Manchester City Accused of Financial Rule Breaches in Premier League Report

An independent commission has found Manchester City guilty of numerous charges related to serious breaches of financial rules, according to a 40-page ruling.

The report details how the club's owners, the Abu Dhabi United Group, allegedly implemented a "Disguised Funding Scheme" from the 2009-10 season to inflate sponsorship income and conceal the true financial state of the club. The commission's ruling states the word "sham" appears eight times in its document, primarily in relation to these financial maneuvers.

Inflation of Sponsorship Income

The commission found that from the 2009-10 season, the club's owners recognized significant overspending would be necessary to achieve their ambitions. To avoid exceeding financial fair play rules, the club allegedly boosted sponsorship income. This scheme, described as the "Disguised Funding Scheme," is central to the charges.

According to the ruling, sponsorship deals were structured such that a base fee was paid by the sponsor, with the majority of the contract's value being paid by the club's owners. This practice, the commission stated, "gave the misleading impression to third parties (including regulators and its auditors) in its financial statements and any required FFP returns that its commercial revenues from sponsorship agreements were far, far greater than was in fact the case."

Between the 2009-10 and 2017-18 seasons, total commercial income from sponsors reportedly amounted to £949.94 million. The ruling claims only £119.25 million of this represented legitimate base fees, while £830.69 million came from the owners as "tagged sums."

Manchester City has denied these claims, asserting that the Premier League misinterpreted the sponsorship agreements. However, the panel rejected this explanation as untrue explanation, calling it "concocted well after the event in an attempt to obscure and conceal the realities of the disguised funding scheme."

An example cited involved a shortfall in May 2013. Days before the end of the 2012-13 financial year, the club allegedly needed £9.9 million to comply with UEFA's financial rules. Without contacting sponsors, modified agreements were reportedly generated to cover bonuses for past events and a U.S. tour, thereby "plugging" the feared shortfall.

Project Longbow and the Fordham Arrangement

In 2012, the club launched "Project Longbow," an initiative to boost revenues and reduce operating losses. While many aspects of this project were deemed legitimate, one strand, the "Fordham Arrangement," was described as "little more than a front."

This arrangement, according to the ruling, involved funds from the club's owners being used to enable a third party, Fordham, to acquire the club's entitlement to player image rights at an artificially inflated price. This was another method to conceal the origin of funds, allowing the club to present them as operating income.

Financial statements wrongly recorded £24.5 million as operating income and wrongly excluded £49.414 million from operating expenses due to this arrangement. The ruling indicates this was operated with the knowledge and approval of several unnamed individuals.

Failure to Cooperate

The commission also found that Manchester City "made concerted efforts to stop and frustrate the Premier League investigation." The ruling stated that evidence provided by some key witnesses was "false in a number of key respects" and that certain witnesses provided evidence "that they knew to be untrue and so had been dishonest."

The club was aware that its annual accounts "did not provide a true and fair view of the financial position" and was "reckless as to whether those annual accounts provided a true and fair view." The commission concluded that the club failed to act with "utmost good faith" and breached its duties of cooperation owed to the Premier League.