Inside the Everton Points Deduction Story: Are Man City and Chelsea Next?
Ben and Angus are joined by former Manchester City Financial Advisor, Stefan Borson, to break down the Everton points deduction and what it might signal for City and Chelsea.
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hello and welcome to the debrief live I'm anger Scots nothing was felt more on Gladis Street than the seismic shock of a 10-point deduction for Everton for breaching the Premier League's profitability and sustainability rules it was the biggest points penalty the league had ever handed out the ruling threw the tofes back into the relegation Zone one off the bottom on goal difference only and two points away from safety with 26 games left in the season Sha D may feel he has enough time to guarantee Everton's survival in the Premier League an appeal may help to but what are the implications what does it mean for Manchester City a club charged with more than 100 counts of Financial impropriety and waiting to hear its verdict from the Independent Commission in a moment lawyer Stefan borson will join us you may have heard him this week suggesting both Manchester City and Chelsea could be relegated were they to be found guilty of any charge remember but Chelsea haven't as yet been charged with anything by the Premier League Stefan is a lawyer and businessman and is a former financial adviser to Manchester City Fabrizio Romano will also be here shortly with news of what this means to Everton on the transfer market and also answers to questions about the likes of what next for Ruben NES Bruno Fernandez and Ivan Tony as ever Ben Jacobs is here today back from a week in the Florida Sunshine at the soccer X conference were you stuck inside most of the time Ben are you asking that because I haven't come back with a tan your tan is not as good as for britos as we will see in just a moment Ben um tell me a little bit recap what has happened to Everton and why yeah I think you summed it up quite nicely in your introduction but Everton have a 10-point deduction and it comes from breaching the Premier League's profit and sustainability rules and this was handed down from an independent Commission in March originally when the referral was made and finally ruled over the course of the last few days the original plan was to try and get a ruling either towards the end of the season or by June at the latest and that's significant because it may have allowed for that 10-point penalty to be deducted from last season in which case my club Leicester would have actually stayed up but instead it's been put on this season are now down to Joint bottom they're only not bottom because of goal difference but they stand a chance of still claing their way out and most importantly they will appeal so we don't know whether this 10-point deduction is final and that's quite an interesting debate because maybe it is Harsh and severe as a deterrent and to make a statement but ultimately Everton May succeed in their appeal and as a consequence we shouldn't look at this 10o deduction as being set in stone and the punishment comes from the fact that that premier league rules dictate that clubs can lose up to 105 million pound over a three-year cycle but there's certain mitigating circumstances that allow you to be more creative in layman's terms on the books especially during the covid pandemic and this is the period in question so Everton originally denied any wrongdoing and the Premier League maintained the everon were almost 20 million pounds over the agre limit for losses Everton then changed their tune slightly and accepted that there was a breach but it was just under 10 million and that there were substantial as they called it mitigating circumstances the costly project of their new stadium the impact of covid-19 and the fact that there were various sponsorship agreements that because of the war in Ukraine Everton had to suspend and those were linked with companies that were Affiliated to the sanctioned oligarch Alicia usmanov so that's Everton's perspective and they still stand by that and they believe that this punishment was unjust but the independent panel that's right Ben because one point of this is that they they felt the loans that they were taking out for the building of of the new stadium shouldn't be a part of this and it seems like the independent commission disagreed with that finding yeah the Premier League refer to the independent commission the independent commission determine that they were in breach and this is the biggest ever penalty from the Premier League so everon will appeal and that's a very key point in all of this because we're starting with this premise now again that the 10-point deduction is severe that it could result in relegation and so on but ultimately there's an appeals process and that has to run its course and I'm not too surprised that the independent commission have set a statement here because it becomes a deterrent for other clubs and we'll come a little bit later into how that ties into Manchester City and Chelsea the other thing just to outline for those that are unfamiliar with the story is that concurrent to this case another ruling was made public with a cluster of Premier League clubs who felt that they were impacted by the fact that everon were able to stay up and hadn't been punished and were prepared to take Collective legal action against Everton if found guilty and that includes for example my club Leicester leads United and Burnley Southampton and Nottingham Forest are the other two clubs and it's unclear yet whether they will all take Collective action but you could certainly argue that in 2021 2022 and because there was no punishment in that season the subsequent season Evon obviously stayed in the Premier League and they may not have done so in either of those Seasons if this type of points penalty stands so the clubs that went down in each of those Seasons particularly the ones in the final relegation spot in place of etton if this punishment was to be retrospectively done in those Seasons may have a case for compensation and that's Burnley and Leicester in particular but other clubs May argue that they're impacted by things like prize money even some of the clubs that went down if they were not in that final spot may also maintain that they have been negatively influenced by the fact that everon were able to stay up so there may be a concurrent compensation claim to the tune of about 300 million that Everton also have to deal with so it's going to be complicated it's going to drag on but I think we need to wait and see how successful Everton are in their appeal which is likely to be resolved before the end of the season okay well it' be a good time now to bring in Stephan borson who was a financial advisor to Manchester city until 2007 while he was working at investech he was uh engaged by them we should point out but not employed by the club and Stefan is with us now thanks for joining us on the debrief Stefan hi heying yeah very well it look it's complicated for a lot of people but um give us your understanding of why the premier league has handed out this or the independent Commissioners handed this out this this verdict out on Everton I I think it's an important starting point to say that the independent commission is uh independent of the Premier League and once the investigation had been completed and the complaint made by the Premier League uh the whole matter passes to an independent Commission and we have to trust that the independent commission is actually independent of the Premier League uh and therefore is providing something to the best of its ability uh something that's legally correct and something that is robust upon Challenge and really the nub of of how we end up in this situation in terms of 10 points and the sporting sanction is really around the assessment of the independent commission that Everton have had a sporting advantage and there's been some controversy I think around the Everton fan base as to whether that was the conclusion of the independent commission but it's very clear in the Judgment that the independent commission believes that over a period of Four Seasons because of the way that the numbers work in this situation with covid over a period of Four Seasons they have had a sporting advantage and in that scenario they believe that it's uh appropriate for there to be a sporting sanction and not merely a financial sanction and that's really where we see the step change from the way that UEFA uh has generally approached breaches of financial fair play where breaches have been generally settled by uh compromise and where P penalties have been largely Financial so the the key thing really is once you get to a point that uh an independent commission assesses that there's been a sporting advantage then then you're into sporting sanction and and there's no guidelines uh in the Premier League rules as they sit now Richard Masters did give evidence to the panel um to the commission about the the rules that he he appears to want to say have been put in place but don't actually exist which is a sixo penalty plus one point for every five million over the limit uh the independent commission rejected uh that assessment of the the penalty but uh surprisingly or or uh usefully came up with the same amount because it was a 20 million pound uh breach and so they added six plus four and came to 10 their own way but they were very clear that the Premier League's own approach to this was not the approach they were taking and they didn't want their discretion feted by uh potential discussions that have happened at Premier League level when they don't appear in the rule book it's interesting what you say about uefa's compromise one person's compromise is is is another person's fudge I I would suggest um but when we look at this point that the uh independent commission has made this is substantive this is the one of the most well the most serious points deduction that that has ever been handed down on a Premier League club let's look at it in the bigger uh picture and I've heard you say recently in the last few days that it were Manchester City and still uncharged Chelsea to be found guilty of anything then it's almost certainly a a relegation in Prospect for them such would be the uh huge uh amount of contradiction to the the rulings that that they may have committed look you've got to separate Financial fair play from the sorts of allegations that are made against Manchester City and that frankly admitted by chelc in respect of the off book payments so if we start with City the allegations are effectively that over an 11-year period the club has engaged in what can only be described as systematic uh accounting uh misdemeanors and um City have never shied away from that being the allegation that's been made to them if you were to read the Cass judgment you will see what city wrote uh about the allegations made at that point and the allegations are very similar in this situation so um these are the most serious allegations that can be made against uh companies and against individuals uh they are allegations of dishonesty of Deceit of concealment so it stands to reason and and frankly this is not a you know I've not waited to see what the evident judgment is from the very first moment in my view once you get to a point where those allegations are made over an 11-year period there can be no other conclusion that if proven and it is a very big if and I'll explain later if you want why it's a big if but it's a very big if but if it is proven there can be no doubt that such um such uh Behavior will be punished in the most severe way and it can only be relegation uh in my view uh but I do think that it is incredibly High hurdle that the premier league has just given the way that they one set the case up and two the sorts of things that they're alleging um with with Chelsea it's a similar situation you're talking about and in Chelsea it's it's even worse in some respects because it's admitted but you're talking about systematic concealment of off book effectively fraudulent transactions that make their accounts for a very long period from I mean we don't even know the extent of it but but something like a period of at least 10 years we met they make those accounts false they don't cover all of the costs of of the club at the time they are admitted and so you get to a point where the only conclusion of a panel can be uh the most severe uh sanctions and of course Chelsea will say that they should have uh mitigation for admitting these matters when and if they're charged and I'm pretty confident that they will be charged with these matters and they will seek mitigation for the fact that they cooperated and admitted these things and no doubt they will get some mitigation the problem that Chelsea have got is that the aggravating factors are so severe given what I've just said about concealment and the nature of the payments that have been made that it's not going to save them from the most severe sanctions from an independent Commission in my view can I just clarify one thing you said that you know we do differentiate between Man City and what's happened to Everton but is not part of the charge to Man City that they uh did not comply with the relegate regulations around Club licensing and financial fair play during three seasons 134 145 and 1718 which is similar to what Everton have been charged with it is but the the reality is that the breaches of the both the UFA situation and also of the Premier League situation in terms of the ffp regimes there they will be a consequence of a finding that the underlying matters I the sponsorship arrangements and the off- buug payments were proven in which case the the the matters the core matters the substantive matters to which they relate are far more serious than a breach of the the profit and sustainability rules so yes they will of course have some penalty in respect of those as well but the penalties that they're going to get in respect of if proven and as I say very very big if if proven the penalties in respect of those sponsorship agreements that are effectively alleged to be fake and of those off-book payments which are effectively alleged to be um off book the penalties in respect of those are going to blow out of the water any uh analysis of penalties in respect of the pns or UEFA licensing so that's why I focus in on the core substantive matters because once I if the Prem League fail to prove their case in respect of the substantive matters the sponsorships and the off-book payments then the whole thing Falls away and you are effectively just left with the non-cooperation charge which I don't think will uh receive a sporting sanction purely because of what I said earlier about the everon situation in that there's no sporting Advantage the cooperation situation is very much first of all it's very debatable one man's cooperation is is another man's obstruction and at the end of the day the likelihood is that there could be at least I would think at least a million pages of documents that are going to be in play on the city case we know from the etton case that just in the bundle that was there available to the hearing there was 28,000 documents not 28,000 Pages 28,000 documents and and in terms of the complexity of the situations the Evon situation is a walk in the park compared to the city one Stephan I just want to come and zoom in on each of the clubs one by one but before that I want to clarify your take on the word relegation in relation to either Manchester City or Chelsea if they are charged and we should stress that Chelsea haven't been charged yet with anything by the Premier League when you say relegation are you talking about a punishment that actually excludes potentially Manchester City from the club or just a default relegation because you think the points deduction would be so big I just think it's an important clarification because there's a lot being said on 30 points but if it's towards the end of a season when Man City have already got 90 points in the bag then you could deduct them 50 points and they still wouldn't go down look people are plucking numbers out the air nobody knows right there is no tariff okay so these are unprecedented matters it was unprecedented in respect of Everton they tried to look at um precedents such as the efl's um guidelines they they listen to the evidence given by the Premier League and they effectively ignored all of it and came up with their own tariff 30 points is plucked out of the air and and the reality is that I don't know whether it's going to be a 100 points relegation 50 points that gives them a chance of survival whatever who knows and frankly uh the only the people that know probably hav't hav't even been constituted at this stage because an independent commission will be set up it may or may not have been set up at this point we we have no information about when that hearing is going to be I have seen it reported that it will be in 2024 and it may well be but it may well be that if it is in 24 we still don't even know who the independent commission will be and we don't know how they're going to come up with their assessment if proven o of the penalty and there is another issue in respect of this and the relegation and and how that works because the independent commission will should not look at the timing uh of the football season and there is this sort of theoretical possibility that you have a situation where let's say um city or Chelsea and I accept what you say that Chelsea have not been charged and that is true and should be made clear um but let's say they they they're found against and let's say that the punishment is relegation but let's say the independent commission by the time that they've come up with their judgment just happen Happ s to come out with that judgment on the 1st of September so the season just kicked off and it says we're relegating Manchester City well then what happens The Season's just started are we expecting City to play the entire season out and then get relegated or let's say another scenario where City uh get uh City or Chelsea get a 100 Point deduction um in May so the so the independent commission is very kindly has very kindly waited till the end of the season they've said right it's 100 points you are therefore relegated and you're relegated in the forthcoming season the season starts and City go for an appeal and the appeal says we don't know what the independent commission was was looking at here of course these matters are not proven uh they're not relegated anymore well they've already gone down into the lower division so the point I'm making is nobody knows right nobody knows how it would be constructed how many points it might be how uh the appeals process will fit into it how the independent commission is going to deal with the timing issues nobody knows this is all completely unprecedented there is no guide book for it there is no rule book for it everybody is making up as they go along and and the amazing thing is that even the Premier League is probably very very nervous about the outcome of its own complaint you know we've got this very strange situation where although I think the Premier League is comfortable that it's taken action aggressively against one of its clubs in city and as I say I expect to do so against Chelsea I think the big issue uh that the premier league has got is that it's going to be very hard to contain the consequences of this situation in an orderly manner because You' mentioned just earlier about compensation for clubs the rule book says in in uh in rule 51.5 W 51.5 as you refer to the other um um judge that was given at the same time as the Evon judgment it says that the independent commission can award compensation to other clubs or persons now in the scenario let's say that we're talking about City let's say those those matters are proven they're proven over 11 years the number of clubs that might have a claim I mean it doesn't it's impossible to kind of figure out how an independent commission can possibly