Everton, Manchester City, Chelsea and a new era of Premier League financial regulation — The Athletic 18/11/23
Oliver Kay
At a time like this, maybe a useful starting point is to
recall the words of Ivan Gazidis, who, after eight years working as deputy
commissioner for Major League Soccer (MLS) in the United States, was shocked by
what he found when he arrived in the Premier League as chief executive of
Arsenal.
“It’s a bit like the Wild West,” he said in early 2009. “I
see practices here that would not be permissible in U.S. sports leagues.”
Historically, English football has shown little appetite for
hard-and-fast rules on club ownership, club expenditure, homegrown players or
much else. European football’s former president Michel Platini used to decry
the “big liberalism” that was turning the Premier League into a billionaire’s
playground where pretty much anything — off-the-scale spending fuelled by oil
money at Chelsea and Manchester City, leveraged ownership under Americans at
Manchester United and Liverpool — was deemed fair game until Portsmouth, having
spent far beyond their means, went into administration and forced a reappraisal
that was long overdue.
Until Friday lunchtime, that was the last time a Premier
League club was docked points. In fact, it was one of just five instances in
English top-flight history: Sunderland two points for fielding an unregistered
player in 1890-91, Arsenal two points and Manchester United one point for an
on-pitch brawl in 1990-91, Middlesbrough three points for failing to fulfil a
fixture in 1996-97, Portsmouth nine points for going into administration in
2009-10… and now Everton 10 points in 2023-24 for breaching financial
regulations.
Over the past decade or so we have seen:
Chelsea banned by world governing body FIFA from signing
players in 2019 after breaching regulations over signing youth players.
Manchester City heavily sanctioned by European equivalent
UEFA in 2014 for breaching its financial fair play (FFP) regulations before the
emergence, four years later, of a series of damning allegations about their
financial conduct, leading to a follow-up case at which they were fined
£8.8million ($11m at today’s rates) for failing to provide substantial
evidence.
Sunderland given a six-figure fine for fielding an
ineligible player (South Korean forward Ji Dong-won, who played four matches
without the required international clearance).
Bournemouth, Leicester City and Queens Park Rangers
sanctioned by the English Football League (EFL) after breaching financial
regulations when promoted to the Premier League.
Watford fined £4.3million by the EFL in 2017 after Raffaele
Riva, their chairman at the time, submitted a forged “bank guarantee” stating
the owners had sufficient resources to fund the club during the promotion
campaign that followed. Riva was also later fined and banned.
Liverpool pay Manchester City £1million after their Premier
League rivals made a complaint that their scouting system had been hacked.
Manchester United unable to fulfil a home fixture against
Liverpool following a demonstration by their fans against their owners.
Arsenal, Chelsea, Liverpool, Manchester City, Manchester
United and Tottenham fined a total of £22million for signing up to a
short-lived “European Super League” project that posed an existential threat to
club football as we know it.
In the past few days alone, fresh allegations about
financial malpractice at Chelsea during Roman Abramovich’s time as owner.
What we had not seen since 2010, until now, was a points
deduction in the Premier League.
Even when West Ham United were fined £5.5million for
breaking regulations on third-party ownership with the signings of Carlos
Tevez, whose goals enabled them to stay up at Sheffield United’s expense in
2006-07, and Javier Mascherano, a points deduction was considered a no-go area.
It calls to mind a conversation with a club executive a
decade or so ago as we debated the rights and wrongs of the Ji/Sunderland case.
“Do we really want to go down that route?” the executive asked. “Do we really
want the league table to be covered in asterisks because five or six clubs have
been docked points?”
The dreaded asterisk is there now, the weight of it dragging
Everton five places into the relegation zone. Their crime? Breaking the Premier
League’s profit and sustainability regulations over a three-year period ending
in the 2021-22 season. Specifically, according to the findings of a regulatory
commission, the club exceeded the permitted losses by a sum of £19.5million and
“submitted misleading information about the stadium financing costs”.
Even among rival fans, there was sympathy for Everton on
Friday. Are financial mismanagement and errant book-keeping on this scale — an
overspend of £19.5million higher than permitted over a three-year period in
which the club finished 12th, 10th and 16th — really the most grievous offence
committed by any club in the Premier League era?
It is a legitimate question, even if the relegated clubs
from that period are entitled to feel aggrieved that Everton breached the rules
in staying up at their expense.
Everton, who immediately announced their intention to
appeal, called it a “wholly disproportionate and unjust” sanction, adding they
would “monitor with great interest the decisions made in other cases concerning
the Premier League’s profit and sustainability rules”.
So will everyone else. It is remarkable that the allegations
made against Manchester City by German newspaper Der Spiegel in November 2018 —
initially resulting in a two-year ban from UEFA competition in February 2020
that was overturned by the Court of Arbitration for Sport (CAS) five months
later — took until February of this year to be referred to a Premier League
commission. City are determined to defend themselves against the allegations
and there is still no resolution.
Everton’s case was felt to be too complex for the commission
to convene and reach a verdict by the end of last season — as clubs such as
Southampton, Leeds United and Leicester, who all ended up relegated, had
requested — so it is hardly surprising that Manchester City’s case, involving
115 alleged breaches, is proving more complicated.
But some of Manchester City’s alleged infringements date as
far back as the 2009-10 season. In the intervening period, they have gone from
a chaotic club with a wealthy, ambitious owner to the dominant force in English
and European football, winning the Premier League seven times (including five
of the last six), the FA Cup three times, the League Cup six times and the
Champions League once.
This week Manchester City reported an annual revenue of
£712.8million, a record for an English club, but there are still 115 unanswered
questions over whether this modern-day sporting empire was built in accordance
with regulations. The club deny any wrongdoing, but the CAS hearing in July
2020 left no doubt over the authenticity of the hacked emails published by Der
Spiegel that suggested they broke rules. Manchester City’s legal team have
challenged the emails’ admissibility at every turn, first with UEFA and more
recently with the Premier League.
As for Chelsea, they have not disputed the reports made in a
variety of global newspapers this week relating to payments allegedly made to
various parties by Abramovich-owned companies to various parties linked to
deals that appeared to benefit the club.
Those reports were part of the “Cyprus Confidential”
project, based on 3.6million offshore records leaked to the International
Consortium of Investigative Journalists and Germany’s Paper Trail Media.
Chelsea say the allegations are “based on documents which the club has not been
shown and do not relate to any individual who is presently at the club”. But
the new owners at Stamford Bridge had already contacted UEFA, the Premier
League and the English Football Association (FA) to alert them to incomplete financial
information relating to various transactions under Abramovich between 2012 and
2019.
How did English football end up like this? By turning a
blind eye, frankly. By allowing a “Wild West” culture to take hold, allowing
clubs to be bought by individuals or entities it knew little or nothing about —
and whose business dealings they struggle to monitor accurately, let alone
regulate.
And that brings us back to Everton. For all the genuine
sympathy felt by many over the points deduction, for all the
us-against-the-world instinct that will grip their fanbase, the real grievance
felt by their supporters should still be — as it has been all along — the
shoddy, shady way in which a proud club has been mismanaged in recent years.
The commission’s report underlines a series of uncomfortable
truths that the fanbase has echoed when the conversation has been about the
need for regime change, rather than sanction: 1) “mismanagement” in running up
such big losses; 2) “recklessness” in continuing to sign players in 2021-22
“despite repeated warnings” by the Premier League, 3) a business plan that
relied so heavily on the largesse of USM Services Limited, registered in the
British Virgin Islands and owned by Alisher Usmanov, one of the oligarchs
sanctioned by the UK government after the Russian invasion of Ukraine.
Again, how did English football end up like this? Again, by
turning a blind eye. By convincing itself that any cash was good cash, rarely
stopping to worry about what entanglements might come with it.
That applies to numerous clubs, via both owners and
sponsorship. But it also applies to English football as a whole, with too much
time spent admiring the talent on show in the Premier League and not enough
time wondering whether the game was becoming ungovernable, taken over by
individuals and authorities far beyond its occasional scrutiny.
Slowly but surely, there have been moves towards tighter
regulation. But they have gone against the grain for English football.
For years, Premier League clubs saw UEFA’s FFP initiative as
an attempt to clip the league’s wings. Likewise the quotas on homegrown
players. Even some of the old-school English owners, with nothing like
Abramovich’s deep pockets, didn’t like being told their club couldn’t run up
big losses year after year. This drive towards sustainability felt like
anathema to many.
In a way, it still does. There is still a feeling among many
that accountancy should form no part of football. Why, after 125 years of
league football in England, were clubs suddenly being told they could only
spend within certain arbitrary limits? If a rich man wants to bankroll a club,
allowing it to spend beyond its means, isn’t that up to him?
The initial intentions behind FFP seemed honourable enough.
But the version that emerged, once the most powerful European clubs had their
say, was deeply compromised and deeply flawed. The past decade has illustrated
that.
But it’s that “Wild West” thing again. Particularly in the
Premier League, the sums involved spiralled out of control as clubs were passed
on from local businessmen to anyone from Russian oligarchs to American venture
capitalists to Middle Eastern sovereign wealth funds. It made for chaos and
instability as the stakes got higher and higher.
Think of the extent to which Everton spent beyond their
means between 2016 and 2022 — and now imagine how recklessly owner Farhad
Moshiri might have spent had there not been financial regulations to comply
with, however loosely.
Everton’s owner and board members were warned. They were
already close to their break-even limits in the summer of 2020 when, to the
astonishment of some of their rivals, and with their revenue streams severely
compromised by the COVID-19 pandemic, they signed Ben Godfrey, Allan and
Abdoulaye Doucoure and James Rodriguez, adding £16million to their wage bill
and making a loss of £120.9million.
Part of Everton’s defence rested on the fact that every new
signing they made in 2021-22 had to be approved by the Premier League under the
terms of an agreement at the start of that season. The league says it kept
spelling out that it was “not managing Everton’s finances and that it was for
Everton to ensure that it complied” with the break-even targets.
It reads like it’s a parent trying to teach a child not to
spend all his/her money in the sweet shop. Except in the case of Everton’s
transfer business under Moshiri, the feeling of gratification rarely lasted as
long as a sugar rush.
That is the most pitiful thing about Everton’s case: all
that excess spending, which put the club at serious risk, brought so little
reward by way of reward. Seventh in year one, under Ronald Koeman in the
2016-17 season, remains Everton’s highest finish since Moshiri bought shares in
Everton. They have not got beyond the quarter-finals of any cup competition in
seven years. A 10-point deduction in either of the last two seasons, which were
spent battling grimly against relegation, would have sealed their fate.
This year? Going by their recent results under Sean Dyche
and the struggles of the promoted teams, they could well be fine.
It raises the question of the “sporting benefit” of
Everton’s spending. The commission report suggests a club breaching the
regulations must inevitably have enjoyed advantages it would not otherwise have
had — and that this advantage would usually be “to the detriment of competing
clubs who have managed their finances more responsibly”. It adds that the
sanction “must ensure that the defaulting club does not retain a benefit at the
expense of other clubs” and “must act as a deterrent to clubs that might be tempted
to breach” in future.
And just as inevitably, that raises the question of what
kind of sanctions might be imposed Manchester City could face if they were
found guilty of even one of their 115 alleged breaches — and likewise Chelsea
if they too are referred to a regulatory commission. It barely even seems worth
speculating. If this new hard-line approach is the way forward for the Premier
League, it really is anyone’s guess, particularly if “sporting benefit” were
brought into the calculation.
There are already plenty of rumblings about the Premier
League having opened an almighty can of worms here, stirring up a hornets’ nest
and inviting the kind of chaos that feels unavoidable once you have determined
that a breach like Everton’s merits a 10-point sanction.
Some within the game wonder whether, in trying to flex its
muscle as the UK government attempts to introduce a football regulatory body of
its own, the Premier League has thrown itself into a series of bruising
battles, some of which it will not win.
