When the evidence stacks up
Service Area: Criminal and Regulatory
Member: Roger Isaacs
Sheffield Wednesday FC has been charged with breaching EFL (English Football League) rules around financial fair play over the sale of the Hillsborough ground, following an investigation earlier this year.
According to a statement from the League, a large number of documents obtained from the club, as part of the investigation, have been reviewed and the EFL has concluded that “there is sufficient evidence to justify issuing charges of misconduct.”
The club, nicknamed ‘The Owls’, sold the ground for around £60 million, which helped them record a pre-tax profit of £2.5 million for 2017-18.
However, if the ground had not been sold, the club would have posted a pre-tax loss of £35.4 million for the financial year covering the 2017-18 campaign and that loss would have followed on from deficits of £9.8 million and £20.8 million in the previous two seasons.
This would have breached EFL profitability and sustainability rules (previously known as financial fair play), which state that Championship clubs are only allowed to lose £39 million over three years.
If the club had breached the rules, it would have suffered a heavy points deduction, so investigators found the timing of the sale and the fact that the profits were included in the 2017-18 accounts suspicious.
Forensic investigators are frequently brought in when such suspicions arise.
In the case of Sheffield Wednesday, there is a precedent for a club to sell its ground to generate money but some details about this case triggered the investigation including what looked like an inflated sales price and the fact that there was no reference of ownership by the new company with the land registry until 12 months after the sale.
According to the club, the charges “will be vigorously defended”, and as part of this defence, it will no doubt employ forensic investigators to prove that the transaction was undertaken at arm’s length.
Roger Isaacs, Forensic Partner at Milsted Langdon, said: “The financial rules surrounding football and other sports clubs are very strict and go beyond what most ordinary businesses or individuals face.
“Sheffield Wednesday FC isn’t alone in being investigated by the EFL over its finances, as the league takes a tough approach to ensure its regulations are followed.
“It will be interesting to see what the EFL uncovers and whether there is sufficient evidence to show that The Owls acted inappropriately.”
Author: Roger Isaacs
18 November 2019