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Derby charged for a breach of spending rules


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12 minutes ago, ITK..... said:

Great mind's think alike..

 

12 minutes ago, hodge said:

Would be hilarious if it was their share of the Rooney deal which pushed them over the line

Red 32 is it ? Their sponsors increased the sponsorship deal which in effect is paying Rooneys wages. More likely to be the valuation of the stadium. Either way hope they get smashed. 

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From the BBC website.

Derby County have been charged by the English Football League for a breach of spending rules and now face a possible points deduction.

The charge relates to losses in the three years up to June 2018, despite the £80m sale of their stadium to owner Mel Morris, which saw a pre-tax profit of £14.6m in their 2017-18 accounts.

Spending rules allow Championship clubs to lose £39m over a three-year period.

The club has been referred to an Independent Disciplinary Commission.

In March 2019, Birmingham City were deducted nine points by the EFL for a similar charge of breaching profitability and sustainability rules.

The Rams are 17th in the Championship and 10 points above the relegation zone.

In the 2017-18 season, which covers the 12 months between 1 July 2017 and 30 June 2018, Derby recorded a pre-tax profit for the first time in 10 years. 

In the three years under review by the EFL, the club recorded combined pre-tax losses of just over £8m.

And while that appears well below the £39m of allowable losses set out in league rules, the sale of its Pride Park home which allowed them to turn the profit in an attempt to meet financial regulations has come under scrutiny.

The Rams have leased back the ground, which was said to have been independently valued at £80m despite it being on the club's books as an asset worth £41m, from a company owned by Morris.

From discussions on the ffp thread, they didn't break the ffp rules by selling Pride Park to another of Morris's companies, so it looks like the issue will be the £81m valuation Derby placed on Pride Park, and which resulted in sufficient profit to keep their loss to £8m and within ffp limits.

If the EFL have had their own valuation carried out, and which is nearer to Derby's own book value of £41m, then it will wipe out all of that profit , increasing the loss and giving the EFL the opportunity to apply the appropriate penalty, although I suspect Morris has instructed his layers to be ready for action!.

While Derby might not currently be a play off contender, this ruling will almost certainly have a bearing on Sheffield Wednesday's situation, as they also "sold" their stadium, although they have other issues, such as late production of accounts and the sale transaction appearing to have taken place  at a different time than the "profit" shows in their accounts.

Fingers crossed this shows that the EFL do have some balls after all! 

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3 minutes ago, ExiledAjax said:

The cynic in me says I'd expect the EFL to deliberate for a while on this, say until Derby are just about mathematically safe in April, then they'll give them a points deduction to leave them 20th in the division. 

The cynic in me says I'd expect Morris to come out with all his legal guns blazing in order to either head off the EFL or to delay any action until late in the season , at which point, as you suggest,  as long as Derby are safe from relegation  points deduction would do no major harm.

However, it if that were to happen, it would be mighty poetic if the EFL announced that a points deduction would be applied next season,  and the penalty increased because of Derby being so bloody minded!

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27 minutes ago, ExiledAjax said:

The cynic in me says I'd expect the EFL to deliberate for a while on this, say until Derby are just about mathematically safe in April, then they'll give them a points deduction to leave them 20th in the division. 

Is that the Famous Club rule? You do know Derby were once famous don't you? If that's escaped your notice I believe Bailey & Fam will have to carry the can.

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Just another reason for us to be cheerful about current owner and us not being liable for point deductions.

Not sure about any/everyboday else reading this but this period under Lee Johnson is the highest we have ever been in our watching lifetime (respect to the older ones). Therefore we've never had it so good - the season under Steve C was superb, more exciting in some ways but we all know league 1 is NOT the Championship. We are very lucky to have a well-run club, playing at this 'height of our history' and even finishing higher every season - it is phenominal!

 

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2 hours ago, Alex_BCFC said:

Doesn't really affect us - that aren't near the top to bother us sadly. Might get them relegated though with a big points deduction but I doubt it.

But it did affect us. Derby got in the play offs last season ahead of us. We complied with FFP, they didnt. They basically cheated their way into them.

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4 hours ago, Alex_BCFC said:

Doesn't really affect us - that aren't near the top to bother us sadly. Might get them relegated though with a big points deduction but I doubt it.

We play them in February and it could be a distraction that they don't need.

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4 hours ago, downendcity said:

From the BBC website.

Derby County have been charged by the English Football League for a breach of spending rules and now face a possible points deduction.

The charge relates to losses in the three years up to June 2018, despite the £80m sale of their stadium to owner Mel Morris, which saw a pre-tax profit of £14.6m in their 2017-18 accounts.

Spending rules allow Championship clubs to lose £39m over a three-year period.

The club has been referred to an Independent Disciplinary Commission.

In March 2019, Birmingham City were deducted nine points by the EFL for a similar charge of breaching profitability and sustainability rules.

The Rams are 17th in the Championship and 10 points above the relegation zone.

In the 2017-18 season, which covers the 12 months between 1 July 2017 and 30 June 2018, Derby recorded a pre-tax profit for the first time in 10 years. 

In the three years under review by the EFL, the club recorded combined pre-tax losses of just over £8m.

And while that appears well below the £39m of allowable losses set out in league rules, the sale of its Pride Park home which allowed them to turn the profit in an attempt to meet financial regulations has come under scrutiny.

The Rams have leased back the ground, which was said to have been independently valued at £80m despite it being on the club's books as an asset worth £41m, from a company owned by Morris.

From discussions on the ffp thread, they didn't break the ffp rules by selling Pride Park to another of Morris's companies, so it looks like the issue will be the £81m valuation Derby placed on Pride Park, and which resulted in sufficient profit to keep their loss to £8m and within ffp limits.

If the EFL have had their own valuation carried out, and which is nearer to Derby's own book value of £41m, then it will wipe out all of that profit , increasing the loss and giving the EFL the opportunity to apply the appropriate penalty, although I suspect Morris has instructed his layers to be ready for action!.

While Derby might not currently be a play off contender, this ruling will almost certainly have a bearing on Sheffield Wednesday's situation, as they also "sold" their stadium, although they have other issues, such as late production of accounts and the sale transaction appearing to have taken place  at a different time than the "profit" shows in their accounts.

Fingers crossed this shows that the EFL do have some balls after all! 

Telegraph article states that EFL have undertaken their own valuation and comes out at £50m.

Ignoring the £31m difference in valuation, surely EFL doing their own valuation is a massive indication that they don’t think the Derby valuation was “independent”.  So, they might not see it as a mistake, a £31m mistake, but a deliberate attempt, an aggravated breach???

The EFL are either very confident, with the findings, or setting themselves up for a massive fail, which would call into question their governing of our leagues.

Wouldn't surprise me if Mr Gibson (perhaps backed by SL) has played a long game:

1) have a little push at Derby initially, test the waters, find out who might back him going forward, find out which ones might be bricking it

2) push the EFL with a threat

3) EFL take action

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1 minute ago, Davefevs said:

Telegraph article states that EFL have undertaken their own valuation and comes out at £50m.

Ignoring the £31m difference in valuation, surely EFL doing their own valuation is a massive indication that they don’t think the Derby valuation was “independent”.  So, they might not see it as a mistake, a £31m mistake, but a deliberate attempt, an aggravated breach???

The EFL are either very confident, with the findings, or setting themselves up for a massive fail, which would call into question their governing of our leagues.

Wouldn't surprise me if Mr Gibson (perhaps backed by SL) has played a long game:

1) have a little push at Derby initially, test the waters, find out who might back him going forward, find out which ones might be bricking it

2) push the EFL with a threat

3) EFL take action

Absolutely Dave.

I commented a long time back in the ffp thread that the valuation of Pride Park was always going to come in at the figure Mel Morris wanted/needed. Once they realised the loophole the EFL had created by their cock up in drafting the new ffp rules and then got the OK from the EFL for the "sale" of their stadium they must have thought they were home and dry. There is no established and active market in football stadium sales so no comparable sale prices , as there would be in the housing market so I am certain that Derby thought there would be no questioning of the valuation they applied.

Whether the EFL has set themselves up for a fail I don't know, but, with a number of other clubs following suite and the fuss stirred up by Gibson, I think the EFL were forced to do something, otherwise they might as well tear up ffp completely. I am certain that Morris will come out fighting and "tooled up" with an army of lawyers, but the UEFA rule regarding sale of club assets to related third parties having to be at fair value gives them a strong legal foundation and it will be a question of who blinks first as to which is the right valuation figure.

The implications of this action are pretty important as it will also impact upon Wednesday's "sale of Hillsborough and of course Villa's sale of Villa Park - if the Derby case holds up it will be interesting to see how the premier league look at Villa's situation, and I am sure we all look forward to seeing Villa's plight if they are relegated!

 

 

 

 

 

 

It seems that once Derby realised the loophole the EFL opened by cocking up the drafting of the new ffp rules and then got the OK from the EFL for the "sale" of Pride Park, they thought they were home and dry. This is especially so as because there is no established and active market in football stadia sales, there were/are no comparable against which it can be gauged, so as I commented a long time back in the ffp thread, the valuation was always going to come in at the figure Morris needed/wanted. 

What I think Derby did not legislate for, was the UEFA rules regarding the sale of club assets ( I stand to be corrected if I have got this wrong) to related third parties,  which requires that fair value has to be applied.  

 

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2 hours ago, Davefevs said:

Telegraph article states that EFL have undertaken their own valuation and comes out at £50m.

Ignoring the £31m difference in valuation, surely EFL doing their own valuation is a massive indication that they don’t think the Derby valuation was “independent”.  So, they might not see it as a mistake, a £31m mistake, but a deliberate attempt, an aggravated breach???

The EFL are either very confident, with the findings, or setting themselves up for a massive fail, which would call into question their governing of our leagues.

Wouldn't surprise me if Mr Gibson (perhaps backed by SL) has played a long game:

1) have a little push at Derby initially, test the waters, find out who might back him going forward, find out which ones might be bricking it

2) push the EFL with a threat

3) EFL take action

It could come down to different valuation methods too, possibly? £50m...62% overvalued, that's major!! For arguments sake might Derby have put it through as say housing or commercial property in terms of valuation input, but in reality continued playing in it- surely Depreciated Replacement Cost or Value In Use the most apt there? Fair value or the payment of it to me at least, would suggest that there is a genuine disposal as opposed to a mere sale and leaseback! Which clearly is not the case here.

Agreed. Aggravated breach quite possible IMO. Hard to say though, methods- many ways to value, but if they have used the incorrect valuation method to get the best price then yeah...different way to reach that point but once again an aggravated breach!

Yep- I think they are under Parry and to an extent Jevans- but mainly Parry, much better Governed. Harvey was just a joke in this respect wasn't he- and many. I did like the fact he was pro Safe Standing AND trials to end the alcohol ban but on this, he ran it appallingly. He might argue that he was trying to keep the competition strong and attractive with a light touch approach- his words in August 2018 are really worth revisiting- I remember a few months ago before any charges looking back at them and having a wonder but in the wake of what he left, I really wonder!

Yes, agreed- could also throw in Leeds chairman who was pretty angry about these actions and Nottingham Forest too potentially though they were not so vocal- and probably many middling to smaller clubs. Mr. Gibson has been leading the charge and what a job he has been doing though! Hats off.

Oh yeah, Harvey's words then look really interesting now!

Quote

"There is a seriousness. The big challenge we have got in the next six months is to communicate really clearly what can and cannot take place by clubs that breach these rules.

That went well...under him last season I mean!

Quote

"The EFL has not lost a club to administration in over five years now. Coventry were the last one.

He was clearly proud of his record...'in over 5 years now' Erm yeah, just so long as it was with his tenure...he let Steve Dale buy Bury without any proper due diligence, either for motives or competence or proof of wealth it later turned out!! Didn't he praise Ken Anderson quite highly...notable as well that Dale said the only help he had off the EFL, well guess who it was off??

Quote

"There is no doubt in the Championship in particular a lot of the clubs survive purely on the basis of owner funding. The vast majority are all making a loss.

Correct- he got one thing right- it's a ludicrous scenario financially!!

Quote

"The level of the loss changes. What we have to be really careful about is making sure the owners of the clubs keep funding it."

This bit I feel is incredibly key...in explaining bits of his motives or perceived motives. Maybe he was worried- and it's not for him to decide, he's got to be impartial to ALL- but maybe he was worried that if transactions in summer 2018 disallowed and an FFP breach found, Chansiri especially walks away. Morris I'm not so sure as he is a Derby fan from Derby and even used to go and watch them- but similar point. Plus of course Aston Villa...too big to fail??

When talking about Birmingham and their Soft Embargo and Soft Embargoes or otherwise in general, it also gets quite interesting:

Quote

"The EFL is not about restricting clubs' activity.

Then why have a Soft- or an actual- Embargo as a punishment, Shaun?

Quote

We want clubs to be strong and we want them to be vibrant and want clubs to be strong

It's good from a commercial POV of course, and it's good for the League but at the same time we also want them to be solvent- and avoid pushing others who are less able to a risk of insolvency by scrambling to keep up!! 

Quote

Clubs not being able to sign players they would like to sign is not good for the EFL."

Then don't bother with an Embargo as a punishment, Shaun!! If that's how you really feel...don't bother to have the punishment open, yet at the same time seemingly allow let a variety of 'clever' clubs (or clubs who think they are clever) to fudge it...******* hell!

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1 hour ago, downendcity said:

Absolutely Dave.

I commented a long time back in the ffp thread that the valuation of Pride Park was always going to come in at the figure Mel Morris wanted/needed. Once they realised the loophole the EFL had created by their cock up in drafting the new ffp rules and then got the OK from the EFL for the "sale" of their stadium they must have thought they were home and dry. There is no established and active market in football stadium sales so no comparable sale prices , as there would be in the housing market so I am certain that Derby thought there would be no questioning of the valuation they applied.

Whether the EFL has set themselves up for a fail I don't know, but, with a number of other clubs following suite and the fuss stirred up by Gibson, I think the EFL were forced to do something, otherwise they might as well tear up ffp completely. I am certain that Morris will come out fighting and "tooled up" with an army of lawyers, but the UEFA rule regarding sale of club assets to related third parties having to be at fair value gives them a strong legal foundation and it will be a question of who blinks first as to which is the right valuation figure.

The implications of this action are pretty important as it will also impact upon Wednesday's "sale of Hillsborough and of course Villa's sale of Villa Park - if the Derby case holds up it will be interesting to see how the premier league look at Villa's situation, and I am sure we all look forward to seeing Villa's plight if they are relegated!

 

 

 

 

 

 

It seems that once Derby realised the loophole the EFL opened by cocking up the drafting of the new ffp rules and then got the OK from the EFL for the "sale" of Pride Park, they thought they were home and dry. This is especially so as because there is no established and active market in football stadia sales, there were/are no comparable against which it can be gauged, so as I commented a long time back in the ffp thread, the valuation was always going to come in at the figure Morris needed/wanted. 

What I think Derby did not legislate for, was the UEFA rules regarding the sale of club assets ( I stand to be corrected if I have got this wrong) to related third parties,  which requires that fair value has to be applied.  

 

Yep, I remember that- you mentioned it for Derby and you touched upon it for the other clubs too. Horne and dry would be the assumption but they forgot about one thing...the FFP Fair Value regulation!

Will be a very interesting, actually as far as FFP goes, seismic case at this level. UEFA rule on fair value to related parties...actually I think the UEFA rule is that assets to related parties don't count towards FFP verbatim, nothing to stop a club doing it, but basically that it would cancel out for FFP purposes- the Fair Value rule is for sponsorship etc IIRC- will doubtless check it up in the next day or two.

Absolutely...could you imagine if Sheffield Wednesday as well as their current charges also were charged with overvaluing Hillsborough?? Double bubble! Where to start with the penalties given that the EFL are looking for a major punishment for Charge 1, where to start who knows- any ideas? Aston Villa- they've got to be in big trouble if they come down surely- which is why it's important that the EFL get it right with these charges and look into Birmingham's sale anmd leaseback too- only £23m I think it was or £25m something like that for St Andrews in total and that included the release of a grant so maybe £23m so I can't see that valuation attracting ire- paying £1.25m x 25 on the lease seems like a commercial rent so that aspect of it seems fine.

Reading? Does anyone really mention them- Madjeski Stadium £26.5m- curiously though, the transaction for Birmingham seems not to appear on the Land Registry. Reading I'm unsure on...they'll also need to look at the rental arrangments, 5% of a £50m sale is £2.5m rent per season- sure Derby paying less than that! Need to up it for FFP or deduct the difference from their allowance- make it a paper rent payment added in for FFP purposes- but even at that revised rate, their rental arrangement is rather generous!

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This article might cover old ground and the headline may turn out to be a bit sensationalist and yes it's the Daily Mail but Matt Hughes- along with Matt Lawton and John Percy- they are the 3 FFP journalists to look to in the country IMO.

Kieran Maguire is of course an expert but these 3- and David Conn of course but he doesn't seem to get the same tip offs, but I digress maybe he covers other areas of football finance, he's excellent in any case...looks ominous for Derby! Possibly the earlier article now updated.

https://www.dailymail.co.uk/sport/football/article-7895895/Derby-County-charged-EFL-making-excess-losses-FFP-regulations.html

Wonder if this is why their mooted investment has suddenly ground to a halt...

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Docking Brum 9 points and detailing the punishment rules should’ve been the moment clubs woke up.  But in the case of Wednesday it was the point they tried to fudge a ground sale into a previous year’s accounts.

The EFL might not yet win, clever legal teams etc, but I do think if those clubs re-offend, they will be hit.  Interesting that Derby’s case us for the 3 year period to summer 2018...they might be equally as stuffed for the 3 year period to 2019 too.  The sake was a quick win, one-off gamble, on the basis that if they got promoted it would all be ok.

The irony of Red32 - when it looks like the bull stopped in Red31 (£31m reduction in value). Unlaaaaky.

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Times- and Lawton is excellent- says it's a 49 million valuation. My £50-55 million valuation gives me a belief that Hillsborough has a strong chance of being overvalued and Villa Park could be once the 2016 Impairment factored in. Either the Impairment was incorrectly applied or it was correctly applied and the ground valuation in 2019 overstated.

Either way, a million or so aside, it's a big problem for Derby, also possibly Aston Villa and Sheffield Wednesday...

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9 hours ago, Mr Popodopolous said:

Yep, I remember that- you mentioned it for Derby and you touched upon it for the other clubs too. Horne and dry would be the assumption but they forgot about one thing...the FFP Fair Value regulation!

Will be a very interesting, actually as far as FFP goes, seismic case at this level. UEFA rule on fair value to related parties...actually I think the UEFA rule is that assets to related parties don't count towards FFP verbatim, nothing to stop a club doing it, but basically that it would cancel out for FFP purposes- the Fair Value rule is for sponsorship etc IIRC- will doubtless check it up in the next day or two.

Absolutely...could you imagine if Sheffield Wednesday as well as their current charges also were charged with overvaluing Hillsborough?? Double bubble! Where to start with the penalties given that the EFL are looking for a major punishment for Charge 1, where to start who knows- any ideas? Aston Villa- they've got to be in big trouble if they come down surely- which is why it's important that the EFL get it right with these charges and look into Birmingham's sale anmd leaseback too- only £23m I think it was or £25m something like that for St Andrews in total and that included the release of a grant so maybe £23m so I can't see that valuation attracting ire- paying £1.25m x 25 on the lease seems like a commercial rent so that aspect of it seems fine.

Reading? Does anyone really mention them- Madjeski Stadium £26.5m- curiously though, the transaction for Birmingham seems not to appear on the Land Registry. Reading I'm unsure on...they'll also need to look at the rental arrangments, 5% of a £50m sale is £2.5m rent per season- sure Derby paying less than that! Need to up it for FFP or deduct the difference from their allowance- make it a paper rent payment added in for FFP purposes- but even at that revised rate, their rental arrangement is rather generous!

I am sure most of us will expect Derby to defend their position vigorously ( for which read legally!) and almost certainly on the basis of their (independent) valuation against the EFL's valuation, i.e. in valuation terms, your word against mine.

Accordingly, I hope the EFL have strengthened their case by obtaining 2 or 3 separate valuations, all of which are in the same ball park as this would make  it  almost impossible for Derby to defend it's position. 

 

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14 hours ago, Up The City! said:

But it did affect us. Derby got in the play offs last season ahead of us. We complied with FFP, they didnt. They basically cheated their way into them.

Exactly this. It’s getting a bit tiresome that clubs are getting away with breaking the rules (cheating) to succeed and then getting a token punishment (at most) after they’ve enjoyed the fruits of that cheating. 
Even worse is that if the cheating gets you into the Premier League (Villa, Bournemouth) then it’s just forgotten about and allowed to pass. 
It should mean automatic demotion - or evening better, on promotion, all clubs should be looked into and any breach of fair play should deny them the step up and also have to begin the new season with a points deduction. 
Then watch clubs spending suddenly come in line with the rules..! 

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54 minutes ago, Up The City! said:

Simon Jordan on Talk Sport very shortly discussing this, should be interesting. 

Damn, missed it have I?

On catchup?

46 minutes ago, Bar BS3 said:

Exactly this. It’s getting a bit tiresome that clubs are getting away with breaking the rules (cheating) to succeed and then getting a token punishment (at most) after they’ve enjoyed the fruits of that cheating. 
Even worse is that if the cheating gets you into the Premier League (Villa, Bournemouth) then it’s just forgotten about and allowed to pass. 
It should mean automatic demotion - or evening better, on promotion, all clubs should be looked into and any breach of fair play should deny them the step up and also have to begin the new season with a points deduction. 
Then watch clubs spending suddenly come in line with the rules..! 

Yep spot on.

To add though, Aston Villa may not be getting away with it, Bournemouth were punished under the old regulations so I don't see how that case can be reopened- the old ones allowed for a massive fine n a sliding scale if promoted or a transfer embargo or not- suppose you could try to increase the fine, stick an embargo on or both. Retrospective rule changes to apply rules that came into force from 2016/17 season to a one season case in 2015 though can't be done IMO.

I'm of the view that Aston Villa's promotion should have been blocked one way or another. Technically they surely were in breach in March 2019 FFP submissions once those added to the 'real' 2 years of accounts...T-2 and T-1=Actuals and T=Projected for the existing season.

Doubt they were compliant in those so the points penalty should've been applied there and then...no playoffs, no promotion! Which the rules allowed for...doubt the Ground sale was thought of by March 2019, but subsequent to that!

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