Four Star Daydream: the Pompey Owner Saga Part 6.

By on Jan 23, 2012 in Finance, Latest | 12 comments

So, Fantasy Football Owner is being played at Pompey yet again. Against a background of a HMRC winding up order for two months unpaid PAYE – a total of £1.6m – the familiar dance of chancers, secret consortia and mad millionaires continues. Yet no serious candidate has emerged. The transfer window advances towards slamming point and all our promising new manager, Mike Appleton, can do is manipulate a-one-in-one-out situation with our expensive but depleted eighteen man squad. The reason? The club is so weighted with debts owed to Balram Chainrai it would have to be sold way beyond its worth to get him out of our orbit.

In November, under the usual Pompey circumstances involving allegations of fraud, money laundering, misappropriation, forgery and dodgy involvement with the Russian Mafia, I wrote of the difficulties into which the extradition case against owner Vladimir Antonov had left the club. Essentially the freezing of his assets had sent Pompey’s parent company, Convers Sports’ Initiatives, into administration. This step was forced on the company by Pompey’s previous owner, Hong Kong businessman Balram Chainrai, placing a charge on them. This was consequent on CSI’s failure to pay Chainrai the first instalment for the purchase of the club and their clear inability to do so without Antonov’s money – CSI being funded in its various activities by the private fortunes of its owners, largely Antonov with a minority input from Roman Dubov and Chris Akkers.

In purchasing the club CSI had been able to renegotiate the terms placed by the Football League on Chainrai at the exit from administration in October 2010. This gave some leeway for development and enabled Antonov to ‘lend’ the club £10.8 from CSI in order to facilitate player purchase and running costs, placing the club further in debt. It is to be assumed that the Football League, having passed Antonov through their ‘Owners and Directors’ test, thought that he was good for the money. Guarantees were there from his bank, Snoras. Snoras has gone under and triggered the charges against Antonov. Despite the warning bells against this institution worldwide, the Football League considered Antonov to be a good enough owner for PFC. In effect, all the Football League have succeeded in doing is aiding and abetting the club’s fall deeper into debt, making it unsustainable yet again.

Since the end of November the club has been for sale. This is to make sure Chainrai, as secured creditor of CSI, gets his money back. Although one begins to get a sneaking suspicion that he is on a nice little earner with the interest on his loans, it seemed this time he needed a ‘pretty big fool,’ as football economics have it, to step up to the plate in order to insure him against any loss.

And then along came Joseph Cala.

On the front of it the bigger fool premise seemed to have been fulfilled. According to the Portsmouth Evening News Joseph Cala’s chief business interest is the building of undersea resorts and casino ships, ‘a new ocean leisure concept incorporating the elegance of a luxury undersea atmosphere habitat.’ Or rather the ‘pre-sale’ of such building work. The business, Carla Corp., hasn’t advanced very far so nothing has been built yet. Cala told the News that this was down to the rising price of steel, which might explain the fact that Cala Corp has recorded losses of $2,439,726. It has net assets of $6,377, with an accumulated deficit of $14.3 million (£9.3 million). He claims it is a ‘dormant company’. A bit like Salernitana in Italy’s Serie C, which Cala owned for part of February this year. The club suffered financial collapse after he failed to pay the wages and had his ownership revoked.

This should be enough to ring warning bells at Football League headquarters. Yet as the media circus gained momentum Cala seemed to become more and more likely to be the next owner of the club. In the Telegraph on Thursday morning he was 90% sure of getting the club and by Friday morning the deal was 95% done he said, being about to talk to the Football League that afternoon. He had great plans to cut the wage bill by ridding the club of eight expensive players, leaving a team of ten, and being hands-on in running the business. This would soon elevate us to the Premier League and make us one of the best … you get the drift. Perhaps he intended to play himself. He did claim to have been on the books of Inter Milan’s academy before his family moved to America.

Now put like this the whole thing is ludicrous but it is apparent that Administrator Andrew Andronikou had been entertaining the idea of Joseph Cala as the preferred buyer. This became clear on Friday afternoon when Cala finally withdrew his offer. Despite allegedly being able to prove funds of £20m to the administrator Cala said  he had baulked at lodging £3m to £5m into his lawyer’s bank account as a guarantee to Chainrai’s company, Portpin. He added that Portpin were not willing to take up his suggestion of becoming ‘landlords’ of the club. Consequent on his withdrawal Andronikou went from being bullish about a ‘preferred buyer’ being close to completion to speaking vaguely of ‘two or three parties remaining in contention.’ One can only conclude that Cala was his preferred buyer.

If Cala, a man who spoke of his enormous losses in business being useful to set against future profits, had passed the Owners’ and Directors’ test some serious questions would have had to be asked. Fans tried to raise these questions whilst negotiations were under way, doing their own research after the failure of the League to properly check Antonov. The Supporters Trust was part of this research effort, stating “Portsmouth Football Club is in a precarious position, it cannot afford to once again be handed to anyone who does not have the finances to stabilise the club,”  offering to work with the Football League in the research into any prospective buyers in order to pre-empt their last excuse that they did not have the resources to investigate Antonov. Despite any incredulity at anyone passing Cala as ‘Fit and Proper’, given Pompey’s past history of arms dealers, fraudsters, invisible men and people in fear of their life from the Chechen Mafia, anything seemed possible to the fans. Trusting the League to save us really wasn’t enough. Cala’s withdrawal from the deal was a blessed relief to all with Pompey’s best interests at heart.

Why would Cala be the preferred buyer of anyone charged with vetting owners for a football club? Perhaps the answer lies in the £1.6m tax bill for which HMRC has issued its winding up order and the reason why the tax bill hasn’t been paid.

We know that PFC is not running at a sustainable level due to Antonov having to make a loan to keep the club running. We knew in November that the cash would run out by the end of December. It is clear that since November, whilst this attempt to sell the club has been under way, the cash flow has had to be juggled, and it would appear that yet again the club has been forced to use the Taxman as an unauthorised overdraft. A sale going through in the next week to someone with money in hand would solve all that and ensure Mr Chainrai’s security for his money continued to exist, because Portsmouth Football Club is the only viable asset of CSI that will realise the money owed to Chainrai.

So we come back to the conclusion that yet again our most reluctant owner has a stranglehold on the club. Someone who is prepared to push the club to the brink of extinction rather than let go of any of the money he ‘invested’ so rashly back in October 2009. Money that has earned a nice packet of interest along the way. Money that did the club very little good at the time it was invested, failing to stem the fall into administration in February 2010. If you trace the pattern of events at that time, they seem to be mirrored this time. Even down to the failure to pay the tax bill and the desperate scrabble to find ‘another fool’. Well it didn’t work in 2010 and chances are it won’t work now. The bigger worry is that this time administration might not be an option. The club has a CVA in place on which it has not paid a penny yet, having already deferred one payment, but has managed to accrue more debt. The worry is the court will say – go straight to liquidation, do not pass go, do not collect your parachute payments. Already other clubs are circling, bidding for our attractive young players,  such as Pearce and Ward. No one wants the expensive, older, money draining legacies of the excesses of the Premier League days, such as Tal Ben Haim. We are obliged to keep these players no matter what our financial state.

This puts pressure on Chainrai. If he can’t sell, and much time has been wasted already in pursuing Cala, then he has to chose to drip feed the club to keep it as a going concern or let it go to the wall. He already claims to have spent £1m doing that recently but there is much scepticism in regard to that statement. Other potential buyers appear to have been repelled during the negotiations with Cala. Pompey Supporters Trust, when approaching the administrator in regard to finding a way for the Trust to get involved, were told they would need proof of £1oom in funds before they could even get a look at the books. Chainrai seems as determined as ever to get his money back. The alternative of pricing the club to attract a serious buyer, one that will run the club as a proper football business with the community of Portsmouth at its heart, does not seem to have occurred to him at all. Cutting his losses is not an option it seems. It also seems the administrator can do nothing but dance to the tune of CSI’s major creditor.

Portsmouth Football Club yet again is caught in the spider’s web. Today Portsmouth MP Mike Hancock is quoted in the Sun, asking the Sports Minister to step in. He says, “We have been serially shafted. We’ve had character after character turn up and say they are going to buy the club and make all sorts of promises. As long as someone has got the money or alleges they have the money they are allowed to take over part of our heritage. All these characters are just unbelievable and none of them should be allowed to get near a football club, in my opinion. If football doesn’t start to deal with that stuff, in the end there is going to have to be Government intervention.” But government intervention takes time and Pompey’s is running out.

Make no mistake. Pompey is one of the best examples going of the pathetic state of regulation of our game. Repeat offenders are allowed again and again to decimate our clubs, yet no one seems to be able to stem the flow. The Pompey Supporters’ Trust is being repelled at every turn. There is a desperate attempt to gather details of all Pompey Supporters together in one place to give power to our voice. Pompey’s 12th Man website has gone live today for fans to register their support for some element of fan ownership at the club. There is no one else who will help.

You can follow SJ Maskell on Twitter by clicking here.

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    12 Comments

  1. The time is rapidly approaching when the supporters have to be mobilised – not so as to apportion blame, tht serves no useful purpose now, The time has come for action, for fundraising, for public meetings, for all major individuals and authorities in the city to come together before its too late. We can no longer stand by, as we have done up to now, and watch helplessly from the sidelines.

    Peter Jeffs

    January 23, 2012

  2. Excellent article, SJ! This deserves to be Facebooked, Twittered, picked up by the mainstream media and shared with everyone who supports a football team.

    Gary

    January 23, 2012

  3. Sick to back teeth of them and their escapades now. The bleating of the fans “look at what we’ve got to put up with” was the final straw for me when we played them last season as if it’s an injustice they’ve got to slum it in the Championship.

    Like Leeds before them, they’ve had times most fans can only dream of and if the punishemnt is having to play Barnsley and Doncaster for a few seasons, who wouldn’t take the punt again?

    Mick Nick

    January 23, 2012

  4. The injustice isn’t that Portsmouth have to play in the Championship, Mick, and I very much doubt that their fans feel that it it is. If my – or your – club had put up with serial frauds and woeful Premier League/Football League dereliction of duty which put the entire club at risk, I’m sure we’d be “bleating” about it.

    Steve

    January 23, 2012

  5. Mick – most of us Pompey fans enjoy the Championship (we were there for 18 years before we went up, so it does feel like home to many of us!). The problem is, as explained in the article above, that undesireable owners, let in by the Premier & Football League, are gambling with our football club with very little (no) regard to the fans or the legacy they are leaving behind. True, we enjoyed winning things (as all fans would), however, at every step along the way up and back down we have been lied to about the financing behind it all. Bottom line is, it isn’t about playing in the Championship (or League 1/2), it is about our club facing liquidation whilst we fans are currently vitrually powerless to do anything about it except to try and make the wider world realise what is going on.

    Gaz

    January 23, 2012

  6. Very good article Sue.

    You’ve raised some pretty important questions about Admin Andy and how serious he really has been about trying to sell the club.

    Hey Nick, I’m a Pompey fan, born and bred and I could give less of a damn about which division we play in, but not much. I’d just like my club to be something that we can be proud of again, that represents the honesty and spirit of the city and not being constantly described as “crisis-club”.

    Paul W

    January 23, 2012

  7. £1.6 million is a huge amount of money but its not too far short of the percentage that Redknapp would have got paid on the sale of Lassana Diarra to Real Madrid ;)

    pfcjames

    January 24, 2012

  8. Well, nothing that we don’t already know. The point of the article seems to be to encourage the idea of fans taking control but this is wishful thinking at Championship level. Quite simply, a rally of all the fan websites and their followers wouldn’t even raise the tax bill for next couple of months.
    The Exeter City model has worked well in the lower divisions but our running costs are much much higher.
    As for Hancock and the council, their contributions have been worth absolutely nothing. Same goes for that other empty windbag, Brian Howe.
    If we as Pompey fans were serious, we’d start a new PFC independently from what happens at Fratton. I say ‘if’ because it would have already happened if we were. Instead, we are all waiting for the white knight who doesn’t exist. Alternatively, stage a massive sit-in at Fratton Park – a sort of Occupy Fratton. Maybe we could recruit all those hippies about to be ejected from St Pauls. It would be quite something to see a sea of tents on the pitch of the hallowed turf.
    What would Jimmy Dick say?

    Dinksy

    January 24, 2012

  9. “The Exeter City model has worked well in the lower divisions but our running costs are much much higher.

    BUT that’s the whole point…the reason Pompey are in deep doo-doo is because their running costs are much higher – i.e. they are living beyond their means.

    If running costs exceed income, and therefore cash is not around and you end up in debt then you reduce your running costs, if necessary to the levels of Exeter City. Simple.

    jertzee

    January 24, 2012

  10. … or even, Dinksy, the Swansea City model – fans in partnership with private owners who want to run a FOOTBALL Club.

    If we, as Pompey fans, are serious about wanting to save the club – or even resurrecting it – we need to work together and educate ourselves in what is possible. Useful info on the benefits of fan ownership can be found here: http://www.supporters-direct.org/pages/?p=8321

    The White Knight idea is defunct mush. See here: http://www.fansonline.net/pompey-fans/article.php?id=389

    SJMaskell

    January 24, 2012

  11. Is anyone sure that the HMRC petition is just for £1.6m? They tend to be extremey cagy about giving information out as to the amount of any claim. Under the CVA they were receiving 20% of their total debt over about 5 years. However if the terms of the CVA fail then it is open to any creditor to claim their original debt. How were HMRC being paid? It may be that there is a period of grace within the CVA (Does anyone know where I can see a copy) but if the terms of the CVA including not running into more Tax debt then the CVA may have been breached even if the current instalments are being met (and there must be a query over whether they are).

    Lesley

    January 26, 2012

  12. The club have issued a statement regarding the WO which includes the statement:

    “The petition sought by HMRC is for the PAYE for December which is approximately £800k. Since the raising of the petition a further £1m (in VAT and PAYE) has become due for payment.”

    http://www.portsmouthfc.co.uk/LatestNews/news/Portsmouth-Football-Club-Statement-3049.aspx

    The terms of the CVA haven’t failed YET. (See whole of PFC statement). The hearing is on 20 February. I guess things could be put right if the bill is paid before then. That is part of Mr Chainrai’s dilemma, as outlined in article.

    SJMaskell

    January 26, 2012

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