Manchester City case: Disguised funding and dishonest witnesses in Premier League ruling

The Premier League's independent commission has published the core of its decision against Manchester City, a 40-page document that confirms the most severe reading of the club's behaviour. The ruling finds the reigning champions guilty of all charges for breaching the competition's financial rules and states that their lucrative sponsorship arrangements with Abu Dhabi companies were, in reality, 'shams'. The tribunal also concluded that several witnesses called by the club deliberately lied during the hearings.

• The commission found that the Abu Dhabi sponsorships formed a 'disguised funding scheme' rather than genuine commercial deals.
• Of the £949.94m booked as sponsorship revenue, only £119.25m was paid by the sponsors themselves.
• The remaining £830.69m was paid by Abu Dhabi United Group, the vehicle controlled by owner Sheikh Mansour.
• The tribunal said several City witnesses gave false evidence and that the club tried to obstruct the investigation.
• City plan to appeal the ruling, while the independent body must meet to decide on a sanction.

How Manchester City's disguised funding scheme worked

When Sheikh Mansour bin Zayed al-Nahyan bought the club in 2008, he set out highly ambitious plans for City. Those aspirations could not be met by the finances the club was generating at the time. The commission notes that City knew from the early days of Mansour's ownership that enormous funds would be required to achieve its goals. Initially, the club relied on direct injections from the owner, known as owner equity, but that model was not sustainable in the long run.

With owner equity excluded from financial fair play rules, the club needed to grow its commercial operations. The solution it found was to seek high-value sponsorship agreements in the United Arab Emirates and particularly in Abu Dhabi. That approach gave rise to what the commission calls the 'disguised funding scheme'. It involved signing deals with Abu Dhabi sponsors at fees far above fair market value. The sponsor, however, was not liable to pay the recorded amount.

Each of the Abu Dhabi sponsorship agreements was a sham.

The sponsor would only pay a small percentage of the fee, described by the commission as the 'base sum'. The rest, or the 'tagged sum', was paid by Mansour or by Abu Dhabi United Group, the company he formed to control City. This mechanism allowed the club to state that its commercial revenues from Abu Dhabi sponsorships were far, far greater than they really were, while concealing the true scale of the owner's equity contributions.

The scale of the breach: £830m in disguised payments between 2009 and 2018

The financial impact of the scheme was enormous. Over the nine seasons under investigation, from 2009-10 to 2017-18, Manchester City booked £949.94m in sponsorship revenue from Abu Dhabi-based companies. Of that total, only £119.25m was paid as the 'base fee' by the sponsors. The remaining £830.69m came as 'tagged sums' from ADUG.

Some estimates put that £830m at around 30% of City's revenue over the period examined, a figure higher than the total turnover of most of their Premier League rivals. The volume of funding also grew significantly over time. In 2009-10, the commission identified £22.5m in tagged sums paid by ADUG. By 2017-18, that figure had risen to £134.73m, the highest total across the seasons under review.

From UEFA breaches to obstructing the Premier League investigation

The commission divided the charges into four blocks. Once the first was proven, relating to the provision of accurate financial information, the rest fell like dominoes. Blocks two and three concerned City's obligation to comply with the financial rules of first UEFA and then the Premier League. Removing the tagged sums from the balance sheet meant the club failed to comply with either set of regulations in every season covered by the charges.

The submission of inaccurate financial information also meant the club breached the fourth block, relating to its duties of cooperation towards the Premier League. But City's conduct went further. The tribunal found that the club made concerted efforts to stop and frustrate the Premier League investigation and concocted explanations for the scheme well after the events, in an attempt to obscure and conceal the reality.

Dishonest witnesses and the failed bid to keep the verdict private

The commission made damning comments about the behaviour of witnesses called by City during the hearings. Several important factual witnesses gave evidence that was false in key respects, and the tribunal found that some of those falsehoods were deliberate. Certain witnesses gave evidence they knew to be untrue and were therefore dishonest, the commission wrote.

Beyond the main charges, other smaller breaches were proven. Payments totalling more than £15m were made to three former employees, understood to include Roberto Mancini and Yaya Touré, which were not recorded in employment contracts but instead in consultancy agreements. A scheme known as the 'Fordham arrangement' also proved to be a sham, with City selling players' image rights to a third party that 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. The verdict was published after one party failed in an attempt to keep it private. The commission described the proceedings as fiercely contested on both sides and noted that no stone was left unturned.

What happens next: City's appeal and the pending sanction

The case stretched more than two years from the start of proceedings, partly due to its combative nature. Evidence submissions ran to many thousands of pages, the core bundle of documents reached tens of thousands, and even the index to the documents used in the hearing was over a thousand pages long. The commission admitted it took far longer than anticipated to produce its decision and described the delay as regrettable.

Manchester City continue to deny any wrongdoing and announced they will appeal the ruling on the grounds that it contains material errors of law, principle and fact. Chief executive Ferran Soriano told employees in a video that the decision was based on a 'Premier League conspiracy theory'. The appeal is expected to be filed before Friday, while the commission must convene to decide the sanction it will impose on the club.