Disguised funding and dishonest witnesses: key findings in Manchester City case

Agreements were ‘shams’ The independent commission’s “core decision” is a 40-page document which appears to confirm the worst interpretation of Manchester City’s behaviour. Central to the finding that the club were guilty of all charges of breaching the Premier League’s financial rules is the conclusion that City’s lucrative sponsorship arrangements were “shams”.

When a member of the Abu Dhabi royal family, Sheikh Mansour bin Zayed al-Nahyan, bought the club in 2008 he set out “ambitious plans” for City. But those ambitions could not be met by the finances then being generated. “The club appreciated from the early days of [Mansour’s] ownership that very significant funds would be required if the steps needed to realise … ambitions were to be fulfilled,” the commission said.

Related: Manchester City’s ‘sham’ seasons: how they fared and who was in charge

In the first instance the club relied on extra injections from Mansour, or “owner equity”. But according to the commission: “The club recognised that [this] was not a sustainable model”, and that with owner equity to be excluded from financial fair play rules it “needed to grow its commercial operations”. One way of doing this, the club decided, was to “seek high-value sponsorship arrangements in the UAE generally and in Abu Dhabi in particular”.

Interactive What resulted was what the commission call the “Disguised Funding Scheme” (DFS). Traditional sponsorship valuations would not be enough for City to meet their ambitions and forestall financial losses. So City applied a different approach. In the words of the commission: “The club would enter into sponsorship agreements with Abu Dhabi sponsors which contained substantial [fees] at well above fair market value. However, the sponsor would not be liable to pay the recorded sponsorship fee, and would not do so.” Instead the sponsor would pay only a small percentage of the fee, described by the commission as the “base sum”. The rest, or the “tagged sum”, would be paid for by Mansour, or at least the company that he had formed to control City, the Abu Dhabi United Group (ADUG).

The DFS, the commission said, allowed the club to state that “its commercial revenues from Abu Dhabi sponsorship agreements (and so its income generally) were far, far greater than was in fact the case”, and also “conceal from third parties the true extent of the equity contributions in fact being made into the club by ADUG”. As a result, it said: “Each of the Abu Dhabi sponsorship agreements was a sham.”

City had argued in their defence that sponsors had paid all the money but that the sponsors had required, “from time to time”, financial assistance from the Abu Dhabi government and its crown prince court to meet their sponsors’ obligations. City’s argument therefore was that although money was given by the Abu Dhabi government to sponsors, the club was not involved.

The scale of the funding The commission calculated that, over the course of the nine seasons under investigation, from 2009-10 to 2017-18, City had booked £949.94m in sponsorship revenues from Abu Dhabi-based companies. Of that total, only £119.25m had been paid in “base fee”. The rest, £830.69m, were “tagged sums” paid by ADUG to the club.

By some estimates, the £830m accounted for as much as 30% of City’s revenue over the period of the investigation. It was a sum far greater than the total revenue of most of their Premier League rivals. The scale of the funding also grew heavily over time. In 2009-10, the commission identified £22.5m in “tagged sums” paid by ADUG. By the 2017-18 that figure had risen to £134.73m, the highest total across the seasons under investigation.

The knock-on effect The commission broke the charges into four blocks and once the first had been proven – relating to the provision of accurate financial information – a domino effect ensued. Blocks two and three related to City’s requirement to meet the financial rules of first Uefa then the Premier League. Removing the “tagged sums” from any balance sheet meant that City had failed to comply with either set of regulations “in any of the seasons” under which they were charged.

The submission of inaccurate financial information meant that City were also in breach of group four of the charges, relating to the “duties of cooperation” it owed to the Premier League. But City’s behaviour went further in this regard. The commission found that the club had “made concerted efforts to stop and frustrate the Premier League investigation” and had “concocted” explanations for the DFS “well after the event in an attempt to obscure and conceal the reality”.

Dishonest witnesses The commission also made damning comments on the behaviour of witnesses called by City during the hearings. “Evidence given by a number of important factual witnesses called to give evidence on behalf of the club was false in a number of key respects,” the commission wrote, arguing that some of falsehoods had been deliberate. “Certain of those factual witnesses had given evidence at the hearing that they knew to be untrue and so had been dishonest,” it said. Also contained in the verdict is the detail that, in the event of City being found guilty, the Premier League had reserved the right to challenge “additional and perhaps more egregious acts of non-cooperation” relating to City’s behaviour during the League’s own investigation.

Further wrongdoing Further, smaller charges were proven against City. Payments “not recorded in an employment contract … but instead recorded in a consultancy agreement”, totalling more than £15m, were found to have been made to three former employees, understood to include Roberto Mancini and Yaya Touré. Equally, a scheme known as the “Fordham arrangement”, was shown to be another sham whereby City sold their players’ image rights to a third party which was “in reality little more than a front for ADUG”.

The only charge City were cleared on related to one subset of the club’s obligations to act “in the utmost good faith” towards the Premier League.

No love lost The commission describes the case as having been “fiercely contested” and there is no sense of either side pulling their punches. City were revealed to have sought to dismiss the Premier League’s investigation, its decision to charge the club and its decision to prosecute the charges. The verdict was published after one party failed in an attempt to keep it private. “The proceedings were at all times extremely hard fought on both sides,” the commission said. “We in no way mean that as a criticism of either party; it is simply fact. No stone was left unturned.”

The competitive nature of the proceedings will have been a key factor in turning the case into such a substantial endeavour that the verdict could be published only more than two years after proceedings began. The commission said evidence submissions ran to “many, many thousands of pages”, the core bundle of documents to “tens of thousands” of pages, and even the index to the documents used in the hearing was 1,000 pages long.

“It has taken us much longer than we would have wished, and much longer than we had anticipated would be the case when the hearing concluded, to produce our decision,” the commission wrote. “That is regrettable.”

The submissions are likely to continue given City intend to appeal against the decision before Friday. The commission must also meet to decide upon its sanction.

What do City say? The club continue to deny wrongdoing. City have said they will appeal “on the basis that the opinion contains clear material errors, of law, principle and fact, and is unsafe”. Their chief executive, Ferran Soriano, said in a video to employees that the decision was based on a “Premier League conspiracy theory”.