The English Football League (EFL) has imposed a 12-point deduction on Sheffield Wednesday after finding that the Championship club breached its Profitability and Sustainability (P&S) rules in relation to a deal concerning its Hillsborough stadium, with Charlton Athletic stating it is considering its legal options in the wake of the verdict.
The EFL sanctions concern Wednesday’s accounts for the three-season reporting period ending 2017-18. Crucially, the points deduction will be applied in 2020-21, and not the recently concluded 2019-20 campaign when the punishment would have dropped Wednesday from 16th in the table to a relegation place.
The club was charged in November and referred to an independent Disciplinary Commission, which conducted a full hearing at the end of June, before finding the club guilty based on the fact that the club should not have included profits from the sale of Hillsborough in its financial statements for the period ending July 2018.
Wednesday was found not guilty of a further charge of breaching its duty of utmost good faith to the EFL by deliberately concealing information from the League in respect of filings made in respect of the P&S rules.
In December, Wednesday issued a claim against the EFL for what it claimed was the organisation “acting unlawfully” when charging the club. Wednesday said it had sought to engage with the EFL to agree a “sensible procedure” to resolve the dispute, stating that the club relied upon representations from the EFL in relation to the sale transaction.
Wednesday said it would “vigorously defend” its position after being charged with misconduct. The EFL had been probing the deal amid concerns it was agreed using creative accounting moves in order to ensure Wednesday stayed within the League’s P&S rules, potentially avoiding a points deduction.
Earlier in 2019, the EFL launched an investigation into the club’s financial submission for the period ending July 2018, following the completion of the sale of Hillsborough. The EFL said it had reviewed a “large number of documents” obtained from the club as part of this process and concluded there was sufficient evidence to justify issuing charges of misconduct.
The charges were in respect of a number of allegations regarding the process of “how and when” the stadium was sold and the inclusion of the profits in the 2017-18 accounts. In September 2019, the EFL was reported to have asked Wednesday why a £38m (€42.2m/$49.5m) profit for the deal was declared in its 2018 accounts when Land Registry documents dated the acquisition to almost a year later.
The Hillsborough agreement was first reported in July 2019 when the club’s latest accounts detailed the £38m profit, without specifying the identity of the buyer. At the time, Wednesday reported a pre-tax profit of £2.58m for the period spanning June 1, 2017 to July 31, 2018, a stark contrast to losses of £20.8m and £9.8m, respectively, in the previous two sets of accounts.
Losses in excess of £13m per year over a three-year term would breach the EFL’s P&S rules, and had the Hillsborough deal not been included in the 2017-18 accounts Wednesday would have posted a pre-tax loss of £35.4m, taking it significantly past the £39m threshold.
In July 2019, it was reported that Wednesday sold its ground to owner Dejphon Chansiri earlier in the year before leasing it back in order to meet the EFL’s rules. However, although the accounts stated that Hillsborough was sold for about £60m during the 2017-18 period in question to deliver a £38m profit, they did not state the identity of the buyer.
Moreover, the Land Registry was said to have noted that the club still owned the venue, which has a capacity of nearly 40,000, while the accounts did not indicate that any cash was brought in after the sale.
Following the EFL’s announcement on Friday evening, Wednesday said in a statement: “The club is extremely disappointed that the commission has imposed a 12-point deduction to be applied next season and awaits the written reasons for this decision.”
Charlton finished 22nd on its return to the Championship last season and was subsequently relegated. Charlton said in a statement: “The club is considering a legal challenge following the news that Sheffield Wednesday will receive a sporting sanction that will take effect in the 2020-21 season.
“We fail to understand why the deduction will take place next season rather than the current season, which seems to be irrational, and are writing to the EFL to get an explanation of the justification.”
Image: Sheffield Wednesday