Sheffield Wednesday EFL misconduct charge: what does it mean, will they get a points deduction and how long will it all take?

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Sheffield Wednesday have been charged by the EFL for misconduct around the submission of their accounts for the 2017/18 season, for questions marks over the circumstances surrounding the sale of Hillsborough stadium for £60m.

The charge comes with no direct precedent, leaving questions over the likely outcome of the charge, not to mention the severity of any sanctions to be imposed by the EFL if Wednesday are found to be guilty.

The world of football finance is a murky and complicated world to most, but not to Kieran Maguire, a finance and accounting expert from the University of Liverpool known to be one of the country’s leading lights in football finance analysis.

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We asked him what he thought of the shock twist in the Sheffield Wednesday financial saga and what punishments could be imposed on the club in the event of a guilty ruling.

Sheffield Wednesday owner Dejphon ChansiriSheffield Wednesday owner Dejphon Chansiri
Sheffield Wednesday owner Dejphon Chansiri

What, in a nutshell, happened back in the summer?

KM: Sheffield Wednesday were likely to be in breach of Financial Fair Play (FFP) regulations, which limit losses of Football League clubs to £39m over three years. To address that, Dejphon Chansiri sold Hillsborough Stadium to another company that he owned for £60m. That generated a huge profit, which could then be offset against the losses, meaning Wednesday were then compliant with FFP.

So what’s the problem?

KM: First of all, the timing of the transaction is an issue. Sheffield Wednesday’s accounts were originally for the year ending the 31st of May 2018, then they extended their accounting year to the 31st of July 2018 and then they didn’t publish their accounts on time. These are always little red flags when doing analysis work on football finance.

Hillsborough stadium was bought for around £60m - to be paid in instalments over the next seven yearsHillsborough stadium was bought for around £60m - to be paid in instalments over the next seven years
Hillsborough stadium was bought for around £60m - to be paid in instalments over the next seven years

Then you get into the Land Registry. The transaction didn’t go through the Land Registry books until July 2019, 12 months after Wednesday’s accounting year. There could be legitimate reasons for that – the Land Registry can be slow – but it would be highly unusual for it to be that slow. This all raised a concern over the true date of the transaction.

OK, what else?

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KM: The second issue is the terms of the transaction. In normal circumstances – it’s the same as with a house – you don’t get the property until you pay for it. What we’ve seen though with Sheffield Wednesday is that although they sold the property to Mr Chansiri’s other company, no money changed hands and Sheffield Wednesday have in their accounts a debt of £60m owing from this other company.

That debt is repayable in seven instalments of £7.5m over an eight-year period. That is very unusual for a property transaction. You’ve got to ask – is this a genuine sale of a property, or has it been undertaken purely to improve Wednesday’s accounts for the purpose of FFP?

And there’s also the issue of the valuation of Hillsborough, which was bought for £60m?

KM: Mr Chansiri is effectively selling Hillsborough to himself and if he is selling the property for the purposes of falling in line with FFP, he might be willing to produce a very generous price for Hillsborough.

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Reading sold the Madejski for £27m, substantially less than Hillsborough. It is smaller, but it is more modern and it is in Berkshire, where land prices there are significantly higher I would expect. West Ham’s owners sold Upton Park for £40m, and that’s in London.

Aston Villa sold Villa Park for £56m, broadly in line with Hillsborough, and Derby blew everybody out of the water with £80m for Pride Park, which has left a few people scratching their heads.

The final question is; has Hillsborough been sold for a market price, or has Hillsborough been sold for a price to sidestep Financial Fair Play?

As you said, similar stadium sale controversies took place at Derby County and Aston Villa. Why have they come after Sheffield Wednesday?

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KM: The fact is that we don’t know what is going to happen with Derby and Aston Villa. The fact that the EFL have not said anything regarding to any other clubs being investigated could suggest that both investigations are still a work in progress.

The main difference in the cases of both Villa and Derby is that the cash was paid during the year and there was no backdating. The question marks over the validity of their valuations is still open to question.

So – if found guilty – what sanctions are likely to be imposed on Sheffield Wednesday?

KM: Realistically there are four grades of sanction. There’s the ‘telling off’ of a club, but I don’t think that would appear to be compatible given what we saw happen to Birmingham City last season (Birmingham were slapped with a nine-point deduction for a £48m loss).

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Next would be something to do with a transfer embargo or squad sizes and the third range of sanction would be a points deduction. I stripped out the property sale and re-worked the losses made by Wednesday and looking at the tarriff that the EFL announced, that would suggest that they would probably be heading for a 12-point penalty on the basis of the losses they’ve made.

Potentially there could be a further points deduction for what are called ‘aggravating factors’ and those are, in theory limitless, but they could be brought if the EFL feel that there was a deliberate attempt to manipulate the financial statements to ensure compliance with FFP.

But we’re in the middle of a busy Championship season. How long is all this going to take?

KM: The only thing we’ve really got to go on is what happened with Birmingham City last season, who originally flagged that there was an issue in July and it took until April before a final decision was made. A lot of that was down to legal prevarications, demands for additional documentation and so on.

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The EFL will want to get this sorted as soon as possible. There will be implications on the January transfer window, there implications for other clubs who are trying to get into a play-off place that would be tempted to spend more if Wednesday are taken out of the picture.

The logic would be for this to be sorted out before the transfer window takes place, but financial justice in football, as we saw with Queens Park Rangers, that took three or four years. It can be very slow, but really it would have to happen before the end of this season.