Summary of the Commission decision, aggravating factors, mitigation claims and the sanction

Trying to condense 28,000 documents, several months of pre-commission preparations and five days of complex legal argument into something that is (i) readable but (ii) an accurate representation of proceedings is quite a challenge. I’m going to deal with the introduction, the aggravating factors, the mitigating circumstances, the decision and then the sanction or penalty (depending on what side of the argument you sit).
In other, later articles I will go into the details, particularly those of the stadium financing which is quite fascinating in that it says so much about how the club was run during the peak Moshiri, Kenwright,Baxendale years.

In the meantime here’s the summary – it’s the views of the Commission, not mine!

The complainant (The Premier League) alleged that Everton were in breach of its Profitability and Sustainability rules (PSR). The Premier League’s case was that the proper calculation for season 2021/22 showed Everton’s losses to be £124.5 million. Rule E51 permits losses of £105 million. Therefore Everton’s losses exceeded the maximum permitted by £19.5 million.
By the conclusion of the hearings, Everton accepted that it was in breach, however arguing that the breach was £9.7 million albeit with significant mitigation.
The initial submissions following the Complaint (24 March 2023), the Answer (29 April 2023) and the Reply (26th May 2023) were significantly amended from 4th October 2023. The hearing took place on 16th-20th October 2023.

The aggravating Factors:
ThePremier League advanced four separate factors that it says aggravates Everton’s “default”

That Everton overspent despite repeated warnings.
An agreement reached on 13 August 2021 placed certain obligations on Everton, one of which was the requirement of Premier League permission for new signings. The Premier League approved each request but cautioned Everton that it was the club’s responsibility to make sure it complied with PSR
The Premier League asserts it was “reckless” to have continued signing players in the face of their warnings.
To a degree this is balanced by whilst acknowledging Everton took unwise risks in the belief it would achieve compliance, this was not a deliberate breach by Everton.

Extent of the breach of the PSR threshold
The Commission will take the extent of the breach of the PSR threshold (£105 million) as an important indicator of the level of culpability.

Misleading the Premier League about stadium interest
The Premier League complains that Everton deliberately misled about the source of funds for the stadium development. Everton had two sources of funds – Moshiri’s interest free shareholder loans (albeit not charge free) and commercial loans from Rights and Media Funding and Metro Bank. By applying the costs of the commercial loans to the stadium development company, the Premier League complained this was deliberately misleading. The commercial loans were for working capital purposes within the club.
Importantly the Premier League makes no allegation of dishonesty. However by providing materially inaccurate information there was a breach of utmost good faith as imposed by Premier League Rule B15.

Misleading the Premier League about the intent to sell Player Y
In its full year 2022 PSR submission Everton identified player Y as being one of the players it had targeted for sale, but had been unable to do so. The Premier League asserts this was false.
Player Y had originally appeared in Everton’s summer player trading strategy paper as a player to sell (paper dated 13 March 2020). However in a series of documents from April 2020 his name was no longer included.
Everton explained this was due to his potential sale being handled by Bill Kenwright and as a result was not on the list. However this did not mean the club were unwilling to sell him. Additionally the player was granted a new contract during the summer 2020 transfer window.
The Premier League argued this demonstrated that Everton’s submission was false. The Commission disagreed, finding that had Everton received an appropriate offer, Player Y would have been sold. As a result the commission agreed this was not an aggravating feature.

Mitigating Factors
Everton advanced six mitigating factors.

Post planning permission interest
Everton relied on an argument that after planning permission had been obtained substantial amounts of interest could be capitalised (thus being removed from PSR calculations). Everton chose not to capitalise the post planning permission interest expenditure in order to assist their prospects of securing the senior debt package it was seeking.
As a result the Commission thought it inappropriate to raise in mitigation a position that not only did not take place but would not have taken place.
In the view of the Commission, this was not a mitigating factor.

Positive Trend
Everton argued that its PSR calculation showed a downward trend for losses, pointing out that the EFL allows credit for such. The Premier League challenged this as mitigation, claiming you could not use this as no such rules existed in the Premier League. Additionally the downtrend was a result of averaging FY 2020 and 2021. Finally that trend reversed in 2023.
The Commission largely agreed with Everton and concluded that the improving trend goes some limited way to diminish Everton’s culpability.

Player X
Everton claimed it deserved credit for not pursuing an economically viable claim against Player X (Everton had decided not to sue Player X for breach of contract on the grounds of his mental health)
Everton asserted it had suffered a loss as a consequence,
The Commission argued that this business decision could not stand as mitigation. Secondly there was no evidence of his psychological state at the time the decision was made and thirdly the £10 million claim made by Everton was speculative.
As a result the Commission refused to accept this as mitigation.

Everton claimed that the Russian invasion of Ukraine was a mitigating factor. Everton had the right to call down a naming rights agreement with USM worth £10 million a year. It was expected to come into force in the 2025/26 season. Everton claimed in mitigation that it was in negotiations to bring the agreement into force earlier, commencing in 2022. The sanction of Russian entities by the UK Government brought these negotiations to a halt. Everton felt it had no alternative but to withdraw from the negotiation.
The Commission agreed with the Premier League that this could not stand in mitigation. Firstly there was no certainty in reaching an agreement. There was no documentary evidence that the receipt of monies was probable. Secondly, this type of event was normal business experience. It could not diminish Everton’s culpability.
Additionally the argument that the invasion of UKraine caused stadium construction costs to increase and therefore harder to secure senior debt could not be considered as a mitigating factor.

Impact of Covid on the market for players
Everton planned to sell players in the 2020 summer transfer window. Marcel Brands placed values on eight players who were targeted for sale at a total value in excess of £80 million. In the event sales did not take place as projected, Everton arguing that the failure was caused by the depressed market as a result of Covid.
The Premier League argued that the difficulties Everton faced was largely due to there being no ready purchaser for those players at the prices Everton sought. Everton’s difficulties arose from market forces.
The Commission accepted the Premier League position and as a result disallowed this as a means of mitigation.

Transparency and cooperation with the Premier League
Everton asserted it had behaved openly and responsibly in its dealings with the Premier League. As a result that should be to its credit.
The Commission recognised that Everton engaged extensively in the problems relating to the inability to capitalise pre planning permission expenditure. However, Everton acknowledged that some of its claims were novel, and some were dropped shortly before the hearing. Additionally the Commission had found Everton’s conduct not to be in compliance with the obligation of utmost good faith.
The Commission found that Everton’s dealings with the Premier League were not of such an exceptional nature as to stand as mitigation of Everton’s culpability.

Sanction, the nature of the sanction
The Premier League submitted that the nature of the sanction could only be a sporting sanction in the form of a deduction of points.
The Premier League relied upon the decision in Sheffield Wednesday FC v The Football League Ltd, that a sporting advantage is to be inferred, therefore anything other than a points deduction would be inappropriate.
Everton disagreed, claiming a financial penalty would meet the justice of the case. If some form of sporting sanction is required, then a transfer ban should be considered.

Two points to consider – it is already established that Everton had no quantifiable sporting advantage, so why is Sheffield Wednesday FC v The Football League Ltd relevant?. Secondly and most importantly if the disqualification for a financial penalty is having “very wealthy owners” how does that fit with the financial punishments handed out to the breakaway six after the aborted attempt at a breakaway league?

The Commission agreed with the Premier League that the requirements of punishment, deterrence, vindication of compliant clubs and the protection of sporting integrity required a sporting sanction in the form of a points deduction.
The issue then is not the form of sanction but its extent.
The Commission justified its decision in the following way: There is no fixed formula to be applied. They could (and did) exercise their discretion as a specialist panel.
The Commission determined that Everton overspent, not because of the stadium development but due to the purchase of new players and the failure to sell players. Additionally the lower League places (16th as against a projected 6th) caused a loss of expected income of £21 million. Everton’s understandable desire to improve on-pitch performance led to taking chances with its PSR position. Those chances resulting in the £19.5 million overspend in exceeding the £105 million limit.
The conclusion drawn by the Commission is that Everton were responsible for their own position. It was of their own making and the consequence of their culpability was great. Furthermore Everton were (in the Commission’s eyes) less than frank over the stadium interest issue.
In the view of the Commission this was a serious breach that requires a significant penalty, a sporting sanction of ten points

I stress that the above is a summary of the findings and decision of the Commission – not my own views!

Everton, rightly are to appeal.

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25 replies »

  1. Sorry Paul,not sure my earlier reply was sent. Briefly, what do you believe Everton’s chances of having the points deduction reduced on appeal?

    Secondly, Who conducted Everton’s defence of the charges bearing in mind the main protagonists have been removed ie DBB and Grant Ingles?

  2. This mess typifies the performance of our whole board of directors – amateurish in every single respect despite the comments and glowing references of “wealthy” Mr Moshiri. I’m astounded that a man of Moshiri’s background that he failed to consider the impact of his pre-planning consent expenditure on PSR and how did our auditors not give advice about the treatment of said expenditure. Treat it as a prepayment and capitalise it after consent is given – get it underwritten by Moshiri so the Company is not saddled with expenses. Moshiri could have setup another company to take the cost and then Everton buy that company for a price to cover those costs once planning consent was given. Naive, incompetent management lacking forsight and experience.

    Sort out this timing difference and everything else disappears.

    I’m confident that we will survive if the 10 point penalty stands although a good and solid defense will hopefully reduce the penalty. At least the monkey is off our back on this problem leaving just 777 to be resolved.

  3. A thorough and dispassionate review, level headed, non judgemental. Balanced. Personally, it looks to me that our points to the commission have not been put well. As has been commented elsewhere, maybe this is due to arrogance or an unprofessional presentation. Bearing in mind the lack of professionalism in other parts of the Boards dealings, an the generally amateurish approach of those involved, I suspect the commission took this in to account in the judgement. Next Tuesdays meeting of the Premier League members will be interesting, I am hoping that a balanced discussion takes place and that other teams under the spotlight get equal treatment. I do hope that the club appeal the decision, and that the appeal is presented in a more professional manner. I have been on both sides of appeals, and during the appeals process it has become apparent as to whether or what outcome is likely. If there is no prospect of success in the appeal, whatever amounts to success, then we should just move on, as unpalatable as that is.

  4. „ The conclusion drawn by the Commission is that Everton were responsible for their own position. It was of their own making”

    Hard to disagree With that to be honest

    • I don’t think anyone, even Everton, dispute the fact that the situation was of its own making. However, that does not mean that the “independent” Commission can hand out whatever sanction it wishes. Any review of the report published by the PL confirms that it is both unsupported (by PL Rules, by legal precedents etc) and that it has no basis in logic or fact. For example, and as Paul noted in the podcast, the Commission recognises that Everton gained no sporting advantage and yet it has imposed a sporting sanction – with its only justification for this being that Moshiri is a very rich man and so a financial penalty would not have any impact. Similarly, the Commission rejected the PL’s proposed formula for calculating the points deduction (as they correctly stated that it was not in its Rules, and therefore not known to Everton) and yet it then arrived at the same points deduction (10) that it would have if it had used the formula; and it provided no other basis for its calculation. To me, the club breached the PSR and then tried to back-fit the interest calculations etc into its book to try to avoid the consequences – therefore, and although some of the mitigating factors (eg. Ukraine & Sigurdsson etc) should have been considered in the context of the extent of the breach – we should still have got some form of penalty/sanction. However, the PL has simply engineered this to give the outward impression that it can self-govern, and so does not need an independent/governmental regulator. Everton should appeal, but it should do so based upon the basis/quantification of the penalty; and maybe it should also refine its arguments in relation to some of its more plausible mitigation points.

      • The Commission unequivocally found that Everton derived a sporting advantage through excessive spending during the period in question (4 years). Please read §95 of the judgment. As a consequence, a sporting sanction was deemed appropriate. The level of that sporting sanction (points deduction) was then determined with reference to the severity of the breach and any mitigating/aggravating circumstances. Quite clearly, Everton’s less than frank cooperation with the PL went against them and its hard to argue against that.

      • LG, If you think anything within that report is either unequivocal or substantive (or reasonable), there is no point in debating any further – and I say this as someone with a legal background. My comment related to substance and quantum of the penalty/sanction – and it also clearly states that I agree that Everton breached the PSR and so should have been penalised. However, plucking a number out of the sky (or implicitly using a formula that is acknowledged to be irrelevant) is not the way to reasonably determine the penalty. NB. I have read the report at length & know it’s a poor ruling, and so don’t intend to comment any further on it/respond to anything you may care to post. UTFT.

      • GGse3, I have no interest in a debate, simply to point out your error in asserting that the Commission ‘recognises that Everton gained no sporting advantage’ when §95 is unequivocal about the Commission’s view that Everton derived a sporting advantage from its PSR breach (4 year period). With your legal background, I can only assume you have not read that section of the Commission’s decision. As I previously pointed out, the Commission’s view that Everton derived a ‘sporting advantage’ led it to a finding that a sporting sanction was appropriate. I agree that the Commission could have been clearer about how it reached the 10 points figure. LG

  5. Thank you Paul for the summary. I am enjoying listening to your discussion with Andy and George as I try and take in all the relevant points. I have seen a few references to the commission stating that we (Everton) have not gained any sporting advantage but cannot find any reference to this in the report. Would be most grateful if someone would point me in the right direction. UTFT 💙

    • Hi Rob, My apologies, I published the wrong draft, my final draft used the term “no quantifiable sporting advantage”. I have amended the article. The argument being if you can’t quantify the advantage, which is there just as a general principle and is not quantified/backed by evidence how can it form part of the justification for the sanction.

      • Hi Paul, a very useful summary but your argument here is weak. First, despite what seems to be doing the social media rounds, the Commission did find that Everton derived a sporting advantage from their excessive spending over a 4 year period. That point should be recognised in your summary as it is a crucial finding by the Commission.

        Second, I don’t think anyone can dispute (unless you are disputing this point?) that a club that spends excessively beyond what is permitted (inc on transfers and wages) derives an advantage over those clubs that complied with the financial rules (even if in Everton’s case that spending was poor). Linked to this point, are you positing that the ‘sporting advantage’ should be quantifiable for it to be taken into account when determining the type of sanction? Is it not sufficient for the Commission to acknowledge that the sporting advantage existed?

        Third, once the Commission determined that a sporting advantage had been obtained, it deemed it appropriate for a sporting sanction to be administered (whilst acknowledging other sanctions, i.e financial, would not be appropriate). When quantifying the level of sporting sanction, the Commission did not need to quantify the level of sporting advantage obtained. Its focus was on the severity of the breach (which was considered to be substantial as Everton were £19.5m over the ‘generous’ upper threshold of £105m losses) and any aggravating/mitigating factors that impact upon the club’s culpability.

        Are you suggesting that quantifying the ‘sporting advantage’ is of any relevance to determining the level of sporting sanction i.e number of points deducted? i think this would be flawed, if so. It would give rise to a situation whereby a huge overspend beyond the 105m threshold could receive a lesser sanction than a minor overspend above the 105m threshold when the former club performed well and the latter poorly. In effect, clubs would be punished based on how ‘well’ or ‘poorly’ they overspent, when they are being punished for the overspend, irrespective of how it was spent.

      • Hi Paul. Many thanks for your response. Firstly, I would like to apologise also as I was in no means wishing to undermine anything you had presented in your well-crafted commission report summary. On the contrary, as a fellow passionate blue, I was attempting to clarify this position of ‘Sporting Advantage”. Alan Myers (Sky Sports) in his Reporter Notebook article (Saturday 18 November) also stated, ‘Indeed, even the commission itself said the club had not breached the rules to gain Sporting Advantage’.

        Secondly, It would appear that David Phillips KC and the commission have left the door wide open for clubs like Leeds Utd and Leicester,etc. to potentially gain financial compensation from EFC going forward (citing Sheffield Wedneday v The Football League Ltd). I wholeheartedly agree with you that if you are unable to quantify the sporting advantage then a financial penalty in place of a points deduction should have been the appropriate outcome.

        One final thought Paul, of the three men who made up the Commission, Nick Igoe was the West Ham Utd Finance Director at the time of the Carlos Tevez affair (as per your X post Friday 17th November) and David Phillips KC represented Ken Bates’ Leeds Utd in the 15 point controversy following breaches in financial rules (2007). Enough said!

        Keep up the good work and your good health.

        UTFT 💙

      • I’m struggling to agree with this point. If you read section 14.91 it states further, as was recognised in sheff wed case etc etc a breach if PSR WILL confer a sporting advantage on the defaulting club to the detriment of competing clubs who have managed their finances more responsibly.

        The fact that the sporting advantage cannot be quantified but must be inferred etc etc

        I’m no lawyer but that says to me that the independent commission thinks a sporting advantage has been gained opening the door for aggrieved clubs to sue?

        Your thoughts on my interpretation ?

      • Hi Paul. The report stated that the PL suspended player X. Do you know if that suspension was lifted ,if so when ? When did they inform EFC ? Have they informed the player that the suspension has been lifted as he is now in foreign parts.
        I note that the PFA have to be advised and give approval of chair positions in disputes ( Z1.2) Did they ?
        Do you know if teams who accepted Furlough monies have declared that in their PSR remember Everton paid staff themselves
        The report also states the PL devotes considerable resources to monitor PSR. Why so late with Manchester City
        Also I am aware that minutes of contentious meetings are always slanted to suit the authors.
        Minutes also state that PL promote similar objectives to UEFA . Why did UEFA prosecute Manchester United instead of the PL
        Possible further costs for EFC are the costs of the commission and all the staff that dealt with the amount of paperwork submitted.
        And they thanked themselves in the minutes

      • LG and Chris Neil. I suggest you take a look at section 104 of the report and maybe you will be able to understand a little clearer! UTFT 💙

      • Rob, I think it is you that needs to read §104 again to enhance your understanding, not me. Commission held at §95 that a club derives a sporting advantage from a PSR breach over those that are compliant. Therefore, Everton did gain a sporting advantage! Ok, that is settled. Next issue.

        Essentially, at §104, the Commission held that an excessive breach of the threshold could indicate a *deliberate* attempt to gain said sporting advantage and could increase culpability. Therefore, a club that overspends by say £300m could get a harsher punishment than one that overspends by £30m. However, in Everton’s case, the spending was reckless (because club knew PSR calculations were tight) but the Commission did not consider Everton deliberately tried to gain a sporting advantage by overspending and therefore didn’t find this an aggravating factor.

        I also think this section of the decision has been misinterpreted by Paul. The Commission were not quantifying the sporting advantage gained, they were assessing the level of culpability in obtaining the advantage that derived from the PSR breach. Happy to have clarified. LG

  6. Thank you so much Paul. So much easier to read than the commission’s legalised report. I can’t stop thinking that us Everton fans have been totally vindicated for challenging our Ownership/Board for mismanagement but the Premier League have wrongly administered a sporting sanction which hurts no one but the players/fans. Why not a fine, transfer embargo, individual bans for our Board members for not being ‘fit and proper’ to operate a football club? – place the blame where the blame lies. Finally, this case opens a can of worms for the Premier League in that it has tried, far too late, to demonstrate their case for remaining their own regulator but the lack of fairness and transparency is in plain sight and could well lead to a raft of challenges over their handling of other issues and avoidance of others. Reap what you will sow. Keep up the good fight Paul – excellent stuff.

  7. Thank for the insight Paul.

    I pick a few things out out that. And I’m not being defensive with Royal Blue tinted glasses.

    I accept we were given warnings. Yet we were given approval to proceed. That’s contradictory. It’s yes or no.

    We took risks but no accusation of dishonesty. Are the Premier League or their Independent commission business people? I doubt very much.

    The punishment does not fit the crime. No fixed formula? So basically they made their judgement as they were going along and there is no strategy to deal with these cases.

    Wait until they take on the non-compliant Manchester City and Chelsea. If they dare to do so.

    Should we be punished? Yes. We broke the rules. But for the cost of a decent Defender, how can that punishment be more than administration in terms of points deduction?

    Fight Everton. Appeal and fight.

  8. Paul,

    Thank you for taking the time to summarise in such a good and effective way the judgement.

    The one thing that strikes me about the punishment, apart from its severity, are the potential ramifications. This judgement makes Administration and Pre-Pack look like an attractive option for other clubs faced with such charges.

    I share the sentiments of Jeff’s penultimate sentence

  9. I don’t think any of us can argue much about the findings but the level of sanction of 10 points isn’t justified in any way. Simply a figure they plucked from thin air.

  10. It seems to me that the club were clutching at straws looking for any argument however tenuous to reduce the “overspend”. The case in point being the transfer levy.

    The naming rights deal was surely not that difficult to resolve as I recall Baxendale was to make a big announcement about this at one point ?

    One would assume these talks were in an advanced stage with Usmanov and there would be some documentation to support the claim or was this just smoke and mirrors from Baxendale?

    Final question, do these other relegated clubs have the right to sue Everton or is the PL they should be going after? As alluded to earlier the question of sporting advantage seems a bit of a grey area still.

  11. Great report even I can understand. It seems there could be a different agenda here. Today Monday November 20 Alan Myers points out every team in the league can sue us for loss of income ie league position or anything els. The only way I see the future is EFC going into administration on top of the points deduction. Hope I’m wrong.

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