Everton are stunned by a ten-point deduction for breaking Premier League financial rules.
By Harry Poole.
Everton have received an immediate 10-point deduction after being found to have breached the Premier League's profit and sustainability rules.
The punishment is the biggest sporting sanction in the competition's history and leaves Everton 19th in the table on a new total of four points.
The club said it was "both shocked and disappointed" by the "wholly disproportionate and unjust" ruling.
Everton have said they intend to appeal against the decision.
The Premier League referred Everton to an independent commission in March but did not reveal the specifics of the club's alleged breach.
Everton posted financial losses for the fifth successive year in March after reporting a £44.7m deficit in 2021-22.
Premier League clubs are permitted to lose £105m over a three-year period and Everton admitted to being in breach of the profit and sustainability rules (PSR) for the period ending 2021-22.
Following a five-day hearing in October, the commission found in favour of the Premier League that Everton's losses during that period amounted to £124.5m.
In a statement, Everton said: "The club does not recognise the finding that it failed to act with the utmost good faith and it does not understand this to have been an allegation made by the Premier League during the course of proceedings.
"Both the harshness and severity of the sanction imposed by the commission are neither a fair nor a reasonable reflection of the evidence submitted.
"The club will also monitor with great interest the decisions made in any other cases concerning the Premier League's profit and sustainability rules."
The points deduction comes at a time of significant uncertainty at Everton.
In September, owner Farhad Moshiri agreed to sell his 94% stake in the club to American investment fund 777 Partners. The takeover is going through the regulatory processes and, before this ruling, sources said it was on course to be completed by next month.
The club are in the process of building a new stadium on the banks of the River Mersey at Bramley-Moore Dock, which is due to open in late 2024.
'Irresponsible - a position of Everton's own making'
Explaining why Everton's points deduction was so high, the commission said in its written reasons that the cause of the club's issues was because of overspending - largely on new players - along with an inability to sell players, and a lower than projected league finish.
The club's 16th-place finish in 2021-22 caused a loss of expected income of around £21m, the reasons state.
The commission added: "Everton's understandable desire to improve its on-pitch performance (to replace the non-existent midfield, as Mr Moshiri put it in evidence) led it to take chances with its PSR position.
"Those chances resulted in it exceeding the £105m threshold by £19.5m.
"The position that Everton finds itself in is of its own making. The excess over the threshold is significant. The consequence is that Everton's culpability is great.
"We take into account the fact that Everton's PSR trend over the relevant four years is positive, but cannot ignore the fact that the failure to comply with the PSR regime was the result of Everton irresponsibly taking a chance that things would turn out positively."
The commission ultimately found Everton's failure to comply with the Premier League's "generous threshold" was down to their own "mismanagement".
The chair of the commission, David Phillips KC, also referenced applications for financial compensation from current Premier League clubs Burnley and Nottingham Forest and last season's relegated sides, Leicester City, Leeds United and Southampton.
Phillips said he was "satisfied that the applicant clubs have potential claims for compensation" - but noted the commission holds no "inherent jurisdiction" and it is instead "the role of the Premier League to bring and prosecute complaints".
'Player X' among six mitigating factors argued by Everton
Everton advanced six mitigating factors in their defence. Among them, the club maintains they were entitled to credit for not pursuing an economically viable claim against 'Player X' - a decision they say was taken out of concern for the player's psychological wellbeing after he had been arrested.
The commission dismissed this argument as an event that can "occur in the management of football clubs", adding Everton's £10m valuation of the player was "speculative".
Further mitigating factors submitted by Everton surrounded the Covid-19 pandemic and the war in Ukraine.
The Toffees said they had planned player sales exceeding £80m in the pandemic-impacted 2020 summer transfer window but the commission sided with the Premier League's assertion that Everton's inability to raise that money was "largely attributable" to market forces - namely the prices Everton were asking for.
Further, it stated the club should be expected to "plan for untoward eventualities", while it was also considered that Everton had benefitted from the Premier League's Covid-related concessions totalling £70.2m.
Similarly, the commission found that both the loss of a naming rights agreement with Russian billionaire Alisher Usmanov's company USM Services Limited and a rise in stadium-related costs following Russia's invasion of Ukraine could be considered "the type of event that businesses experience".
The commission also dismissed Everton's claim that interest incurred in relation to the stadium development could have been capitalised after planning permission had been obtained as being "based on a false premise", adding Everton had been "less than frank" over the issue.
Everton also asked for their cooperation during the process to be considered in the ruling. In response, the commission said it did not find any aspect of the club's dealings to be of an "exceptional nature".
But the club's argument that the improving losses trend, as shown in the PSR calculation, was viewed more favourably and had gone a "limited way to diminish Everton's culpability", the commission said.
Biggest sanction in Premier League history - but can Everton survive?
In Premier League history only two other clubs have received a points deduction.
Middlesbrough were deducted three points for failing to fulfil a fixture against Blackburn during the 1996-97 season, while in 2010 Portsmouth were deducted nine points after going into administration.
Neither club was able to avoid relegation following those sanctions.
The deduction leaves the Toffees level with bottom club Burnley on four points after 12 matches - and two points adrift of safety.
Sean Dyche's side, who ended last season two points above the relegation places, had been 14th in the standings - and eight points clear of the bottom three.
On the three previous occasions when a Premier League club has had as few as four points after 12 games, Everton in 1994-95 were the only side to stay up.
Manchester City are the only other club to have been charged by the Premier League for financial breaches, when they were referred to an independent commission over more than 100 alleged rule breaches between 2009 and 2018.
Treble winners City were charged in February - before Everton - and that case is still ongoing.
Meanwhile, Chelsea could face further scrutiny from football's authorities over reports of payments connected to the club's former owner Roman Abramovich.
Chelsea were fined £8.6m by European football governing body Uefa in July for "submitting incomplete financial information" between 2012 and 2019 as part of a settlement for breaking Financial Fair Play rules.
Reacting on X (formerly Twitter), former Liverpool and England defender Jamie Carragher said: "The 10-point deduction for Everton is excessive and not right, considering they have been working with the Premier League about this for the last couple of years. Would it have been better to be evasive and try to drag it out like other clubs?"
Carragher added: "No doubt relegated clubs will have put big pressure on the Premier League to deal with Everton, but when you consider six clubs tried to leave the league and there was no sanction at all it doesn't feel right.
"Until other clubs are sanctioned Everton will feel they are being used to show there is no need for an independent regulator, and they are right."