Manchester City were found to have made inadmissible submissions to Uefa over financial fair play in 2014 and were reported for not making their bank statements available, the Guardian can reveal.

City’s submissions for the 2012 and 2013 financial years were questioned in relation to £118.75m in sponsorships from companies in Abu Dhabi, the home state of the club’s owner, and their accounting methods over transfer fees and the formation of two new companies were rejected.

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Almost £60m was added to the club’s losses by the European game’s governing body as a result of findings relating to accounting methods, the Guardian’s investigation can reveal.

The findings against City were made by consultants appointed by Uefa in spring 2014 to delve further into the accounts the club submitted. The Guardian can reveal Uefa concluded City had made losses totalling approximately €180m in 2012 and 2013, vastly exceeding the €45m FFP maximum deficit allowed, provided those losses were covered by an owner.

Uefa’s first inquiry into City over FFP has been known about for six years. So too has the deal which City eventually and reluctantly agreed with Uefa to limit their transfer spending. But the detail of the process, revealed today by the Guardian, has never officially been made public.

The Guardian understands that within Uefa there were people who believed the regulations should have been more strictly enforced in 2014 and one staff member working on FFP is said to have left shortly after the settlement was agreed.

The exposure of these details has come as a second investigation into City’s FFP compliance, sparked by revelations in November 2018, is nearing completion.

The Abu Dhabi sponsorships became bitterly contested issues in November 2018 when Der Spiegel published “leaked” internal City emails and documents which suggested the club’s owner, Sheikh Mansour bin Zayed al-Nahyan, was largely funding the Etihad sponsorship deal himself, unknown to Uefa.

The “adjudicatory chamber” of Uefa’s Club Financial Control Body (CFCB) is understood to be hearing the charges made against the club this week.

If its panel finds the charges proven it could ban City from the Champions League, the trophy the club has most coveted since the start of Mansour’s £1.3bn project and transformational 2016 appointment of Pep Guardiola as manager. City are certain to appeal against any adverse finding to the court of arbitration for sport.

In 2014 European football’s governing body was led by the now Fifa president, Gianni Infantino, and leaks published in 2018 by Der Spiegel appear to show he was personally involved in the settlement.

Facebook Twitter Pinterest Gianni Infantino was Uefa’s head when a settlement with Manchester City was struck in 2014. Photograph: Jean-Christophe Bott/EPA

The club risked severe sanctions for the scale of its deficit including possible exclusion from the Champions League, yet a controversial settlement was agreed in May 2014. City vehemently objected to the process and the conclusions, and were seriously threatening legal action against FFP, arguing that the break-even principle could be considered unlawful.

The consultants reported to Uefa that City had not provided them with bank statements so that the payments, including from the sponsoring companies, could clearly be seen, the Guardian understands.

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City did make available their online bank account, which went back 12 months to the spring of 2013, but that did not cover 2012 or most of the 2013 financial year, which together constituted the first accounting period of Uefa’s FFP regulations.

City are understood to have replied that the paper bank statements were not accessible to the club’s management at the time the consultants came to Manchester. The club’s hierarchy suggested to Uefa that the consultants could have made further requests for statements before highlighting that they had not been provided.

The consultants are also understood to have reported to Uefa that some multimillion-pound sponsorship contracts with Abu Dhabi companies had not been signed. City dismissed that as an issue, telling Uefa that they also had contracts with non-Abu Dhabi sponsors which had not been signed, and that it was clear the deals had been done because the sponsorships were being fulfilled.

The FFP regulations, introduced in 2010-11, were aimed at dampening players’ wage inflation and encouraging European clubs not to make huge losses. Under FFP losses cannot be reduced by owners putting more millions in via excessive commercial partnerships with companies related to them.

City were taken over by Sheikh Mansour of the Abu Dhabi ruling family in 2008 and he with his executives instantly transformed the club’s finances and ambitions.

Facebook Twitter Pinterest Manchester City’s owner, Sheikh Mansour bin Zayed al-Nahyan. Photograph: Andrew Yates/AFP/Getty Images

City faced a severe challenge to comply with the €45m loss limit when the club’s spending was escalating dramatically, with the multiple signings of star players; City’s sponsorships with the Abu Dhabi entities were examined closely by the CFCB.

In 2011 City’s sponsorship by the Abu Dhabi state airline Etihad was converted into a 10-year deal, to include the stadium, and by 2013, after City had won the Premier League for the first time, it is understood to have gone up to £67.5m a year. The deals with three other entities from Abu Dhabi are understood to have been £15m a year from the investment firm Aabar, £16.5m from the telecommunications giant Etisalat, and £19.75m from the Abu Dhabi Tourism Authority.

In 2014 Uefa’s consultants, reported to be PwC, are understood to have advised the CFCB that Aabar and Etisalat were “related parties” to City because Mansour was the chairman of the investment funds which owned them. After further research Uefa was also advised that Etihad should be considered a related sponsor because of relationships of Mansour’s with members of the extended ruling family involved in the airline.

City have strenuously rejected the conclusion that Etihad or the other two companies are related to City under the rules, arguing Uefa needed to show Mansour had substantial influence over their management, not just that he was the chairman of the funds owning them.

Uefa is understood to have asked specialist sponsorship consultants to consider whether the money being paid to City by the Abu Dhabi companies was “fair value”. The Etihad deal is thought not to have been considered too excessive.

Facebook Twitter Pinterest Uefa was advised that Etihad and two other sponsors were related to Manchester City under its rules but the club strenuously rejected that. Photograph: Alex Livesey/Getty Images

In the ultimate settlement agreed with Uefa City committed “not to seek to improve” the value of two of the secondary sponsorships, which were not named, and Uefa is thought to have agreed not to press the argument that the companies are related.

In relation to transfer fees the consultants added £31m to City’s deficit after rejecting allowances City had claimed for the cost of players signed before June 2010. The rules allowed a club to take off the wages of players signed before FFP was introduced but not the transfer fees.

City are understood to have argued fiercely that despite Uefa issuing guidance that such annual accounting for transfer fees, known as amortisation, was not an allowance for FFP, the rules did not exclude it.

A further £28m was put on to the club’s deficit by Uefa’s consultants regarding the formation in January 2013 of two companies, City Football Services and City Football Marketing. The companies were to provide resources including scouting, analysis and marketing to the group of clubs worldwide which Sheikh Mansour was intending to buy. City submitted that the club had in effect sold the companies, receiving approximately £11m for each, and that the companies had taken around £6m of staff costs off the club’s payroll.

City argued strongly that this was a legitimate way of accounting for the companies but the CFCB’s consultants are understood to have concluded that it should not be allowed.

Under a settlement with Uefa City undertook to repay €20m from the 2013-14 Champions League revenues, have a European squad limit of 21, constrain transfer spending, not increase their wage bill until 2016 and make a maximum €30m loss for 2014 and 2015. City’s chairman, Khaldoon al-Mubarak, made clear publicly that he disagreed with Uefa and the settlement but argued that given the club’s success they would comply with the break-even rules after 2014.

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Etihad, Etisalat, Aabar and the Abu Dhabi Tourism and Culture Authority did not respond to emailed questions from the Guardian about the sponsorship contracts. Etihad has previously stated that the City sponsorship is the airline’s “sole liability and responsibility,” and that it “continues to deliver important ongoing and accumulative returns on our investments”.

Uefa declined to comment in response to any questions about the 2014 assessment and settlement, or the current proceedings.

A spokesperson for City said: “The 2014 settlement agreement resolved all open matters between the parties and was based on comprehensive information disclosure. The settlement agreement contains confidentiality provisions that prevent Manchester City from commenting on both the agreement and the investigation that it settled.

“It continues to be our position that we will not be providing any comment on out-of-context materials. The attempt to damage the club’s reputation is organised and clear.”