PL charge City for alleged breaches of financial rules

halfcenturyup said:
Warning *Long post*

We go around and around sometimes, so I tried to summarise where we are and how we got here. By necessity it avoids some of the intricacies, but I tried to be factual where I could. Feel free to comment if I have said anything you disagree with.

2014 UEFA investigation and settlement
  • City were never charged with anything.
  • City accepted the settlement without accepting guilt.
  • There was an investigation but UEFA and City settled before referral to the Adjudicatory Chamber for verdict.
  • A settlement does not indicate guilt.
  • UEFA moving the goalposts was the club’s main concern for an FFP breach but it wasn’t the only issue.
  • Other issues included fair values of sponsorships, related party nature of sponsorships, the inclusion of contract amortisation in the pre-2010 squad cost mitigation, the sale of IP to CFG and the sale of image rights to Fordham.
  • Any of these could have led to a breach even if the goalposts hadn't been moved.
  • It was in the interest of both parties not to litigate all this, so they settled.
  • Importantly for City, the settlement meant the issues of fair value, related party, CDG and Fordham weren’t raised again in 2019.

2019 UEFA investigation, punishment and CAS
  • City were found guilty by UEFA but all charges except non-compliance were not proven on appeal at CAS
  • So, while it is accurate to say City were found guilty by UEFA, it is disingenuous to say that without referring to the successful appeal.
  • The issues for which City were punished by UEFA were: funding of Etihad sponsorship, funding of Etisalat sponsorship, filing incorrect accounts, filing incorrect FFP information.
  • City were banned from the CL for two years and fined 30 million Euros (for all the charges, there was no split).
  • City appealed to CAS and provided new information, mostly external.
  • City didn’t choose the Chairman of the CAS panel, City chose one arbitrator, UEFA chose one and City proposed the Chairman, which was accepted by UEFA. CAS rules allow the two parties to choose the three arbitrators, if they can’t agree they select one each and the two selected arbitrators choose a Chairman and, finally, if they can’t agree then the Chairman of the Judicial Panel can appoint a Chairman. Nothing untoward there.
  • CAS time limited the Etisalat issue and part of the Etihad issue.
  • Note time limiting isn't a “got off on a technicality”, it is a part of case law in every jurisdiction and just means the issue can’t be proven.
  • CAS found, on the balance of probabilities, taking into account the “evidence” presented by UEFA and the counter-evidence provided by the club, that the issue of Etihad was not proven.
  • CAS found that City had not complied sufficiently with UEFA, distinguishing three areas: information requested by UEFA on which they later did not insist - no sanction; information requested by UEFA but was presented for the first time at CAS - sanction; information not requested by UEFA that was later presented to CAS - no sanction.
  • So the CAS award was Etihad and Etisalat not proven, non-compliance partly proven - CL ban overturned and 10 million Euro sanction.

2019 PL investigation
  • Investigation was opened concurrently with UEFA investigation.
  • Was delayed firstly by UEFA investigation/ charges and CAS then by some procedural complaints from City on cooperation (countered by PL) and confidentiality (backed by PL).
  • Complaints were legitimate but ultimately rejected.
  • Allegations referred to disciplinary panel chairman in February 2023.
  • Alleged rule breaches were:
  • Filing incorrect accounts, presenting incorrect financial information to the PL, acting in bad faith, 50 alleged breaches.
  • Understating manager remuneration, 8 alleged breaches.
  • Understating player remuneration, 12 alleged breaches.
  • UEFA FFP and licensing, 5 alleged breaches.
  • PL FFP, 6 alleged breaches.
  • Non-cooperation, 30 alleged breaches.
  • Total 111 alleged breaches (plus 4 for when rule changes mid-season led to two rule breaches multiple times in a season).

2023 Independent PL Panel (more personal comment as in progress)
  • Three member panel chosen by chairman of judicial panel who was chosen by PL.
  • We don't know the detail of the allegations, but:
  • Some of the allegations mirror the UEFA charges (funding of sponsorships, filing incorrect accounting information, acting in bad faith), so it is safe to assume the detail of the allegations, and the evidence to support them, is also the same.
  • The PL may also have additional evidence from their investigation, but, even if the allegations were true, any real incriminating evidence would be external and I doubt any external evidence was provided to the investigation.
  • There are also additional allegations concerning matters that were clearly time limited at UEFA (certainly Mancini), matters that were time limited by CAS (Etihad partly, Etisalat), matters that were included in the 2014 settlement and therefore not raised by UEFA in 2019 (most probably Fordham) and, possibly if unlikely, matters that were not in the leaked emails but were included in the 2014 UEFA settlement and therefore not raised by UEFA in 2019 (fair values, related parties, IP sale to CFG).
  • General consensus is a hearing in the autumn, an award next year followed by the inevitable appeals.
  • Possibility of a settlement before that.

Predictions (completely personal)
  • Mancini, time- limited unless the PL can show knowing concealment (unlikely).
  • Fordham, time- limited unless the PL can show knowing concealment (unlikely, but don’t know enough about Fordham to be sure).
  • Etihad, same as CAS, unproven unless PL have some particularly cogent incriminating evidence from somewhere (unlikely).
  • Etisalat, CAS evidence will show no knowing concealment, so time- limited.
  • Filing of incorrect accounts, hinges on Etihad (rest isn’t material), so unlikely to be proven.
  • Acting in bad faith, if the above comes to pass, this falls away.
  • PL FFP breaches, if Etihad resolved as above, shouldn't be a problem.
  • UEFA FFP and licensing breaches, if all resolved as above, shouldn’t be a problem.
  • So what is left -1? Non-compliance. I can’t imagine that City didn't comply with all reasonable requests from the PL after the failed court appeals, so that leaves requests from the PL that City considered either unreasonable (fishing) or requests outside the scope of the PL rules (external information, imo). Probably same as CAS, financial sanction, maybe reduced if City can show unreasonable or outside scope.
  • So what is left - 2? PL disagreeing with some 10 year old accounting treatments (understating expenses due to Fordham / IP sales to CFG). Possible sporting sanction (very unlikely), possible financial sanction (more likely, possibly suspended).
  • So that is it, imho. Most likely outcome: financial sanction for non-compliance and (possibly) understatement of expenses on Fordham/IP sales.
Click to expand...
Fantastic summary. Chapeau doffed.
 
Damocles said:
Just a clarification. Only deals which were adjudged to be related parties needed fair value appraisal and that in itself wasn't a "breach" so to speak, they'd just adjust the figures. The Etihad deal was found not to be a related party transaction, only the CFG and Fordham ones were.
Click to expand...

Iirc, UEFA were advised that two secondary sponsors, Aabar and Etisalat, were considered related parties because of Khaldoon's position as chairman of the investment fund that owned them, but also that Etihad was also a related party because of the involvement of the wider ruling family in the airline. This was disputed by City as a wider interpretation of related party (more akin to the PL's new associated party rules, actually) than a strict accounting definition, which would require UEFA to show substantial influence.

For Etihad it didn't matter, because UEFA accepted the fair value in the end.

For the secondary sponsors, though, they considered both were overvalued which is why the settlement restricted increases in those two sponsorships.

In the end, the settlement closed off the related party and fair value arguments for UEFA, probably one of the reasons why the club accepted it. It could have become a little messy.

The issue with Fordham and the IP sale wasn't the value iirc, but the recognition of income from the sale of assets, not footballing income (much like UEFA have recently done with Barcelona and would do with Chelsea if they ever qualify), and the effect on future costs. Again, the settlement removed these thorny issues that would have pushed the club into an FFP breach

Sorry, long response.
 
halfcenturyup said:
Iirc, UEFA were advised that two secondary sponsors, Aabar and Etisalat, were considered related parties because of Khaldoon's position as chairman of the investment fund that owned them, but also that Etihad was also a related party because of the involvement of the wider ruling family in the airline. This was disputed by City as a wider interpretation of related party (more akin to the PL's new associated party rules, actually) than a strict accounting definition, which would require UEFA to show substantial influence.

For Etihad it didn't matter, because UEFA accepted the fair value in the end.

For the secondary sponsors, though, they considered both were overvalued which is why the settlement restricted increases in those two sponsorships.

In the end, the settlement closed off the related party and fair value arguments for UEFA, probably one of the reasons why the club accepted it. It could have become a little messy.

The issue with Fordham and the IP sale wasn't the value iirc, but the recognition of income from the sale of assets, not footballing income (much like UEFA have recently done with Barcelona and would do with Chelsea if they ever qualify), and the effect on future costs. Again, the settlement removed these thorny issues that would have pushed the club into an FFP breach

Sorry, long response.
Click to expand...

A question on the Fordham income, sorry if you've answered.

I seem to recall that the Fordham image right income was standard practice for many clubs at the time, but as rules changed, many brought it in house and the extra income gained pretty much matched the income from the Fordham sales. Does that sound correct? I'm a little confused on the Fordham stuff generally.
 
Damocles said:
Just a clarification. Only deals which were adjudged to be related parties needed fair value appraisal and that in itself wasn't a "breach" so to speak, they'd just adjust the figures. The Etihad deal was found not to be a related party transaction, only the CFG and Fordham ones were.
Click to expand...
Not sure you're quite correct there Damo.

The related party issue was brought up in 2014 but has never been formally tested, as far as I know. But at the time UEFA accepted that the Etihad sponsorship was broadly fair value, which CAS agreed with.

I also believe UEFA looked at Fordham but, again, I'm not aware that was classed as a related party deal. However, whatever the outcome of the discussions over Fordham, I think we ended that arrangement quite quickly, possibly in 2015 but certainly no later than 2017.

As part of the settlement, we (voluntarily) agreed not to include further intra-group transactions in our FFP submissions but what was never properly understood about the CFS and CFM arrangements is that City (and other CFG clubs) paid those two companies for their services. We were accused of using that arrangement to reduce costs by getting wages off the books, but what actually happened was that the costs moved from wages to operating expenses. UEFA also widened its 'reporting perimeter' to include companies like CFM & CFS.
 
halfcenturyup said:
Iirc, UEFA were advised that two secondary sponsors, Aabar and Etisalat, were considered related parties because of Khaldoon's position as chairman of the investment fund that owned them, but also that Etihad was also a related party because of the involvement of the wider ruling family in the airline. This was disputed by City as a wider interpretation of related party (more akin to the PL's new associated party rules, actually) than a strict accounting definition, which would require UEFA to show substantial influence.

For Etihad it didn't matter, because UEFA accepted the fair value in the end.

For the secondary sponsors, though, they considered both were overvalued which is why the settlement restricted increases in those two sponsorships.

In the end, the settlement closed off the related party and fair value arguments for UEFA, probably one of the reasons why the club accepted it. It could have become a little messy.

The issue with Fordham and the IP sale wasn't the value iirc, but the recognition of income from the sale of assets, not footballing income (much like UEFA have recently done with Barcelona and would do with Chelsea if they ever qualify), and the effect on future costs. Again, the settlement removed these thorny issues that would have pushed the club into an FFP breach

Sorry, long response.
Click to expand...
Don't worry about your long posts, the more info the better for everyone.

I'll 2nd wolvie's post, it helps a lot and especially when the usual nobheads on here are spouting there wum posts.
 
halfcenturyup said:
Warning *Long post*

We go around and around sometimes, so I tried to summarise where we are and how we got here. By necessity it avoids some of the intricacies, but I tried to be factual where I could. Feel free to comment if I have said anything you disagree with.

2014 UEFA investigation and settlement
  • City were never charged with anything.
  • City accepted the settlement without accepting guilt.
  • There was an investigation but UEFA and City settled before referral to the Adjudicatory Chamber for verdict.
  • A settlement does not indicate guilt.
  • UEFA moving the goalposts was the club’s main concern for an FFP breach but it wasn’t the only issue.
  • Other issues included fair values of sponsorships, related party nature of sponsorships, the inclusion of contract amortisation in the pre-2010 squad cost mitigation, the sale of IP to CFG and the sale of image rights to Fordham.
  • Any of these could have led to a breach even if the goalposts hadn't been moved.
  • It was in the interest of both parties not to litigate all this, so they settled.
  • Importantly for City, the settlement meant the issues of fair value, related party, CDG and Fordham weren’t raised again in 2019.

2019 UEFA investigation, punishment and CAS
  • City were found guilty by UEFA but all charges except non-compliance were not proven on appeal at CAS
  • So, while it is accurate to say City were found guilty by UEFA, it is disingenuous to say that without referring to the successful appeal.
  • The issues for which City were punished by UEFA were: funding of Etihad sponsorship, funding of Etisalat sponsorship, filing incorrect accounts, filing incorrect FFP information.
  • City were banned from the CL for two years and fined 30 million Euros (for all the charges, there was no split).
  • City appealed to CAS and provided new information, mostly external.
  • City didn’t choose the Chairman of the CAS panel, City chose one arbitrator, UEFA chose one and City proposed the Chairman, which was accepted by UEFA. CAS rules allow the two parties to choose the three arbitrators, if they can’t agree they select one each and the two selected arbitrators choose a Chairman and, finally, if they can’t agree then the Chairman of the Judicial Panel can appoint a Chairman. Nothing untoward there.
  • CAS time limited the Etisalat issue and part of the Etihad issue.
  • Note time limiting isn't a “got off on a technicality”, it is a part of case law in every jurisdiction and just means the issue can’t be proven.
  • CAS found, on the balance of probabilities, taking into account the “evidence” presented by UEFA and the counter-evidence provided by the club, that the issue of Etihad was not proven.
  • CAS found that City had not complied sufficiently with UEFA, distinguishing three areas: information requested by UEFA on which they later did not insist - no sanction; information requested by UEFA but was presented for the first time at CAS - sanction; information not requested by UEFA that was later presented to CAS - no sanction.
  • So the CAS award was Etihad and Etisalat not proven, non-compliance partly proven - CL ban overturned and 10 million Euro sanction.

2019 PL investigation
  • Investigation was opened concurrently with UEFA investigation.
  • Was delayed firstly by UEFA investigation/ charges and CAS then by some procedural complaints from City on cooperation (countered by PL) and confidentiality (backed by PL).
  • Complaints were legitimate but ultimately rejected.
  • Allegations referred to disciplinary panel chairman in February 2023.
  • Alleged rule breaches were:
  • Filing incorrect accounts, presenting incorrect financial information to the PL, acting in bad faith, 50 alleged breaches.
  • Understating manager remuneration, 8 alleged breaches.
  • Understating player remuneration, 12 alleged breaches.
  • UEFA FFP and licensing, 5 alleged breaches.
  • PL FFP, 6 alleged breaches.
  • Non-cooperation, 30 alleged breaches.
  • Total 111 alleged breaches (plus 4 for when rule changes mid-season led to two rule breaches multiple times in a season).

2023 Independent PL Panel (more personal comment as in progress)
  • Three member panel chosen by chairman of judicial panel who was chosen by PL.
  • We don't know the detail of the allegations, but:
  • Some of the allegations mirror the UEFA charges (funding of sponsorships, filing incorrect accounting information, acting in bad faith), so it is safe to assume the detail of the allegations, and the evidence to support them, is also the same.
  • The PL may also have additional evidence from their investigation, but, even if the allegations were true, any real incriminating evidence would be external and I doubt any external evidence was provided to the investigation.
  • There are also additional allegations concerning matters that were clearly time limited at UEFA (certainly Mancini), matters that were time limited by CAS (Etihad partly, Etisalat), matters that were included in the 2014 settlement and therefore not raised by UEFA in 2019 (most probably Fordham) and, possibly if unlikely, matters that were not in the leaked emails but were included in the 2014 UEFA settlement and therefore not raised by UEFA in 2019 (fair values, related parties, IP sale to CFG).
  • General consensus is a hearing in the autumn, an award next year followed by the inevitable appeals.
  • Possibility of a settlement before that.

Predictions (completely personal)
  • Mancini, time- limited unless the PL can show knowing concealment (unlikely).
  • Fordham, time- limited unless the PL can show knowing concealment (unlikely, but don’t know enough about Fordham to be sure).
  • Etihad, same as CAS, unproven unless PL have some particularly cogent incriminating evidence from somewhere (unlikely).
  • Etisalat, CAS evidence will show no knowing concealment, so time- limited.
  • Filing of incorrect accounts, hinges on Etihad (rest isn’t material), so unlikely to be proven.
  • Acting in bad faith, if the above comes to pass, this falls away.
  • PL FFP breaches, if Etihad resolved as above, shouldn't be a problem.
  • UEFA FFP and licensing breaches, if all resolved as above, shouldn’t be a problem.
  • So what is left -1? Non-compliance. I can’t imagine that City didn't comply with all reasonable requests from the PL after the failed court appeals, so that leaves requests from the PL that City considered either unreasonable (fishing) or requests outside the scope of the PL rules (external information, imo). Probably same as CAS, financial sanction, maybe reduced if City can show unreasonable or outside scope.
  • So what is left - 2? PL disagreeing with some 10 year old accounting treatments (understating expenses due to Fordham / IP sales to CFG). Possible sporting sanction (very unlikely), possible financial sanction (more likely, possibly suspended).
  • So that is it, imho. Most likely outcome: financial sanction for non-compliance and (possibly) understatement of expenses on Fordham/IP sales.
Click to expand...
Brilliant summary. Excellent. Well done!
 
Norbiton said:
If Project River’s tease about non-cooperation a few weeks ago, which turned out to be about Forest rather than us, was accurate the Premier League were arguing that presenting documents not in their preferred format and insufficiently cross referenced amounted were worthy of being penalised. One step away from accusing them of failing to highlight in marker pen the bits that proved they were guilty
Click to expand...
Is that true? I missed it if so.

I did wonder if at least some of the non-cooperation was for disputing what they could and couldn't ask and went to a court to decide (possibly multiple cases?).

But when (or if) the court found in the PL's favour we gave them what was requested, surely they can't charge us with non-cooperation for that?
 
What we do know based on the coverage we have had over last week or so is that no letters have been sent warning media how they speak about us.
 
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