Manchester City guilty of hiding over £830m in sponsorship funding to beat financial fair play

Manchester City have been found guilty of every charge relating to serious breaches of the Premier League's financial rules and all but one concerning their failure to cooperate with the investigation. The 40-page ruling, released on Tuesday, reveals how the Abu Dhabi owners systematically inflated sponsorship income for years, concealing more than £830 million of disguised funding while presenting accounts that gave a misleading picture of the club's finances.

• The disguised funding scheme hid £830.69 million in owner contributions between 2009 and 2018.
• Sponsorship deals were split into a base fee paid by the sponsor and a tagged sum covered by the club's owners.
• Additional devices moved £90 million in expenses off the books.
• The panel described key witness evidence as false and ruled the club failed to act with utmost good faith.

What the disguised funding scheme was and how it worked

The central finding of the ruling is a plan the commission calls the disguised funding scheme. After buying the club in 2008, the new owners quickly realised that competing at the top would require enormous spending. Projections for the 2009-10 season showed losses that would have beaten the Premier League record at the time: Chelsea's £140 million deficit in 2006.

The City owners were determined not to set that record, and both UEFA and the Premier League were about to introduce financial fair play rules. The only way out was to dramatically boost commercial revenue and reduce the visible reliance on owner funding. The solution was to split sponsorship agreements into two parts: a base fee and a tagged sum, with the owners paying the tagged amount themselves.

The scheme gave "the misleading impression to third parties (including regulators and its auditors) in its financial statements and any required FFP returns that its commercial revenues from sponsorship agreements were far, far greater than was in fact the case", the ruling states.

Over £830 million in sponsorship revenue that was never real

From 2009-10 to 2017-18, the club reported £949.94 million in commercial sponsorship income. According to the commission, only £119.25 million of that represented genuine base fees. The remaining £830.69 million were tagged sums paid by the owners, money that allowed the club to invest in players while presenting itself as commercially self-sufficient.

City denied the claims and argued the Premier League had misunderstood the sponsorship agreements. The panel rejected that explanation as untrue, adding that it had been concocted well after the events to conceal the realities of the scheme.

The May 2013 fix: plugging a £9.9m gap in days

A concrete example shows the scheme in action. Less than a week before the end of the 2012-13 financial year, City realised they were £9.9 million short of UEFA's financial requirements. Within days, without approaching any sponsors, several modified agreements were generated that inflated recorded fees to cover bonuses for events that had already taken place and to pay for a US tour. The feared FFP shortfall was immediately plugged.

Project Longbow and the Fordham Arrangement: a front for image rights

In 2012, the club launched Project Longbow, which the commission accepts included many genuine and legitimate strands aimed at increasing revenue and cutting operating losses. But one strand was not genuine: the Fordham Arrangement, an agreement with a third party that the ruling describes as little more than a front.

Owner funds were used to enable Fordham to buy the club's financial rights to player image rights at an artificially inflated price. This funnelled money into City while hiding its true source, allowing the club to present it as operating income. The ruling puts incorrectly recorded operating income at £24.5 million and wrongly excluded operating expenses at £49.414 million. The arrangement operated with the knowledge and approval of several individuals whose names have been redacted.

Off-book salaries and dishonest witness testimony

Player and manager contracts paid through third parties

Another method used to pass the financial rules involved moving expensive contracts for players and managers off the books. Remuneration was paid through third parties, though in reality the money came from the owners. These payments were recorded as consultancy agreements, concealing the true scope of the club's liabilities. Three separate cases are documented, with payments of £8.866 million, £7.4 million and £0.5 million, all names currently redacted.

False evidence and concerted obstruction

City served witness statements or documentary evidence from 24 individuals, most of whom gave evidence at the hearing. The ruling found that the evidence given by a number of important factual witnesses was false in key respects, and that some witnesses provided testimony they knew to be untrue. The panel concluded the club failed to act with utmost good faith, making concerted efforts to stop and frustrate the Premier League's investigation while breaching its duties of cooperation.

Frequently asked questions about the Manchester City ruling