Chester City: The Death Rattle – Part 13

Chester City: The Death Rattle – Part 13

By on Feb 17, 2010 in Finance, Latest | 26 comments

Another seven days have passed. There are now less than twenty-four hours until the Football Conference meets to decide the future of Chester City. It’s yet another potentially pivotal moment in the season, but there is little reason to have any confidence that the authorities will put the club out of its misery and expel it from the Blue Square Premier. As mentioned on here before, they have had several opportunities to do this and have failed to do, which they have uniformly rationalise to anybody (watching observers could be forgiven for thinking that the football authorities hold supporters in almost complete contempt). And with vultures still circling, hoping that a slick enough sales pitch would be enough to steal The Deva Stadium from the supporters of the club (who they would, of course, subsequently expect to turn out and pay money to watch their team), there is no reason for complacency on the part of Chester Fans United.

It seems absurd, but it is true nevertheless, that the organisation which done the most to get rid of the Vaughan family from the game isn’t the Football Conference or the Football Association, but HMRC. Last summer, they successfully challenged the old Chester company’s CVA in court. The Football Conference’s decision to allow them to start the season with a new company was in flagrant breach of its own rules (to the extent that it was given a suspended fine by the FA). Everybody concerned had an opportunity to get rid of them at that point, and they chose not to. Somehow or other, they decided that some sort of wider interest was served by keeping them in. Whose interests this was – other than the Vaughans themselves or the possibility that some sort of illusory veneer of respectability was being applied to the BSP season – has never been disclosed. Nobody from “within” the game has given anybody on the outside looking in a convincing reason why they should be trusted with anything, given their handling of affairs at Chester.

More puzzling still is the question of how Stephen Vaughan Senior still seems to be pulling the strings at The Deva Stadium, when he now fails the Football Association’s Fit & Proper Persons regulations and has done now for almost three months. Having been investigated by HM Customs & Excise over money laundering in 1998, Vaughan was disqualified by the Insolvency Service from acting as a company director for eleven years from the 25th of November 2009 after admitting “carousel fraud”. Carousel fraud is a very particular type of fraud, in which a company “buys” goods and then “sells” them on the same day in order to reclaim VAT illegally. Here’s the undertaking that he agreed in full:

  • Mr Vaughan caused Widnes Rugby League Football Club Limited to purchase clothing from a UK company, in three transactions worth a total of £2,877,228 plus VAT of £505,265. The clothing goods were sold on the same days of purchase to a Spanish company for a total of £3,002,855. The three transactions took place in June, 2006.
  • These transactions were carried out in a manner which involved Widnes Rugby League Club in Missing Trader Intra Community (MITC) VAT fraud, also known as ‘carousel fraud.’
  • He caused these transactions to take place when he knew the club was insolvent.
  • Payment for the goods purchased was not made to the alleged supplier, but was instead made into a third party’s bank account in the Netherland Antilles.
  • He failed to inform the other directors of Widnes Rugby League Club of these transactions.
  • He also failed to disclose to other directors a loan of £392,000 made to the club in August 2006.

Stephen Vaughan Senior, though, is not a director of Chester City 2004 Ltd. He was a director of Chester City Football Club Ltd, who had their CVA thrown out on appeal last summer and have effectively been dormant ever since. He is, instead, a “shadow” director, meaning someone that is not a director but upon whose instructions the directors of a company operate. It’s the reason why the Insolvency Service’s disqualification from directorship is worded thus:

…may no longer act as either an active or inactive director, or exercise control over an individual who is a director, of any company

The Football Association aren’t as daft as to not be aware that shadow directors exist, of course, and this is the reason why the Fit & Proper Persons Test is worded thus:

  • a person in accordance with whose directions or instructions the persons constituting the management of the Club are accustomed to act; or
  • a person who exercises or is able to exercise direct or indirect control over the affairs of the Club. For the purposes of this definition, a person shall be regarded as being able to exercise direct or indirect control over the affairs of the Club in particular but without prejudice to the generality of the preceding words if that person owns or is entitled to acquire 30% or more of the share capital or issued share capital of the Club or the voting power in the Club.

Vaughan should have been given twenty-one days to offload his shareholding in the club. Has he done this? Is it in any way reasonable to say that he in no way “exercises or is able to exercise direct or indirect control over the affairs of the Club”? Would it, considering everything, be fair to say that the FA are at the very best sailing close to breaking their own definition of the Fit & Proper Persons Test? Anyone that wishes to explain this is more than welcome to do so, because Stephen Vaughan Senior has continued to be involved at Chester City for almost three months since his disqualification from acting as a company director and for two months since he should have ceded any involvement in the running of the club, and he is doing a damn good impression of still being in charge of the club.

Meanwhile, another group has come forward, this one from Denmark, claiming to be interested in buying the club in its current constitution. Quite asides from the damage that they are doing by giving the Vaughans the capacity to turn up at meetings with the Football Conference or in court and state that they need a little more time to finalise a sale of the club when everybody knows that the only way forward for football in the city of Chester is a supporters-owned, community focussed club run by local people, there are reasons to be very concerned about their involvement. Their initial press statement claimed that:

The consortium is in daily contact with the Chester City FC’s official fan club CFU, and we are keeping them informed of every progress in the negotiations.

This, however, was little short of a lie. CFU has been clear – very clear – about what they want and they seem to have the overwhelming support of their membership. The Danes went a step further on their website, stating that they had the “100% support” of CFU – comment that was quietly removed after words from CFU themselves. They also seem to be understating the size of the club’s debt somewhat on the website. Consider what we wrote about the level of the current company’s indebtedness last week and this statement, taken from the website:

The club currently has a debt of about 250,000 Danish Kroner in tax debt. Besides that it owes a similar amount to additional creditors, who do not file for a bankruptcy petition, but are willing to enter into an instalment agreement. This is, among others, local businesses who definitely are interested in the survival of the club.

It is categorically not true that “the club owes a similar amount to additional creditors”. The 250,000 Danish Kroner is the amount that is required to be paid in order to stave off the winding up order. Chester City (2004) Ltd’s current total indebtedness is £703,000 (6,027,709 Danish Kroner), of which £485,000 (4,158,600 Danish Kroner) is owed to “the Vaughan family”. Investors in this particular little scheme may be interested to know that Chester’s current football debts (which have to be paid, in full and on time) amount to £64,300, or 552,530 Danish Kroner. On top of all of this – and as with the Norwegian Facebook group that we discussed last week, they did a considerable amount of media groundwork at home – including a piece on Danish television – before even having the common courtesy to contact anyone from the supporters’ side of the Chester divide.

There was good news for CFU on Monday night, when BBC London’s Non-League Show spoke to a local council member who spoke encouragingly of his contact with CFU and of his desire to keep a club going in the city as a benefit to the community. The council hold the ownership of The Deva Stadium, and are therefore critical to any group wishing to resuscitate football in the city. Meanwhile, CFU holds a meeting at the Guild Hall in Chester tomorrow night. Much of what the meeting will be about will be determined by the Football Conference’s decision tomorrow. Many have long since lost hope of the football authorities doing anything to help the supporters of this club, but there is still time for them to do the right thing, put Chester City out of its misery, draw a line under the past and let the future begin.

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    26 Comments

  1. Great stuff once again.

    blogdroed

    February 17, 2010

  2. As I understand it the Danes do not intend to pay off the Vaughan debt in full. They’ll try to get Vaughan to settle for a lot less. Whether or not this is realistic is another thing.

    The Danes claim that they have been in contact with a person from the CFU. Apparently they have misinterpreted the positive tone in the correpondance or maybe that person has been operating without mandate from the rest of the board but that is obviously speculation.

    I’m not sure that the “lie” posted on the Danish Website is intentional. As for gathering supporters in Denmark they do not gain that much from stating that they have support from CFU. If the had omitted the CFU contact from the website or merely stated that they had running talks with the supporters I do not think that it would have been of great difference to the Danish supporters of this project.

    Coco

    February 18, 2010

  3. Another brilliant article and great read.. thank you.

    CCFC fan

    February 18, 2010

  4. The FA, FL and Conference authorities are becoming increasingly unfit to run our national sport and need replacing.

    Sadly that would probably be by the likes of Scudamore and Murdoch and cause further unnecessary divisions and conflict in what is basically a simple game almost destroyed by greed.

    Martin

    February 18, 2010

  5. Sadly, I just can’t see the FC doing the decent thing. I’m sure (though I fervently hope I’m wrong) that they’ll find some excuse to let this whole sorry episode plod along. Having broken their own rules to let CCFC play in the first place (though I believe this was underpressure from the FL who had threatened to remove the FC promotion place if they didn’t? Please correct me if I’m wrong), their main concern now seems to be protecting their own decisions and reputations (HA!). But, in the end, what’s the point? If CCFC is allowed to survive this time, the fans will desert on-mass, the players will still strike/leave as they won’t be paid; neither will the Police or Council. And the whole issue will crash down in an even bigger mess. There’s a phrase about holes and digging isn’t there?

    RichardG

    February 18, 2010

  6. I don’t think anyone seriously expects Chester City to be expelled from the Football Conference today, do they?

    Either the club will pull another rabbit out of the hat at the last minute or, failing that, the Conference will bottle out citing the decision having been made in consultation with the clubs who will of course have voted with nothing but self-interest.

    Dermot O'Dreary

    February 18, 2010

  7. A lot of people expect it Dermot.

    They simply cannot fulfil home or away fixtures at the moment and there is absolutely no sign of that changing.

    Martin

    February 18, 2010

  8. You clearly have more faith than me in the decision-makers Martin !!

    Dermot O'Dreary

    February 18, 2010

  9. The FC would be foolish in the extreme to accept more rubbish in the guise of promises of funding, or bridging loans, or new investment or whatever is spouted by Vaughans puppets when they get in front of the FC. The current regime is doomed, is hanging on for whatever revenue they can continue to squeeze (they are wanting to finish the season to get their hands on the FL parachute payment. They will probably tell the board at the FC that they will use this to settle debts…) out of the club.

    Vaughan lost 3 of his apartments on Chester Wharfside this week to repossesion. Hardly the actions of a man who can keep any football club afloat. If he cant pay the coach company in full, and only has 7 first team players, wtf would the FC think he can do to keep it going to the end of the season? Scottish oncers again?

    Pistov

    February 18, 2010

  10. So whats the difference between being kicked out and failing to turn up for any more fixtures?

    Richie

    February 18, 2010

  11. And so to absolutely no-one’s surprise, my expectation of no expulsion today proved to be accurate.

    Wonder what bullshit tale they span THIS time?

    Dermot O'Dreary

    February 18, 2010

  12. Wrexham’s site now contains what appears to be a statement by the FC Board –
    http://www.wrexhamafc.co.uk/page/NewsDetail/0,,10311~1970370,00.html

    This makes it clear that the board want to expel Chester, but that ultimately they are leaving it the the other Conference Clubs to decide, claiming that they are legally required to do this. Whether the clubs will in fact vote for this is of course open to question – but the statement (presumably issued early by Wrexham, and I would guess should have been embargoed until tomorrow) makes it pretty clear that the Board have no confidence that Chester City in its current form can complete the season….

    Albert Ross

    February 18, 2010

  13. CONFERENCE STATEMENT ON CHESTER CITY

    The of the Football Conference today (18th February 2010); met with representatives of Chester City (2004) FC, when the club pleaded guilty to all five counts with which they were charged.

    These included those in respect of failing to fulfil fixtures, non payment of Football Creditors, failing to attend satisfactorily to competition business and bringing the competition into disrepute.

    At the conclusion of a lengthy meeting, the representatives were advised that the Board failed to be convinced with their presentation that the club were able to demonstrate the club’s ability to fulfil future fixtures in the competition and as a consequence informed the club of their finding in relation to Conference Rule 8.6.

    In compliance with Article 5.2 of the Football Conference, the Board will recommend to its Member Clubs that Chester City (2004) FC should face expulsion from membership. To facilitate this recommendation the Board are now legally mandated to convene a General Meeting of Member Clubs to, receive, deliberate and vote on the said recommendation to expel in consideration of Rule 8.6 and Article 5.2. Until the meeting is held the club will remain suspended from the competition and their representatives suitably advised as to any future plans or presentations they may well wish to pursue against the recommendation of the Board to its Member Clubs.

    The date and venue of the meeting is subject to final clarification.

    Ralph

    February 18, 2010

  14. Apparently a 3/4 majority is required to expel Chester – I can’t believe that that many clubs will vote in favour. Stevenage has already been griping about the points that they’ll lose if Chester’s record is expunged, and there’s plenty of other clubs who’ll be relishing the prospect of a fixture that’ll be little more than a walkover. Self-interest of the clubs will be enough to save them.

    Dermot O'Dreary

    February 19, 2010

  15. I think the Football League have some questions to answer about why they put pressure on the Conference to accept Chester in breach of their own rules. Was this a misguided attempt to help the fans of CCFC? If so it has blown up massively in their face. All it seems to have done is prolong the whole sorry affair and allow SV another 6 months in which to attempt to offload the club onto someone else. Funny how the authorities always seem to get it wrong, sitting back when they should be intervening or sticking their oar in only to make things worse!

    Micky F

    February 19, 2010

  16. Dermot, the Conference Board recommending to its member clubs to expel a club at an EGM is the most they can ever do under their rules.

    The member clubs ARE the Conference.

    The process is in motion, just be patient.

    Good luck with starting again Chester fans. You’re going to have a lot of fun :)

    Martin

    February 19, 2010

  17. Micky F, the precious 72 largely insolvent Football League clubs just need a working flushable loo.

    That’s why they pressured the Conference to take Chester in the first place under threat of pulling up their draw-bridge again.

    Their competition must have somewhere for failing clubs to go that will not kill them immediately. Sadly that is probably almost inevitable anyway these days (Boston, Scarborough, Halifax, next year Darlington etc.)

    Martin

    February 19, 2010

  18. A little unfair suggesting that Darlo will go under, although I have few doubts that they will struggle to even be a respectable mid table side. At long last they have an owner who seems to be trying to keep to a budget that’s realistic – this really is why they are struggling on the field – but at least they shouldn’t be running at huge losses. The stadium will always be a drain on their resources of course, but I don’t see them going out of business just yet…

    Albert Ross

    February 19, 2010

  19. Albert, whilst your naivety or loyalty is charming, have you considered what it costs to run that massive white elephant stadium of theirs? The electricity, water, rates and insurance bill must be crippling alone.

    They wouldn’t be the first relegated club to completely underestimate the competitiveness of the Conference.

    How are they different to other failing northern League clubs like Scarborough or Halifax?

    Martin

    February 19, 2010

  20. Martin – loyalty is not the issue, given I’m a Hartlepool fan!

    I’m not suggesting they will find the conference an easy league – anything but! – more that the signs so far are that the new owner seems to at least have a grasp of financial reality, something that neither of the two Georges could be accused of. The ground is a big enough problem for them that it will always mean that they will be at least a step lower than where their fanbase might be able to support them, and I’d argue that would see them battling to get into mid-table – their average attendance this season is equivalent to that of Stevenage who are 8th in the attendance table, and if they are winning a few games they might at least stabilise that fanbase in the Conference. The problem they may well have (as my own club do) is that the fans who are not “Core” decide instead to follow one of the Big Three NE teams, or just get a Sky subscription and follow Chelsea/Man Utd or whoever rather than support what’s on the doorstep. I don’t think they’d realistically survive lower than the Conference National, but I can see them surviving at least if they stay there.

    Albert Ross

    February 19, 2010

  21. Thanks for doing these, it makes it a lot easier to keep up!!

    Kowalski

    February 19, 2010

  22. I have been reading the Articles of Association of The Football Conference Limited for 2008-2009. I assume they have not changed for 2009-2010.

    Article 7.1 requires an extraordinary general meeting to pass a special resolution to be called by at least 21 clear days notice otherwise 14 clear days notice is required.

    Article 5.2 provides “The members in a general meeting by a resolution passed by a THREE QUARTERS’ MAJORITY OF THOSE PRESENT AND VOTING may on the recommendation of the Directors expel a member from the Competition.”

    Resolutions requiring a three quarters’ majority are normally described as special resolutions. Therefore, the earliest the Conference could hold a meeting to consider expelling Chester City is, by my calculations, Monday 15th March. This is assuming that the notices convening the meeting were sent out today. The Conference teams will have played a further six games by this stage and will only have around 8 games left.

    Assuming all 24 teams attend and vote at the meeting then 18 clubs will need to vote in favour of expelling Chester City from the League. This means that if seven teams vote against the resolution to expel Chester City then the resolution will be defeated. Possible teams who could object include Mansfield (would lose 6 Points), Stevenage (6 Points), Tamworth (6 Points), Cambridge United (6 Points), Salisbury (4 Points), Altrincham (4 Points), Ebbsfleet (3 Points), Forest Green Rovers (3 Points) and Chester themselves!!

    This issue needs resolving quickly one way or another so all the clubs involved in promotion and relegation know where they stand. It is not acceptable to have say the Stags finish in the play offs above Luton or AFC Wimbledon and then have the positions changed at the end of the season when points are deducted due to Chester’s demise. It is similar to the situation when Leeds United were appealing against their points deduction a few seasons ago and Forest, Donny and Carlisle were wondering whether they would lose second place and the chance of automatic promotion. It will probably also create chaos for the bookies!!

    Darren

    February 20, 2010

  23. I’m glad their new owner is more sensible so far and that’s a start.

    You can’t compare just averages because grounds and costs are so different. Stevenage have been building slowly for decades and even they make large losses.

    Smaller ex-League clubs don’t tend to stabilise in the Conference. They either get lucky and get back up pretty quickly (Torquay) or they sink without trace within a few years (Halifax, Scarborough etc.)

    The lack of a Conference TV deal with Setanta and the end of the Blue Square sponsorship will make the drop even harder financially than ever too.

    Good luck to them but I think it’s more than likely we will be having a similar debate about Darlington this time next year.

    Martin

    February 20, 2010

  24. Why do they need police presence at a game anyway? My team (St Albans) had very little to zero police at the games in the conference.

    Let all them players go and get a pub team to complete the fixtures for a peppercorn wage (expenses?) worked for Croydon a few years back (well they got tonked 13-0 every week but took one step back for 2 steps forward)

    There must be enough players / fans / officals that can transport a pub team to away games without the need for hotels / coaches

    At least they could see the season out then

    gertcha

    February 21, 2010

  25. Worth pointing out that in voting to recommend expulsion, Conference Board Members Forest Green, Ebbsfleet and Rushden would all suffer, being in relegation (FGR and EUFC) and promotion (Rushden) fights.

    This seems to be being missed in the dash to label everyone as self-interested.

    Wibbly Wobble

    February 22, 2010

  26. They’d need police for the Wrexham game, obviously, and if the ground safety authority say they need them, then they do. It’s more to do with not being paid a penny this season too remember.

    With all due respect the Deva Stadium isn’t Clarence Park.

    No other club will have gained or lost anything as none of Chester’s matches would be valid anymore.

    Martin

    February 23, 2010

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  1. And in other news… « Llandudno Jet Set - [...] about the same time as the Chester story seems to be near it’s unfortunate epilogue, (See Twohundredpercent to catch up), the …

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