How Manchester City’s £830m disguised funding scheme became central to the 115 charges

Manchester City booked £949.94m of income from Abu Dhabi sponsors between the 2009-10 and 2017-18 seasons, but an independent Premier League commission found that those sponsors paid only £119.25m of it. The other £830.69m came from Abu Dhabi United Group Investment & Development Ltd (ADUG), which owned the club, and the commission ruled that it was owner funding booked as commercial revenue. That finding, set out in a redacted core decision published on Tuesday, September 29, sits at the centre of the accuracy, PSR and UEFA charges within the 115, and City were found guilty of 114 of them .

City deny any wrongdoing , describe the opinion as unsafe and have until Friday, October 2 to appeal, so every finding below remains open to challenge. Abu Dhabi Sponsorship

2009–10 to 2017–18

£949.94m Booked as Abu Dhabi sponsorship, 2009–10 to 2017–18

£119.25m Paid by the sponsors themselves

£830.69m Paid by ADUG and booked as sponsorship

Man City 115 charges: What is a disguised funding scheme? A disguised funding scheme is a method of putting an owner’s money into a club while making it look as though the money came from an independent source. In City’s case, the commission found that ADUG paid part of each sponsorship fee while the club recorded the full amount as income from the sponsor. The commission called the sponsor’s share the base sum and ADUG’s share the tagged sum.

The Premier League’s statement described these as sham commercial deals, with the sponsors required to pay only a portion of the fees. The commission also concluded that the recorded fees were far in excess of fair market value. Man City 115 charges: How the sponsorship revenue was structured

By the second half of 2009, the commission found, City’s own documents showed that signing commercial deals was proving harder than the club had budgeted for. The club feared that its 2009-10 loss would break the £140m single-season record that Chelsea set in 2006, and it was adamant that it should not. In early 2010 the club devised a plan under which its Abu Dhabi sponsors would owe a base sum, with ADUG paying a tagged sum on top. The club then recorded the combined total as sponsorship income, although only the base sum was genuine commercial revenue.

The commission found that using the scheme at the very end of the 2009-10 financial year is, in large part, what let City avoid breaking that record. Tagged sums were £22.5m in 2009-10 and had grown to £134.73m by 2017-18.

In that final season sponsors paid £11m of a recorded £145.73m, so the accounts showed more than 13 times what the sponsors actually handed over. The commission also found that the arrangements were occasionally tweaked to reduce the likelihood of difficult questions being asked.

Two further devices ran alongside the sponsorship deals. ADUG funded Fordham, an entity that bought City’s players’ image rights in what the commission found was a sham circular arrangement. That arrangement overstated City’s income by £24.5m and understated its expenses by £49.4m. Three more ADUG-funded arrangements, worth £16.77m in total, kept remuneration liabilities out of the club’s recorded expenses. The Premier League put the combined effect at more than £900m of inflated revenue and reduced costs across the nine seasons. Man City 115 charges: Why the line between sponsor money and owner money mattered

Owner investment is allowed under the rules, but only within limits and only if it is labelled correctly. Under PSR, a club’s adjusted losses could not exceed £105m over a rolling three-year period, and any loss above £15m had to be covered by owner equity.

UEFA’s break-even rules drew the same line, because owner money could not count as relevant income while commercial income could. Booking ADUG’s money as sponsorship therefore moved it from a category the rules ignored into one they treated as ordinary revenue.

The £134.73m of tagged sums in 2017-18 alone was larger than the £105m that PSR allowed a club to lose across three seasons. City’s accounts showed a pre-tax profit of £10.4m for that season, which falls to a loss of about £124.3m once the tagged sums are removed. The commission found that, had every agreement been reported accurately, City would have breached both the Premier League’s and UEFA’s spending limits “by a very substantial amount”.

Man City 115 charges: How the commission viewed the arrangements

The commission concluded that a number of City’s Abu Dhabi sponsorship agreements were shams and that the club “clearly intended to circumvent” the rules. It set out a fallback in case that was wrong, finding that the tagged sums were still equity contributions in substance rather than sponsorship income. It added a second fallback, finding that cutting the deals back to fair market value would still have left City failing both the PSR and UEFA tests.

It found that City’s financial statements for every season from 2009-10 to 2017-18 did not give a true and fair view. The true position, the commission said, was concealed from the club’s auditors and from the regulators. City’s defence was that the sponsors always owed the full fees and sometimes asked the Abu Dhabi government for financial help to pay them. The commission rejected that account as untrue and described it as “concocted well after the event”. It also found that some of the club’s witnesses gave evidence that they knew to be untrue.

City’s response is that the opinion contains clear material errors of law, principle and fact. Chief executive Ferran Soriano went further in an internal video to staff, saying the commission had backed a Premier League conspiracy theory and that bank statements and money transfers prove the money did not come from the owner. The sponsors’ identities are redacted in the published decision, so this article does not name them. Man City 115 charges: Why accurate revenue reporting mattered

The accounts City submitted for 2015-16, 2016-17 and 2017-18 were the basis on which the league assessed PSR compliance. The same recorded sponsorship fees fed City’s UEFA break-even submissions from 2013-14 to 2017-18. If revenue is overstated, the loss is understated, and a club can sit inside the £105m limit on paper while sitting well outside it in reality.

The commission restated the accounts to remove the overstated revenue before applying both tests, which is why the accuracy findings fed straight into the PSR and UEFA charges. Clubs also owe the league a duty of utmost good faith, and the commission found that City breached it during the four-year investigation, including through concerted efforts to stop and frustrate the inquiry. City were found guilty on three of the four co-operation charges and cleared on Charge 4(B). Chief executive Richard Masters called the case the most significant in Premier League history and said it showed City systematically broke the rules for nearly a decade. Man City 115 charges: What happens next

The commission has decided liability only. A separate private hearing before the same commission will set the sanction, with the available options including fines, points deductions and other sporting sanctions, up to expulsion. City must lodge an appeal by Friday, October 2, and a three-member Appeal Board, one of whom must have held judicial office, would hear it.

No dates have been set for the appeal or the sanction hearing. Under the Premier League handbook, an appeal hearing should finish within 12 weeks of the appeal being filed and run for no more than five consecutive days. Man City 115 charges: We say We say the £830.69m finding is the centre of the case, because the commission restated City’s accounts without it before applying the PSR and UEFA tests. It is not the only support, though, since the fair-market-value fallback would still have left City failing both tests. That means City’s appeal cannot rest on the tagged-sum finding alone, because it would also have to defeat the fallback.

City’s best point is that only a redacted core decision has been published, with 37 appendices still to come, so the full reasoning has yet to be tested in public. The hardest detail for City to answer is May 2013, when sponsorship income was raised to plug a £9.9m UEFA shortfall without the sponsors being approached. That sits badly with the claim that the sponsors always owed the full fees.