The Ongoing Failure Of The Fit & Proper Persons Test

By on Sep 29, 2009 in Finance, Latest | 2 comments

English football’s “fit and proper persons” test, I would submit, has failed, and here are just four reasons why:

1) Tom Hicks and George Gillett still co-own Liverpool.
2) Sulaiman Al-Fahim owns Portsmouth.
3) The Gods alone know who owns Notts County, even now “they” have “told” us
4) It isn’t really a “test” at all.

You can’t buy the sort of luck Hicks and Gillett have had this week. There have been revelations about the accountancy trick they’ve employed to squeeze manager Rafa Benitez’s transfer budget until 2014. And there was exposure of willingness to drop a “payment-in-kind” loan on Liverpool from a great height.  Such revelations would ordinarily have heaped opprobrium on them. This week, they have been swamped by events elsewhere on Planet Football. They came from a March 2009 prospectus drawn up by investment banks Rothschilds and Merrill Lynch when Hick and Gillett were chasing investors to help them refinance their Liverpool debts. What coverage there was focused on two issues. Potential ticket price hikes of 8%, while competing clubs were freezing or dropping prices. And Benitez having less than £20m-per-year to spend on new players, as that money has to cover the costs of extending existing players’ contracts – considerable costs when the players concerned go by the names of Gerrard and Torres.

More disturbing, however, is yet another example of the Americans’ apparent determination to follow the Glazers’ Manchester United business model, despite their well-documented and specific promises on arrival at Anfield not to do so. Payment-in-kind (PIK) loans are the main reason why United’s ‘debt’ continued to spiral during a year which included a Premier League and Champions League double. United took out a PIK loan of £138m in August 2006 and, as their accounts stated in a rather matter-of-fact manner, “Interest accrues at a fixed rate of 14.25% and may be added to the principal”. Such loans are not repayable until they mature or debts are refinanced. The Glazers have been unable to do either, so 14.25% interest will be added to the loan annually, until its “term of 11 years” elapses. Also, as fans of compound interest will know, that means £138m will be a lot more than £138m when the time comes. In United’s accounts to June 2007, “interest accrued amounted to £14.185m,” (14.25% for the ten month period). So 14.25% of £152.185m accrued to June 2008. Liverpool’s PIK loan would have been £50m. Repayments in five years would have been £104.4m, which would have been met by a comparable forecast increase in commercial revenue. In other words, just like at Manchester United, by fans, not the owners themselves.

Meanwhile, it has been more of the same from Sulaiman Al-Fahim at Portsmouth. His attempts to squirm out of a meeting with Portsmouth fans last Friday were in the “dog ate my homework” column. Few observers believed he postponed the meeting because he felt it would distract the players. And just as many would have bought his story of a “major business commitment that I could not release myself from.” Some of the things he said at the meeting had similar credibility. The media focus was on the “£50m” Fahim announced on Friday. “Sulaiman said there’s £50m coming, publicly, at a meeting, to supporters,” said CEO Peter Storrie, in his best ‘so you’d better not be lying’ voice. “On that basis, I’m happy to stay,” he concluded, refuting reports that he was about to resign, but leaving the door open to resignation should this money be as real as the rest Fahim promised over the summer. However, it was the ignorance Fahim displayed on club issues which really took attendees by surprise, memorably described by one as “head-in-hands” moments. He seemed unaware of the planning issues surrounding Portsmouth’s new stadium project – his work at Hydra Properties hadn’t prepared him for matters such as “planning permission”. He talked about a Portsmouth Academy as if it was a major revenue stream. Finally, he seemed blissfully ignorant of the effect of his takeover procrastinations. “Who expected Portsmouth to lose their first six games?” he asked, clearly not expecting everyone to reply “I did”. If the “Fit and Proper Persons Test” was actually a ‘test’ of whether Fahim was qualified for the position of club owner, he’d currently be revising for his re-takes.

Within hours, my last attempts to cover the Notts County takeover tale had fallen so out of date they might as well have been written in Latin. Revelations about the ‘chequered’ business history of some of the cast would hardly be topped if Notts CEO Peter Trembling was revealed as a women trapped in a man’s body – the most shocking being that some of them had even tried to buy Newcastle United. The least shocking, though, was Eriksson’s lack of concern about Notts’ then ‘mystery’ investors: “Money comes in and everything is good,” he proclaimed, adding: “I don’t know where the money comes from and I’m not interested in that. The important thing is that the money comes” – a depressing mantra for our times even if it didn’t appear to also be the attitude of the Notts County Supporters Trust’s attitude as well. While Chief Executive Peter Trembling has been busy telling us that the Football League “aren’t holding an inquiry, they’re just asking questions”, there have been more and more questions to ask. Sol Campbell would, if he’d hung around, have received £33,000-per-year to be an ambassador for a company’s South African mining interests. That might strike some as a blatant attempt to sidestep League Two’s salary cap regulations. He didn’t answer the question of how a moody ex-international would be qualified to promote mining interests in South Africa. Eriksson, too, was to be an ‘ambassador’ for “Swiss Commodity Holdings AG”. The company claims to have 100,000 employees worldwide and an investment portfolio in the mining and finance industries worth £100m but no-one in the mining industry has heard of them. How so?

Still, now that we know that the Shafis and the Hyats are “two key members of the independent trust which owns the club” we can all rest easy in our beds at night. All of us, that is, except the Shafis and the Hyats, whose lives will be destroyed by this breach of their coveted anonymity. Trembling is still suggesting that Notts are “being pilloried for putting money in the oldest club in the world”, which is demonstrable nonsense. All the “confusion and misplaced allegations” which Trembling cites have stemmed from Notts refusal to publicly state who the club’s beneficial owners are. This begs one question. Why could they not have told us this months ago, certainly before the Trust voted control over to them? Unfortunately, until that question is answered, none of those surrounding Notts County at the moment can be. All these questions and more should have been asked of Munto Finance et al before they were allowed near Notts. Sulaiman Al-Fahim should have been forced to demonstrate adequate knowledge of ‘his’ club’s true position before it became ‘his’ club. And Hicks and Gillett should only have been allowed near Liverpool if, and for as long as, they kept the promises they made when they first donned red scarves in February 2007. Richard Scudamore once said “You can’t bar people because you don’t like the cut of their jib”, and he told a parliamentary select committee that, “I don’t know how, as the administrator responsible, we can apply a “we don’t like the cut of your jib” test”.  It is a pity that such a test cannot be applied to some of the people currently involved in running English football.

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    2 Comments

  1. can anyone supply links for the Notts county updates, as i seem to miss these stories.

    Also a link for the liverpool ownership debacle.

    Once again a good article.

    Cheers.

    jamie

    September 30, 2009

  2. Good stuff Mark.

    I suspect it goes something like this:

    “Are you a fit and proper person to own and/or run a football club?”

    “Yes.”

    “OK then.”

    Richard Scudamore would probably even fail that…

    Martin

    October 1, 2009

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