A 40-page report from an independent commission has laid out the inner workings of an alleged financial operation designed to disguise the true source of Manchester City’s funding. The ruling, which concludes that the club utilized sham contracts and misleading accounts, highlights how the ownership group sought to navigate Premier League and UEFA financial regulations. That is the Oxford English definition of the word “sham”. Which found Manchester City guilty of all charges related to serious breaches of financial rules, and all but one in relation to a failure to co-operate with the investigation, and that word appears eight times in the independent commission’s ruling published on Tuesday. The 40-page document makes fascinating reading. We break down the key findings from the document.
The commission noted that the term “sham” appears eight times in its findings, referring to acts of deception and false pretenses. The documentation traces how the Abu Dhabi United Group, which purchased the club in 2008, identified early in the 2009-10 season that achieving their competitive ambitions would require significant overspending. Faced with record-breaking financial losses that threatened to exceed the £140 million mark set by Chelsea in 2006, the club allegedly prioritized avoiding such thresholds. To cheat, trick, deceive, delude with false pretences; to impose upon, take in, hoax. It catalogues how the club’s owners, Abu Dhabi United Group, knew from the 2009-10 season that there would be major overspends if the club was to reach the level they wanted to get to. The problem became apparent very quickly for the new owners.
The Disguised Funding Scheme
- Base Fee: The portion of a sponsorship contract actually covered by the sponsor.
- Tagged Sum: The portion of the sponsorship value paid directly by the club’s owners.
- Objective: To provide the club with capital for player investment while creating the appearance of legitimate commercial revenue.
- Concealment: The scheme was periodically adjusted to prevent scrutiny and ensure that regulators remained unaware of the true source of funds.
Between 2009-10 and 2017-18, the club recorded nearly £950 million in commercial income. However, the report alleges that only £119.25 million originated from legitimate base sponsor fees, while £830.69 million consisted of “tagged sums” provided by the owners. This process allowed the club to present a misleading view of its financial health to regulators and third parties.
Project Longbow and the Fordham Arrangement
- Project Longbow: An initiative launched in 2012 intended to boost revenues and reduce operating losses; the commission found several elements were legitimate, though others were not.
- The Fordham Arrangement: A deal involving a third party, Fordham, described in the ruling as little more than a front to inject owner funds into the club.
- True Nature: The arrangement allowed funds to be classified as operating income, misleadingly concealing their origin.
- Financial Impact: The scheme resulted in over £73 million in falsely recorded operating income during specific reporting periods.
The report also details specific instances where the funding scheme was used to plug sudden shortfalls. In May 2013, as the financial year approached its end, the club realized a £9.9 million deficit against UEFA’s financial fair play requirements. Within days, modified sponsorship agreements were created to cover this gap, effectively “plugging” the shortfall without sponsors being meaningfully involved.
Beyond sponsorship inflation, the ruling points to other mechanisms used to bypass regulations, such as moving expensive player contracts or remuneration packages off the club’s balance sheet. The commission noted that it rejected Manchester City’s explanations for these arrangements as untrue, describing them as accounts concocted well after the fact to obscure reality. The club continues to deny the allegations, maintaining that the Premier League has fundamentally misunderstood the nature of its sponsorship agreements.
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