TT BLOG

Clive Hayward – @Byehorse

THE MAN CITY CASE

Can I shock you? I have always quite liked Man City!

It’s a grand old football club. Maine Road was a huge football ground, dominating the mean streets of Moss Side. City won the league in the thirties, and again in 1967-68, when they played some great football under Joe Mercer and Malcolm Allison.

They famously nicked Dennis Law from Man Utd, and it was his goal that put the Reds into Division Two in 1974. But the next 3 decades weren’t kind to the light blue and they yo-yoed between the top two divisions, overshadowed by Alex Ferguson’s all conquering sides. But City fans never gave up, still turning up in their droves even during a notorious season in the third tier.

Torquay, of course, had a couple of League Cup ties with them in the 80s. As a teenager, I saw us lose 6-0 up there in 1983 as Billy McNeill started the task of gaining promotion after Luton had sent them down the season before.

The Takeover:

After flirting with success under a new Thai owner- Kevin Keegan having a brief spell in charge- their fortunes changed for good when they were bought by Abu Dhabi United Group in September 2008. What fun they have had since then! Cup winners in 2011. A first Premier League win thanks to that unforgettable Aguerroooo goal in 2012, followed by an unprecedented 4 consecutive titles and a Champions League in 2023.

Their previously long-suffering fans have loved every minute, especially being able to blow Man United out of the water: a 6-1 win at Old Trafford in 2011 foreshadowing a long-term power shift.

Many people in the area have cause to be thankful for the massive Arab investment into the city. A run-down part of East Manchester has been transformed as the stadium originally built for the Commonwealth Games has been improved and the surrounding area transformed almost beyond recognition.

It would be an appalling pun to say that the UAE-funded success story was built on sand. It would also be wrong, because the money is real

and the investment genuine. But lurking behind all the glittering success there was a dirty secret. Actually, there were lots of them.

Financial Fair Play:

For very good reasons, governing bodies like UEFA and the Premier League started to introduce rules about the amount of money that clubs could spend, and the losses they were allowed to make.

Why was that?

Well, as Torquay fans we probably don’t need reminding that excessive spending can create financial problems which- at their worst- can mean the demise of a football club. We came close. The fans of Bury, Rushden and Gretna- to name but three- paid the ultimate penalty and saw their clubs disappear after chasing the dream too hard. In the early 2000s Leeds bet the farm on getting into the Champions League every year. They put it all on red, the roulette ball landed on black, and they are only now re-establishing themselves properly.

UEFA called their rules “Financial Fair Play.” The Premier League’s were known as the “Profit and Sustainability Rules.”

There is some criticism of the Premier League rules (recently changed and renames as “Squad Cost Ratio”). Ambitious clubs like Newcastle and Aston Villa feel that their wish to join the current elite is being frustrated by the amount of money their overseas owners are allowed to put in.

I am no fan of the Premier League myself. It was born from greed, with the largest clubs breaking away from the rest of the Football League in order to control and take the lion’s share of the TV money- but it does attempt to set the rules for its members and- crucially- every club signed up to “Profit and Sustainability.”

City’s Problem:

Man City’s new owners were aiming high. They weren’t interested in any more midtable finishes, and they knew it would be very expensive to put themselves in a position to challenge for the highest prizes. They signed Tevez, Aguerro, Balotelli, YaYa Toure and countless other megastars.

It now seems obvious that they wouldn’t be able to get where they wanted to go without massive cash injections. But under the Profit and Sustainability Rules, clubs were only able to lose £105 million over a rolling period of three years. Owners weren’t allowed simply to throw their own money at it.

City’s Solution:

How could City square this circle?

· They told us that the answer was “massive middle east sponsorship.”

· The real answer was “a disguised funding scheme.”

The disguise was very effective. For at least 8 seasons, from 2009/10 to 2017/18, their accounts showed that thanks to sponsorship deals that any commercial department would kill for, City were keeping within all the rules.

Except they weren’t.

Investigations:

How did we find out? It’s a murky tale. Investigative journalists smelt a rat, and fair means and foul were used to get to the truth. By 2018, German magazine Der Spiegel was able to publish a story alleging that City had disguised massive investment by their owners as commercial sponsorships.

One of the prime instigators was a Portuguese hacker called Rui Pinto. It didn’t end well for him: he served prison sentences for various wrongdoing, but I would argue there are times when the public interest is well served by similar whistleblowers. The ethics behind the MPs Expenses revelations and the Watergate Scandal are complicated, but sometimes the means do justify the ends.

The Premier League don’t appear to have acted quickly on what Pinto’s “Football Leaks” had unearthed, but UEFA did.

The reason that the Champions League anthem is booed to this day at The Etihad is that UEFA nailed City’s lies. In February 2020 they banned them from the Champions League for 2 years. City appealed, and although they had only very limited success in refuting the facts of the case, the Court For Arbitration in Sport (“CAS”) ruled that under UEFA’s own rules they would have needed to take action within 5 years of the offences being committed. The ban was lifted and a fine reduced from 30 million Euros to 10 million. Or, in other word, peanuts.

The Premier League would doubtless have taken a keen interest in all this and, better late than never, they started to investigate themselves.

Charges:

In 2023 the Premier League charged City with 115 offences.

City lawyered up, big time. They engaged the services of David Pannick KC. City fans, along with many others, thought they might escape again. Referencing The Smiths’ song, they went so far as to fashion a “Pannick on the Street of London” banner.

I wondered myself whether 115 charges might not be excessive: was the Premier League going too far?

Judgement Day:

This week, an independent commission released its Core Ruling on the case.

The judgement- made by 3 other KCs- is devastating. City have said they will appeal it, but it describes misconduct on a massive scale. The commission found serious breaches across the 2009/10 to 2017/18 seasons and concluded that the club intended to circumvent Premier League rules.

What had City been doing? Remember the “Disguised Funding Scheme?” It comes back to that. The commission found that money originating with Abu Dhabi United Group Investment & Development Ltd (ADUG), the club’s owner, was made to look like arm’s-length commercial income.

Basically it worked like this. It’s all about what the Commission has memorably described as “Sham Agreements.” What was written down in those agreement (shams, every last one of them!) was never what actually happened.

· A firm (almost always in Abu Dhabi) signed a sponsorship agreement with the club.

· The agreement said that they would pay all of the money, but that wasn’t true. What would typically happen was that the company would only pay a small proportion. The rest- the vast majority in fact- would be funded by the owners.

· So City’s accounts showed that they were coining it from sponsors, that their financial position was healthy and that they were only spending what they were legitimately bringing in. But this was a big fat lie. Sponsors were liable for only a small part of the headline fee; ADUG supplied the balance. That distinction was crucial because genuine sponsorship counted as revenue, while owner funding did not count for Profit and Sustainability.

How Much??

The scale of the wrongdoing is breathtaking.

The Commission has found that £949.94 million was recorded as sponsorship income.

· But in reality the sponsors themselves only paid £119.25 million.

· The remaining £830.69 million—about 87 per cent—was, the commission found, funding from City’s owners that should have been recorded as shareholder equity rather than commercial revenue.

So, not to put too fine a point on it, City cooked their books by the thick end of a billion quid!

There was other wrongdoing, with costs suppressed under what was known as “the Fordham Scheme”

The Commission also agreed with the Premier League that in all but one example the club had failed to cooperate with the investigation (as the league’s rules instruct all clubs to do). UEFA had found City guilty of that in 2020 too.

What Happens Next?

City must make any appeal this week. Unless they have a last-minute change of mind, they look as though they will do this, and try to get the decision overturned. They will probably say the Independent Commission was biased and that the Premier League were on a witch hunt against the new kids on the block.

Having read the core decision, I think they have an uphill task. The decision essentially says that they and their witnesses lied time and time again. They appear to have a credibility problem almost as big as that £830.69 million they pretended was coming from sponsors.

So the question on everyone’s lips is this: what penalty should City get?

For me, a suitable punishment would be, at the very least:

1. A massive points deduction, which sees them relegated by at least one division

2. A multi-year transfer embargo to try to prevent them from being able to bounce straight back to the top of the game. I think this intervention is fair and justified, because the illegal financial doping they did for almost a decade put them in a position they had not truly earned. They simply weren’t playing by the same rules as the other clubs.

3. A big fine- which will only be symbolic, because until the oil runs out Sheikh Mansour and his mates will be easily able to pay it. But the money could do a lot of good. As an example, I would use it to fund the replacement of dangerous perimeter walls throughout grassroots football.

The new Independent Football Regulator (IFR) may also be taking a close interest, because one of their remits is to take a view about whether owners and directors are fit to run a club. The leaders at Man City certainly have questions to answer about this. In theory, the IFR has the power to force a sale of the club. My own hunch though is that the IFR might not want to bite off more than it can chew as it finds its feet. The signs are that City would fight that all the way, and we are already hearing rumbles that politicians might not want to poke Abu Dhabi too hard given the Emiratis’ willingness to invest in the UK.