Hello, everybody, and welcome back to the Garribaldi Red podcast, a Nottingham Forest podcast. Do hope you are well. Today is our main episode this week, and something slightly different as we join you on a midweek rather than at the start of the week. During this, I was about to say quiet international break, but it really hasn't been one, has it? Forrest handed, of course, the four points deduction last week, and a PSI Our Breach. However, those 50 pages of that document released by the commission that found Forest in Breach certainly needs explaining. And as much as me and Sarah might sometimes be all right talking about football, we're probably not the best people often to break it down. And it is such a complex situation. That's why I'm delighted to say we are joined by Robert Matiwesky, who I hope I've pronounced his last name wrong. We've been joking about it all night and all morning in preparation for this podcast. Robert serves as a financial expert and is on also the board of the Nottingham Forest Supporters Trust. Robert, thank you for joining us. Really appreciate your time. And just, I suppose, for the listeners, give us a bit of background info on yourself and also maybe the forest connection with the Trust as well.

As for myself, Chartered Accountant over a fairly extensive professional career got involved in sport, the niche of sport, and advising a range of clubs and sporting franchises as well as elite athletes. I've also done expert witness reports in various financial investigations, and so I have a background of reading legal contracts and agreements and trying to understand them.

I'm glad you do and we don't. It's such a complex situation, and that's why we really appreciate you joining us today. I will also add that Robert Robert released a joint statement with the Forest Supporters Trust yesterday. You can view that it is probably going to be updated in the next few days. So by the time this podcast is out, there will be some things added to that. Also, when we're recording this Tuesday afternoon, Monday, Forest announced that they were going to appeal the points deduction. They had seven days to decide, and the club have decided that they will appeal the original points deduction. But Robert, let's go back to the beginning with the actual charge and break it down. What were Nottingham Forest actually charged for by the Premier League?

Before we get into that, can we go back a step further, really, just to explain the objectives of the PSR rules? Because I think it's important to understand what the objectives of the PSR rules are and then consider what Forest have done and been accused of and compare what they've been accused of with what the objectives of the rules are. And at risk of boring the listeners, the stated aims of PSR, and I'll have to read them, improve the economic and financial capability of clubs, increased transparency and credibility, improve governance standards, encourage clubs to operate on the basis of their own revenues, introduce more discipline and rationality in club finances, and encourage responsible spending for the long term benefit of football. So basically, it's to install and instill in clubs some financial discipline so that they don't overspend and remain solvent. So that's the first thing. That's the first element of PSR. The second element is what clubs are allowed to spend, or how much they're allowed to lose before they find themselves on the naughty step. And it's relatively simple. Premier clubs are allowed to lose £35 million pounds a year, and the breach is assessed over a rolling three-year period.

So in any three-year period, a Premier League club can lose £105 million. The rules are changed slightly if a club spends time in the Championship because the allowed losses for a Championship club are 22 million pounds a year less than a Premier League club. And so that's why For considering Forest Premier League, the PSR breach, they had two years in the Championship and one year in the Premier League. So the allowed losses was £61 million. The Independent Commission found that Forrest had actually breached that and the losses amounted to 95 million, an excess of 34 million. And a lot of the media have taken the simple approach and thought, Well, that's a slam dunk. Guilty has charged. How many points are you going to be deducted? And again, on the face of it, that might appear to be a reasonable approach. Rules are rules. You've broken them. Take the punishment. But the situation with Forrest is far more complicated than that. And having read the 50 odd pages, it's almost as if there was an agenda. There's a technical breach, but I think the circumstances underlying it haven't been recognized at all by the commission.

And I can understand absolutely why the Forrest Board and owners were not happy when the judgment was delivered last week.

Okay, very interesting. Yeah. And just going back to the start, if you like, Robert, and we'll touch on what we're going to do in the podcast is we're going to try and break this down into almost subsections, and we'll talk about certain elements of why Forest were charged. But when you go back to the start, is it fair, given the club were in the Championship for so long, and you talk about the difference of obviously the Championship clubs allowed to lose less and Premier League more. And then also the same with Forest not having parachute payments. Forest got promoted with Bournemouth and Fulham in the season that they got promoted, and both of those sides had parachute payments. So did the Commission take that into consideration at all, or is that something the Premier League doesn't account for if you haven't got parachute payments and if you were in the Championship?

Far as the Independent Commission concerned, it's irrelevant. And again, I think they're wrong in their application And certainly some of the comments in the report, I think, are materially wrong. But again, going back a stage, and to Forest Breach, the club were in contact with the Premier League throughout the season, and And there have been discussions with... The clubs were required, I think, sometime in December '22, to submit to the Premier League what they thought their PSR position would be. And Forrest did that. Based on their accounts after six months and their expectations of what the year would show, it was recognized that they were close to the limit. But what Forrest had done in coming to that, in posting those numbers, they'd recognized that there were COVID related costs of 12 million or thereabouts. And the PSR breach is based on a club's audited accounts with a number of allowed adjustments for academy expenditure, community expenditure. But there's also an allowance for COVID for COVID costs. And Forrest had claimed around 12 million for COVID costs, a figure which had been submitted to the EFL as part of their Championship PSR review and being accepted.

And so the December '22 submission or forecast of PSR included an allowance for COVID costs, but it also recognized or claimed as an allowance, I think an additional 20 million. That was the cost to players for bonuses and what have you following success in the playoff final. And on that basis, Forrest was sailing close to the edge, and they recognized that. And even in December, we're looking at the need, potential need to sell a player. And that process started in December. In March '23, Forrest submitted a further revision of their PSR projection. On the second of June, shortly before the final game of the season, the Premier League advised Forrest that they weren't going to accept the COVID claim, and they didn't regard the bonuses paid on promotion as being an allowable deduction from the losses. So at a stroke at the beginning of June, two or three weeks before the year end, at a time when the transfer window was closed, Forrest were told, 'You're not going to mine a breach, you're 35 million adrift. ' We could argue forever and a day, 'Well, Forrest should have known that. ' I'd have had more sympathy with that argument if the potential stance of the Premier League had been identified and been notified by to Forrest in January, when the winter transfer window was still open.

But I'm not sure what the Premier League thought Forrest could do about it, being told that they had a material breach after the season had finished or just as the season was finishing, and at the time, two weeks before the transfer window had opened, I mean, the transfer window opens on the 14th of June, the forest year ends, the 30th June, anybody that has been involved with professional football clubs will know that the minute the season finishes, the players, staff, managers are off. That's when they have the holidays. In the majority of cases, they've gone. And if you look at the statistics of transfers during the summer window, there's next to nothing at the beginning of the window because everyone's on holiday, and it heats up towards the towards the end of the season. I mean, looking at the timelines, I think Forrest were put in an almost impossible position with the timing of the advice that they were in breach. You have to ask yourselves, when the Premier League knew that that was going to be a problem. And why wasn't the club advised sooner rather than leaving it till what seems like the last minute?

Robert, do we know why the timeline don't correlate in terms of the transfer into the end of the season and the Premier League's rules? Because it seems a bit... I can't say I've looked into it myself, but it seems daff. It's a shambles. Yeah, it seems daff not to have them correlated together so that it works along the same lines.

There's no explanation, because you identified what I think is a huge flaw in the PSR rules. I mean, there's no sense in having... Well, actually, there could be a reason for it. If you were serious about the objectives of PSR that I ran through at the start of this, then it would make perfect sense to have club year ends running coterminus with the opening and closing of transfer windows. So if the transfer window closes on the 30th of June, have accounts run to the 30th of June, and then it avoids... I mean, it could still be problems, but it would avoid a lot of problems because we've We've already seen from speculation that Forrest might have a PSR problem in the coming year. And already you can see, oh, Morgan Gibbs-White, Murillo on the cheap, referring back to the objectives of PSR, on what possible basis can creating that situation where clubs could be held to ransom to sell star players at low fees just to avoid a breach of PSR simply because the dates aren't in line. It's madness. It's madness. But sometimes looking for sense in rules in football is There's no point in it because there is no right reason.

You've only got to look at Willy Bollies sending off against Bournemouth. And the VAR couldn't intervene because it was a second yellow. Well, actually, I think they could have looked as a red for the Bournemouth player. And then having apologized for the sending off, and yes, it was a mistake, but the rules say, I still got to serve a one match ban. There's no logic to it. And I think it perhaps is an indication that maybe the Premier League and their rules or their rule setting procedures aren't up to scratch.

A lot of Forest and football fans given Everton and now Leicester's points deductions, possible points deductions for Leicester and breaking PSR comes into consideration. So when, Robert, we talk about the rules not being fit for purpose, but with these rules, that the Premier League currently have in place. Is a four-point deduction fair, given almost your findings when you've looked into this commission, or is it unbelievably harsh? And with Forrest appealing, is there a sense that... A lot of fans were talking about more points, but a lot of media reports yesterday said that that's very unlikely. Is there a sense that points could come off with this appeal as well?

If you look at the Brennan Johnson transfer in detail, and various stages that it went through, and you examine the stance of the commission, it's ridiculous. It's ridiculous because I think it was on the 30th of June, Forrest's year-end, Athletic A Madrid came in with an offer for Brennan Johnson, but it was conditional on a number of factors. It needed Spanish League approval, they needed to agree terms with the player. But more significantly, it was dependent on Athletic actually selling one of their own players to generate the transfer fees to pay for Brennan. That wasn't an offer that was capable of acceptance. And you can only speculate as to what the reaction of the commission would have been if Forrest had accepted this conditional offer and the whole thing turned to dust because they couldn't sell the player that wanted to sell and get the money for it. I can only speculate as to what the commission would have said about what a daft decision it was to accept the conditional offer. But there's a comment in the report that says Forrest should have accepted that because hopefully It would have been concluded sometime shortly after the year-end.

Well, honestly, I've never seen a comment like that in a court judgment before, in a legal judgment like that. Never. I mean, on what basis is the Independent Commission suggesting that Forrest should have accepted an offer because hopefully it would have been completed? Nonsense. So that was rejected. Then a few weeks later, Brentford steam in with an offer, 30 million, I think, that was rejected. They come back a fortnight later, 35 million, and I think they increased it again after that, and the offers were rejected because, again, and it's recorded in the report that Brenan had appointed new advisors. The club had told the new advisor that they were in a position where they might have to sell. And And so the new advisors were looking for Brenan. Now, Tottenham were mentioned as a potential purchaser during the back-end of last season, and I suspect that a potential new club for Brenan was being sought shortly after January. Given the option of joining Tottenham and Brentford, well, it's up to the player to choose. It's not It's not Forrest's choice. It's not Forrest's choice where a selling player goes because it takes three parties to agree for a transfer.

The selling club and the buying club need to agree a price, and then the buying club needs to agree terms with the player. And without those three in agreement, no transfer can take place. That's a factor that seems to have been ignored by the independent commission in the way that they have to finish this report. Because, again, there's another conversation. Of course, Forrest subsequently sold Brennan to Totman for 47.5 million, 17.5 million more than the original offer from Brentford. So to my mind, and I think to the minds of any right-thinking person, that is totally consistent with the aims and objectives of PSR, sensible financial management, maximizing your revenues. The Commission view was somewhat different. Forrest should have accepted the lower offer. It might have cost them money, but it would have shown respect for the rules. Again, what rules? How on Earth could willingly, knowingly take a loss of or losing 17.5 million? How on Earth is that consistent with the stated names of PSR. It's nonsense, absolutely nonsense. And whereas the Commission was looking as if it would have taken acceptance of the conditional offer from Athletic A Madrid, it would have taken the sale to Brentford as a near miss and recognized the profit that Forrest earned.

In fact, it says in the report, If Forrest had accepted 30 million, it would have almost cleared the shortfall, as if that's what they should have done and this wouldn't be a problem. But the fact that Forrest had the temerity to hold out for the fair value for Brennan, the Commission have said they're not going to regard it as a near miss because it should have happened close to the year-end. And then, well, it started off at 6:00, and then they, I think, recognized that that was a sticky wicket and came up with some fairly convoluted means of reducing reducing it to two by two to four.

Yeah, I was going to jump in there, Robert, actually. Did Forest's points deduction then get reduced by that two to four because of anything to do with Brennan and the whole mitigating circumstances, or was it more reduced because Forest, of what the Premier League called, cooperated efficiently with them?

It's a bit of both, I think. And again, I Having read the report following the reduction of the points hit on Everton to six, I have to say I didn't quite follow it. I mean, it was almost, again, as if they realized, well, we've got to do something here, ' because some of the reasons given for the deduction, I didn't think made sense, but it went from 10 to 6:00, and that was it. And so there's a bit of spiel in this 50 pages that it was a serious breach, and we could have done this, and we could have done that, and we could have done the other, but we'll call it six, and then we'll knock two off. The impression I got when I was pouring through this 50 odd pages was that it was a hatchet job. Max, you mentioned earlier the Bournemouth and Fulham and parachute payments. Another thing, do you remember when Forrest were newly promoted, how the media kept banging on and on and on about the number, 'Oh, they've signed somebody else and we've got all these players? ' Well, it was like an echo in this report. They spent all this money on players and got all these players.

But actually, if you look at... I actually looked at the movement in squad numbers. Yeah, a lot of players came in, but a lot of players went out in the promotion season and the head count actually fell when you take account of permanent signings in and loan signings in, and permanent signings out and loan signings out. So again, it was repeating this old line of signed all these players without actually paying attention to the facts. And they also said, 'The voice spent 145 million, and that's far more than any club has spent having been promoted, ' and they covered the period of 2013 to 2022, 2023. And you think, oh, crike, that's an interesting statistic. And in some respects is right. The report's right. Nobody spent 145 million on players in 2013. But what the report didn't say to qualify that statistic is that football revenues in 2023 were twice the level in 2013. And so it sounds like the statistic you'd throw in if you wanted to make it look as if you knew what you were talking about, but without actually thinking about the ramifications of what you were saying, because if you were to track transfer payments, transfer fees from 2013 to now, I bet there'd be a line, an upward curve that followed the upward curve in football revenues.

Wage inflation, transfer fee inflation follows the revenue. So I thought that was a slightly disingenuous statistic to throw in. Coming back to the parachute payment, Forrest also argued that they'd come up from the Championship, but we all know the circumstances that Forrest were in when Steve Cooper took over, and the rebuilding that the squad needed. And Forrest said, 'Yeah, but Fulham and Bournemouth have come up and they We've had the benefit of parachute payments. And the Premier League expert reported that that's true. Fulham had 44 million of parachute payments. Bournemouth had two years worth, 79 million. But that wasn't spent on players. That was spent to... It wasn't invested in players. It was spent to cover the loss in revenue from relegation. I think that's, again, a slightly misleading stance because by virtue of the fact they had the parachute payments, they were able to continue to pay the salaries of the players with Premier League experience that they wanted to keep. So they didn't have to buy players to cover a gap as Forrest did, because parachute payments allowed them to keep them on the payroll. And the other thing with the statistic that the expert threw out was, and Fuller had 44 million parachute payment, not recognizing that Fulham were promoted to the Premier League, relegated, promoted, relegated, and promoted again.

So they actually had two parachute payments in a four year span, which again allowed them to retain and experience Premier League squad without needing major purchasers. And again, looking at the... With this comment, nobody spends as much as... Nobody spends as much as Forrest on getting promotion. I actually had a look to see how to work out, to see how accurate that was. And it's true to some extent, Aston Villa spent 138 million when they were promoted. Leeds spent 105. But when you consider the movement in time, wage inflation, transfer fee inflation from when Aston Villa were promoted and Leeds were promoted. I dare say if you did a present value cash flow calculation, you'd probably find that Forrest were not way over the spend limit. So again, it's individually, the points aren't that significant other than it paints a picture of the way statistics were used to portray Forrest's position. And I don't think it's right.

When you look at this commission, do you feel that Forrest were punished in a way for making smart business? You look at the Brennan Johnson sale, obviously the timing of that and to laying it up until selling for Tottenham, and also the smart business of, yes, everyone argues that Forrest made too many signings, and we probably did. However, Forrest had to do that to cover loan players that went out. And as you mentioned about parachute payments and Fulham and Bournemouth being able to retain Premier League players. So in terms of the rules that the PSR state about increasing transparency and credibility in a league, surely Forest have done that and they've been punished for almost smart business.

Yeah, no, absolutely. If a player is a homegrown player, they don't appear on the balance sheet at all. If a club buys a player for 100 million, then that 100 million is capitalized in the balance sheet and it's written off over the life of the player. And so if somebody signs a player for 100 million over a five-year contract, there's a 20 million hit to the profit and loss count every year as that cost is reduced. And if the player is sold part going through that contract, the transfer fee received is compared with the outstanding unamertised balance of the player's original purchase. Sorry, I can see your eyes glazing over there. Then that will determine the profit or loss. When Brennan was sold, the 47.5 million is almost all straight onto the bottom line profit. So if you actually consider the forest balance sheet and account at the 30th of June at the year-end, it's got an asset that was sold two months later for 47.5 million sitting there at nil, nil value in the club. Two months later, they've got 47.5 million. And because of that delay, the commission And what's the question of saying it's a four-point penalty.

It's nonsense. Nonsense. I mean, in any other business that had an appreciating asset that was worth 47.5 million, it would have been recognized in the accounts at 47.5 million. There wouldn't have been a loss in that year. But because the accounting rules are such that it doesn't allow for human asset accounting, Brennan wasn't included on the accounts anywhere. So it was just a hidden asset that was realized shortly after the year-end, but totally disregarded, not regarded as a near miss, four points. Crazy.

So you think then, Robert, that Forrest shouldn't have got any points at all, or should there have been maybe one or two, given your findings, potentially?

Well, this again is where we come to another problem with PSR. Financial fair play rules have been introduced since in in 2013, in around 2013. And I'm not really aware of many other clubs up until the recent flurry of being called to account. A cynic might suggest it has something to do with the Premier League trying to show that they're in control of the game, so there's no need for an independent regulator, but that's just my view. But there's no framework for sorting out what the penalties should be for a breach. They say, well, if it's a serious breach, then it should be... Well, if a club goes into administration, it's nine points. So if a club goes bust, leaving chaos with its creditors, it's nine points. But you sell a player two months after the year end and you get four points. Where's the sense in that? It's totally disproportionate. So what could the Premier League have done? They could have said, 'There's a technical breach, don't do it again. There's a fine. ' That's one way. They could have said, 'There's a technical breach. You can't sign anyone in summer. ' That'd be another way.

They could have said, 'You've been naughty boys. You're on the naughty step. There's a four-point penalty, but we'll hold it over until we see your next set of accounts. That would have been another approach. They decided that Forest deserved a full pointer. If the Premier League applied the rules fairly and consistently across all the clubs in the Premier League without favor, then perhaps be more accepting of it. But that's not what the Premier League are doing. And it seems, and again, this could be a cynical view, but it seems, depending on how big the club is and how much cloud they've got in the smoke-filled corridors of the Premier League, it's probably not smoke-filled anymore, it's probably vape-filled, but they get away with it.

You've obviously read the Everton judgment as well. So Forest's Appeal, do we read anything into the fact that Everton got theirs reduced, or is it completely different and we can't take anything from it?

I wouldn't take anything from it. To be honest, if somebody had presented the facts of the Forest case to me without mentioning any names. And I've tried to be dispassionate and independent in assessing these facts. I would have thought it's a technical breach, but there are circumstances. And if the objective of the Premier League really is to have a competitive league and everyone playing on a level playing field, then I would have thought A fine, maybe. Slap on the wrist, suspended transfer embargo, possibly suspending points deduction, possibly. I wouldn't have thought in the month of Sundays that it would have been a four-point deduction. And I think the comparison with Everton's penalty of 10 points reduced to six because their breach was only 19 million and Forrest was 38 million. It's comparing couples with pears because Everton's breach has continued and got bigger. Forrest was a two month, a two month delay because of the circumstances, because of the timing of the relevant dates, and the fact that whatever the commission thinks about selling Brennan Johnson, when the transfer window shut on the 31st of January and then reopened on the 14th of June, there was nothing they could do.

There was nothing they could do. I think Forest have been harsh, you dealt with, if I'm honest.

When you look at the Premier League and the difference of golf of quality in the top six, and even you could argue maybe the top 10 and the rest of the Premier League, how hard is it for newly promoted clubs that included Forest and still include Forest in a way to actually compete? And does it almost create a sense of a top six bias here, given that the teams that have been deducted points so far are the teams that, if you include Leicester, are in the lower half of the league. And the teams like Chelsea, and obviously everyone talks about Man City's 115 charges, possibly more, are left alone.

Absolutely. I mean, I don't think newly promoted teams stand a chance. And I've been tracking the accounts of Premier League clubs as they're filed. And Sheffield United filed their accounts for 2023 a few days ago. And they In their promotion season, they announced a loss of 35 million. Well, if they survive in the Premier League this year, you know they're going to have a PSR problem next year unless they sell a shed load of players. So any team that comes up is going to be put in an almost impossible position needing to sell to avoid a PSR breach. And of course, that That means players are going to have to be sold in the winter window, or they're going to run the same risk that Forrest had with having a foot two weeks at the end of June to sell a player before the shutter comes down and the PSR get the abacus out and calculate how big the deficit is. It's crazy. It's crazy. Now, again, a cynical view might be that would suit the top six clubs to a T if all of the star players in the teams that are promoted can be pipped off at low transfer fees because they're desperate to sell because they don't want a points penalty.

But why? Again, on what basis is that encouraging a strong and fair competition? It's not. It's not. The rules have to change.

Can you understand the decision to appeal, Robert?

Absolutely. And I'm not surprised that The club were a little upset when they read the report because it read to me like a hatchet job. But the Premier League is a Premier League and they appointed a commission. And I would have expected better from them, I have to say.

I think that does us nicely. A lot of points covered. I think all the 50 pages simplified, if you like, in 40 minutes or so. Sarah, any Any final points from you or just how you're feeling at the minute, given that Forest will appeal?

I think the only difficulty with it is from a psychological point of view. How do you tell the players, We've had this deduction, but hang on, we thought it was sorted. It's not. I think that's the only challenge that Nuno potentially faces now. He said that he wanted everything resolved fairly quickly. He wanted it done as soon as possible. Obviously, the clubs still want that as well. But it's just, how How do you manage that from a psychological point of view, trying this siege mentality and saying, 'Oh look, now we know what we've got to deal with, but we don't yet? ' That would be the sticking point, I think, at the minute. But I can completely understand why the club are so frustrated and why, as Robert explained a lot better than I could have done, why they've decided to appeal.

I think with regards to going forward, the club has to work on the basis of the Premier League against being transigeant and stick it at four points and work on that basis. And hopefully when it comes to the end of the season, it doesn't matter whether it's four points because it will be clear.

Best thing for everybody, not just Forrest, but for everybody in the relegation is to get it sorted before, not just Forest, but Everton as well, before the season finishes. The last thing anybody wants, which would be an absolute nightmare, is for it to go on beyond the final game, for there to be some uncertainty of anybody thinking, we don't know if we're safe, we don't know if we're going down. That's ridiculous to be in that situation.

I think all fans would want the league position to be determined by what happens on the pitch, not what happens in some back office with opposing lawyers arguing the cases.

I think that's a very good point to end us. Robert, really appreciate your time today. Thank you for coming on the podcast.

Okay. Thank you.

And Sarah, really appreciate it, as always. An interesting insight.

I'm a lot better informed than I was. So thank you, Robert.

Yes. Yeah. Thanks very much, Robert. We'll be back this week as well with Sarah's Q&A, and I'll be back as well with Dave to do our Friday preview as Forest returns to action against Crystal Palace. Huge game after the points deduction, hopefully a rocking city grounds and fingers crossed for a win. As always, if you do enjoy the podcast, give us a like, share and subscribe across YouTube. A review on Spotify and Apple podcast, where you always get your podcast from. And we will see you very, very soon. I'm off for another lie down after more points deduction chat. Bye bye.