Man C being investigated of financial deception by the European Commission

 

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By Tony Attwood

In an extraordinary revelation that has only just been made public it appears that the president of the Spanish Football League, Javier Tebas, filed a complaint to the European Commission almost two years ago concerning the finances of Manchester City FC.  In response the club has said little other than the fact that it rejects the claims made against it.

Until now, the media has kept quiet about the affair, and indeed the English media has constantly been very restrained in investigating the growing number of legal cases that Manchester City are involved in – some of course, of their own making, and some brought against them by others.

But now PA Media is stating quite clearly that this complaint reveals that Manchester City have been using companies within the United Arab Emirates, which are part of the same group as that which own Manchester City, to move money back and forth.  The point  of the activity is to ensure that Manchester City’s financial balance sheet shows no breach of football governance rules and also meets other legal requirements.

A simple parallel would be that if I had a need to show that Untold Arsenal was a profitable operation, I might get another company of which I am a director, (let’s call it XYZ Ltd)  to buy advertising on Untold Arsenal at particularly high prices.   This might well be advertising which really is quite irrelevant to the needs of XYZ but it is bought and paid for.   XYZ can afford that advertising because it is making vast profits elsewhere (let’s say from the sale of the oil I have just discovered in my back garden) and wants to cut its tax bill.   So now XYZ reduces its profits, and hence the tax is has to pay, and Untold Arsenal shows a profit – but only pays a lower rate of tax.

In one sense this is legitimate.   Here are two companies (XYZ and Untold Arsenal) trading with each other, and if they agree to do the deal what’s wrong with that?

The answer is nothing is wrong if the deal is done for normal commercial reasons at normal market prices.   But if XYZ are paying £1m for advertising on Untold Arsenal where others pay £300, and if the advertising is pointless in terms of the operation of XYZ, you could see that the whole thing was arranged just to avoid paying so much tax.  In that case, the arrangements would be fraudulent.  

The latest in what seems to be a growing number of accusations against Manchester City and the City Group is that companies related to the club, which are registered in the United Arab Emirates, are helping Manchester City in a way that is similar to the Enron scandal.

In that case, as the Guardian points out, “Enron executives were found to have reaped millions by using a web of partnerships to generate false profits and hide the company’s true debt.”

In a press conference at the Financial Times Business of Football Summit, it was openly stated that “City have a lot of companies in their group which lie outside the City Football Group structure, extra companies where they put their expenses. These other companies lose the money but not the club itself. We have reported them…”

Then, in an enormously powerful comparison, the statement continued, “Do you remember the case in the United States? The Enron case. What they did, they got their losses and they put them into different companies. Well, it’s a similar case.”  Enron, the major energy supplier, you may recall, went bust in 2001 in the biggest corporate scandal in U.S. history

A further point here however, is one of accumulation.  As we know, Manchester City are still holding up the finalising of the case involving well over 100 charges against them brought by the rest of the Premier League.

In an article in the Telegraph these charges are spelt out as including “failures to provide accurate details for player and manager payments from 2009-10 to 2017-18… failures to comply with Uefa’s rules including financial fair play (FFP) from 2013-14 to 2017-18… breaches of the Premier League’s profit and sustainability rules from 2015-16 to 2017-18 and … failures to co-operate with Premier League investigations from December 2018 to February 2023.”

Now you may well remember that Uefa banned City from the Champions League for two seasons and fined them £25 million in a previous case.  However, the punishment was overturned by the Court of Arbitration for Sport primarily on the technical grounds that it was presented by Uefa to the court after the deadline for the case had passed.   Quite why Uefa took so long to present its case or how it could be so incompetent has never been revealed, and it is something that the media have generally chosen to ignore.  It might have been due to devices used by Manchester City to delay the case, although of course, I have no evidence of that, for it might also have been gross incompetence by the Court of Arbitration for Sport.  Which one, we don’t know.