MANCHESTER — Manchester City have been found guilty of operating "sham" contracts and filing misleading accounts in a damning independent commission ruling published on Tuesday, with the word "sham" appearing eight times in the 40-page document. The panel found the club guilty of all charges related to serious breaches of financial rules and all but one charge relating to a failure to co-operate with the investigation, centering on a Disguised Funding Scheme that hid more than £830m in sponsorship funding while other devices hid £90m in expenses.
The commission catalogued how Abu Dhabi United Group, which bought the club in 2008, knew from the 2009-10 season that ambitious plans to sign the best players would create major overspends. Total losses for 2009-10 were set to exceed the then-record single-season loss by a Premier League club — Chelsea's £140m in 2006 — a record the owners were adamant not to break, with large losses expected for at least five further seasons as Uefa and the Premier League prepared financial fair play rules. The solution, the ruling says, was to significantly increase commercial revenue. From 2009-10 to 2017-18, commercial income from sponsors totalled £949.94m, but only £119.25 million represented base fees paid by sponsors, while £830.69 million represented tagged sums paid by the club's owners.
Under the scheme, sponsorship deals were split into a base fee and a tagged sum. Sponsors paid the base fee and the owners paid the tagged sum, which the ruling said "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 panel said the scheme was tweaked from time to time to "assist with continued concealment" and "reduce the likelihood of difficult questions being asked". City denied the claims and said the Premier League had misunderstood the agreements, but the panel said it "rejected that explanation as untrue" and that it was "concocted well after the event in an attempt to obscure and conceal the realities of the disguised funding scheme". In one example in May 2013, less than a week before the end of the 2012-13 financial year, the club was £9.9m short of complying with Uefa's rules and, without sponsors even being approached, generated modified agreements to pay bonuses for events already held and for a US tour. The shortfall was thus "plugged".
The ruling also examined Project Longbow, launched in 2012. While many strands were genuine attempts to boost revenues and reduce losses, one was not: the Fordham Arrangement. The commission described Fordham as "little more than a front" and said funds from the club's owners "would be used (and were used) to enable Fordham to acquire from the club (at a sizeable, artificially-inflated price) the club's entitlement to benefit financially from its players' image rights". It was a "further device by which funds could be paid into the club in a manner that concealed their true origin" and "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 was wrongly excluded from operating expenses, operated "with the knowledge and approval" of individuals whose names were redacted.
The commission further found the club moved expensive contracts for players and managers off the books by paying remuneration through third parties, in reality funded by the owner. The findings build on Manchester City Found Guilty of Sham Contracts Breach and detail a web of arrangements designed to conceal the true origin of funding and present inflated commercial revenues to regulators and auditors across nine seasons.