In another High Court move, ‘Watford v. Gillingham’
Posted by John Beech on August 4, 2010
I’m currently on leave, but huddled over my laptop following HMRC v. Portsmouth, courtesy of Portsmouth Evening News and Dan Roan on Twitter. Latest news is that the court has adjourned for the day, and at least an executive summary of Mr Justice Mann’s judgement can be expected later on tomorrow afternoon.
In the fairly lengthy gaps between anything happening which is interesting enough to transmit, I came across this rather intriguing story (1). It seems that Valley Grown Foods, a company owned by the Russo brothers, who were directors of Watford, is suing Paul Scally, chairman of Gillingham, over the non-repayment of a loan of £250,000, made in December 2007 (the second such commercial loan).
The Russo brothers have a history of play-making. In December 2008 during a fairly turbulent period of the club’s history, the Russo brothers placed a motion of no confidence at a Watford EGM. One outcome of the meeting was the resignation of Chairman Graham Simpson. Shortly afterwards Chief Executive Mark Ashton resigned (2), to be replaced by Graham Taylor (3). In March Jimmy Russo succeeded Graham Simpson as Chairman (4), and a few weeks later Sir Elton John returned as Honorary Life President (5).
In May 2009 Jimmy Russo was reported to own 30% of the shares (6) of the financially stretched club. In November it was reported that Valley Grown Foods had, by then, lent the club a total of £3.7m (7), and by the end of the month they had lent the club a further £1m (8) as the club faced severe and immediate cashflow problems. These loans were secured against Vicarage Road (9). On 15 December the Russo brothers and one other director resigned from the board (10), seeking the return of the various loans (11). Jimmy Russo refused to defer repayment and threatened to put the club into Administration (12). Lord Ashcroft stepped forward to save the club, but on terms unacceptable to the Russo brothers (13). However, fortunately for the club, a deal was thrashed out (14), but not before Graham Taylor had called Jimmy Russo a ‘bad man’ (15).
None of this can make for terribly comfortable reading for Paul Scally then.
The timing of the loan – 5 December 2007 according to the writ – to Scally is particularly interesting. The day before (4th), the BBC website reported that Scally was proposing to sell Gillingham’s Priestfield stadium and lease it back, in order to ease the club’s debt (16). The day after (6th), they reported “Scally reveals Gills stadium plan: Gillingham FC’s chairman has proposed selling the Priestfield Stadium to a company of which he would be sole owner – and then leasing it back to the club” (17).
Paul Scally has assured Gillingham fans that the debt dispute has nothing to do with the club (A). With respect to any connection with the purchase of the stadium by Prestfield Developments Ltd. he said “It’s completely unconnected. I don’t know what the timing of it was and I don’t know where that’s come from. It’s got absolutely nothing to do with Priestfield Developments.”
Jimmy Russo has won the court case (B). It was revealed that Gillingham are now £13.5m ‘in the red’.