 Dean Ashton's career at Upton Park was blighted by injury
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West Ham have wasted money and certain players have not performed, according to the club's financial director.
Writing in the latest accounts, Nick Igoe said renewing Dean Ashton's contract and signing Freddie Ljungberg and Kieron Dyer were major mistakes.
Figures show wages totalled around 80% of their annual turnover in 2006-2007, 20% above the Premier League average.
Igoe said: "Many of the group's investment decisions in the last two to three seasons have been ill-judged."
The financial chief added: "No football club can sustain this level of expenditure on underperforming members of its squad.
"It must be concluded that the investment in the playing squad has not generated an appropriate return, either financially or in terms of performance.
"It follows that an eighth and 10th place league finish, one Carling Cup last eight and one FA Cup last 16 represent an unsatisfactory return on this expenditure.
"Clubs with fewer resources and lower levels of expenditure on their squad have achieved a greater level of league and cup success."
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Former Birmingham City owners David Gold and David Sullivan took control of West Ham in January, but it is the Icelandic regime, led by Eggert Magnusson between 2006 and the end of 2007, that came under fire in the accounts published on Monday.
Taking on former Arsenal midfielder Freddie Ljungberg, who left in 2008 just one year into a four-year deal, and former England midfielder Kieron Dyer were highlighted as two bad deals.
The pair started a combined total of 32 matches for West Ham since the summer of 2007, and according to Igoe will cost the group £34m over the term of their contracts.
"It is a truism to observe that a club's playing success (and almost certainly long-term financial success) is largely dependent on how wisely it invests its available resources," he added.
The accounts also revealed the extent the club went to last season in trying to avoid a financial meltdown.
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The debt is relatively short term in nature and has to be viewed alongside other liabilities such as the Sheffield United settlement
West Ham accounts
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Team wages were reduced and £10.8m was made from selling players - but that accounted for less than a quarter of the transfer expenditure from the previous two seasons.
The club's turnover was down to £76.1m, due mainly to the collapse of title sponsor XL, while "exceptional expenses" such as the Ashton pay-out certainly did not help to alleviate the club's losses which were £16.2m before tax.
Ashton broke his ankle in an England training session in 2006, recovered to play again for the Hammers in the 2007-08 season, and then signed a lucrative five-year deal just 18 months before he was forced to retire.
The bank debt of £45m was considered "not excessive" for a club of West Ham's size but the club claimed the debt remained "challenging".
The accounts added: "The debt is relatively short term in nature, expiring as it does in August 2011, and has to be viewed alongside other liabilities such as the Sheffield United settlement and net transfer fee creditors of £14.4m."
The Hammers and the Blades reached an out-of-court compensation deal over the 'ineligible' striker Carlos Tevez, who played for West Ham for a year from August 2006, helping to seal Sheffield United's relegation in 2006/2007.
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