BREAKING NEWS!! EFL -12 Points - Full Written Explanation Thread

[Rev Owl]

First of all thanks for the help and useful explanation of this tortuous document especially I think @Nero.

If I've got it right we are docked 12 points because we breached FFP rules over 3 seasons and we couldn't count the 'stadium money' against it.

So what happens to the 'stadium money' now? Can we use it as a cushion against FFP going forward?

[Tommy Crawshaw]

8 hours ago, Nero said:

That's a very balanced and fair minded point of view. Rare today.

The problem I have with the way this has been prosecuted, is that Parry is clear that the problem is parachute payments. Previous massive FFP cheats (£7m fine) Bournemouth are coming down with £45m in their back pocket and an ability to lose another £40m plus next year alone. The P&S EFL £39m cap is driving the ground sales. Making an example of SWFC and Derby - as seems to be clearly the intention - will not make any difference at all. Except to certain interested and over-influential EFL parties. 

 

6 hours ago, ChapSmurf said:

 

I posted something the other day about the way I would counteract parachute payments, but they themselves are the sticking plaster for financial failings that are happening prior to relegation. It's that that needs sorting, but of course it won't happen, because, well there is too much finance involved.

 

Bournemouth are a team I quoted regarding the injustice of parachute payments. Then I looked a little deeper at their financial situation, and realised that without parachute payments, they are in a mess. Even with them, they could still be. They owe around £80M in unpaid transfer fees, have staff costs of £110M (in 2019) and have a whole host of players who will not immediately receive wage reductions due to relegation. Over the past 2 seasons they have posted losses of around £43M, with £34M coming last year alone. Whose fault is it they are in this mess? Their own of course, but the financial landscape has almost forced that upon them. They either committed to overspending or they would have been admitting relegation before a ball was kicked. It's a vicious cycle.

 

Until such times as the reigns can be pulled in on the run-away finances of the PL, the only way that parachute payments can be counteracted is for the P&S rules to allow clubs to invest the same amount per season, as is being received in parachute payments by an individual club, with some heavy caveats on how the loan is made to the club and by whom, to avoid potential administration at some later date. If you like, a “gift” payment, from the Chairman who can afford to do so. I do appreciate that this suggestion is in fact making the entire financial landscape worse for football as a whole.

 

Failing that, change the P&S rules such that parachute payments can only be used for OpEx costs, like current staff wages and building maintenance, not for funding new transfers, agents fees or new contracts. Limit the way it can be used to bring some parity back to the EFL leagues.

 

 

Besides the massive parachute payments relegated clubs receive they are also allowed greater losses under P&S rules than other

championship clubs.

 

Bournemouth for example will be allowed £35 million losses for each season 2018-19 and 2019-20 that they were in the PL. So with the £13 million loss allotted for the 2020-21 season, when the assessment is made next March/April they will be allowed losses of £83 million for P&S purposes.

 

That is as long as the losses can be covered by the clubs owner putting cash into the club. If not the total amount allowed for losses is £15 million over 3 seasons.

[Emerson Thome]

1 hour ago, Jimbob1867 said:

Ok but we didn’t meet that challenge. It may have satisfied the auditors but being kind they were less than forensic about their investigations re the contract. We shouldn’t be relying on the EFL and some random auditors taking some half assed positions about whether or not what we’re doing is ok. Yes if the EFL has some rules that says come to us with xyz view and if we sign off on it then all is ok - but the rules don’t work like that. 

 

Yes, absolutely. There is no-one to blame but the club for getting into this position:

 

1) You can trace this whole thing back to the ludicrous signing of Jordan Rhodes when we already Hooper, Fletcher, Joao, Nuhiu, Forestieri and Hirst and were already right at the limits of FFP and had little or no chance of automatic promotion. Winnall you could just about justify given the lesser cost, but Winnall and Rhodes....

 

2) As you say, we were very slow to realise the consequences of the spending, then when offered an olive branch by the EFL, very slow to take it. Reading between the lines, I think DC wasn't convinced by this process and didn't realise the 12 point penalty would be applied.

 

But I do think the EFL should share some of the blame. There is some justification as the EFL make the rules and interpret the rules for the league (bit in bold above). So if EFL say - this arbitrary line in the sand is good and the other side is bad, you would expect to follow it and not expect the EFL to move the line a few months later.

 

In particular the EFL have had:

 

a) ambiguity over the punishment

b) promoted misdirection over how to evade the F&P rules

c) pressed charges of misconduct when there were people at the organisation (even if the EFL Chairman had changed) that knew full well that they had been prepared to turn a blind eye and even advised the club on what to do

 

Whether that is grounds for a successful appeal, I don't know. It seems appropriate to me to somehow share the punishment between the club and the EFL because if Wednesday had followed the EFL advice to the letter what the EFL were proposing seems borderline criminal to me. So perhaps halving the points deduction, of the EFL paying substantial compensation to the Chairman for what amounts to a malicious accusation of not acting in good faith would be appropriate. It's a shame we can't dock 12 points off the EFL...!

[Utah Owl]

10 hours ago, wellbeaten-the-owl said:

Maybe but EFLs new management certainly looking for a sacrificial lamb

I'm starting to think this may be the case. 

 

Seems very suspicious to me how this was all signed off under the previous EFL regime yet gets resurrected as soon as Parry takes charge, especially given his Liverpool FC connections - it makes one wonder.

[Plonk]

So basically on Aug 3rd the EFL say it’s ok to bend the rules.

 

Then ten months later say you’ve bent the rules we are charging you.

 

I think that’s straight forward.

[Manwë]

5 hours ago, Utah Owl said:

Contracts can be formed verbally without the need for being written down but no idea how this applies in respect of property contracts and EFL rules.

The report covers that issue, and for UK property, a verbal agreement is not a contract that is considered legally binding.  

[Manwë]

1 minute ago, Plonk said:

So basically on Aug 3rd the EFL say it’s ok to bend the rules.

 

Then ten months later say you’ve bent the rules we are charging you.

 

I think that’s straight forward.

No they didn't say you can bend the rules.  They said you can apply the £60m in the 17/18 as long as you can show you have a legally binding agreement in place before 31st July.  Wednesday then waited until mid-August and produced two contradictory agreements with the same date in mid-July, sent two days apart though.

[Guest mkowl]

38 minutes ago, Manwë said:

No they didn't say you can bend the rules.  They said you can apply the £60m in the 17/18 as long as you can show you have a legally binding agreement in place before 31st July.  Wednesday then waited until mid-August and produced two contradictory agreements with the same date in mid-July, sent two days apart though.

It wasn't even 60m at that stage - they were talking 37.5m or 42.5m in the August.

 

Why this was then upped to 60m ?

 

The FFP numbers presumably worked on the lower valuations

 

Interesting snippet that the club simply wanted to use the insured value for the price and were not keen on using depreciated replacement cost. 

 

I am still wondering if we have ever had a formal RICS valuation

[Plonk]

46 minutes ago, Manwë said:

No they didn't say you can bend the rules.  They said you can apply the £60m in the 17/18 as long as you can show you have a legally binding agreement in place before 31st July.  Wednesday then waited until mid-August and produced two contradictory agreements with the same date in mid-July, sent two days apart though.

No. They said we can “ create” a document that satisfies the accountants. That was on Aug 3rd. And I will ask again why no minutes from the meeting in Preston. Surely the EFL would want minutes to show everything agreed?

[RedDragonOwl]

6 minutes ago, mkowl said:

It wasn't even 60m at that stage - they were talking 37.5m or 42.5m in the August.

 

Why this was then upped to 60m ?

 

The FFP numbers presumably worked on the lower valuations

 

Interesting snippet that the club simply wanted to use the insured value for the price and were not keen on using depreciated replacement cost. 

 

I am still wondering if we have ever had a formal RICS valuation

 

I think the plan was to use the highest valuation they could, but they needed to use the minimum valuation as to be able to fit the sale into the accounting period. To which they can change at a later date.

Edited August 18, 2020 by RedDragonOwl

[Guest mkowl]

But ultimately this is one of the reasons this failed, the HoT was so vague as to the valuation / price and how it would be calculated that it was deemed not to be a contract acceptable for a property transaction.

 

Accounting standards required an unconditional binding contract in place on 31st July 2018. Notwithstanding the true date this was signed it seems this was not a contract.

 

The EFL gave leeway IF a contract was acceptable to the auditors but not if the auditors were erroneous in their requirements. That is the panel conclusion really, the rest is peripheral. Irrespective of all the communication here, was the stadium sale incorrectly included, yes.

[Plonk]

Accept your greater knowledge on this MK, and it is apparent from the summary that’s why we were found guilty. But I would disagree that the rest is peripheral. I think where representatives of the ruling body are giving advice and guidance ( which I think is indisputable) agree to a course of action and sign it off, then the club are entitled to believe they have acted within the rules. The fact the EFL reps weren’t in a position to give that advice and guidance only makes our case stronger.

The other issue is the timing. Again this is more than peripheral as it would have led to relegation if the EFL had their way. They have breached their own rules in failing to get this resolved in time for the penalty to be applied when it should have been. This is due to their negligence. 

[Manwë]

21 minutes ago, Plonk said:

No. They said we can “ create” a document that satisfies the accountants. That was on Aug 3rd. And I will ask again why no minutes from the meeting in Preston. Surely the EFL would want minutes to show everything agreed?

The lack of minutes is not important.  Hardly anyone takes minutes these days, even less so for informal meetings which that was.

 

What the EFL said was that Wednesday had to create a document that satisfies the auditors.  The auditors would have to be confident that there was an agreed Heads of Terms in place before 31st July.  A week or so after your mentioned email, Wednesday  produced two contradictory agreements with the same date, backdated them and sent both off to the EFl.  It's Jarndyce and Jarndyce.

 

Para 127 shows that two within the EFL believed the Heads of Terms had genuinely been signed before 31st July.

 

Either way, that quote relates to the second charge, which found in Wednesday's favour so the system works.

 

 

[ChapSmurf]

7 hours ago, Tommy Crawshaw said:

 

 

Besides the massive parachute payments relegated clubs receive they are also allowed greater losses under P&S rules than other

championship clubs.

 

Bournemouth for example will be allowed £35 million losses for each season 2018-19 and 2019-20 that they were in the PL. So with the £13 million loss allotted for the 2020-21 season, when the assessment is made next March/April they will be allowed losses of £83 million for P&S purposes.

 

That is as long as the losses can be covered by the clubs owner putting cash into the club. If not the total amount allowed for losses is £15 million over 3 seasons.

 

I used to read it that way too (the P&S rules), but I got it wrong. It's ambiguous the way it is written.

 

The P&S rules also apply to the PL and what that rule is saying is while a club is in the PL, they can lose up to £35M per season ("for every season they are in the PL, they can lose an additional £35M"). If they are relegated, they have to abide by the lower/upper thresholds of £15M/£39M over 3 seasons.

Edited August 18, 2020 by ChapSmurf

[Plonk]

53 minutes ago, Manwë said:

The lack of minutes is not important.  Hardly anyone takes minutes these days, even less so for informal meetings which that was.

 

What the EFL said was that Wednesday had to create a document that satisfies the auditors.  The auditors would have to be confident that there was an agreed Heads of Terms in place before 31st July.  A week or so after your mentioned email, Wednesday  produced two contradictory agreements with the same date, backdated them and sent both off to the EFl.  It's Jarndyce and Jarndyce.

 

Para 127 shows that two within the EFL believed the Heads of Terms had genuinely been signed before 31st July.

 

Either way, that quote relates to the second charge, which found in Wednesday's favour so the system works.

 

 

I will have to accept what you say on minutes pal, as I’m now retired, but up to five years ago it was still common practice where I worked. So how are agreements now recorded, a genuine question, because what’s happened here is  “ some notes in a book that he’s not sure of the meaning of”  that can’t possibly be an acceptable method of recording such important decisions?

[Guest Kameron]

We took the ******** and have been rightly punished, still worth appealing though because we received the maximum punishment.  Our question needs to be why we received the same deduction as Wigan who went into administration and hopefully we can get it reduced to 9.

Edited August 18, 2020 by Kameron

[ChapSmurf]

7 hours ago, Tommy Crawshaw said:

 

 

Besides the massive parachute payments relegated clubs receive they are also allowed greater losses under P&S rules than other

championship clubs.

 

Bournemouth for example will be allowed £35 million losses for each season 2018-19 and 2019-20 that they were in the PL. So with the £13 million loss allotted for the 2020-21 season, when the assessment is made next March/April they will be allowed losses of £83 million for P&S purposes.

 

That is as long as the losses can be covered by the clubs owner putting cash into the club. If not the total amount allowed for losses is £15 million over 3 seasons.

 

12 minutes ago, ChapSmurf said:

 

I used to read it that way too (the P&S rules), but I got it wrong. It's ambiguous the way it is written.

 

The P&S rules also apply to the PL and what that rule is saying is while a club is in the PL, they can lose up to £35M per season ("for every season they are in the PL, they can lose an additional £35M"). If they are relegated, they have to abide by the lower/upper thresholds of £15M/£39M over 3 seasons.

 

Ignore my previous post. I was half asleep when I posted so you are correct in saying that Bournemouth were allowed losses of £35M per season for 18/19 and 19/20.

 

However, what a lot of people are doing is dividing the upper threshold by 3 and thinking a club can lose up to £13M per season. That is strictly true, as an average, but that may not be the case for a relegated club whose losses are already £43M for the previous 2 seasons. I've actually no idea how that works, as technically they have now breached the upper threshold of the EFL P&S rules. I don't think that the EFL divide either the lower or upper threshold by 3 seasons. It's merely a lower and upper threshold.

 

It might be argued that with parachute payments, the EFL are looking at Bournemouth breaking even, or significantly reducing their debt.

[latemodelchild]

I've not read the whole report, some of it would be over my head anyway I reckon, but I've read other people's interpretation etc in this thread. 

 

Seems to me that the EFL gave us a way out but we didn't take it. No idea why we didn't do what they said when they said it but it worries me that we're being run this way. Amateur hour. My main source of optimism during the investigation was that accountants and auditors had signed things off so it had to be above board. To then find out it wasn't, or at best dubious, has my blood boiling. Utter incompetence from both sides has led to us starting on minus 12 next season. A mountain to climb before we start the same mountain as everyone else. 

 

I'd be interested to see what our grounds for appeal are cos the way I see it we're bang to rights and have been punished in line with the rules. I'm not confident at all. 

 

DC needs to bring in some people who actually know how to run a business, never mind a football club. He has no clue, that's obvious. Until he does that we will lurch from one disaster to the next until we're dead. I have zero confidence in him as it stands and pray he sorts it out. Just throwing money in isn't enough now, it needs to be properly spent by people who actually know what they are doing. 

[Emerson Thome]

5 hours ago, Manwë said:

The lack of minutes is not important.  Hardly anyone takes minutes these days, even less so for informal meetings which that was.

 

What the EFL said was that Wednesday had to create a document that satisfies the auditors.  The auditors would have to be confident that there was an agreed Heads of Terms in place before 31st July.  A week or so after your mentioned email, Wednesday  produced two contradictory agreements with the same date, backdated them and sent both off to the EFl.  It's Jarndyce and Jarndyce.

 

Para 127 shows that two within the EFL believed the Heads of Terms had genuinely been signed before 31st July.

 

Either way, that quote relates to the second charge, which found in Wednesday's favour so the system works.

 

 

The people in the EFL knew that the Heads of Terms hadn't been signed at the meeting on 3rd August, and again this is made clear in the follow up emails of 6th August. The arbitration panel doesn't want to directly accuse them of lying, but the scepticism drips off the page in the aforementioned paragraph 127:

 

Quote

Whilst Shaun Harvey and Nick Craig, in particular, have said that they had assumed that the Heads of Terms were signed before 31 July, we think that, had they applied their minds fully to the situation at the time, it was obvious that this was not so.

 

[Tommy Crawshaw]

4 hours ago, ChapSmurf said:

 

 

Ignore my previous post. I was half asleep when I posted so you are correct in saying that Bournemouth were allowed losses of £35M per season for 18/19 and 19/20.

 

However, what a lot of people are doing is dividing the upper threshold by 3 and thinking a club can lose up to £13M per season. That is strictly true, as an average, but that may not be the case for a relegated club whose losses are already £43M for the previous 2 seasons. I've actually no idea how that works, as technically they have now breached the upper threshold of the EFL P&S rules. I don't think that the EFL divide either the lower or upper threshold by 3 seasons. It's merely a lower and upper threshold.

 

It might be argued that with parachute payments, the EFL are looking at Bournemouth breaking even, or significantly reducing their debt.

 

The way I read it is a newly relegated club is allowed losses of £35M for each of the previous 2 seasons in the PL and for the first season back in the championship the EFL allow them the 3 yearly EFL average figure of £13M, so £83M in total.

 

If they spend a second season in the EFL then they are allowed £35 for 1 season in the PL and the 2 year average of £26M for the EFL = £71M losses allowed.

 

I could be wrong but that's how it reads to me.

 

Take that along with the £83M received in parachute payments a club relegated from the PL shouldn't even come close to breaking the losses limits for P&S.