Everton have been docked 10 points, the heaviest punishment ever handed to a Premier League team, for breaching financial rules, opening them up to the prospect of paying tens of millions in compensation to a group of other clubs.
Leeds, Leicester, Burnley and Southampton, who were relegated in recent seasons while Everton stayed up, have threatened previously to take legal action and a ruling from David Phillips KC in May agreed the clubs could apply for compensation through the Premier League if Everton were found to have breached financial rules.
Under Premier League rules, clubs are allowed to lose a maximum of £105m over three years. The commission found Everton overreached their allowed losses by £19.5m and concluded: “This was a serious breach that requires a significant penalty.”
The commission found the club’s transfer business, as they attempted to stave off relegation, “was recklessness that constitutes an aggravating factor”.
Everton said they were “shocked and disappointed” by the punishment after an investigation by an independent commission and would appeal. The appeal will be concluded before the end of the season.
The severity of the punishment surprised Everton, who feel a sporting sanction for what they believe is a disagreement over accountancy interpretations is unjust. The decision has put into focus other Premier League investigations and how those clubs will be dealt with if also found guilty.
Manchester City have been charged with more than 100 alleged breaches of the rules by the Premier League but are yet to have a verdict amid legal wrangling on both sides. City have denied wrongdoing. Chelsea are under investigation for alleged breaches relating to the era of Roman Abramovich’s ownership.
Everton were referred to the commission after an audit of Premier League clubs’ financial records for the 2021-22 season. Last year Burnley and Leeds wrote to the Premier League to question whether Everton had broken the rules after they recorded losses of £371.8m over the past three years.
A Premier League statement said: “Following a five-day hearing last month, the commission determined that Everton FC’s PSR [profit and sustainability rules]calculation for the relevant period resulted in a loss of £124.5m, as contended by the Premier League, which exceeded the threshold of £105m 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.”
In August 2021 Everton had entered into an informal agreement with the Premier League over its expenditure which effectively put the club under a salary cap. The league had to sign off any potential transfers but each time warned Everton over their finances.
Everton believe there are a number of mitigating factors, which they explained to the commission. One important issue Everton faced was having to pull out of a lucrative naming rights deal for the stadium with Alisher Usmanov’s holding company, USM, which was worth about £200m, after Russia’s invasion of Ukraine. Everton argue that some loans they took were for their new stadium and should not count in the process because infrastructure projects sit outside PSR but the commission disagreed.
The club is in the process of being taken over by 777 Partners after the owner, Farhad Moshiri, agreed to sell his 94% stake. There are built-in clauses relating to the purchase of the club which means the price of the sale will drop if the charges are upheld.
The ruling surpasses the nine-point deduction handed to Portsmouth in 2010 for going into administration. Middlesbrough are the only other club to have been punished in a similar. They received a three-point deduction in 1996-97 for postponing a fixture against Blackburn at short notice, saying they were unable to field a team because of injury and illness.
Everton said in a statement: “The club believes that the commission has imposed a wholly disproportionate and unjust sporting sanction … Everton maintains that it has been open and transparent in the information it has provided to the Premier League and that it has always respected the integrity of the process.
“The club does not recognise the finding that it failed to act with the utmost good faith and it does not understand this to have been an allegation made by the Premier League during the course of proceedings. Both the harshness and severity of the sanction imposed by the commission are neither a fair nor a reasonable reflection of the evidence submitted.
“The club will also monitor with great interest the decisions made in any other cases concerning the Premier League’s profit and sustainability rules.”
The #AllTogetherNow alliance of Everton supporter groups expressed “outrage at the disproportionate punishment” that “punishes those innocent of any wrongdoing – the fans”. It accused the league of double standards when, in 2021, the clubs who backed a European Super League were each fined less than £4m.
Steve Rotheram, mayor of Liverpool city region, said: “This is an excessive and grossly unfair punishment for a single charge – and makes a rod for the PL’s back in future. I’ll be supporting the club in their appeal.”