EPL hits Everton with 10-point deduction, largest in Premier League history

A general view of a corner flag with a poppy logo ahead of the Premier League match at Goodison Park, Liverpool. Picture date: Saturday November 4, 2023. (Photo by Peter Byrne/PA Images via Getty Images) (Peter Byrne – PA Images via Getty Images)Everton, a Premier League mainstay that has spent nearly its entire 145-year existence in English soccer’s top flight, has been hit with a 10-point penalty for breaking financial rules — an unprecedented punishment that will drag the club down into the EPL’s relegation zone. The points will be deducted immediately, pending appeal, and leave Everton on 4 points, in 19th place, after 12 matches this season. They represent the most severe sporting sanction in Premier League history. They also spark all sorts of messy questions about the rules themselves, the consequences of Everton’s breach, and the implications for Manchester City — the EPL juggernaut that has separately been charged with over 100 breaches of similar rules. Shortly after the Premier League announced its decision Friday, Everton responded with a statement, saying it was “shocked and disappointed by the ruling.” It plans to appeal what it called “a wholly disproportionate and unjust sporting sanction.” But the independent Premier League commission that ruled on the case was unequivocal: “The position that Everton finds itself in is of its own making.” What did Everton do? Everton ran afoul of the Premier League’s so-called “Profitability and Sustainability Rules,” which essentially state that a club must not lose more than £105 million ($130 million) over a given three-year period. Everton, over three years beginning with 2019-20 and ending with 2021-22, lost £124.5 million ($155 million) in relevant areas, according to an independent Premier League commission that ruled on the case. It initially used fishy accounting to try to cover up that loss and avoid punishment. The Premier League cited that “misleading information,” and argued that the real reasons for the losses were “that Everton overspent on players, and that it failed to take steps to reduce expenditure.” What is Everton’s defense? Everton eventually admitted to exceeding the £105 million limit, but, by the end of a five-day hearing last month, the club still argued that its losses were only £9.7 million beyond what’s allowed, not £19.5 million. And all along, it essentially argued that stadium costs and losses stemming from the COVID-19 pandemic were mitigating factors that the Premier League, in its calculations, wasn’t fully taking into account. What makes the Everton case so complicated? “This is a complicated case,” the lawyers who ruled on it acknowledged in their 41-page decision. It’s complicated because the Premier League’s rules — similar to UEFA’s Financial Fair Play rules — don’t cover all income and expenses. Everton actually reported a £305.5 million loss over the three seasons in question, but the relevant numbers are “adjusted earnings before tax” — which, as the ruling commission explained, “exclude costs incurred, broadly speaking, on matters that the Premier League recognizes to be in the general interest of football,” such as spending on youth development and women’s teams. The EPL also allowed clubs to exclude pandemic-related costs when they calculated their “adjusted earnings.” Additionally, Everton hoped to exclude costs related to the new stadium that it’s currently building, and which it hopes to open in 2024 or 2025. The Premier League permitted some exclusions, but then questioned the legitimacy of Everton’s accounting. Specifically, it pointed to “£13.6 million in respect of interest incurred on inter-company loans used to finance stadium costs.” It also cited “calculation errors.” The EPL also disputed other excluded costs related to transfers and the termination of a player’s contract. Everton, according to the ruling, “claimed to exclude a sum of £43.9 million on the grounds of impact on player trading in the 2020 summer transfer window caused by Covid.” In other words, the club tried to write off losses by arguing that it would have been able to sell certain players for eight-figure fees if not for the economic impacts of the pandemic. Why did Everton lose the case? The Premier League referred all those irregularities to the independent commission. The commission concluded: “Everton’s [financial] difficulties are not attributable to the costs of the stadium development. … The cause of Everton’s [] difficulties was the fact that it overspent (largely on its purchase of new players and its inability to sell other players), and because it finished lower in the league than it had projected in [2021-22] (16th against the projected 6th — causing a loss of expected income of £21 million).” In other words, Everton spent like a big club but performed like a middling club. In layman’s terms, where did Everton go wrong? Everton, under owner Farhad Moshiri, spent huge sums on players that, it hoped, would propel it into the Premier League’s top six. It aspired to play in the Europa League or even the Champions League, which, in turn, would have yielded record revenues and helped pay for stars. But it picked the wrong players to invest in — overrated players, aging players — and plummeted toward the bottom of the league instead. That is the root of its problems.

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