Everton, Manchester City, Chelsea and a new era of Premier League financial regulation

At a time like this, maybe a useful starting point is to recall the words of Ivan Gazidis, who, after eight years working as deputy commissioner for Major League Soccer (MLS) in the United States, was shocked by what he found when he arrived in the Premier League as chief executive of Arsenal.

“It’s a bit like the Wild West,” he said in early 2009. “I see practices here that would not be permissible in U.S. sports leagues.”

Historically, English football has shown little appetite for hard-and-fast rules on club ownership, club expenditure, homegrown players or much else. European football’s former president Michel Platini used to decry the “big liberalism” that was turning the Premier League into a billionaire’s playground where pretty much anything — off-the-scale spending fuelled by oil money at Chelsea and Manchester City, leveraged ownership under Americans at Manchester United and Liverpool — was deemed fair game until Portsmouth, having spent far beyond their means, went into administration and forced a reappraisal that was long overdue.

Until Friday lunchtime, that was the last time a Premier League club was docked points. In fact, it was one of just five instances in English top-flight history: Sunderland two points for fielding an unregistered player in 1890-91, Arsenal two points and Manchester United one point for an on-pitch brawl in 1990-91, Middlesbrough three points for failing to fulfil a fixture in 1996-97, Portsmouth nine points for going into administration in 2009-10… and now Everton 10 points in 2023-24 for breaching financial regulations.

Over the past decade or so we have seen:

• Chelsea banned by world governing body FIFA from signing players in 2019 after breaching regulations over signing youth players.
• Manchester City heavily sanctioned by European equivalent UEFA in 2014 for breaching its financial fair play (FFP) regulations before the emergence, four years later, of a series of damning allegations about their financial conduct, leading to a follow-up case at which they were fined £8.8million ($11m at today’s rates) for failing to provide substantial evidence.
• Sunderland given a six-figure fine for fielding an ineligible player (South Korean forward Ji Dong-won, who played four matches without the required international clearance).
• Bournemouth, Leicester City and Queens Park Rangers sanctioned by the English Football League (EFL) after breaching financial regulations when promoted to the Premier League.
• Watford fined £4.3million by the EFL in 2017 after Raffaele Riva, their chairman at the time, submitted a forged “bank guarantee” stating the owners had sufficient resources to fund the club during the promotion campaign that followed. Riva was also later fined and banned.
• Liverpool pay Manchester City £1million after their Premier League rivals made a complaint that their scouting system had been hacked.
• Manchester United unable to fulfil a home fixture against Liverpool following a demonstration by their fans against their owners.
• Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham fined a total of £22million for signing up to a short-lived “European Super League” project that posed an existential threat to club football as we know it.
• In the past few days alone, fresh allegations about financial malpractice at Chelsea during Roman Abramovich’s time as owner.

What we had not seen since 2010, until now, was a points deduction in the Premier League.

Even when West Ham United were fined £5.5million for breaking regulations on third-party ownership with the signings of Carlos Tevez, whose goals enabled them to stay up at Sheffield United’s expense in 2006-07, and Javier Mascherano, a points deduction was considered a no-go area.

It calls to mind a conversation with a club executive a decade or so ago as we debated the rights and wrongs of the Ji/Sunderland case. “Do we really want to go down that route?” the executive asked. “Do we really want the league table to be covered in asterisks because five or six clubs have been docked points?”

The dreaded asterisk is there now, the weight of it dragging Everton five places into the relegation zone. Their crime? Breaking the Premier League’s profit and sustainability regulations over a three-year period ending in the 2021-22 season. Specifically, according to the findings of a regulatory commission, the club exceeded the permitted losses by a sum of £19.5million and “submitted misleading information about the stadium financing costs”.

Even among rival fans, there was sympathy for Everton on Friday. Are financial mismanagement and errant book-keeping on this scale — an overspend of £19.5million higher than permitted over a three-year period in which the club finished 12th, 10th and 16th — really the most grievous offence committed by any club in the Premier League era?

It is a legitimate question, even if the relegated clubs from that period are entitled to feel aggrieved that Everton breached the rules in staying up at their expense.

Everton, who immediately announced their intention to appeal, called it a“wholly disproportionate and unjust” sanction, adding they would “monitor with great interest the decisions made in other cases concerning the Premier League’s profit and sustainability rules”.

So will everyone else. It is remarkable that the allegations made against Manchester City by German newspaper Der Spiegel in November 2018 — initially resulting in a two-year ban from UEFA competition in February 2020 that was overturned by the Court of Arbitration for Sport (CAS) five months later — took until February of this year to be referred to a Premier League commission. City are determined to defend themselves against the allegations and there is still no resolution.

Everton’s case was felt to be too complex for the commission to convene and reach a verdict by the end of last season — as clubs such as Southampton, Leeds United and Leicester, who all ended up relegated, had requested — so it is hardly surprising that Manchester City’s case, involving 115 alleged breaches, is proving more complicated.

But some of Manchester City’s alleged infringements date as far back as the 2009-10 season. In the intervening period, they have gone from a chaotic club with a wealthy, ambitious owner to the dominant force in English and European football, winning the Premier League seven times (including five of the last six), the FA Cup three times, the League Cup six times and the Champions League once.

This week Manchester City reported an annual revenue of £712.8million, a record for an English club, but there are still 115 unanswered questions over whether this modern-day sporting empire was built in accordance with regulations. The club deny any wrongdoing, but the CAS hearing in July 2020 left no doubt over the authenticity of the hacked emails published by Der Spiegel that suggested they broke rules. Manchester City’s legal team have challenged the emails’ admissibility at every turn, first with UEFA and more recently with the Premier League.

City have enjoyed incredible success but remain under investigation (Franck Fife/AFP via Getty Images)

As for Chelsea, they have not disputed the reports made in a variety of global newspapers this week relating to payments allegedly made to various parties by Abramovich-owned companies to various parties linked to deals that appeared to benefit the club.

Those reports were part of the “Cyprus Confidential” project, based on 3.6million offshore records leaked to the International Consortium of Investigative Journalists and Germany’s Paper Trail Media. Chelsea say the allegations are “based on documents which the club has not been shown and do not relate to any individual who is presently at the club”. But the new owners at Stamford Bridge had already contacted UEFA, the Premier League and the English Football Association (FA) to alert them to incomplete financial information relating to various transactions under Abramovich between 2012 and 2019.

How did English football end up like this? By turning a blind eye, frankly. By allowing a “Wild West” culture to take hold, allowing clubs to be bought by individuals or entities it knew little or nothing about — and whose business dealings they struggle to monitor accurately, let alone regulate.

And that brings us back to Everton. For all the genuine sympathy felt by many over the points deduction, for all the us-against-the-world instinct that will grip their fanbase, the real grievance felt by their supporters should still be — as it has been all along — the shoddy, shady way in which a proud club has been mismanaged in recent years.

The commission’s report underlines a series of uncomfortable truths that the fanbase has echoed when the conversation has been about the need for regime change, rather than sanction: 1) “mismanagement” in running up such big losses; 2) “recklessness” in continuing to sign players in 2021-22 “despite repeated warnings” by the Premier League, 3) a business plan that relied so heavily on the largesse of USM Services Limited, registered in the British Virgin Islands and owned by Alisher Usmanov, one of the oligarchs sanctioned by the UK government after the Russian invasion of Ukraine.

Again, how did English football end up like this? Again, by turning a blind eye. By convincing itself that any cash was good cash, rarely stopping to worry about what entanglements might come with it.

That applies to numerous clubs, via both owners and sponsorship. But it also applies to English football as a whole, with too much time spent admiring the talent on show in the Premier League and not enough time wondering whether the game was becoming ungovernable, taken over by individuals and authorities far beyond its occasional scrutiny.

Slowly but surely, there have been moves towards tighter regulation. But they have gone against the grain for English football.

For years, Premier League clubs saw UEFA’s FFP initiative as an attempt to clip the league’s wings. Likewise the quotas on homegrown players. Even some of the old-school English owners, with nothing like Abramovich’s deep pockets, didn’t like being told their club couldn’t run up big losses year after year. This drive towards sustainability felt like anathema to many.

In a way, it still does. There is still a feeling among many that accountancy should form no part of football. Why, after 125 years of league football in England, were clubs suddenly being told they could only spend within certain arbitrary limits? If a rich man wants to bankroll a club, allowing it to spend beyond its means, isn’t that up to him?

The initial intentions behind FFP seemed honourable enough. But the version that emerged, once the most powerful European clubs had their say, was deeply compromised and deeply flawed. The past decade has illustrated that.

But it’s that “Wild West” thing again. Particularly in the Premier League, the sums involved spiralled out of control as clubs were passed on from local businessmen to anyone from Russian oligarchs to American venture capitalists to Middle Eastern sovereign wealth funds. It made for chaos and instability as the stakes got higher and higher.

Think of the extent to which Everton spent beyond their means between 2016 and 2022 — and now imagine how recklessly owner Farhad Moshiri might have spent had there not been financial regulations to comply with, however loosely.

Everton’s owner and board members were warned. They were already close to their break-even limits in the summer of 2020 when, to the astonishment of some of their rivals, and with their revenue streams severely compromised by the COVID-19 pandemic, they signed Ben Godfrey, Allan and Abdoulaye Doucoure and James Rodriguez, adding £16million to their wage bill and making a loss of £120.9million.

Rodriguez became a symbol of Everton’s excess (Tony McArdle/Everton FC via Getty Images)

Part of Everton’s defence rested on the fact that every new signing they made in 2021-22 had to be approved by the Premier League under the terms of an agreement at the start of that season. The league says it kept spelling out that it was “not managing Everton’s finances and that it was for Everton to ensure that it complied” with the break-even targets.

It reads like it’s a parent trying to teach a child not to spend all his/her money in the sweet shop. Except in the case of Everton’s transfer business under Moshiri, the feeling of gratification rarely lasted as long as a sugar rush.

That is the most pitiful thing about Everton’s case: all that excess spending, which put the club at serious risk, brought so little reward by way of reward. Seventh in year one, under Ronald Koeman in the 2016-17 season, remains Everton’s highest finish since Moshiri bought shares in Everton. They have not got beyond the quarter-finals of any cup competition in seven years. A 10-point deduction in either of the last two seasons, which were spent battling grimly against relegation, would have sealed their fate.

This year? Going by their recent results under Sean Dyche and the struggles of the promoted teams, they could well be fine.

It raises the question of the “sporting benefit” of Everton’s spending. The commission report suggests a club breaching the regulations must inevitably have enjoyed advantages it would not otherwise have had — and that this advantage would usually be “to the detriment of competing clubs who have managed their finances more responsibly”. It adds that the sanction “must ensure that the defaulting club does not retain a benefit at the expense of other clubs” and “must act as a deterrent to clubs that might be tempted to breach” in future.

And just as inevitably, that raises the question of what kind of sanctions might be imposed Manchester City could face if they were found guilty of even one of their 115 alleged breaches — and likewise Chelsea if they too are referred to a regulatory commission. It barely even seems worth speculating. If this new hard-line approach is the way forward for the Premier League, it really is anyone’s guess, particularly if “sporting benefit” were brought into the calculation.

There are already plenty of rumblings about the Premier League having opened an almighty can of worms here, stirring up a hornets’ nest and inviting the kind of chaos that feels unavoidable once you have determined that a breach like Everton’s merits a 10-point sanction.

Some within the game wonder whether, in trying to flex its muscle as the UK government attempts to introduce a football regulatory body of its own, the Premier League has thrown itself into a series of bruising battles, some of which it will not win.

But the alternative is just sticking to the path of least resistance. And that doesn’t seem like an option anymore. If the rules exist, they have to be enforced rigorously and consistently for the integrity of the competition. Otherwise, it really will be the Wild West.