Good day everyone,
I hope you are all well and had an excellent week, welcome to CryptoGod-1’s blog on all things sports. Today I will be doing a one off piece, away from my usual sports analysis and predictions, to look at the punishment Everton Football Club have been handed for breaching profit and sustainability rules.
10 Point Deduction
The news broke on Friday the 17th of November 2023. Everton Football Club have been handed heaviest points punishment in Premier League history. They initial reaction from the club noted how they were shocked and disappointed by the ruling and vowed to appeal the decision. It is a landmark ruling in terms of the Premier League given that clubs would be faced with a 9 point deduction if they entered administration.
With the financial issues surrounding the club, it was always going to be a difficult challenge to face but the club had always felt they were battling against unforeseen and unprecedented circumstances. The statement on the Premier League website reads as follows:
"An independent Commission has imposed an immediate deduction of 10 points on Everton FC for a breach of the Premier League’s Profitability and Sustainability Rules (PSRs).
The Premier League issued a complaint against the Club and referred the case to an independent Commission earlier this year. During the proceedings, the Club admitted it was in breach of the PSRs for the period ending Season 2021/22 but the extent of the breach remained in dispute.
Following a five-day hearing last month, the Commission determined that Everton FC’s PSR Calculation for the relevant period resulted in a loss of £124.5million, as contended by the Premier League, which exceeded the threshold of £105million permitted under the PSRs. The Commission concluded that a sporting sanction in the form of a 10-point deduction should be imposed. That sanction has immediate effect."
The news came as a disappointment to both the club's fan and directors, along with current manager Sean Dyche. It is believed that club director of football Kevin Thelwell informed Dyche of the commission's decision, to which the manager was extremely disappointed. The club released their official response to the announcement, noting they had remained open and transparent throughout the process and investigation, along with their intention to appeal the commissions decision.
Finally, Everton noted how they will observe with great interest how the decision's are made in other cases regarding profit and sustainability breaches in the Premier League. This is extremely interesting, as Manchester City are facing 115 charges in relegation to profit and sustainability breaches, while Chelsea are also being investigation for profit and sustainability breaches. The club will want similar if not harsher punishments for clubs who have committed worse, in what would be their opinion, breaches than Everton managed.
However, with the club's profit and sustainability coming in at a loss of £124.5m for the relevant calculated period, and the allowed threshold of loses sitting at £105m, they overshot their limit by around £20m or so. In the grand scheme of football where clubs are spending millions on transfers and wages, it seems a minimal figure with a harsh punishment.
How other clubs are punished and regulated will be a major indicator of how serious the Premier League intends to implement its profit and sustainability rules going forward.
Background
The first indication Everton were in trouble was back in March 2023 when in a statement released by the Premier League it was noted that Everton's breach of rules had been referred to an independent commission. This commission would assess the club for breach of Premier League rule W.3.4. The assessment period for which it is alleged that the Club was in breach of the rule was the period ending Season 2021/22. The statement in full read:
In accordance with Premier League Rule W.82.1, the Premier League confirms that it has today referred an alleged breach of the League’s Profitability and Sustainability Rules by Everton Football Club to a Commission under Premier League Rule W.3.4. The assessment period for which it is alleged that the Club is in breach is the period ending Season 2021/22.
Commissions are independent of the Premier League and member clubs. The members of the Commission will be appointed by the independent Chair of the Premier League Judicial Panel, in accordance with Premier League Rules W.19, W.20 and W.26.
The proceedings before the Commission will, in accordance with Premier League Rule W.82, be confidential and heard in private. Under Premier League Rule W.82.2, the Commission’s final award will be published on the Premier League’s website. The League will be making no further comment until that time.
Once this news broke Everton were very clear on their stance. The club felt that unforeseen circumstances, such as the war in Ukraine, had a major impact on the clubs finances. They feel their overspend came about partially from severing financial ties with Alisher Usmanov's holding company USM. The club had 15 commercial deals with USM along with a naming rights deal for the new stadium at Bramley Moore dock. This was worth £200m to the club and would have been activated once planning permission was granted.
Premier League Table
Looking at the bottom half of the league, it is clear to see the impact a points deduction has on the club. Everton have slipped from sitting in fourteenth with 14 points all the way down to nineteenth with 4 points. With the club having found a rich vein of form recently, winning five of their last seven, many will feel the club should have enough about them to emerge from this campaign with their Premier League status intact. Ten points is a big punishment, but the quality at the lower end of the league is lacking this season. Everton will believe they can survive, as even with the deduction they are only two points from safety with a much, much better goal difference.
Leicester, Burnley, and Leeds
Two of the sides relegated from the Premier League last season, there had been rumours of potential legal action being taken against Everton for the relegation of those other clubs last season. Everton managed to remain in the league with two points to spare as Leicester and Leeds went down alongside Southampton.
It is believed that a joint letter signed by Leeds chief executive Angus Kinnear and Burnley chairman Alan Pace made the Premier League aware of Everton's situation, as this issue goes back to the 2021/22 season where Burnley were relegated. Burnley may see this as a vindication with the club now sitting level on points with Everton and giving them more of a realistic chance to remain in the league this season.
However, with Leicester already in the Championship alongside Leeds, those clubs are considering their options and consulting lawyers about how they may respond to Everton's 10-point deduction. Leicester will feel they would still be in the Premier League had this points deduction been implemented last season, while Leeds could also argue their outlook would have been different last campaign and they too may have remained in the division.
The Foxes could bring a case through the civil courts against Everton, where they would only be able to seek financial reparations for the lost revenue associated with relegation. There is no outcome where Everton are immediately relegated and Leicester are reinstated back into the division.
There have been rumblings that Leeds, Leicester, and Burnley could look to sue Everton Football Club for the tune of £300million after the club were found guilty of profit and sustainability breaches. The three clubs have repeatedly expressed unhappiness that the Everton case was not dealt with last season and are understood to feel even more strongly following the guilty verdict. They are keen to pursue their threats over the summer to sue the club, with the figure mooted on a rough estimate of the £100m each club believes they lost from being relegated to the Championship.
The Road Ahead
A massive moment for the Premier League and their profit and sustainability rules. They have seen the biggest ever punishment in terms of points deductions handed out, and will look to further stamp their authority over the clubs in the league. As for Everton, the drama is far from over yet. They are still very much in the division with a great chance to avoid relegation this season, but with likely impending lawsuit the club will need to focus on ensuring their planned takeover from American investment firm 777 Partners is not derailed.
As for Manchester City and Chelsea, well, whether or not we can believe it, former Manchester City financial and legal advisor Stefan Borson fears for them and Chelsea after the news. The clubs are both under the spotlight for their own financial irregularities, with Chelsea faces issues from the Roman Abramovich era and Manchester City with their charges spanning from September 2009 to the 2017-18 season. Borson's opinion on the matter was very clear in his tweets.
His view is quite simple and informative, clearly indicating that if Everton get 10 points as a deduction for their crimes, both Chelsea and Manchester City could be facing relegation for theirs.
Chelsea brought the attention on themselves when new owner Todd Boehly instructed his club to inform the league of 'potentially incomplete financial reporting' linked to Abramovich's era while completing due diligence as part of the takeover. This irregularities are over a series of payments connected to former owner Abramovich who allegedly made use of several offshore companies to funnel money around and ensure his club was not 'overspending' in terms of profit and sustainability rules. In other, working around them.
As for Manchester City, their long list of allegation in terms of breached rules are as follows:
1. In respect of each of Seasons 2009/10 to 2017/18 inclusive, the Premier League Rules applicable in those seasons that required provision by a member club to the Premier League, in the utmost good faith, of accurate financial information that gives a true and fair view of the club's financial position, in particular with respect to its revenue (including sponsorship revenue), its related parties and its operating costs, namely:
(a) for Season 2009/10, Premier League Rules B.13, C.71, C.72, C.75 (amended to C.79 from 10 September 2009 for the remainder of Season 2009/10) and C.80;
(b) for Season 2010/11, Premier League Rules B.13, C.78, C.79, C.86 and C.87;
(c) for Season 2011/12, Premier League Rules B.13, E.3, 4, E.11 and E.12;
(d) for Season 2012/13, Premier League Rules 16, E.3, E.4, E.11 and E.12;
(e) for Season 2013/14, Premier League Rules 15, E.3, E.4, E.11, E.12 and E.49;
(f) for Season 2014/15, Premier League Rules 16, E.3, E.4, E.11, E.12 and E.50;
(g) for Season 2015/16, Premier League Rules 16, E.3, E.4, E.11, E.12 and E.50;
(h) for Season 2016/17, Premier League Rules16, E.3, E.4, E.11, E.12 and E.51; and
(i) for Season 2017/18, Premier League Rules B.16, 3, E.4, E.11, E.12 and E.51.
2. In respect of:
(a) each of Seasons 2009/10 to 2012/13 inclusive, the Premier League Rules applicable in those Seasons requiring a member club to include full details of manager remuneration in its relevant contracts with its manager, namely:
(1) for Seasons 2009/10 to 2011/12 inclusive, Premier League Rules Q.7 and Q.8; and
(2) for Season 2012/13, Premier League Rules P.7 and P.8; and
(b) each of Seasons 2010/11 to 2015/16 inclusive, the Premier League Rules applicable in those Seasons requiring a member club to include full details of player remuneration in its relevant contracts with its players, namely:
(1) for Seasons 2010/11 and 2011/12, Premier League Rules K.12 and K.20;
(2) for Season 2012/13, Premier League Rules T.12 and T.20;
(3) for Seasons 2013/14 and 2014/15, Premier League Rules T.12 and T.19; and
(4) for Season 2015/16, Premier League Rules T.13 and T.20.
3. In respect of each of Seasons 2013/14 to 2017/18 inclusive, the Premier League Rules applicable in those Seasons requiring a member club to comply with UEFA's regulations, including UEFA's Club Licensing and Financial Fair Play Regulations, namely:
(a) for Season 2013/14, Premier League Rule B.14.6; and
(b) for Seasons 2014/15 to 2017/18 inclusive, Premier League Rule B.15.6.
4. In respect of each of the Seasons 2015/16 to 2017/18 inclusive, the Premier League Rules applicable in those Seasons on Profitability and Sustainability, namely:
(a) for Season 2015/16, Premier League Rules E.52 to E.60; and
(b) for Seasons 2016/17 and 2017/18, Premier League Rules E.53 to E.60.
5. In respect of the period from December 2018 to date, the Premier League Rules applicable in the relevant Seasons requiring a member club to cooperate with, and assist, the Premier League in its investigations, including by providing documents and information to the Premier League in the utmost good faith, namely:
(a) for Season 2018/19, Premier League Rules B.16, B.19, W.1, W.2, W.12 and W.13;
(b) for Season 2019/20, Premier League Rules B.16, B.19, W.1, W.2, W.12 and W.13;
(c) for Season 2020/21, Premier League Rules B.16, B.19, W.1, W.2, W.12 and W.13;
(d) for Season 2021/22, Premier League Rules B.15, B.18, W.1, W.2, W.15 and W.16; and
(e) for Season 2022/23, Premier League Rules B.15, B.18, W.1, W.2, W.15 and W.16.
Historical Points Deductions
What makes this such a landmark case is the sheer level of points deduction applied to Everton. In the past there have only been three deductions in the league, with Middlesborough, Tottenham, and Portsmouth the culprits.
Tottenham were the first club sanctioned by the Premier League way back in 1994. The club was issued a £600,000 fine, being banned from that seasons FA Cup, and a 12 point deduction prior to the 1994/95 season commencing. This was due to financial irregularities committed several seasons earlier. That deduction was reduced to 6 points, before eventually being revoked entirely. The fine was later increased to £1.5 million, but the FA Cup ban was also revoked as Spurs finished the 1994/95 season sitting seventh in the Premier League.
Middlesborough were punish with a three point deduction for failing to fulfil a fixture against Blackburn back in the 1996/97 season. The club postponed the game, or so they thought, due to flu sweeping through the Middlesborough camp and a day before the game the club had 17 players out with the illness. They contacted the Premier League and were told a postponement was acceptable in extreme circumstances, and after sending over the medical records, the Premier League said they would contact Blackburn. However, Blackburn were never contacted and the rest is history, as Middlesborough manager Robson was called to a commission hearing where he was fined £50,000 and the club given their three point deduction. The club were relegated that season by a single point and although they were runners up in both domestic cups, the knowledge that fielding even a youth team would have kept them up will haunt the club evermore.
Finally, Portsmouth were handed the standard nine point deduction when they entered administration back in March of 2010. The club had the sanctions imposed on them after they opted to go into administration ahead of a scheduled winding up order from HM Revenue and Customs. This was down to overdue tax believed to amount to around £10m. Pompey had debts of about £65m at the time and was mainly down to the heavy investment made under Harry Redknapp. He guided the club to an FA Cup victory in 2008 but it was done so with a star studded squad which resulted in Portsmouth paying a whopping £55m in wages alone. The club was also docked 10 points in 2012 for a second administration, although at the time the club was in the Championship.
Check out my 2023/24 Season Predictions here: Predictions 23/24 Season
Have a great day, I hope you enjoyed the preview of the matches and get to see the games.
Peace. CryptoGod-1.
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