How Manchester City’s financial fraud was exposed: Explained

Manchester City are staring down the aftermath of one of the biggest financial scandals in Premier League history. After a lengthy investigation by an independent committee, the club was found guilty of 114 of the 115 charges brought against it, including serious breaches of the league’s financial rules.

At the heart of the case is the huge financial liability that followed City’s takeover of Abu Dhabi United Group (ADUG) in 2008. The money helped transform the club into one of English football’s biggest powers, but investigators discovered that hundreds of millions of pounds recorded in City’s accounts as sponsorship income were actually provided by its Abu Dhabi owners.

The central question was not whether City had access to vast wealth, but how that money got to the club and how it was accounted for. European football’s financial rules were designed to prevent wealthy owners from simply covering a club’s losses, allowing it to spend far beyond its own income. According to the panel’s findings, the City developed arrangements that allowed owner financing to be presented as commercial income.

So how did investigators uncover Manchester City’s financial fraud? The answer lies in leaked emails, sponsorship contracts, payment records, financial statements and internal correspondence that allowed investigators to track the money and piece together how the club’s finances were structured.

HOW WAS MANCHESTER CITY DISCOVERED?

The Associated Press reported that the investigation can be traced back to 2018, when leaked emails relating to Manchester City were published and raised questions about the club’s finances. A lengthy investigation and hearing into the club’s financial affairs followed, eventually leading to findings involving more than 100 alleged breaches of Premier League rules.

The period under review from 2009 to 2018 was also the time when City went from a club that had seen better days to one of the most powerful teams in European football.

ADUG was bought by City in 2008 and was eventually owned by Sheikh Mansour bin Zayed Al Nahyan, a member of the ruling family of the United Arab Emirates. The new ownership had ambitious plans for the club, but these plans required significant spending at a time when City were still making significant losses.

According to the Premier League, it was clear in the 2009–10 season that City would continue to lose money for several years. The league argued that the only way the club could maintain its planned spending was for ADUG to continue to provide “very significant sums”.

This created a major problem for City. If the money came directly from the owner, it could have implications for the financial rules the club was required to follow. The investigators therefore began to investigate whether the money recorded in the City accounts as sponsorship income actually came from the sponsors themselves.

FOLLOWING SPONSOR’S MONEY

This became one of the most important parts of the investigation.

Manchester City had business deals with a number of companies based in Abu Dhabi. According to the Premier League, these deals were valued significantly higher than what the companies themselves were actually paying.

Investigators described the arrangement as a “hidden financing scheme”. Under the scheme, sponsors would pay what the panel called a “base sum”, which was only a fraction of the sponsorship amount recorded in City’s accounts. A much larger ‘marked sum’, as claimed by the Premier League, was paid by ADUG.

In reality, investigators said, money from City’s owner was funneled to the club through commercial deals and recorded as sponsorship income.

The numbers in the investigation show the extent of the alleged collusion. Over the nine years under review, Abu Dhabi sponsors paid £119.25m of the £949.94m recorded in City’s accounts. According to the ADUG panel, it paid the remaining £830.69m.

The discrepancy became central to the case because it gave investigators a way to distinguish between money that appeared on paper to be commercial income and money they believed actually came from the club’s owner.

Alleged tagged amounts also increased significantly during the period under investigation, eventually reaching £134.73 million in the 2017-18 season. The Premier League said City had occasionally “enhanced” measures to make difficult questions less likely to be asked.

SHORTAGE OF £9.9 MILLION

One episode in 2013 provided investigators with a particularly clear example of how the scheme allegedly worked.

By May of that year, City were facing a £9.9m shortfall, which the Premier League said could leave the club in breach of financial rules. The investigation found that a number of modified agreements with Abu Dhabi sponsors were drawn up within days, despite the sponsors not being approached about additional payments.

The changes, according to the report, effectively covered up this shortcoming.

For investigators, the episode was significant as it illustrated the relationship between City’s financial demands and sponsorship arrangements. When the club needed more money to meet the rules, the value and structure of the deals could be adjusted to bring more money into the accounts without presenting it as a direct injection from the owner, according to the findings.

The club disputed this interpretation.

Manchester City said that its Abu Dhabi-based sponsors have requested and received financial assistance from the Abu Dhabi government from time to time to help them meet their sponsorship obligations. The panel rejected this explanation, concluding that it was created after the fact to cover up what it described as the reality of the funding arrangement.

PLAYER IMAGE RIGHTS

Sponsorship contracts were not the only part of the city’s finances investigated by investigators.

The jury also dealt with the so-called Fordham Agreement, which related to the image rights of the club’s players. The deal was seemingly set up to buy the image rights of City players from the club at what investigators believed to be artificially inflated prices.

The jury concluded that the arrangement was “little more than a presumption” and argued that it provided another way for the owner’s funds to enter the club while concealing where the money actually came from.

According to the findings, the arrangement allowed the city to present owner financing as operating income while removing some operating expenses from its financial statements. Investigators said this meant the owner’s money could be used to meet liabilities that would otherwise appear in the club’s accounts.

The panel found that operating income of £24.5 million had been incorrectly recorded and that operating costs of £49.414 million had been incorrectly excluded.

Together with the sponsorship arrangements, these findings formed part of a wider Premier League case that City did not simply receive large sums from their owner, but developed mechanisms to disguise the source and nature of this funding.

WHAT DID MONEY HELP THE CITY BUILD?

The financial measures came at a time when Manchester City were rapidly changing the landscape of English football.

The club signed the likes of Yaya Toure, Sergio Aguero and Kevin De Bruyne, while Roberto Mancini and Pep Guardiola were brought in to manage the team. City won three Premier League titles in the nine seasons covered by the investigation, including Guardiola’s first league title, and collected a host of other trophies.

The club also qualified for the Champions League in eight of those nine seasons, giving them access to another significant source of income.

This achievement is important to the investigation because the financial measures were not just about balancing the books. They helped to maintain the spending that allowed City to build a team capable of competing at the highest level, while the club’s success itself generated more commercial and competition income.

The Premier League’s case is therefore built on the relationship between the money coming into Manchester City, the way that money was recorded and the financial rules the club was required to follow.

THE CITY denies guilt

Manchester City have consistently denied wrongdoing and challenged the Premier League’s interpretation of sponsorship arrangements in Abu Dhabi. The club claimed that its sponsors received financial assistance from the Abu Dhabi government and that this assistance enabled them to meet their sponsorship obligations.

The commission of inquiry rejected this explanation, describing it as an account that was “fabricated long after the event” to cover up the reality of the funding arrangement.

City were found guilty of almost all of the more than 100 charges brought against him and now face the possibility of a severe punishment, including a ban from the Premier League among the potential sanctions. The club said it would appeal the findings.

But at the heart of the case is a fairly simple question: when Manchester City’s accounts showed hundreds of millions of pounds in sponsorship income, who was actually providing the money?

The investigators’ response was that Abu Dhabi sponsors paid only a small portion of the amounts recorded in the accounts, while ADUG provided the vast majority. The leaked emails opened the door to the investigation, but it was a subsequent review of sponsorship contracts, payment records and financial statements that allowed investigators to piece together what they described as a scheme to mask the owners’ funding.

This makes the findings significant. The problem was not just that Manchester City had access to an extraordinarily wealthy owner, but that investigators concluded that the club had developed a sophisticated way to make that owner’s money look like something else.

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