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When 2 = 115 or 134 ?

By: Ted Fred Franky, Refuting misinformation, January 2, 2024  5 months ago

06/02/2023 – Martyn Ziegler @ The Times mis-reports Manchester City’s Premier League Charges

The Premier League have made two allegations against Manchester City, and if proven a further three might follow.

These five allegations occurred from 2012-2023, and if proven relate to 134 breaches of Premier League rules during that 11 year period.

Man City Nero Scarf - Sky/Navy - One Size
Man City Nero Scarf - Sky/Navy - One Size

The Premier League released a statement to this effect on 6th February 2023 (link):

Martyn Ziegler at The Times broke the story and miscounted the charges against Manchester City, coming to a total of 115. He even broke them down and analysed them, and made errors with four of his sections

No one at The Times (or elsewhere in the media for that matter) has bothered to check (ie count) the charges made by the Premier League in their original statement above. So after a tip off in the Blue Moon Forum I copied them onto a spreadsheet and counted them:

Man City Fans Sky and White Traditional Bar Scarf
Man City Fans Sky and White Traditional Bar Scarf

The Premier League has chosen not to correct this factual error either!

The reason for this is quite simple, it is all hype and sensationalism, accurate reporting is not necessary. Next time you see or hear someone mention 115 charges then send them to this article!

Arbitration Act

According.to the Premier League Handbook (2022/2023) Section X, arbitration must be done in accordance with the Arbitration Act 1996.

Section 69 of the Arbitration Act 1996 allows an appeal on a point of law. In other words, if arbitration does not follow English Law, then City can appeal.

The Limitations Act 1980, section 2 states “An action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued.”

Official Manchester City Scarf – PUMA3
Official Manchester City Scarf – PUMA3

In other words, the Premier League arbitration process has to be followed in line with English Law. If it doesn’t City can appeal the decision, and that means no action can be brought that is more than 6 years old.

Since the allegations were made in 06 February 2023, City cannot be charged with anything prior to 06 February 2017. This removes almost all of the allegations, making them time barred.

Of coure since, I raised this point in February 2023, Section X has been removed from the current Prmeier League Handbook. How strange, or is it simply more evidence that the Premier League is riddled with corruption?

The Two Pairs of Allegations:

1) Disguised Equity Finance

City’s owners ADUG leant money to two of City’s sponsors, so they could pay City their sponsorship money. The Premier League claim this is disguised equity funding of the club. The Premier do not have access to the bank accounts of any party other than City and have no idea: if this happened; whether the money was repaid; or what the commercial relationship was if it indeed happened.

The biggest argument against this allegation is that BrandFinance.com who assess sponsorship deals consistently rank Manchester City’s sponsors as getting the best bang for buck of any football club. The Etihad deal has been in the top 10 most effective sponsorship deals since before FFP was introduced. This totally nullifies any argument that the sponsorship is in anyway inflated.

Official Manchester City Scarf – PUMA 2
Official Manchester City Scarf – PUMA 2

If it is true that ADUG leant this money, it is normal business practice. There are numerous reasons why it would be in the interests of ADUG to lend these sponsores the money to pay their sponsorship deals.

Firstly, both companies (Etisalat and Etihad) trade in the UAE, and do not do their accounts in British Sterling. This means a sponsorship deal, worth say £50m a year, will be affected by exchange rates, and could cost anything from US$50m to US$70m. With financial commitments like this, intermediaries will guarantee the price in sterling regardless of what the rate is when the transaction is done. So they might guarantee £50m for a fixed fee of say US$62m. This takes away the uncertainty of what Etihad or Etisalat might have to pay.

Everyone who has ever bought a house abroad to retire to will be familair with third parties providing this service. So it would make perfect sense for an interested party such as ADUG to underwrite the exchange rate for these deals. The reason third parties provide this service is to make a profit, so it must be commercially sound.

Secondly, both companies (Etisalat and Etihad) are both start ups funded by the UAE. They will receive their funding in fixed lump sums. These fixed lump sums payments may not have coincided with when the payments to City needed to made, so a short term loan would be required. Again it would make perfect sense for an interested party such as ADUG to lend the money to ensure City got paid when they needed to be paid.

I have no idea whether either of these situations occured, and once you start thinking about it there are numerous legitimate reasons why ADUG might have chosen to lend these companies money.

Furthermore, it is difficult to see how this can be argued without affecting numerous financing models in the Premier League at other clubs. For example, Cazoo are owned and bankrolled by ADUG, they sponsor Everton and Aston Villa, have ADUG therefore disguised equity funding of these clubs?

Liverpool owner John Henry’s financial company, John W. Henry & Company, Inc, is linked to Standard Chartered Bank, the club’s major sponsor via a subsidiary called Cazenove. Standard Chartered Bank has no retail/consumer interests, so what value does the deal have for them? Is it simply a way for John Henry to put his money into Liverpool circumventing FFP?

It won’t be wasted on any Man Utd fan that all of their sponsorship deals have been with US companies since their US owners bought the club. US companies have all manner of “kick back” payments going on to ensure deals are done. These might involve payments to the Glazers or to directors of the sponsors to pay a higher price. TeamViewer agreed a wildly excessive sponsorship deal with Man United, did the directors of TeamViewer who signed the contract get such payments to make the original deal go through? As I say this is common practice with large US firms, but very much seen as fraud in the UK.

We have no idea, but once you start trying to analyse these types of deals all you are doing is guessing, which is what all these allegations are. They are based on discredited articles in Der Spiegel.

But actually what is Equity Finance?

Ernst and Young confirmed that City’s accoutns have all been accounted for innaccordance with GAAP, so how can it be equity finance?

If however this idea or principle is upheld, it has serious financial implications for Liverpool. Manchester United and Chelsea, who would all need to be investigated immediately and punished with more severity than Manchester City. There may be many other Premier League clubs who fall foul of this principle too.

Liverpool

Liverpool have a loan with FSG at a preferential rate of 0.5%, if it was at a competitive rate it would be around 6-8%, which on a loan of £240m would be £13m-£18m a year. After all when Liverpool almost went bust under Hicks and Gillete, Nat West were charging Liverpool 11% on their loans. FSG have borrowed this money and are paying a fair market rate on it, then lending it to Liverpool at a heavily discounted rate of 1/12 to 1/16 of what it should be.

Therefore this loan is effectively an injection of cash into the club ie equity funding of the club, and has accrued over the last 12 years at about £13m-£18m a year and probably amounts to around £156m to £216m of disguised equity over that period. Probably nearer £300 if you applied the rate Nat West were charging Liverpool. If this disguised equity funding were added to Liverpool’s accounts it would represent a loss and Liverpool may breach FFP losses for both UEFA and the Premier League. Where is the srutinty of Liverpool’s disguised equity funding loan?

Had FFP been around when FSG bought Liverpool, this deal could not have gone through, with this Premier League interpretation.

Manchester United

Manchester United have a debt of around £600m, in any sale it would be normal to settle the debt ie with £600m of equity finance. The existing arrangement is based on the credit worthyness of Manchester United and their owners, if the owners change so too would the credit worthyness, and the current debt would have to be refinanced, whether that’s a new debt package or the owners pay it off. How can this not be considered equity finance?

Chelsea

Chelsea have £800m of debt under the Tom Boehly takeover. £300m of credit to cover day to day bills, with a £500m of rolling credit. As part of the deal, Tom Boehly pays the interest at 6-8% on behalf of the club, that’s £48m-£64m of equity finance, way above the £30m loss allowed by UEFA and £45m allowed by the Premier League each year. This interest payment is surely equity finance?

Again Chelsea could not be sold in the future without that debt being settled so £800m of equity finance would be needed.

Where are the calls of “cheating” where are the demands to relegate these clubs, and strip them off trophies? The above clubs are clearly manipulating the financial rules and pouring money into the clubs yet this is ignored.

2) Disgused Payments to Staff

Yaya Toure and Roberto Mancini received payments via companies based in Abu Dhabi which should have been included in City’s remuneration of both. City, both men and their agents deny this happened.

The Premier League have no evidence to back up either of these allegations beyond: the discredited Der Spiegel articles; their dishonest journalists; and the criminal source Rui Pinto, who has refused to provide any provenance for where his information has come from?

The idea that these payments were made makes little sense too. Roberto Mancini was the second highest paid manager behind Alex Fergusson in the Premier League, and earning more than double his previous contract. It is also still the highest paying contract he has ever had. Could his agent really have negotiated even more? This is unlikely as City have a track record of not paying over the odds. This was deomonstrated in the way they pulled out of deals for Paul Pogba, Alexis Sanchez, Harry Kane and many others. Similarly Yaya Toure was the highest paid player in the Premier League at the time, is it plausible City would have been paying him even more via some back hand mechanism, why would they need to?

When this was dealt with by CAS/UEFA, it was time barred and will almost certainly be time barred this time.

So why are the Premier League even trying?

3) Breaching UEFA FFP

This breach is about failing to comply with UEFA rules.

This strikes me as a misinterpretation of the rule. Surely the purpose of the rule is to ensure that a club can’t use as a defence for breaching UEFAs rules that they had to to comply with the EPL rules and vice versa? Whilst the rules might be congruent when both systems are introduced, they will diversify as they are modified over time, especially considering there are over 20 associations with their own rules. They can’t all remain consistent, so this rule makes perfect sense. The whole point is if any club finds itself in conflict, it must discuss it with UEFA and the Premier League before taking action and submitting their accounts.

Importantly, the UEFA Rules are a separate contract between City and UEFA and unless there are third party rights for the EPL to enforce UEFA rules in the UEFA contract then the EPL cannot enforce such rights, unless there is a specific benefit to the EPL in doing so (CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999). Virtually every commercial contract I have ever seen has a clause specifically stating no third party can enforce any parts of the contract. I have looked at the UEFA rules and cannot find anything other than a statement that only the UEFA Club Financial Control Body can enforce the rules and hand out punishments:

So surely this allegation can’t be pursued? This charge is purely malicious.

In any event City, were proven innocent of all charges at CAS, surely the Premier League can’t over turn this judgement. It would be counter to all priciples of justice, that a third party can interfere in a private contract between two other parties?

If there is new evidence isn’t it incumbent on the Premier League to share this with UEFA, rather than pursue it themselves? In doing so they are undermining the authority of UEFA, which they are not allowed to do.

This really is a load of rubbish and cannot stand up.

4) Profit and Sustainability

This is about the basic profit and sustainability rule. Basically if the first two allegations are proven to be true, then as a fait acomplis, it means that City have earned less and spent more, which means they breach the allowed losses limit on this rule. However, if the two pairs of allegations above are proved to be false, this allegation has no basis at all.

5) Cooperation

The last is really down to cooperation in investigating the above, and is mainly during the years 2018 to present. City are required to provide certain information and any information requested under certain circumstances. If the events and allegations didn’t happen, how can City provide information which doesn’t exist?

So really the only things City might have done wrong is about cooperating since the investigation was launched. This is very very hard to prove if City have provided all information when asked, and there is no evidence that they have withheld anything. If they had, the Premier League must have sent them correspondence requesting information and cited this rule. Ergo City would have expected to be punished for this. The fact that City were not expecting the allegations published on 06 February 2023 indicates that no warning of non-cooperation and any ramifications was given. So it suggests that this is another fabricated allegation.

Finally there is a rumour that Murray Rosen and his committe has considered all but one of the above issues, and has dismissed them all. How true this is is another matter.

I cannot see how any of these charges will stick, and they can only stick if the committe investigating does not follow English Law. This would then give City a right of appeal through the courts.

So really this whole affair is purely malicious and it is about besmirching the name of Manchester City in the minds of other supporters, and branding them as cheats, when no such thing has occured.