Football Management

Commentary on the management of over 160 English football clubs by Dr John Beech, winner of the FSF Writer of the Year Award 2009/10 Twitter: @JohnBeech Curator of! Football Finance

Archive for December, 2009

How much more benefaction can Pompey take?

Posted by John Beech on December 30, 2009

The news that Portsmouth face a winding-up petition from HMRC (1) can hardly have come as a surprise to anyone. After all, HMRC have had the club under close scrutiny, recently charging both Chief Executive Peter Storrie, former Chairman Milan Mandaric and former manager Harry Redknapp. Nor are winding-up petitions entirely unknown at Fratton Park – the London Gazette reveals that they were served with winding-up petitions in 1998 (T. P. T. Fire Protection Services Limited), and 1999 (Inland Revenue), not forgetting a voluntary winding up back in 1912.

Portsmouth provide a textbook example of the unsustainability of the benefactor model.

My records go back to the 1970’s, and the end of benefaction by John Deacon.  He arrived as ‘saviour’ Chairman in 1972.  By 1976 the club was reduced to being kept out of bankrupcy in 1976 by the donation of £25,000 collected by fans.

Deacon somehow held on as Chairman until 1988 (he was personally declared bankrupt in 1994), when he passed the benefactor baton on to Jim Gregory (fresh from selling QPR to Marler Estates).  Gregory lent the club money, but in the mid-nineties called the loans in.

Next up was Terry Venables, who was reported, the club’s financial state being so dire, as investing a £1 to become Chairman.  He drew a handsome salary but was continually absent because he was also heading up Australia’s bid for World Cup glory.

In December 1998 the club went into Administration, with Gregory’s son Michael at the helm.  To the rescue came Milan Mandaric, who had previously been the benefactor of FC Lika, the San Fransisco Earthquakes, the Florida Thundercats, the Connecticut Bicentennials, the Oakland Stompers, the Edmonton Drillers (these last three being the same franchise), Royal Charleroi Sporting Club and OGC Nice – clearly a man who was into a club for the long term.

To be fair to Mandaric, he did put a reported £25m into the club and saw them rise to Premier League.  Having bought the club from the Administrator for £4.5m, however, he sold it in to Alexandre Gaydamak for a reported £30m in 2006, with Portsmouth fans apparently ‘daring to dream that Alexandre Gaydamak’s takeover of the club could do for them what Roman Abramovich has done for Chelsea‘ (2).

That of course is not quite what happened. The latest woes with successive owners I have blogged about before (see postings passim).  First there was not-a-Dr Sulaiman Al-Fahim – ‘often described as the “Donald Trump of Abu Dhabi”‘ (3) – who had discovered during his brief flirtation with Manchester City that he was, in fact, Truly Madly Pompey (well, one out of the three at least).  When it transpired that he actually wasn’t a Donald Trump, there arrived Ali Al-Faraj, who less than three months ago promised ‘substantial investment‘ (4).  The cheque, it would seem, is still in the post.

What next?  Well, my guess would be a new owner, a Donald Trump of the Far East, or not, as the case may be.

What is abundantly clear is that yet another benefactor is probably not what Pompey needs.  Don’t get me wrong – I’m not saying that none of these benefactors has done the club any good.  Mandaric is arguably an exception, but quite what Venables ever did for the club remains unclear.

For Portsmouth, as with most clubs, the benefactor model has proved desperately unsustainable – soft debt called in, jumping ship, lack of any funds etc. etc. etc.  How fans can fall for it, as they did so recently at Notts County, never ceases to amaze me.

But we can all relax – there is a Fit and Proper Person test I’m told.

Posted in Benefactors, HMRC, Insolvency | Tagged: , , | 8 Comments »

Think of a number…

Posted by John Beech on December 28, 2009

It doesn’t take an academic to spot that ‘one million pounds over a period of time’ is a completely meaningless amount.  The ravages of inflation mean that a pound today is worth far less than a pound was worth, say, twenty years ago. One thousand pounds a year as the starting salary of a graduate in 1970 would be the equivalent of almost £21,000 today, for example (1).

Yet ‘one million pounds over a period of time’ is precisely, or in fact very imprecisely, what David Handley, formerly the Financial Director of King’s Lynn, who certainly therefore should know better, has announced he will invest into a new club, that is, one which he would own.  His announcement (2), I’m afraid, is no more than, in the traditional sense of the phrase, clap trap – a cheap theatrical device to get easy applause.

He says he wants fans on any new board of directors, a claim familiar to Accrington Stanley fans, who gained no representation when Ilyas Khan actually took over.

Quite why he is prepared to invest such a large amount now (or over some unspecified future period) but was prepared to see the former club disappear because of a debt of £66,000 is unexplained.  He is, after all, the man who as recently as October assured fans he ‘will have The Walks outfit on a sound financial footing by the end of the season… I want the fans to judge me at the end of the season, but I’m determined to get the club in a good financial position and move forward from there‘ (2).  The answer must surely lie in the issue of who controls the club, both the previous manifestation and any future one.

If he was prepared to stand by and let the old club fold, why exactly should fans or King’s Lynn Borough Council (owners of the Walks stadium) have any faith in his plans for a future club?  If he wants what is best for a new club and for the community, would he be prepared to put funding into a Community Interest Company running a new club?  The answers to these questions are vital if he wishes to salvage any credibility.

Posted in Benefactors, Community, Ownership, Resurrection | Tagged: , , , | 7 Comments »

Dear Santa ;-)

Posted by John Beech on December 24, 2009

I was going to ask for a ban as a director for John Batchelor, but it seems you have just delivered this!

In no particular order then, this is what I’d really like for Christmas as well:

  • For Accrington Stanley fans, some seats on the board
  • For Chester City, a new unrelated owner
  • For Stephen Vaughan, a copy of The Rough Guide to Ethics
  • For John Armstrong-Holmes, a Sackcloth & Ashes gift set
  • For Rotherham United, Scarborough Athletic and any other clubs in a similar situation, an end to their exiles
  • For Ron Martin, a copy of Blogging made Simple
  • For Peter Ridsdale, a copy of How to Win Friends and Influence People
  • For Avram Grant, some Quality Players vouchers, or at least the freedom to use them
  • For the FA, the drive to introduce an all-league-embracing unified and effective Fit and Proper Persons Test
  • For the game, a review of the current sanctions which are dysfunctional, and the use of ‘bringing the game into disrepute’ charges against appropriate owners and directors
  • For my grandchildren, a game that is still beautiful, but for the ugly business elements to have some remedial surgery
  • If you’ve got the time, for clubs throughout the Pyramid, a lifeline

and last but by no means least

  • a Merry Christmas and a Very Happy New Year for all blog readers, be they in England, Dumbarton, Stockholm, North America or wherever, and whether they are fans or directors, and for my friends and fellow residents of this far-flung sector of cyberspace, Kevin Rye (Supporters Direct blog), Ian King (twohundredpercent) and Wyn Grant (The Political Economy of Football).

Yours in football


[New postings may be a tad patchy over the Christmas/New Year period as I shall be knee-deep in various successive permutations of grandchildren, but I will doubtless seek sanity in my keyboard whenever possible.]

Posted in Uncategorized | Leave a Comment »

The Great Arsenal Mystery

Posted by John Beech on December 23, 2009

No, I’m not referring to the near-eponymous classic 1939 black & white film The Great Arsenal Stadium Mystery, which incidentally is now available as a digitally remastered DVD.

I’m on about the internecine guerilla war which is currently taking place between Stan Kroenke and Alisher Usmanov.

Each has been buying up small tranches of Arsenal shares and edging towards the 30% level of share-holding which would require a formal offer for the remainder of the shares at the highest price paid for stock during the calendar year.  Given that they may well have been paying over the odds for the small tranches, there is every chance that either or both of them will burst through the 30% shortly after 1 January making an offer for the club at a lower share price.

The delicate balance of power in the Arsenal boardroom has been tipping first one way and then another for a decade now.  Back in January 2000 Danny Fiszman bought shares from the then Vice Chairman David Dein to bring his share holding up to 33% (in those days one did not have to make an offer for the rest of the shares) (1).

It was only in September 2006 though that the current jockeying for control really began.  The club was beginning to feel the financial pressure of the move to the Emirates (2), and ‘mystery investors’ acquired £3.5m of the club’s shares (3). Talks began with one Stan Kroenke, a property magnate whose portfolio included the NFL’s St.Louis Rams, the NBA’s Denver Nuggets, the NHL’s Colorado Avalanche and the Rapids, over a possible partnership (4), and in April 2007 he acquired a 10% share of the club from ITV (5).

A possible takeover by Kroenke was not the kind of partnership that Chairman Hills-Wood had envisaged, as he promptly made clear, saying “The shareholders would prefer to stay in control than sell out to some stranger. We would be horrified to see ownership of the club go across the Atlantic” (6). However, Vice Chairman David Dein was very much ‘for’ getting into bed with Kroenke, and left the board (7).  This left the share-holding distributed thus (8):

  • Board members (44.95%):
    Danny Fiszman 24%
    Lady Bracewell-Smith 15.8%
    Richard Carr 4.35%
    Peter Hill-Wood 0.8%
  • Others (43.79%):
    David Dein 14.5%
    Stan Kroenke 11.26%
    Small investors 18.03%

[It’s not clear what the BBC had done with the other 11.26%! It probably consisted of shares in nominee accounts. JB]

A couple of days later Hill-Wood made his position even clearer: “Call me old-fashioned but we don’t need Kroenke’s money and we don’t want his sort. Our objective is to keep Arsenal English, albeit with a lot of foreign players. I don’t know for certain if Kroenke will mount a hostile takeover for our club but we shall resist it with all our might“(9), words he may yet rue.

However, so long as the board remained united, they were in a relatively strong position – they only had to gain the support of, for example, roughly a third of the small shareholders to be able to resist a takeover.  To this end they agreed a ‘lockdown agreement’ – meaning that they pledged not to sell their shares, for a period of at least one year.

Dein was of course not a party to the ‘lockdown agreement’ and might have been expected to consider selling his shares to Kroenke. Instead, in August 2007 he sold his 14.5% share-holding to a company called Red and White, co-owned by Alisher Usmanov, a Russian minerals billionaire, and Farhad Moshiri (10) with Dein as its Chairman. The following month Usmanov bought further shares, making him the club’s second biggest shareholder (11) with 21%.

Hill-Wood’s reaction was very reminiscent of his reaction to the appearance of Kroenke; he said of Usmanov, “Business is murky in Uzbekistan, and that in itself is an argument against him being involved in Arsenal. I wouldn’t want him to be the owner of the club” (12). His attitude to Kroenke was however softening: “Stan Kroenke is involved in sport and we have had constructive meetings with him” (13).

Usmanov’s position became clearer very shortly: “If other major shareholders agreed to sell, he would buy their shares if the price was right” (14).  The response of the board was to extend the period of the ‘lock-down agreement’, with fellow directors being given first refusal, until October 2012, on any sale of shares (15).

Since then two things have happened.  Firstly both Usmanov and more especially Kroenke have incrementally increased their percentage holding, edging towards the triggering 30% level. secondly there have been changes in the membership of the board – Kroenke was appointed in September 2008 (16), Usmanov hasn’t been, and, in December 2008 Lady Nina Bracewell-Smith was ousted from the board (17), leaving her free to sell her shares (although she has not done so).  Her departure could not be described as ‘by mutual consent’ (18).

So, the mystery is what will happen when share trading starts again after the festive break. The incremental purchase of shares by Kroenke and Usmanov would suggest that either or, more probably both, notwithstanding their protestations at various times, will push through the 30% barrier, providing they can buy the necessary shares at a low enough price to form the basis of a takeover bid.  From the current board’s perspective, Kroenke would be the lesser of two evils. The role of Fiszman, and his response to a takeover bid, will prove critical – he is unlikely to sit back and just watch Usmanov in particular try and take over.

For those of you whose list of New Year’s resolutions includes ‘try to be more anoracky’, dealing in Arsenal shares can be followed here.

The only certainty for the New Year is that we will be spared more headlines telling us that Stan Kroenke has bought another handful of shares.

As a final thought, if Arsenal does fall to either Kroenke or Usmanov, it will mean that all of the Big Four clubs will be in foreign ownership, as will, for the first time, a majority of Premier League clubs.  Is this what was envisaged by the Chairmen who led the breakaway from the Football League less than twenty years ago?

Posted in Ownership, Premier League | Tagged: , | 1 Comment »

More on Portsmouth’s woes

Posted by John Beech on December 20, 2009

Since my last posting on Pompey (1), not a great deal has happened off the pitch it would seem.  On the pitch, Liverpool have been defeated, with the media reporting this as ‘Rafa this’ and ‘Rafa that’, largely failing to give credit either to the Portsmouth players or to Avram Grant, notwithstanding the statistics for the game (2), which suggest an impressive performance.  However

David Hurley of the Portsmouth Evening News has highlighted the fact that January will prove a critical month for the club (3). With debts estimated at £60m, the club will face demands for:

  • £10m by way of football creditor payments to other clubs (including those due to Watford [see postings passim]);
  • £9m due to previous owner Sacha Gaydamak, disputed as to whether this owed by the club or by Sulaiman Al Fahim personally;
  • repayments due to banks.

While the club may be happy to focus on the positives of the result against Liverpool (4),  they are becoming increasingly mired with legal actions against past and present key personnel:

  • Peter Storrie faces prosecution by HMRC (5), a case which Storrie believes is ‘seriously flawed’ (6);
  • former manager Harry Redknapp faces prosecution by HMRC (7) over matters which relate to his days at Pompey, but which Redknapp dismisses as ‘farcical’.

We shall have to wait and see whether their optimism is justified, and, if it isn’t, what the ramifications for the club are.

Meanwhile, David Hurley also reports that “Israeli lawyer Daniel Azougy is now in charge of Pompey’s books… Reports that Azougy has [sic] convictions for fraud has only added to the uncertainty surrounding the club.

Paul Jiggins of The Sun is more specific: “Disgraced lawyer Daniel Azougy is controlling the club’s finances, despite a string of convictions for fraud dating back eight years. He was found guilty of FOUR counts of embezzling client funds in Israel in 2002.  He was sentenced to five months in prison – but did not spend any time behind bars as he was allowed to do his time in community service instead.  Azougy was also banned from practising law by the Israeli Bar Association for FOURTEEN YEARS.  Then in March this year, Fratton Park’s new finance man was sentenced to two months’ community service and a year’s probation – and fined £25,000 – for a securities fraud resulting from a dodgy share transfer back in 1999.Azougy was found to have lied to the Israeli Stock Exchange bosses over the deal.  He got off with a light sentence because the offence happened 10 years earlier.” (8)

It would appear that the ineffectual Fit and Proper Person test doesn’t in any case apply to him because, as Jiggins reports the club as saying, “He is working for the owners on finance, but he hasn’t got an official title.” Oh well, obviously there’s no problem there then.

Clearly Pompey is in for a turbulent month.

Posted in Ethics, Fit and Proper Person tests, HMRC, Insolvency, Ownership | Tagged: , , , | 2 Comments »

More on Watford’s woes

Posted by John Beech on December 19, 2009

The banging and crashing of egos in the Vicarage Road boardroom have died down, the club is not going into Administration, and it will not be deducted 10 points. So, Watford fans can dismiss the shenanigans of the last week and turn their attentions back to performance on the pitch.

It would be foolish though to ignore the implications of recent events.

While the outcome might suggest that the multi-benefactor business model is marginally more sustainable than the single-benefactor one, the brinkmanship involved does not suggest the former is a particularly attractive or desirable model.

What we have seen is a blatant battle for power, or more specifically control.  Both sides were prepared to risk the club to achieve their ends.  If Jimmy Russo is a ‘bad man’ as Graham Taylor has suggested (1), it would be difficult to identify any of the participants in the battle as a ‘good man’.  I exclude Graham Taylor himself as he is not one of the major benefactors slugging it out.

Quite what the relationship of the Russos and Robin Williams now is, and will be, with the club remains unclear.  As I write, trading of shares in Watford Leisure on the AIM had not been resumed (2), but, in any case, there had been relatively low levels of trading recently.  This may change.

For the club, there may be a problem with suppliers in the immediate future. Recently at Southampton, the new Swiss owners found suppliers demanding payment up front in spite of the new regime (3).

This would be the least of the club’s problems however.  The present crisis came to a head with the club suffering cashflow problems, through an inability to follow the maxim of Mr Micawber. Unless the club can start to cut its cloth accordingly, a new crisis will be not too far away.

Posted in Benefactors, Insolvency, Ownership | Tagged: , , | Leave a Comment »

That 2018 bid

Posted by John Beech on December 17, 2009

Announcement of the choice of venues which will comprise the bid for the 2018 World Cup has produced a strong and to some extent predictable reaction.  In a general sense, there were always going to be complaints as not all candidates could be winners, but this certainly doesn’t preclude picking over the choice that was actually made.

Of those chosen, strongest objection seems to be the inclusion of Milton Keynes. Most objection has been on the emotional grounds that Hammam Globetrotters / Franchise United should not be seen to have been given some stamp of approval. Now, I have a lot of sympathy with that reaction, but… at the inevitable risk of upsetting all my friends and readers who are AFC Wimbledon till they die fans… I don’t see emotion or even sensitivity as an essential criterion.  The criteria should be, in order, a) the existence of a suitable stadium, b) geographical spread and c) some sensible legacy where a stadium needs upgrading.

On those rational grounds, I don’t see Milton Keynes as a wise choice. The raising of the capacity of the stadium from 21,500 to 45,000 will result in the addition of a white elephant to the concrete cows, and at just over half an hour from Euston there is very little contribution to geographical spread.

The choice of Nottingham, with an unbuilt 40,000 seater stadium is controversial too.  Certainly a stadium in the East Midlands was desirable, but Pride Park, a modern stadium with 33,500 seats, seems a far more rationale choice simply on the grounds of cost.

As for a stadium in the West Country, an unbuilt stadium with 40,000 seats in Bristol, and Home Park in Plymouth with a more than doubled capacity to 45,000 seem economic folly and self-indulgence to me.

If we rejected these three (with Derby instead of Nottingham), which others might we be looking to? A case could certainly be made for a second venue in the West Midlands – plenty of opportunity for local rivalries to come to the fore though.

Having raised blood pressure with the assertion that I am not anti-Milton Keynes on traditional grounds, just on rational grounds, I step on even thinner ice with my last suggestion. We actually have a city in Britain with three 50,000+ capacity stadiums, the only city like this in Europe, which was never considered, on the grounds of course that it is not in England – I refer of course to Glasgow.

Yes, I am being serious.  Joint-nation bids are all the rage, so why not an Anglo-Scottish bid?  If I’m going to commit heresy, why not go the whole hog – a tri-nations bid, including the Millennium Stadium in Cardiff? Why not stick to stadiums that are already fit for purpose – surely a sensible policy in the current economic climate?

This really brings me back to why emotion should not come into the decision-making process. Well, after one quick rant… which should England, in a democratic United Kingdom, get the lion’s share of supposed economic benefit from London 2012 (ask yourself, what did the Olympics, for the third time in London, ever do for the Shetlands?) and a 2018 World Cup?

My use of ‘supposed’ is indeed unemotional.  There is a vast body of academic research that shows that the economic impact of sports events tourism is not as great as its supporters make out, that the positive impact is essentially local, or at best regional, rather than national, and it works much better for places that are not already major tourist destinations like, erm, England.

In a nutshell, if you want better transport links to East London, build a new tube line – sticking a velodrome at the end doesn’t actually help.  If you want to double the capacity of the MK Dons stadium or the Plymouth Argyle stadium, why not just go ahead and do it?

I won’t insult readers by answering that last question.

Posted in Governance, Stadium | Tagged: , | 6 Comments »

Stockport County protest

Posted by John Beech on December 16, 2009

Back in July I blogged on A Forgotten Cost – the cost of having an Administrator, which either have to be added to a club’s debts or paid by a new owner. In particular I noted that football was providing an inordinate amount of business to insolvency practitioners, and that Begbies Traynor had just reported a major jump in profits.

In an unusual and welcome display of fan politicisation, a protest march is planned by Stockport County fans regarding what they see as the high level of charges being made by Administrators Leonard Curtis (1). Davis Schofield, co-organiser of the protest, thinks “the £300 an hour Leonard Curtis is charging is unfairly expensive“. At Southampton, Begbies Traynor were charging “around £340 an hour” earlier this year (2).  Fair or unfair, the Leonard Curtis charge appears to be around the going rate – Administration is a decidedly expensive state to be in.

Posted in Costs, Insolvency | Tagged: , | 3 Comments »

Watford’s woes

Posted by John Beech on December 16, 2009

As I write, the danger of having to seek Administration is imminent.

The immediate cause of this possibility lies with the resignation of Jimmy and Vince Russo, together with Robin Williams, from the board of the parent company, Watford Leisure (1).  As a result, trading of shares on the AIM has been suspended, a precaution that was inevitable once the Russo brothers demanded immediate repayment of a £4.8m loan made by their company Valley Green Salads.  This company had additionally subbed Watford Leisure £1m as recently as 26 November, barely three weeks ago (2), with the warning that the loan “will only be sufficient to cover the company’s cash requirements until 22 December 2009“.

Watford is interesting and unusual example of the unsustainability of the benefactor model.  As well as the Russo brothers, major shareholders included Lord Ashcroft, the controversial Belizian who thinks he is British (or is that the other way round?) and Graham Simpson, former Chairman.  And of course there is Elton John, who returned as Honorary Life President in March (3), having previously resigned in November, shortly before Simpson’s departure as Chairman.  With all these potential benefactors around, plus Graham Taylor on the board, it’s surprising that the club should be in such dire financial straights.  I sense boardroom disputes which might be likened to Chelsea’s era with Ken Bates and Matthew Harding.

Financially things had been looking reasonable. In 2006/07 the club had recorded a profit of almost eight million pounds. Most recent results however had recorded a loss of £5.1m for 2007/08.  The crucial wages/revenues ratio had risen to a very worrying 81%.  Gates have fallen following demotion from the Premier League, and the club does not seem to have adjusted their budget to cope with this. There had been redundancies in April (4), but they proved too little to late.  Maintaining the playing squad was unsustainable if the benefactors were unable and/or unwilling to ‘carry on benefacting’.

Apart from the obvious and immediate concern of Administration, there is the fact that Vicarage Road is security for the £4.8m loan.  The separation of stadium from club casts a long shadow, as Rotherham and Leeds, for example, can vouch, and would make any recovery very problematic.

Posted in Benefactors, Debts, Insolvency, Wages | Tagged: , , , | Leave a Comment »

A time for alliance

Posted by John Beech on December 14, 2009

One of the great strengths of the internet is its underlying democracy (except, of course for readers in China and North Korea).  Anyone can start their own blog or Facebook group. But therein lies one of its weaknesses – there is no quality control and no underpinning rationale – any nutter can post their loony views to an unsuspecting and unwilling readership.  Ok, you can cut that sniggering out. Yes, you at the back, with the silly bobble hat and the monitor with the furry gonk.

The internet would be a curse to, say, the Recruitment Secretary of the People’s Liberation Front for Judea, as any Life of Brian fan will recognise. Apply this factionalism to football supporting and you may just recognise what is happening on the web with support for your club.

Consider three current examples:

  • Portsmouth
    The News today carries the following:
    The Pompey Virtual Alliance [see here for its composition – a domain name has been registered but is not yet active] have issued a vote of ‘no confidence’ in Pompey’s board.
    The supporters’ group, comprising of 13 web-based Blues fan sites and message boards, this evening took the unprecedented step.
    Their strongly-worded reaction comes in the wake of increased supporter anger towards the way the club’s finances are being run
    .” (1)
    If the thirteen groups had issued individual statements at various individual times, they would never have had the impact that coverage in the local newspaper brings.
  • Chester
    As their club continues to face very serious problems, fans have set aside traditional factionalism and formed a single body to voice their concerns – City Fans United. Their strapline is One voice… One passion. What they are achieving is One passion… One voice, and a much more powerful voice than when the various groups spoke with multiple voices.
  • King’s Lynn
    On Facebook there is now a plethora of groups, many of them recently formed, and I’m not going to give them the oxygen of publicity. If ever there was a time in the history of the club for one passion to produce just one voice, now is it.  And that one voice has to be The Blue and Gold Supporters Trust (or 3 and confusingly 4 on Facebook)
    Linnets unite!  You have everything to gain.

Posted in Community, Trusts | Tagged: , | Leave a Comment »

Call me Stanley Cynical, but…

Posted by John Beech on December 13, 2009

There is nothing that quite winds up [oops!  better change that that to ‘rattles the cage of’ to avoid ambiguity in the current financial low] club owners and directors than the thought that a rival club is being inadequately punished.  Witness for example the stone throwing from a glass house of Hereford United’s Graham Turner at Stockport County when the latter ‘only’ received the standard punishment for going into Administration (see postings passim).

There must have been some spluttering of cornflakes yesterday over the breakfast tables, at least for those directors who read the Lancashire Telegraph. A report announced that Ilyas Khan, Accrington Stanley’s latest acquisition as ‘benefactor’, was minded “against lifting a transfer embargo during the January transfer window” (1).  The rationale for this?  “Because 20 is a reasonable squad size in any caseAs long as our injuries aren’t too bad then perhaps 20 is quite a good number to have

Should this be viewed as a welcome, and long overdue, realism creeping into Stanley’s financial management? If so, then only for the briefest of moments.  The key point here is that the embargo was imposed as a sanction – Stanley owe money to a football creditor, the PFA, who had stepped in to stop the previous regime crumbling, and to ensure that players received their wages.

If a cavalier attitude is taken to the repayment of football creditors, the whole transfer system is severely undermined, and the PFA may be reluctant in future to intervene in helping clubs pay their wages (not that in a properly run club they would ever have to).

The ‘sanction’ is no longer that – the transfer embargo is no longer either a punishment, or an incentive to behave ethically.  In short, it has become dysfunctional as a means of disciplining clubs, in much the same way that, as I have repeatedly argued on the basis of my research , deducting points is dysfunctional as a sanction.  We are moving to a situation where sanctions are dysfunctionally farcical. In the case of the transfer embargo, the effect or otherwise of a transfer embargo comes down to the luck or lack of it that a club has with player injuries.

The Accrington action should be seen as a clarion call to sort out the sanctions system, and rid it of its increasing dysfunctionality. Given the number of Premier League clubs currently with financial issues, now is not exactly the best time to have dysfunctional sanctions for financial mismanagement.

Posted in Ethics, Insolvency, Sanctions, Transfer embargo | Tagged: , , , | 1 Comment »

The Spinmeister unspun? ;-)

Posted by John Beech on December 12, 2009

A new message has come through from Planet Ridsdale (1). It reads:

Cardiff City are delighted to announce that they have signed a settlement agreement with the Langston Corporation regarding the loan notes that were taken out in 2004.

This agreement, signed by both parties, therefore removes the threat of any further legal proceedings in the foreseeable future.

Cardiff City chairman and chief executive Peter Ridsdale said: “On behalf of Cardiff City Football Club, I would like to thank the Langston Corporation for their co-operation in this matter and Mr Sam Hammam for helping to facilitate this agreement.”

What could a ‘settlement agreement’ mean?  Was it the debt or the dispute that had been settled?  How come Sam Hammam, previously the arch-villain, was suddenly Peter’s new friend?

Even Auntie seemed puzzled when reporting this on her website.  With the judicious use of a pair of single quotes, she went with ‘Cardiff City ‘settle’ with creditors Langston‘ (2). The interview with Peter there gave some glimpses of what was actually meant though.

A crack team of lexicographers, grammarians, syntaxologists and even former NASA employees (decoding Peter Ridsdale is rocket science!) have managed to remove the spin and come up with the following translation. I can’t vouch for its accuracy, but, for what it’s worth, here it is:

‘Langston could have dragged us back to court again if we didn’t start paying them back some of the money they lent us five years ago.  We might have lost, and been forced to actually start paying them their money back, plus we could have been lumbered with more legal costs.

‘Now this would prove a tad, shall we say, inconvenient, especially as we’ve lost money every year bar one since 1999, and just had an embarrassing little disagreement with the tax man (and please don’t mention 777).  We came up with this cunning plan to get our new chum, Mr Munto TG, to sub us.  Problem was, he wasn’t very happy with us still hanging around with Big Sam.

‘So, we gave in and said we’d start paying Big Sam back so we could get TG to start paying us to pay Big Sam back.  Brilliant or what!

‘Unfortunately our solicitors said we’d have to sign the agreement with Big Sam and his mates as well as get them to sign it. Still, January’s another year.’

Posted in Chutzpah, Debts, Insolvency, Public relations | Tagged: , , , | 1 Comment »

Spotlight on Macclesfield

Posted by John Beech on December 11, 2009

Since the inception of regular movement of teams between the Football League and the Conference, we have seen many clubs yo-yo, in particular the step up proving problematic in the absence of rocket payments (qv). There are clubs which have come up and now seem to be almost part of the furniture however.  Such a club is Macclesfield Town, who have been a part of the Football League scene continuously since 1997.

This achievement has not been without its problems. Most notably, the club has had its own mini-scandal – Eddie Furlong was charged with improper conduct over the use of Football Foundation grant funds (1), but he had already been distanced from the club, having stood down as Chairman four years previously (2).

Macclesfield have been lucky to find backers prepared to put substantial amounts into the club.  By 2004, members of the board owned 75% of the shares, and brothers Amar and Bashar Alkadhi were in possession of almost half the issued share equity (3). Changes were made to facilitate the further issue of shares, and to allow an individual to own more than 50% of the shares.  The Alkadhi brothers, originally from Iraq, have made their money through involvement in the mobile phone business in the Middle East and Africa (4).

The Football Foundation problem resulted in a fine of £62,000, the requirement for the club to repay £195,000, and costs, bringing a total bill of roughly £300,000 (5) – a sum which might well have put paid to many a club at this level. The Alkadhi brothers promptly donated £30,000 to a fighting fund.

Bashar has been interviewed on the club website (6) and comes across as a genuine and committed fan of the club.

Last week the club issued a statement (7) which includes the following:

“In recent seasons the club has benefited enormously from the support of the club’s majority shareholders, Amar and Bashar Alkadhi and also from other members of the current Board via purchases of shares and the provision of loans that provided a degree of financial stability not enjoyed by the majority of other Football League clubs.

“At the end of the last financial year, the club’s Balance Sheet showed long term debts of £1.74m of which, approximately 75% represented loan payments made by Amar and Bashar Alkadhi. The majority of the remaining sum reflects further loans made by other Directors.

“The Board has today moved to strengthen the Club’s finances via a major switch of debt to equity by announcing that it will convert more than £800,000 of loans to the club into shares, a change that will significantly strengthen the Balance Sheet.”

It’s clear that Macclesfield would not have achieved what they have without the generosity of, in particular, the Alkadhi brothers, and their willingness to convert debt to equity, removing the threat of even ‘soft’ debt, must be seen as a major positive from the club’s perspective.

Why then might my joy on behalf of Macclesfield fans be not unmitigated?

The benefactor system at Macclesfield has worked well so far because it has involved a number of benefactors.  My worry would be that the balance of power has now shifted heavily towards the two brothers, ironically, it must be said, through their generosity.  While I have absolutely no reason to question their continued committment and largesse, it is only too clear from a wide range of examples at other clubs that a uni-benefactor model can prove unsustainable for a range of reasons – loss of interest, loss of fortune, growing old and handing on shares to less committed relatives, etc.  etc.

Another weakness of this approach to running a club was brought home to me by a revealing comment by Kettering Town’s uni-benefactor and Chairman Imraan Ladak this week (8). Stung by criticism from fans of his sacking of Assistant Manager John Deehan, Ladack said “It’s very close to a million pounds I have put in over four years. For people to turn against me after what I’ve done, that’s an incredible lack of loyalty from some.” An understandable reaction from his personal perspective no doubt, but he seems to have missed the key point all along – fans are loyal to clubs, not owners.  Their loyalty is not therefore something which can be bought, and any perceived loyalty to an owner is only as strong as the success which the owner achieves.  An even more striking example of this is the recent criticism of Steve Gibbson who has reportedly sunk (and lost) some £60 million into Middlesbrough.

If you want to be a benefactor, you need to recognise the fact that you must be prepared to lose large amounts of money in your hobby interest, an interest which is far from uniquely yours, and that ultimately you will never own the ‘club’, merely the company.  There will be some good times to be had along the way, and a sense of celebrity, but that sense of celebrity is truly vicarious – at best you can bask in reflected glory.  If there is no glory, on the other hand, you cannot dodge public opprobrium.

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Pack Up Pompey?

Posted by John Beech on December 10, 2009

Well, according to the club itself in a statement issued this morning, “The club is not going into administration. If that were the case it would have happened at the end of September or early October. This week alone, HM Revenue and Customs were paid £2m and other historical arrears are being dealt with on an ongoing basis” (see 1 for full statement).  The qualification after the blunt denial at least confirms that what we all knew is true – these are deeply troubling times for the club.

Also in the statement we find “Much is happening behind the scenes but constant malicious rumours and speculation do not assist with the proposed major long-term funding that is currently being put in place“. Far be it from me then, a Pompey fan, to add to that speculation.

However, it is interesting to note that a denial from the club of impending Administration does not always mean that Administration is not so far away.  The denial is certainly not a classic contra-indicator, as in “The Board has complete faith in the manager”, but a cull through my records turned up the following denials, although to be fair it turned up a much larger number of denials that turned out to be correct predictions:

Pompey is not alone among Premier League clubs to deny, at various times, rumours of impending Administration.  These include West Ham, and last season Newcastle United were moved to deny that relegation would lead to Administration.

Certainly Pompey fans do not need to panic, but they should perhaps treat the reassurance with just the merest dash of caution.

Posted in Insolvency, Marketing, Public relations | Tagged: , , | 1 Comment »

The Madness of Munto

Posted by John Beech on December 10, 2009

Few episodes in the modern game can match the bizarre mixture of inanity and insanity which have characterised Munto’s involvement with Notts County. Less than two month’s since their takeover was approved (1) we are greeted with one of those irritating pronouncements that over-use and abuse the word ‘fact’:

There are four facts: Notts County is on the market, Munto Finance are seeking to dispose of the club, Munto are in contact with some potential buyers and fact number four, it is an option for Munto to consider that Eriksson and Trembling are in talks about a possible management buyout.” (2)

It doesn’t take a logician or a linguist to deconstruct ‘fact number four’ as neither a fact nor meaningful English.

Of all the nonsense peddled by and about Munto over the last few months, perhaps the epitome is this particular gem: “They have an overall commitment to the community and fans alike – ensuring a solid and long future to enable the club to steadily rise through the tables, eventually depending on their own resources.” (3)  In spite of the use of the third person, this quote comes from a statement by Munto about their plans to the Supporters Trust.

Munto have shown complete contempt to the community and fans rather committment.  The shadowy men behind Munto/Qadbak should be held accountable for the mess they have created at this venerable club and their failure to deliver.  Will they do the decent thing and ensure that the club is returned to the Supporters Trust who they so outrageously misled with promises that have simply evaporated?  I think we can all guess the answer to that one. Staggeringly, the early runner appears to be none other than ‘one of Munto’s own’, Executive Chairman Peter Trembling!

This must not be allowed to happen.

Posted in Chutzpah, Ethics, Governance, Ownership, Trusts | Tagged: , , , , | 1 Comment »

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