For quite some time the belief at Everton has been that any problems at the club have been limited to matters on the pitch. That is now set to be put to the test with the club facing an allegation it breached Premier League financial regulations.
Everton strongly disputes the accusation. The club has already gone on the record to insist its belief it has complied with the rules - and that it will “robustly defend its position”.
From the timeframe of any investigation to the potential punishment if Everton were found to have breached the regulations, this is uncharted territory for the club, supporters and indeed the Premier League. But what is clear is that this is another complex problem for the club to contend with during a second consecutive fight against relegation.
READ MORE: Premier League statement in full after Everton accused of breach of financial rules
Royal Blue: Sean Dyche is a welcome Everton throwback after Farhad Moshiri's shattered dreams
The Premier League revealed its belief Everton have a case to answer in a statement issued publicly on Friday afternoon. That followed a referral made earlier that day by the organisation of “an alleged breach of the league’s Profitability and Sustainability Rules”. The precise details of the accusation Everton face were not released but the club will have the opportunity to defend itself in front of an independent commission appointed by Murray Rosen KC, the chair of the Premier League Judicial Panel. The case will be heard in private but its conclusion will be made public. Should Everton be found to have been in breach of the regulations, which they have made clear they deny, possible sanctions include a fine or points deduction.
What is known is that the concern being raised over Everton’s finances relates to last season, and therefore the accounts running from the summer of 2021 to the summer of 2022. The Premier League has had sight of Everton’s financial performance over that period since the beginning of March. This was a 12 month period in which Everton, after years of excess since the arrival of majority shareholder Farhad Moshiri in 2016, operated with far more reservation. The only transfer outlay under Rafa Benitez ahead of last season was for Demarai Gray, who cost less than £2m, while the January signings of Nathan Patterson and Vitalii Mykolenko were largely offset by the sale of Lucas Digne to Aston Villa.
Throughout this period Everton said it was working with the Premier League to ensure compliance with regulations and that was a claim that was repeated in the statement the club issued on Friday. The financial term this allegation relates to concluded with the sale of Richarlison to Tottenham Hotspur in a £60m deal that also improved Everton’s accounts for that period.
That such work with the authorities was necessary was a sign of the situation Everton was in. For the three previous accounting years the club had filed losses totalling around £370m. The Premier League allows for just £105m of losses over a three year period, though there are allowances for investment in matters such as the stadium, women's team and community initiatives. Furthermore, additional leeway was made for the pandemic. The club has attributed £170m of losses to Covid-19 so far - a figure that has been questioned previously due it being far higher than other Premier League sides.
Writing in the 2020/21 accounts, chief executive Denise Barrett-Baxendale said Everton was in a “secure” financial position and added, in relation to pandemic losses: “Significant revenue was, of course, lost through the many home fixtures played behind closed doors. However, the implications were wider reaching. With less certainty and less income, clubs across Europe and the world became increasingly reticent to spend and, in many cases, trade. As such, the value of departing players decreased and our flexibility in the transfer market was significantly hampered. Revenue was lost from broadcasting and other commercial operations, whilst the club faced additional costs directly linked to the challenges posed by maintaining our footballing operation during a pandemic.”
In the heat of the relegation battle last season Burnley and Leeds United, two of the teams Everton were competing against for survival, wrote to the Premier League to urge for the Blues’ finances to undergo scrutiny. The case against Everton was sparked by a full audit of all Premier League clubs’ accounts following their official submission at the start of this month, however.
What happens next is largely unprecedented. Manchester City is the only club to have faced allegations under the Profit and Sustainability Rules and that case is yet to conclude, so there is no template for such proceedings. The timeframe will be decided by the commission appointed by Mr Rosen and hearings will be held in private. Everton have placed on record the club’s “disappointment” and its commitment to challenge the allegation will add to the complexity of the case. Everton said: “The club strongly contests the allegation of non-compliance and together with its independent team of experts is entirely confident that it remains compliant with all financial rules and regulations. Everton is prepared to robustly defend its position to the commission. The club has, over several years, provided information to the Premier League in an open and transparent manner and has consciously chosen to act with the utmost good faith at all times.”
Both the Premier League and Everton have said they will not comment beyond the statements issued on Friday. However more insight into the general approach of the league and the specific finances of the club will become available this week. The chief executive of the Premier League, Richard Masters, is set to appear before a parliamentary select committee about sport governance on Tuesday, while Everton’s accounts for the period under scrutiny will be released publicly no later than Friday.
READ NEXT:
- Former Everton player became key man at Nike working with Eric Cantona and Ian Wright
Inside story of Everton training as surprise role and nickname for Asmir Begovic revealed
Everton Shareholders Association reaffirm calls for club to reinstate the Annual General Meetings
Everton irritated for being highlighted over Premier League clubs 'setting a very bad example'
