Nottingham Forest and Everton have been hit with new Premier League charges for alleged breaches of financial regulations.
With Everton already battling to overturn a separate ten-point deduction, the crisis-hit club now faces the prospect of being docked again.
However, both clubs believe they have strong arguments against the prospect of new penalties under the new accelerated sentencing model.
Everton, who are already fighting to have their current sanctions overturned, believe their upcoming appeal will render the new charges effectively baseless. They have already argued that any overspending was due to loan repayment costs, which arose entirely from the stadium’s development costs.
Forest, meanwhile, will argue for a dispensation to include profits from the sale of Brennan Johnson two months after the end of the relevant period.
Both clubs were informed that they were being charged just hours before the official announcement. During talks between the league and the clubs, Forest are said to have confirmed that they have in fact broken the rules allowing losses of £105m over three years.
Everton pointed to a “clear flaw” in Premier League rules as the club pointed out it has already appealed the 10-point sanction covering two of the three years for which they have been re-charged. Executives are now urging the league to follow other leagues in introducing new protections for clubs.
“The Premier League has no guidelines in place to prevent a club from being penalized for alleged breaches in financial periods that have already been sanctioned, unlike other governing bodies including the EFL,” the club said. “As a result – and due to the Premier League’s new commitment to deal with such matters ‘in-season’ – the club finds itself in a position where it has no choice but to submit a PSR calculation which is still is subject to change pending the ruling. outcome of the appeal.
“The club must now defend another Premier League complaint covering the very same financial periods for which sanctions have already been imposed, before that appeal has even been heard. The Club believes that this is the result of a clear deficiency in the Premier League rules.
“Everton can assure its fans that it will continue to defend its position during the ongoing appeal and, should it be required to do so, at a future commission – and that the impact on supporters will be reflected as part of that process.”
Forest, meanwhile, added that the club “acknowledges the Premier League’s statement confirming that the club has today been charged with breaching the competition’s profitability and sustainability rules”.
“The club intends to continue to cooperate fully with the Premier League in this matter and is confident of a quick and fair resolution,” the club added.
Only the “most exceptional cases”, including the 115 charges facing Manchester City, are exempt from new Premier League rules that require any club accused of breaching standard financial rules to be dealt with within 12 weeks. The new rules forced Everton, Forest and all other clubs to submit 2022-23 accounts by December 31, rather than in March under the old rules.
Their defenses have already been prepared by top lawyers as beleaguered club directors will now be referred to an independent commission.
Everton will plead for loans needed for infrastructure costs
In Everton’s case, stadium costs and not player trading will be cited as the main cause of the overspend. The club’s net spend on players among teams has been among the lowest in the Premier League for years running. Everton sold the likes of Richarlison and Anthony Gordon, but the cost of their new £550million ground at Bramley-Moore Dock is being blamed within the club for pushing them over the edge.
The permitted stadium costs have been a subject of intense debate between Everton and the Premier League for years. When the club took a 10-point deduction for the previous cycle, a major factor in the league’s case was that loans were working capital needs, which are not deductible. However, Everton will continue to insist that these payments should be classified as infrastructure costs and therefore excluded.
While infrastructure costs generally do not apply to profit and loss calculations in the Premier League, rivals have previously argued that associated loans at Everton could not be ignored.
Forest, meanwhile, has called in leading sports lawyer Nick De Marco in its bid to avoid becoming the third top-flight club to be punished for alleged wrongdoing.
A total of 30 new players arrived in the season after Forest secured promotion to the Premier League in 2022, ending a 23-year absence from the top division.
The team’s record signing was Morgan Gibbs-White from Wolves for £25 million, which rose to £30 million as the club avoided relegation.
Other key signings included Taiwo Awoniyi (£17.5m from Union Berlin), Neco Williams (£17m from Liverpool) and Danilo (£16m from Palmeiras).
Yet it was the signings of free agent Jesse Lingard (who earned a base fee of £80,000 a week before bonuses), Paris St-Germain goalkeeper Keylor Navas and a litany of players who never played that seemed a calculated but expensive gamble.
Clubs are allowed to incur financial losses of £105 million over three years, with Forest reporting an annual loss of £45.6 million in their latest accounts. In the previous year ending June 2021, they recorded a loss of £34.4 million, reduced to a pre-tax loss of £15.5 million.
Forest will say they were right to hold on to Brennan Johnson for an extra year
In providing Forest’s defense, sports lawyer De Marco will focus on the sale of Johnson to Tottenham, Telegraph Sport reported on January 2.
Johnson was sold for £47.5 million on deadline day – a record sale for the club – and Forest will insist they would have received a much lower fee had they accepted a bid earlier this summer. Brentford failed with two offers of £30 million and £35 million for the Wales international in June and July respectively.
Sources close to Everton also privately claim they believe the Merseyside club will remain within limits this year. The club is also waiting to find out whether the proposed takeover by 777 Partners will be given the green light.
At Goodison Park, the departure of £250,000-a-week James Rodríguez had come as a major relief to the wage bill when he left the club in the autumn of 2021. In the following year, Richarlison was sold to Tottenham for around £50 million. , while Gordon collected more than £40 million from Newcastle.
However, Amadou Onana, Dwight McNeil and Neal Maupay arrived for a multi-million pound fee, and there were other unforeseen factors in the last campaign that caused headaches.
Everton’s original deduction was for the interest payable on loans to build their new stadium at Bramley-Moore Dock. The club calculated £18m of headroom within spending limits, but the Premier League argued they had overspent by £7.9m.
To offset costs amid the global spending crisis since then, sanctions imposed against then-sponsor Alisher Usmanov in March 2022 may have proven costly last season. That said, Everton secured their biggest sponsorship deal yet in June 2022. To offset some of those losses, Everton entered into a “club record master partnership agreement” with Stake.com, the online casino, in June 2022.
Everton were handed the biggest punishment in Premier League history by an independent commission in December. They have appealed the decision to award them 10 points, which will be heard and finalized before the end of the season.
There is deep resentment behind the scenes among smaller clubs over the swift punishments faced by the likes of Forest and Everton, while bigger clubs are still awaiting their fate over more complex cases. Manchester City were charged with 115 alleged offenses in February and the case remains ongoing, with the club vehemently denying the allegations. Chelsea are also under investigation after they referred evidence to the Premier League in relation to transfer deals made during the Roman Abramovich era.
Forest are currently fifteenth in the Premier League, while Everton are one point and one place above the relegation zone.