosecuted in 2024/25.

But obviously if only a tiny part of the claim is proved, the sanctions will be far less than if the sponsorship sham allegation is proved. Obviously.

 

[halfcenturyup]

There's no doubt that deliberate false accounting, like at Wirecard who claimed a seemingly fictitious €1.9bn cash balance on their balance sheet, or at Enron, or claiming revenue or commission from contracts that aren't yet signed, is a serious, and potentially criminal, offence.

But I spent enough years in accountancy and you know, as a CEO, that you may have to choose between different interpretations of accounting standards (or other practices) on how to present figures. That's why the law uses the phrase "true and fair", rather than insisting on 100%, to-the-penny accuracy. Things like valuation of stock, WIP, goodwill, intellectual property, and other intangible assets, investments and joint ventures, etc. That's a completely different kettle of fish to deliberate, false accounting.

As you've rightly said before, City would've had to pull the wool over a lot of experienced financial professionals' eyes if they concealed the things they did, knowing they were wrong and completely misleading. Like you, I find that very difficult to believe and I absolutely agree we'd deserve everything we got if that was the case.

But if that wasn't the case, then what was? The deal with Fordham was, in my opinion, a way of getting a few million extra pounds of revenue onto the books (rather than getting expenses off the books) in an attempt to creep within what we thought would be the maximum allowable loss that would see us escape sanction. We know from the Der Spiegel emails that Jorge Chumillas signalled there was still going to be a shortfall in the 2013 financial year. In the end, UEFA's machinations over the FFP mitigation calculation of wages ended that prospect. We must assume that appropriate legal and financial advice was taken over that Fordham arrangement.

We don't know what was or wasn't reported to UEFA regarding the image rights payments. My guess is that UEFA noticed they'd gone off the FFP spreadsheet around 2015. We do know they approached us about this and the arrangement ended for good in 2018. Let's take the view that we presented our case to UEFA and they said "Yes, we understand you've acted within the letter of the law, but not the spirit. As it wouldn't have made any difference to FFP anyway, we'll call it quits as long as you report the figures properly going forward". And we did, whereupon it made no sense to continue the Fordham arrangement, and the company was liquidated.

This is why I take issue with the black-or-white view that we're either totally innocent of wrongdoing or have knowingly committed fraud on a grand scale over a number of years.

Last time you made this point, I said "Absolutely correct" and got blasted by @petrusha, so I will be more careful this time. :)

For Etihad, if they are still claiming, as we think they are, that the majority of the sponsorship was paid to Etihad by Mansour, then I think there is no doubt that they are effectively alleging fraud, for all the reasons petrusha quite rightly put forward last time. Personally, I am not sure that it affects the true and fair view given by the accounts, which is actually the only substantial rule the PL can allege the club has breached for this. But I seem to be alone on that. I do, though, think the alleged act would effectively meet the legal definition of fraud.

The others, for the reasons you state, I agree with you. The accounting seems to have been in accordance with the contracts the club has, and the dispute, at the of the day, may just be how those issues should have been disclosed.

I shall gird my loins for the inevitable legal onslaught. :)

 

[BerkshireBlue]

The premier league might be wise to protect themselves (from having to deal with messes like this) going forward by putting time restrictions in place.
Yes some teams might get away with some things but mitigate that by monitoring more carefully and acting quicker.

Do you mean like they did when they investigated Liverpool for criminal activity when they hacked into our scouting system? "“A spokesperson said: “The FA carefully considered the evidence received in this matter, including information provided by both clubs involved, and has decided not to progress the investigation. This is due to a number of factors including the age of the alleged concerns"

 

[Silva61]

Nor murdered anyone. Heysel has almost been airbrushed from history. The club should have been dismantled the day afterwards. If the FA acted correctly, all those teams who missed out on Europe may well have had entirely different trajectories and become elite clubs. As it is, no compensation has ever been paid to those clubs and with 40 years interest the likes of Coventry, Oxford, Wimbledon etc etc could do with that money. Plus tthose that missed out because the coefficients had reduced the opportunity for that tailing off period during the ban.

The goofy **** needs telling 29/05/85 was a very bad day for football.

 

[gordondaviesmoustache]

I'm not so sure they would be disadvantaged. Everton for instance might vote for it, an ever present whom should they get relegated would likely come straight back up. They're voting share would drop from 10 votes to 9 for around 10 years. We might vote for it as we'd still have 10 votes and if we got relegated we'd still have voting power.

Actually, losing voting power instead of points or a fine, is a kind of punishment that hasn't been suggested.

But it wouldn't happen anyway so its moot.

Everton would almost certainly vote for it but of current PL clubs I expect Sheffield United, Luton, Burnley, Fulham, Bournemouth, Forest and Brentford would vote against it - and I fully expect City would too.

 

[Odd socks]

I bet our new generation of supporters from 2012 onwai and I mean the 10/11/12 year olds don't give a flying fxxk about the charges and will be city fans forever.
I started out on my journey back in the sixties and to be honest I don't either.

 

[Eric Hitchmough]

Nor murdered anyone. Heysel has almost been airbrushed from history. The club should have been dismantled the day afterwards. If the FA acted correctly, all those teams who missed out on Europe may well have had entirely different trajectories and become elite clubs. As it is, no compensation has ever been paid to those clubs and with 40 years interest the likes of Coventry, Oxford, Wimbledon etc etc could do with that money. Plus tthose that missed out because the coefficients had reduced the opportunity for that tailing off period during the ban.

Not that I want to contribute to this thread continuing to go off topic, but re: Heysel even Mark Lawrenson says it’s been airbrushed out by the Dippers, hence them holding a trophy parade on the anniversary of the tragedy in 2022.

 

[Man_City_Loyal]

Well there's basically two charges.

1) We inflated sponsorships to artificially increase our revenue.
2) We paid Mancini and players without fully reporting it.

We know (1) is a pile of shite and has already been demolished by CAS but we pretty definitely did what's alleged in (2).

Now that might have been perfectly legal but they could still potentially decide we did it in ba faith to avoid reporting it in our accounts.

we did PB?

 

[Man_City_Loyal]

Not that I want to contribute to this thread continuing to go off topic, but re: Heysel even Mark Lawrenson says it’s been airbrushed out by the Dippers, hence them holding a trophy parade on the anniversary of the tragedy in 2022.

he also been airbrushed out of tv as well.

coincidence eh?

 

[The Light Was Yellow Sir]

Also, finishing bottom as champions, having scored the most goals, would be redolent of 1937/38.

Having the best goal difference in the division would surely surpass that?