The independent commission’s “core decision” is a 40-page document which appears to confirm the worst interpretation of Manchester City’s behaviour. Central to the finding that the club were guilty of all charges of breaching the Premier League’s financial rules is the conclusion that City’s lucrative sponsorship arrangements were “shams”. When a member of the Abu Dhabi royal family, Sheikh Mansour bin Zayed al-Nahyan, bought the club in 2008 he set out “ambitious plans” for City.
But those ambitions could not be met by the finances then being generated. In the first instance the club relied on extra injections from Mansour, or “owner equity”. But according to the commission: “The club recognised that [this] was not a sustainable model”, and that with owner equity to be excluded from financial fair play rules it “needed to grow its commercial operations”.
One way of doing this, the club decided, was to “seek high-value sponsorship arrangements in the UAE generally and in Abu Dhabi in particular”. What resulted was what the commission call the “Disguised Funding Scheme” (DFS). Traditional sponsorship valuations would not be enough for City to meet their ambitions and forestall financial losses.
So City applied a different approach. In the words of the commission: “The club would enter into sponsorship agreements with Abu Dhabi sponsors which contained substantial [fees] at well above fair market value. However, the sponsor would not be liable to pay the recorded sponsorship fee, and would not do so.” Instead the sponsor would pay only a small percentage of the fee, described by the commission as the “base sum”.
The rest, or the “tagged sum”, would be paid for by Mansour, or at least the company that he had formed to control City, the Abu Dhabi United Group (ADUG). The DFS, the commission said, allowed the club to state that “its commercial revenues from Abu Dhabi sponsorship agreements (and so its income generally) were far, far greater than was in fact the case”, and also “conceal from third parties the true extent of the equity contributions in fact being made into the club by ADUG”. As a result, it said: “Each of the Abu Dhabi sponsorship agreements was a sham.” City had argued in their defence that sponsors had paid all the money but that the sponsors had required, “from time to time”, financial assistance from the Abu Dhabi government and its crown prince court to meet their sponsors’ obligations.
City’s argument therefore was that although money was given by the Abu Dhabi government to sponsors, the club was not involved. The commission calculated that, over the course of the nine seasons under investigation, from 2009-10 to 2017-18, City had booked £949.94m in sponsorship revenues from Abu Dhabi-based companies. Of that total, only £119.25m had been paid in “base fee”.
Extract — continue reading at the source.
