Business With Blain: Chelsea's Unforeseen Liabilities
JohnB looks into the situation at Chelsea, where their big transfer spending might not be the only issue.
Cast your mind back to May 2022, and the proposed sale of Chelsea Football Club to a consortium (BlueCo) led by Todd Boehly.
At that time, he and his team were completing their due diligence and were a matter of hours away from the deadline set to get sign-off from the Premier League, when they hit a major bump in the road.
The due diligence process exposed issues with unusual transactions that took place between 2012 and 2019. These transactions suggested the football club had not complied with its obligation to annually register accurate accounts.
Conscious that the sanctions applied to Roman Abramovich made the deal sensitive, and with a risk that Chelsea might be excluded from the Premier League if it wasn’t signed off by May 31st, Boehly decided to push on with the £2.5billion takeover. But, crucially, he retained £100m of the sale price to cover ‘unforeseen liabilities’, much to the annoyance of the Chelsea negotiators — Chairman Bruce Buck and Director Marina Granovskaia — both of whom were due large bonuses for completion.
As a direct result of the arguments that ensued, and to create a clean break between the Abramovich years and the new owners, both Buck and Granovskaia left Chelsea soon after the deal was concluded. Granovskaia, in particular, was a major loss, as she had overseen the buying and selling of players since 2014.
A significant fall from grace for someone who, a little over six months previously, had been voted the best club Director in European football. The blow of losing her job was no doubt softened by the alleged £35million she received (with Buck and others sharing £14.75m) for “services related to the club’s sale”.
Boehly filled the void that she left, all be it without her wide experience in the transfer market, and Chelsea have been spending huge sums of money ever since, with many onlookers questioning how they can afford to spend so heavily and still comply with UEFA’s Financial Sustainability Regulation (FSR) and the Premier League’s Profitability & Sustainability rules (P&S).
The Times reported on August 9th, 2023, that financial transactions made during the Roman Abramovich era would be investigated after Chelsea owners BlueCo reported their findings to the authorities.
The article stated that transactions involving payments to about six offshore companies had been identified that had apparently not been reported to the Football Association (FA), the Premier League or UEFA. It is not clear who all the beneficial owners of these offshore companies are, although some have been traced to football agents and intermediaries, whilst the others remain a mystery.
To date, UEFA has investigated the transactions and concluded that Chelsea had breached the old Financial Fair Play (FFP) regulations and as is typical, European football’s governing body agreed a settlement (fine) with Chelsea of €10m (£8.56m).
Fortunately for Chelsea, UEFA has a statute of limitations and so could only go back to 2017; the Premier League has no such limitation, and will be able to investigate the alleged breaches that have taken place since 2012.
Unlike Manchester City, the owners at Chelsea seem keen to foster good relationships with UEFA (and the Premier League, one assumes, saying that their core principles include “full compliance and transparency with its regulators” — this is sure to be tested if, or maybe when, the Premier League decides to press charges.
City are facing 115 charges for alleged breaches of the P&S rules, with a conclusion to that case not expected for several years, while Everton are scheduled to face a Premier League Commission in October 2023 that will reach a conclusion very quickly in comparison.
Some might even think that cooking the books gives clubs a better chance of avoiding detection, extending the time to a decision and maybe even punishment.
Chelsea have it in their hands to walk the talk if they’re charged, which seems likely. They could, and perhaps should, plead guilty immediately, save everyone’s time and money, and claim some mitigation to the punishment, as it was the previous owners who committed the alleged offences.
Meanwhile, when setting the punishment, which would almost certainly be a fine, the Premier League would be minded to remember that when buying Chelsea, the current owners set aside £100million for such ‘unforeseen liabilities’.
By JohnB
Doesn't say a lot about Chelsea's external auditors. Funny how quiet it remains regarding Chelsea and City, the EPL must be bricking it. Perhaps getting things out in the open before the new regulator is appointed?