Football finance expert EXPLAINS the ISSUES of Manchester City's financial charges

under premier league rules football

clubs are allowed to lose no more than

105 million pounds over three years

um

loss is calculated as income less costs

so the allegations which have been made

against Manchester city is first of all

when it comes to their income they have

manipulated the income by overstating it

and in particular what they've done is

the the owner has given the club money

and Manchester City have disguised this

as sponsorship income now if the owner

normally gives the club money doesn't

count as income under these

circumstances it is being counted as

income so therefore that's allowed

Manchester City to go out into the

transfer market to pay higher wages for

talented managers coaches and players

which it wouldn't otherwise have been

able to do

the second allegation is that we said

that that profit or losses is income

less costs well in terms of costs that

Manchester city has deliberately

um understated their costs and they've

done this through things such as let's

say that we've got a coach the good

coach coach who's worth 5 million

Manchester City pay the coach 3 million

and somebody else connected to the owner

a club in the country

um in in UAE in Abu Dhabi who's been

paying the coach two million pounds but

he's only been there for sort of two

days of the year so he's he's

effectively being paid uh for a no-show

job uh if anybody's old enough they'll

remember that Tony Soprano did this in

in the wonderful series The Sopranos

um and that means that uh if you inflate

your income and you deflate your costs

you can stay within the 105 million

pound limit but it gives you a

competitive Advantage because you're

effectively being allowed to employ

better players recruit better staff

um and still stay within the rules

so well ultimately the responsibility

for the decisions made by a company lie

with the board of directors so they are

the executives they are the c-level

staff you know the chief executive the

chief financial office the chief

marketing director yeah uh and therefore

you would have to ask

a were they aware of what was happening

and B if they were not aware why not

because you get the benefits of of being

an executive in terms of decision making

and financial reward then that should

come with the the downside as well in

terms of being held responsible for the

decisions of the company so

um the owners

the element's not necessarily from a

legal point of view because a

shareholder you are independent of of

the company itself although if there are

close links quite often the two parties

are the same then then it could be that

the uh certainly the reputation of the

the directors and the owners would take

a huge hit if these allegations are

proven to be true

well that's that's a really difficult

one because a we've not seen the

evidence B we don't know how many

charges if any at all upon which

Manchester City would be found guilty in

terms of the every there's there's a lot

of politics in in English football

um I think that the preferred punishment

would be for a points deduction because

the argument would be that if it was

just a financial punishment given the

wealth of the owners given that it is a

a effectively assault in wealth fund

which is uh the the benefactors of

Manchester City that are Financial

penalty would not actually particularly

harm the club so therefore you need to

do something which would be seen within

football itself as being a punishment

and also acting as a deterrent should

any other clubs with equally uh

benevolent owners decide to take or

decide to consider a similar action I I

agree entirely with you if we were

talking about Southampton if we were

talking about Brentford if we were

talking about the small club like

Crystal Palace you and I would not be

having this conversation it's because it

is Manchester City who have won the

Premier League for four years out of the

last five who have reached the Champions

League final who have spent around about

1.3 billion dollars in building their

squad that we're having this

conversation and there is jealousy there

is resentment there is Envy

um and there's not a lot of admiration

because football doesn't operate like

that football is a very very snarky

business uh where everybody's trying to

put each put the other clubs down

and issues

well I think I think juventus's

situation was slightly different in in

the sense that Juventus is a listed

company on the Italian stock market and

therefore they are held to a higher

standard of behavior then that is the

case for a private company and in the

case of Juventus some of the accusations

was that the club was

um paying players and therefore

deceiving the stock market with the

level of profits and losses that it was

reporting and that has an impact upon

investment decisions so I think there is

a difference here

um although given that around about 17

of Manchester city is now owned by the

American Investment fund Silver Lake

I would imagine that they will be

observing and reviewing their position

with with a great deal of care and

watching how things proceed

um once the commission starts and uh yes

as it moves towards its conclusions

well it on the face of the things it

looks very very strange but then when

you delve into it I think it's fair to

say that Chelsea have exploited the

existing rules and have taken them to a

new dimension so under the uh the rules

for football and this is most important

when it comes to football player trading

when you sell a player all of the profit

goes into your calculations immediately

but when you buy a player the cost of

buying the player is spread over the

player's contract via process that the

accountants call amortization so what

Chelsea have done is that they've just

put players on extremely long contracts

so if you sign a player for a hundred

million dollars if they'd normally be

almost say a four-year contract so you

say 100 divided by four that gives me a

cost of 25 million a year what Chelsea

have done is they've put them on eight

year contracts so 100 divided by eight

gives a cost of 12 and a half million

dollars a year so can you see do this

six or seven times you can save yourself

you know somewhere in the region of

seventy to eighty million dollars of

costs in a single season and given that

the the losses are 105 million Sterling

over three years that impact can be

significant the downside to what Chelsea

had done is that they've assumed that

all of these players are going to be a

success if they're not a success what

are you going to do for the next six or

seven seasons when you've got a player

who's being paid a salary that nobody

else is prepared to match but you've got

a legal obligation you've signed a

contract to commit to pay that wages so

if the players are great it will be a

fantastic return for Chelsea if the

players turn out to be not so great

they're going to have a huge Legacy of

unwanted inventory which doesn't

particularly want to go anywhere because

the players don't want to take pay cuts

and then you've got a problem

well certainly we have seen some clubs

in terms of the the financial

submissions that they've made make uh

fairly uh significant claims as to the

impact for example that covid had on

their finances and they've played

they've claimed that kovid cost them

money and a myriad of ways some of which

have certainly raised eyebrows as far as

observers are concerned so if Manchester

City are charged you would think that

Manchester City would say to the Premier

League well you've investigated us and

charged us then shortly you have a

responsibility to do this for other

clubs as well if the Premier League

don't do that it could be seen that

they're trying to make a scapegoat of

Manchester City who are unpopular with

certain other elements of the the

English football establishment because

they represent new money and old money

doesn't like new money in all aspects of

life you know in all it doesn't matter

it doesn't have to be sport

um and therefore you can understand why

um there's likely to perhaps be an

enthusiasm for this to move on and and

that's going to be bad news for football

as as a whole because then it becomes

who's got the best lawyers and the best

accountants as opposed to who's got the

best strikers and Center halves to

Midfield players

yeah and

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