Manchester City have been found guilty of running a years-long scheme to hide hundreds of millions of pounds in funding from the Premier League, according to an independent ruling released on Tuesday. The club was found guilty of all charges related to serious breaches of financial rules, and all but one in relation to a failure to co-operate with the investigation.
The ruling, which runs to 40 pages, uses the word “sham” eight times to describe the arrangements. It finds that City found a way to boost sponsorship income for nine seasons, starting from the 2009-10 season.
How the Scheme Worked
City set up what the ruling calls the Disguised Funding Scheme. It hid more than £830m of sponsorship funding, while other devices hid £90m in expenses. The scheme worked by entering into sponsorship agreements significantly above fair market value, splitting each deal into a base fee and a tagged sum.
The sponsors paid the base fee, and the club’s owners paid the tagged sum. That meant the full value of the sponsorship appeared on City’s books as revenue, even though the money came from the club’s own controlling party rather than from outside companies.
Commercial income from sponsors totalled £949.94m in the seasons from 2009-10 to 2017-18. Only £119.25m represented base fees, while £830.69m represented tagged sums paid by the club’s owners.
The ruling also details a specific fix from May 2013. Less than a week before the end of the 2012-13 financial year, City plugged a £9.9m shortfall in Uefa’s financial rules by generating modified sponsor agreements. Those agreements increased recorded sponsorship fees to pay bonuses for events that had already taken place and to pay for a US tour.
The Longbow Connection
Project Longbow was launched in 2012. According to the ruling, many of the strands of Project Longbow were genuine and legitimate attempts to boost revenues and reduce operating losses. One strand was not genuine: the Fordham Arrangement.
The ruling describes the Fordham Arrangement as “little more than a front”. Funds from the club’s owners were used to enable Fordham to acquire from the club the club’s entitlement to benefit financially from its players’ image rights at a sizeable, artificially-inflated price. It was a “further device by which funds could be paid into the club in a manner that concealed their true origin”, and it “enabled the club to pretend that such funds represented operating income”.
The ruling said £24.5m was wrongly recorded as operating income and £49.414m wrongly excluded from operating expenses. It also said the arrangement was “operated with the knowledge and approval” of a number of individuals whose names were redacted.
City’s Response
Man City have denied the claims and say the Premier League had misunderstood the sponsorship agreements. The panel rejected that explanation as untrue, calling it “concocted well after the event in an attempt to obscure and conceal the realities of the disguised funding scheme”.
The club knew they would likely continue to suffer large losses for at least the following five seasons. Total losses for the 2009-10 campaign were going to exceed Chelsea FC’s 2006 record single-season financial loss of £140m.
Key Facts Box
- Disguised Funding Scheme: £830m+ sponsorship funding hidden, £90m in expenses hidden
- Sponsorship income: £949.94m total, £119.25m base fees, £830.69m tagged sums
- May 2013 fix: £9.9m Uefa shortfall plugged via modified sponsor agreements
- Fordham Arrangement: £24.5m wrongly recorded as operating income, £49.414m wrongly excluded from expenses
- Chelsea record loss: £140m, 2006
The ruling describes a pattern of behaviour that stretched across nearly a decade. The Premier League has now judged that pattern to be fraudulent, and the language of the ruling — “sham” appearing eight times — makes clear how seriously it was viewed.
The ruling is long and detailed. The facts of the case are now public, and the Premier League has made its judgment.
What Happens Next
The ruling sets out the breaches and the findings. The next step will be the sanction, which has not yet been announced. The Premier League will need to decide what penalty follows from a finding of this scale.
City’s denial of the claims has been rejected by the panel. The club’s explanation was called untrue and concocted. That is a serious finding, and it carries weight.
The ruling is a statement of fact. The facts of the case are now public, and the Premier League has made its judgment.
Source material: “The intricate web Man City spun to con the Premier League,” the BBC.
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