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EFL charge Derby over ffp

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39 minutes ago, Ghost of Clough said:

A lot of fuss has been made about us selling our stadium for double the value stated in the accounts, yet nothing has been said about Wednesday selling theirs for almost triple - it's only been about the date of the sale.

PPS cost £28m to build. In today's money that is equivalent to roughly £56m. We've made improvements since then, so I feel it's safe to assume our stadium valuation is above this figure.
Althogh, applying the same logic for Reading doesn't quite work. They spent £50m building it and in today's money that would be almost double (£95m). Instead they sold it at half the original build cost (£23m?)

Brighton's 30,750 capacity stadium was opened in 2011, at a build cost of £93m.
The Ricoh Arena built in 2005 and expanded in 2010, had a total build cost of £113m.
Huddersfield's 24k capacity stadium was £40m in 1993 (£84m today).
Hull's (£42m in 2001) and Cardiff's (£48m in 2007) would be equivalent to around £70m today.
Brentford are spending £70m on their new 17,250 seater stadium (and 7 residential buildings for 500 apartments)

I feel there's enough out there to validate our £81m price tag.

The stadium was valued at £55m 12 years ago.

If there was a problem with the valuation (which would also affect the depreciation being charged) how come the FFP have not raised it before?

PS - I cannt remember if depreciation is added back for FFP purposes or not, anyone know the answer to this?

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12 minutes ago, G STAR RAM said:

The stadium was valued at £55m 12 years ago.

If there was a problem with the valuation (which would also affect the depreciation being charged) how come the FFP have not raised it before?

PS - I cannt remember if depreciation is added back for FFP purposes or not, anyone know the answer to this?

https://www.efl.com/-more/governance/efl-rules--regulations/appendix-5---financial-fair-play-regulations/

"4.2 The Fair Play Result is calculated as profit / loss before tax (as identified by the Accounts), adjusted to take into account:

4.2.2 depreciation / impairment of tangible fixed assets (net of any capital grants);"

Depreciation of fixed assets is excluded from the FFP calculation.  Not sure how this factors into our selling the stadium - is the asset price on the books used to calculate the profit, or is there some adjustment there too (to offset the previous exclusions).

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54 minutes ago, Ghost of Clough said:

A lot of fuss has been made about us selling our stadium for double the value stated in the accounts, yet nothing has been said about Wednesday selling theirs for almost triple - it's only been about the date of the sale.

PPS cost £28m to build. In today's money that is equivalent to roughly £56m. We've made improvements since then, so I feel it's safe to assume our stadium valuation is above this figure.
Althogh, applying the same logic for Reading doesn't quite work. They spent £50m building it and in today's money that would be almost double (£95m). Instead they sold it at half the original build cost (£23m?)

Brighton's 30,750 capacity stadium was opened in 2011, at a build cost of £93m.
The Ricoh Arena built in 2005 and expanded in 2010, had a total build cost of £113m.
Huddersfield's 24k capacity stadium was £40m in 1993 (£84m today).
Hull's (£42m in 2001) and Cardiff's (£48m in 2007) would be equivalent to around £70m today.
Brentford are spending £70m on their new 17,250 seater stadium (and 7 residential buildings for 500 apartments)

I feel there's enough out there to validate our £81m price tag.

I am not sure if it actually makes a difference but I read the other day Derby were the only football club who have sold their ground ( to themselves one way or another) to have actually had real cash money move from various bank accounts rather than just on paper.

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8 minutes ago, EssendonRam said:

Need I remind you that the club’s statement describes the issuing of the charge as “unlawful”? In other words, that it’s against the law for the EFL to bring these charges.

Unlawful doesn't always related to the laws of the UK - It can relate to the laws of the EFL - When people say 'The Laws of the Game' they aren't talking about something ratified into UK Law but they are talking about things which are also referred to as Laws

14 minutes ago, EssendonRam said:

Indeed, were Derby not to seek an injunction to stop the charges, the question of why we didn’t seek to mitigate the damage done to our business would be asked very strongly in any future action by Derby seeking damages from the EFL.

Again, that may be possible but I'm not sure - It's a charge which has been levelled against the club by a the organising body of a member organisation of which we're a part - And the rules around FFP and how the charges of that are levelled are something we would have originally signed up to - If we were to ignore the process we've agreed to we'd be in breach of the membership we signed up to

You talk about this like we're an independent company and the EFL are another company but that's not the case - There are processes we signed up to and agreed to as part of our membership of the EFL - Chances are we helped write them - A charge has been levelled and the first thing we must do is respond to that in the manner agreed under the membership we signed up to

19 minutes ago, EssendonRam said:

Hence, my concern as expressed earlier: if Derby don’t seek an injunction, the question “why not?” needs to be asked very strongly.

This notion of not “escalating” the situation is, quite honestly, a bit ridiculous. It suggests that you neither understand the law nor quite grasp how seriously this could damage Derby.

Think I've covered it above - Instead of working through the processes we agreed to as part fo the EFL we'd be jumping straight to a legal challenge under UK law

If we don't agree with the way the EFL board are running things we have recourse to change those - If we disagree with decisions they make we have processes to go through - If they do things we don't agree with there are ways of making changes - However all of those are written into rules which (and I can't emphasise this enough) we signed up to

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8 minutes ago, RamNut said:

your vicarious liability point is interesting, but the employee was not the auditor of the ffp submission. 
***

not great stewardship in my book. 

@RamNut, no, the employee of the EFL was the person who allegedly not only ratified the accounting treatment of both the related party sale and the amortisation treatment but also asked for the sale price of PPS to be “adjusted” presumably to better match the valuation that is now in question. 

As a result, the EFL is bound by said ratification unless they can demonstrate that it was procured in some way by misrepresentation (or fraud) or that Derby knew, or ought to have known, that the employee wasn’t authorised to give such approval. 
 

With regard to your editorial on stewardship, I’ve not commented. You’re entitled to your opinion on that. I have merely sought to correct a couple of factual misstatements on your part because, frankly, there’s been a number that suggest, to a person reading this entire thread from start to finish (as I did), that you have a somewhat curmudgeonly view on the matter and are grasping at reasons to justify it.

As it happens, I don’t necessarily disagree that this episode reflects poor governance on Derby’s part. I’ve criticised Mr Morris on more than one occasion in that regard myself.

But, for the record, I totally disagree that the transaction is, in any way, “dodgy”. It’s a related party transaction and it was openly presented as such. I note that the EFL has emphasised that it’s not the nature of the transaction itself that it sees as a problem but the sale price. It alleges that the sale price was in excess of a fair market value; whether or not that’s the case will emerge in time and I’ve already expressed concern that all may well not be as clear as the club suggests. I don’t know at this stage and neither do you.

But I will point out that I believe you and others miss a critical point about the workings of FFP. It seems to me that they disadvantage those clubs that own their stadium since upkeep, etc come out of their profits. And that’d be an even greater potential impost if they endeavoured to run their stadium as a multi-purpose venue. In other words, it’s preferable to separate stadium ownership from clubs so the risks of operating a MPV don’t impact FFP. That applies directly to PPS and, frankly, I query if that makes any sense at all given the stated intent of FFP.

Where I would be critical of the club’s governance is that addressing the ownership of PPS was seemingly delayed until it became evident that the club was in FFP peril. That’s prima facie poor governance in my view but, to be fair, there may well be reasons for that delay of which I’m not aware.

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@EssendonRam

haven't really got time to reply in full....but 

Quote

the person who allegedly not only ratified the accounting treatment of both the related party sale and the amortisation treatment but also asked for the sale price of PPS to be “adjusted” presumably to better match the valuation that is now in question. 

We don't know exactly who asked for what adjustment,

we don't know whether their input ratified anything as yet.

the point i make is that you can't approve an ffp submission, until it has been submitted, because up to that point there is only partial information. 

For someone who seems to agree with various points i have made, you seem more curmudgeonly than most.

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36 minutes ago, G STAR RAM said:

The stadium was valued at £55m 12 years ago.

If there was a problem with the valuation (which would also affect the depreciation being charged) how come the FFP have not raised it before?

PS - I cannt remember if depreciation is added back for FFP purposes or not, anyone know the answer to this?

Equivalent to about £75m today.

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14 minutes ago, cheron85 said:

Unlawful doesn't always related to the laws of the UK - It can relate to the laws of the EFL - When people say 'The Laws of the Game' they aren't talking about something ratified into UK Law but they are talking about things which are also referred to as Laws

Again, that may be possible but I'm not sure - It's a charge which has been levelled against the club by a the organising body of a member organisation of which we're a part - And the rules around FFP and how the charges of that are levelled are something we would have originally signed up to - If we were to ignore the process we've agreed to we'd be in breach of the membership we signed up to

You talk about this like we're an independent company and the EFL are another company but that's not the case - There are processes we signed up to and agreed to as part of our membership of the EFL - Chances are we helped write them - A charge has been levelled and the first thing we must do is respond to that in the manner agreed under the membership we signed up to

Think I've covered it above - Instead of working through the processes we agreed to as part fo the EFL we'd be jumping straight to a legal challenge under UK law

If we don't agree with the way the EFL board are running things we have recourse to change those - If we disagree with decisions they make we have processes to go through - If they do things we don't agree with there are ways of making changes - However all of those are written into rules which (and I can't emphasise this enough) we signed up to

No disrespect mate but you’re wrong.

Derby’s legal team have (hopefully!) vetted the club’s statement and, rest assured, the term, “unlawful” isn’t synonymous with “contrary to the laws of the game” when it’s legally vetted. Frankly, the entirety of the club statement makes that clear in any case.

 The term is very precise and deliberate. What you’re suggesting seems to be that there’s a line in the EFL rules that’s a VAR for rule breaches. If you think there’s one, I challenge you to find it for me and I’ll happily concede.

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1 minute ago, RamNut said:

@EssendonRam

haven't really got time to reply in full....but 

We don't know exactly who asked for what adjustment,

We know it was the "EFL EXECUTIVE" who asked for a "modest price adjustment".

1 minute ago, RamNut said:

we don't know whether their input ratified anything as yet.

We know we acted in good faith of the 'EFL EXECUTIVE''s advice regarding the transaction and valuation. Our submitted reports were accepted, and nothing since that submission has said otherwise. The club claim the EFL has admitted to making a mistake somewhere along the process.
So, we know the EFL Executive (person of authority) was involved with the sale process before, during and after the transaction. We also know someone of authority signed off on our submitted report(s).

1 minute ago, RamNut said:

the point i make is that you can't approve an ffp submission, until it has been submitted, because up to that point there is only partial information. 

Good job someone of authority approved our report(s) after submission then.

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3 minutes ago, RamNut said:

@EssendonRam

haven't really got time to reply in full....but 

We don't know exactly who asked for what adjustment,

we don't know whether their input ratified anything as yet.

the point i make is that you can't approve an ffp submission, until it has been submitted, because up to that point there is only partial information. 

For someone who seems to agree with various points i have made, you seem more curmudgeonly than most.

Again, I’m proceeding under the stated assumption that Derby have, as stated, written approvals. If that’s the case, it’s literally irrelevant whether formal approval was given before the submission was made or not.

Suffice to say, you’re still wrong as it’s clear there’s been discussions on the proposal and the EFL, if what Derby are saying is true, the proposed sale and the accounting treatment thereof was ratified. The correspondence leading up to that all forms part of the approval. 

The distinction you’re trying to draw is, quite honestly, absurd. What you’re trying to suggest is that FFP approval is something of a lottery; that clubs don’t know if their accounts will be approved or not until they’re written and submitted.

That’s self-evidently silly.

Moreover it’s also obviously irrelevant in relation to the issue of amortisation; the treatment of which has apparently been approved year after year. Until now.

To be entirely honest, this reply is precisely what I meant when I said you appeared to be trying to stuff “facts” to fit your preconceived narrative in a somewhat curmudgeonly fashion. You’ve just done it again😂

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1 hour ago, EssendonRam said:

With regard to your editorial on stewardship, I’ve not commented. You’re entitled to your opinion on that. I have merely sought to correct a couple of factual misstatements on your part because, frankly, there’s been a number that suggest, to a person reading this entire thread from start to finish (as I did), that you have a somewhat curmudgeonly view on the matter and are grasping at reasons to justify it.

Spot on. I was going to post something similar, but you put it better than me.

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2 hours ago, Ghost of Clough said:

 

PPS cost £28m to build. In today's money that is equivalent to roughly £56m. We've made improvements since then, so I feel it's safe to assume our stadium valuation is above this figure.

And property/land prices work totally differently to standard inflation. I would suspect most property purchases in 1997 would be trebled or even more by now

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33 minutes ago, Ghost of Clough said:

"the league is understood to have had its own independent valuation of Pride Park carried out, using different criteria according to its rules."
https://www.theguardian.com/football/2020/jan/17/Derby-hit-out-efl-claim-financial-fair-play-charges-unlawful

This may be why the EFL value the ground much lower than our independent valuer.

But Derby say the EFL agreed the final valuation. Even to the point that Derby adjusted the figure in line with the EFL's thoughts.

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40 minutes ago, Ghost of Clough said:

"the league is understood to have had its own independent valuation of Pride Park carried out, using different criteria according to its rules."
https://www.theguardian.com/football/2020/jan/17/Derby-hit-out-efl-claim-financial-fair-play-charges-unlawful

This may be why the EFL value the ground much lower than our independent valuer.

Last week on Talksport Simon Jordan alluded to the fact that the plans going forward were taken into consideration when Mel got his valuation. If the EFL have just got a valuation as is then the values will differ.

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57 minutes ago, Paul71 said:

And property/land prices work totally differently to standard inflation. I would suspect most property purchases in 1997 would be trebled or even more by now

Not so much for commercial property, probably worth much the same now as it was then.

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46 minutes ago, The Orange Pimpernel said:

But Derby say the EFL agreed the final valuation. Even to the point that Derby adjusted the figure in line with the EFL's thoughts.

Could that be the "mistake" ? The Executive was happy with who the independent valuer was, they were happy with the valuation based on the method used, but they didn't check if the method used was appropriate for the circumstances. Hence, why after re-checking the report(s), they found something they disagreed with.
If this is the case, this may then come down to whether the EFL was mislead to believe the correct method was used, or whether our method is perfectly valid.

I feel we may be found in the wrong for using Residual Values for amortisation purposes. Given this method is used to calculate the 'scrap value' at the end of an assets life (end of contract), we can't feasibly say a player is still worth £xx.xm at the end of contract - it should be £0 as we can no longer sell the player for money. The only real defence may be if we have a policy such as stating a player is only worth £0 point when he retires, so interpolate a residual value from the typical retirement age of a footballer (35?). So a signing like Bielik (£8m aged 21) means that the £8m cost is effectively spread over a 14 year period. Given he signed a 5 year deal, that would set his residual value at the end of his contract to £5.1m. According to Kieran Maguire our transfer fees are effectively spread out over 8.7 years (similar to average player age to retirement age), so I'm probably not too far off being correct.

If we are found to have done some wrong doing, is it fair for us to be punished a year later than Birmingham despite failing P&S during the same period? Also, how does that affect the following two P&S periods given we budgeted for those seasons in the knowledge of all being acceptable by the EFL. Since the stadium sale, we're being investigated for the first period, already completed the second period, and we're approaching the end of the final one - without the stadium sale, it's highly likely we'd fail all period, but would it be fair to punish us for them all?
With regards to the Residual Values, I still believe we wont be punished as the full transfer amount is considered by the time the player leaves anyway. However, we'll be forced to use standard amortisation methods in future, as the EFL will likely re-write the P&S rules to stop it.

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48 minutes ago, ollycutts1982 said:

Last week on Talksport Simon Jordan alluded to the fact that the plans going forward were taken into consideration when Mel got his valuation. If the EFL have just got a valuation as is then the values will differ.

I recall Mel saying this wasn't the case.

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