Source : INDIA TODAY NEWS
Manchester City are staring down the consequences of one of the biggest financial cases in Premier League history. Following a lengthy investigation by an independent panel, the club has been found guilty of 114 of the 115 charges levelled against it, including serious breaches of the league’s financial rules.
At the heart of the case is the enormous financial commitment that followed City’s takeover by Abu Dhabi United Group (ADUG) in 2008. The money helped transform the club into one of the biggest forces in English football, but investigators found that hundreds of millions of pounds recorded in City’s accounts as sponsorship revenue had, in reality, been provided by its Abu Dhabi owners.
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The central question was not whether City had access to enormous wealth, but how that money entered the club and how it was recorded. European football’s financial rules were designed to prevent wealthy owners from simply covering a club’s losses and allowing it to spend far beyond its own revenues. According to the panel’s findings, City developed arrangements that allowed owner funding to be presented as commercial revenue.
So, how did investigators uncover Manchester City’s financial fraud? The answer lies in leaked emails, sponsorship agreements, payment records, financial statements and internal correspondence that allowed investigators to follow the money and piece together how the club’s finances were being structured.
HOW WERE MANCHESTER CITY FOUND OUT?
Associated Press reported that the investigation can be traced back to 2018, when leaked emails relating to Manchester City were published and raised questions about the club’s finances. What followed was a lengthy investigation and hearing into the club’s financial affairs, eventually leading to findings covering more than 100 alleged breaches of Premier League rules.
The period under investigation, from 2009 to 2018, was also the period in which City went from being a club that had seen better days to one of the most powerful teams in European football.
ADUG had bought City in 2008 and was ultimately owned by Sheikh Mansour bin Zayed Al Nahyan, a member of the United Arab Emirates’ ruling family. The new ownership had ambitious plans for the club, but those plans required substantial spending at a time when City was still making significant losses.
According to the Premier League, by the 2009-10 season it was clear that City would continue to lose money for several years. The league alleged that the only way the club could sustain its planned expenditure was for ADUG to continue providing “very significant sums”.
That created the central problem for City. If the money came directly from the owner, it could have implications for the financial rules the club was required to follow. Investigators therefore began looking at whether the money being recorded in City’s accounts as sponsorship revenue was actually coming from the sponsors themselves.
FOLLOWING THE SPONSORSHIP MONEY
This became one of the most important parts of the investigation.
Manchester City had commercial agreements with a number of Abu Dhabi-based companies. According to the Premier League, those agreements were valued significantly higher than what the companies themselves were actually paying.
Investigators described the arrangements as a “Disguised Funding Scheme”. Under the system, sponsors would pay what the panel called a “base sum”, which represented only a fraction of the sponsorship amount recorded in City’s accounts. The much larger “tagged sum”, the Premier League alleged, was paid by ADUG.
In effect, the investigators said, money from City’s owner was being channelled into the club through commercial agreements and recorded as sponsorship income.
The figures in the investigation show the scale of the alleged arrangement. Over the nine years under scrutiny, Abu Dhabi sponsors paid £119.25 million of the £949.94 million recorded in City’s accounts. According to the panel, ADUG paid the remaining £830.69 million.
That discrepancy became central to the case because it gave investigators a way to distinguish between the money that appeared on paper to be commercial income and the money that they believed had actually come from the club’s owner.
The alleged tagged sums also increased significantly over the period being investigated, eventually reaching £134.73 million in the 2017-18 season. The Premier League said City occasionally “tweaked” the arrangements to reduce the likelihood of difficult questions being asked.
THE £9.9 MILLION SHORTFALL
One episode from 2013 provided investigators with a particularly clear example of how the system allegedly worked.
In May that year, City was facing a shortfall of £9.9 million which, according to the Premier League, could have left the club in breach of financial rules. The investigation found that a number of modified agreements with Abu Dhabi sponsors were generated within days, despite the sponsors not having been approached about the additional payments.
The changes, according to the report, effectively plugged the shortfall.
For investigators, the episode was significant because it illustrated the relationship between City’s financial requirements and the sponsorship arrangements. When the club needed additional money to meet the rules, the value and structure of the agreements could, according to the findings, be adjusted in a way that brought more money into the accounts without presenting it as a direct injection from the owner.
The club has disputed that interpretation.
Manchester City said its Abu Dhabi-based sponsors had, from time to time, applied for and received financial assistance from the Abu Dhabi government to help them meet their sponsorship obligations. The panel rejected that explanation, concluding that it had been created after the fact to obscure what it described as the reality of the funding arrangements.
PLAYER IMAGE RIGHTS
The sponsorship agreements were not the only part of City’s finances examined by investigators.
The panel also looked at the so-called Fordham Agreement, which involved the club’s player image rights. The arrangement was ostensibly set up for City players’ image rights to be bought from the club at what investigators considered artificially inflated prices.
The panel concluded that the arrangement was “little more than a front”, arguing that it provided another way for owner funds to enter the club while concealing where the money had actually come from.
According to the findings, the arrangement allowed City to present owner funding as operating income while also removing certain operating expenses from its financial statements. Investigators said this meant owner money could be used to meet liabilities that would otherwise have appeared in the club’s accounts.
The panel found that £24.5 million of operating income had been wrongly recorded and that £49.414 million in operating expenses had been wrongly excluded.
Taken together with the sponsorship arrangements, these findings formed part of the Premier League’s broader case that City had not simply received large sums from its owner, but had developed mechanisms to disguise the source and nature of that funding.
WHAT DID THE MONEY HELP CITY BUILD?
The financial arrangements were taking place during the period in which Manchester City was rapidly changing the landscape of English football.
The club signed players such as Yaya Toure, Sergio Aguero and Kevin De Bruyne, while Roberto Mancini and Pep Guardiola were brought in to manage the team. City won three Premier League titles during the nine seasons covered by the investigation, including Guardiola’s first league title, and collected a number of other trophies.
The club also qualified for the Champions League in eight of those nine seasons, giving it access to another significant source of revenue.
That success matters to the investigation because the financial arrangements were not simply about balancing the books. They helped sustain the spending that allowed City to build a squad capable of competing at the highest level, while the club’s success itself generated more commercial and competition revenue.
The Premier League’s case is therefore built around the relationship between the money coming into Manchester City, the way that money was recorded and the financial rules the club was required to follow.
CITY DENIES WRONGDOING
Manchester City has consistently denied wrongdoing and has challenged the Premier League’s interpretation of its Abu Dhabi sponsorship arrangements. The club argued that its sponsors had received financial assistance from the Abu Dhabi government and that this assistance enabled them to meet their sponsorship commitments.
The investigatory panel rejected that explanation, describing it as an account that had been “concocted well after the event” to conceal the realities of the funding arrangement.
City was found guilty of almost all of the more than 100 charges brought against it and now faces the possibility of severe punishment, with expulsion from the Premier League among the potential sanctions. The club has said it will appeal the findings.
At the heart of the case, however, is a relatively simple question: when Manchester City’s accounts showed hundreds of millions of pounds in sponsorship revenue, who was actually providing the money?
The investigators’ answer was that the Abu Dhabi sponsors had paid only a small portion of the sums recorded in the accounts, while ADUG had provided the vast majority. The leaked emails opened the door to the investigation, but it was the subsequent examination of sponsorship agreements, payment records and financial statements that allowed investigators to piece together what they described as a system for disguising owner funding.
That is what makes the findings significant. The issue was not simply that Manchester City had access to an extraordinarily wealthy owner, but that investigators concluded the club had developed a sophisticated way of making that owner’s money look like something else.
– Ends
SOURCE :- TIMES OF INDIA
