Derby County: When Survival Isn’t Quite Survival
It has been, by its own often chaotic standards, a fairly mundane season at the top of the Championship. The promotion and play-off places were guaranteed well before the end of the season – and deservedly so; it is clear that Norwich City and Watford, both a little more insulated than others from the effects of the pandemic by recent Premier League parachute payments, have been the best two teams in the division this season – while the play-off places were also decided without recourse to last minute penalty kicks, the ball bouncing in off a low-flying eagle, or whatever other pecularities it could have thrown up. Still, there’s always the play-offs.
The bottom of the table, however, has been a somewhat different matter. Sheffield Wednesday started the season with a twelve point deduction over their ground sale shenanigans, but this was reduced to six on appeal. And then there was Derby County, who would likely have been relegated themselves had it not been for Wednesday’s six point deduction.
Derby’s season has been several different flavours of horrendous. Off the pitch, the rumble of a protracted and ultimately failed takeover bid was clearly audible. On the 6th November, the club announced that it had agreed terms with Sheikh Khaled, a cousin of the Manchester City owner Sheikh Mansour for the sale of the club. He’d passed the Owners & Directors Test, the statement advised, and the deal would be closing soon. By the 15th March the deal was dead, after Khaled failed to meet a final deadline set by the Derby owner Mel Morris, with reports starting to emerge of various anomalies that had been evident during the attempts to purchase Liverpool and Newcastle
Meanwhile, on the pitch, things have been little better. Their 3-3 draw with Sheffield Wednesday on the last day of the season, just three days ago at the time of writing, kept them in the Championship by a hair’s breadth, but this came after they won just one of their last fifteen matches of the season, all of which raises questions about Wayne Rooney’s suitability as a manager.
There was an element of soap opera about the club’s decision to appoint him as their manager in the first place. Had somebody within the club seen something remarkable in Rooney as a potential manager during his time as player-coach? The need to replace Philipe Cocu was, by the time he was fired, clear – they’d won one of their first eleven league matches at the time of his departure and were bottom of the table – but was it really such a good idea to take a gamble on an untried manager at such a delicate stage, even if they were England’s record goalscorer?
Cocu’s sacking and his replacement with Rooney came just a week after the takeover was announced. In between these two dates, it was reported that the new owners were “expected to appoint their own manager”, but that Morris was concerned over the cost of sacking Cocu, which was believed to be around £4m. By the time of Cocu’s departure, that figure had been negotiated down. Whether Rooney’s appointment was guided by Khaled is not clear. The departure of Cocu cost Derby £4m, and Rooney’s wages have been reported at £90,000 a week, or around £4.7m a year. And this sort of financial profligacy, coupled with an apparent belief that they can simply make the rules up to their own benefit as they go along, seems to run through the club’s senior management.
For a prime example of this, we need only look to the case of former captain Richard Keogh. Keogh was once known as the guy who looked routinely petrified in kit launch photographs, but when he was seriously injured in a car crash caused by his former team mates Tom Lawrence and Mason Bennett (now of Millwall), the club’s reaction was, frankly, astonishing. Lawrence and Bennett pleaded guilty of drink-driving and and failing to stop at the scene of an accident, but the two players avoided jail and ended up being fined but retained by the club on reduced wages.
Keogh, however, was a different matter. The knee ligament injury caused by his team mates’ negligence was going to keep him out of the team for a year, but Derby reportedly told him that, while he could stay with the club until his contract expired (the majority of which would be spent recovering from the injury that he picked up during this incident), he would have to take a large pay cut in order to do so. When he refused, Derby dismissed him with immediate effect.
Unsurprisingly, Keogh went to the EFL’s Player Related Dispute Commission, where he won a full payout, only for Derby to contest the decision at the League Appeals’ Committee. And after a much-delayed hearing, however, he was this week awarded £2.3m, with the committee finding that, “Mr Keogh had not committed gross misconduct, that he had not brought the club into serious disrepute and that he had been wrongly dismissed by the club.”
Keogh had, at the time of the accident, played seven years for Derby, making 316 league appearances for the club, and the club’s treatment of him – firing the least blameworthy of the three involved, apparently because he was the one who was seriously injured and therefore unable to play, while keeping the other two on – didn’t say much for their honour or values. It’s true to say that Keogh shouldn’t have got in that car that night, but he wasn’t the person driving and he wasn’t the person driving the car that crashed into the car that he was in, either. It is staggering that Derby County seemed to believe that they could treat the two drunk drivers more leniently than they did Keogh, but this combination of arrogance and naivete has become something of a hallmark of the last couple of years of Morris’s ownership of the club.
And it wasn’t the only piece of extremely bad news for Derby County yesterday, either. The club had been cleared of breaching financial fair play regulations last year over the sale of their stadium to Mel Morris and the unusual way in which club calculated the value of players on their accounts balance sheets. Most clubs spread the transfer fee they have paid for a player over the life of the player’s contract, with them being worth nothing by its end.
For example, a player signed for £10m on a five-year contract would cost £2m a year but have no value at the end of that contract. Derby, on the other hand, assigned a residual value – how much they expected to receive in a transfer fee – to a player at the end of the contract, thus lowering their amortisation costs and reducing their losses, on paper. It is estimated that this unusual way of applying amortisation allowed Derby to add £30m to their balance sheet. Yesterday, though, that part of their case was blown out of the water, and the EFL’s statement on the matter read as follows:
The panel concluded that the disciplinary commission was wrong to dismiss the league’s expert accountancy evidence, which demonstrated that the club’s policy regarding the amortisation of player registrations was contrary to standard accounting rules.
The club and EFL will now have the opportunity to make submissions on the appropriate sanction arising out of those breaches.
Despite media speculation there is no definitive timescale for a determination on sanction, though the league will press for a decision as soon as reasonably possible and will provide a further update at the appropriate time.
This media speculation has come about in no small part because the timing of the ruling. With the regular league season having just ended, there is now considerable conjecture over whether sanctions brought against Derby should apply this season or next and Wycombe Wanderers, who finished third from bottom in the table and would be reprieved if Derby were to be docked more than one point this season, will doubtless be watching with interest.
The EFL’s previous inconsistency over this sort of thing makes it difficult to judge what will happen next, though. In the case of Sheffield Wednesday, the club had its points deduction held over to the following season, but it might also be argued that this season is ‘the following season’, when we consider how long it has taken to get here, while there is also precedent for docking points from teams after the season has ended. Macclesfield Town were relegated from the EFL under these circumstances and folded altogether shortly afterwards. The EFL’s AGM will be held next month, and we might presume that this is the cut-off date for this decision to be made, but at present the best that we can say is that there is a chance that they’ll be relegated this season, at this point.
And then there’s Erik Alonso. Alonso had already been tyre-kicking at Sheffield Wednesday, and there have been considerable doubts growing over the last few weeks regarding whether he is anything like as wealthy or powerful as he has repeatedly claimed to be. Just yesterday, a Sheffield Wednesday supporter helpfully posted this Twitter thread outlining the various inconsistencies in Alonso’s (frequently implied) claims regarding his own wealth and level of influence within the game.
Earlier this week, meanwhile, it was reported that a LinkedIn account claiming to belong to the president of the Indonesian Olympic Committee, Raja Sapta Oktohari, was used to put potential investors in touch with Alonso. When asked about this, Oktohari’s response was, “The news is not true. I do know Erik Alonso. I knew him from boxing, not football. I don’t know what his motive is.”
It doesn’t end there, either. Alonso is also linked to Tommy Suharto, the youngest son of General Suharto, who ran Indonesia from 1967 to 1998. General Suharto was placed highest on Transparency International’s list of corrupt leaders with alleged misappropriation of between $15bn and $35bn during his presidency and later charged with embezzling $571m of government donations to one of several foundations under his control and then using the money to finance family investments, only for his declining health to prevent the trail from ever taking place.
Tommy, meanwhile, was convicted and sentenced to 15 years in prison in 2002 for ordering the murder of a judge who had previously convicted him of corruption, illegal weapons possession and, fleeing justice. He served less than four years of this sentence before being conditionally released. Alonso describes Suharto as “a friend”, and it has been strongly suggested that Suharto is the money behind Alonso’s bid to buy the club. Alonso claims that the money in his bank account – $75m – is proof of funding from Spain, but very few people believe anything he has to say about anything, at the moment.
When Derby had stated last month that they’d reached agreement for Alonso to purchase the club but by this time it seemed to be most prudent to wait until confirmation came from a more reliable source. So far as anyone knows, the EFL is still awaiting proof of funding from Alonso, who has not been returning their calls on the subject. One has to wonder whether anybody is carrying out any due diligence at Derby at the moment over anything. The calibre of those seeking to buy the club of late certainly hasn’t been terribly high.
None of this means, however, that Mel Morris doesn’t have questions to answer himself. We can all hazard guesses as to why these takeover attempts from shady characters who’ve tried to buy clubs elsewhere, but we don’t have a ready answer from Morris himself over why he keeps indulging them. “Desperation” is the obvious word to leap to, but it feels increasingly appropriate. All of the above – and we’re barely scratching the surface here, in all honesty, and despite the fact that Morris has put £200m into the club – suggests that “incompetence” might be more appropriate.
And if that sounds harsh, well… Derby County are losing a lot of money at the moment, but we don’t know exactly how much because they haven’t published their accounts since the year to the end of June 2018, and they lost £12m in that period. Pride Park has secured debts against it through Michael Dell’s octopus-like MSD which amount to around £40m, and the team needs a radical overhaul following this season’s disastrous performance on the pitch. The manager might not be any good, but he’s expensive and he has a contract which has a further two years to run on it.
The last fifteen months have been catastrophic for football across the board, and we will hear a lot about these effects over the course of next season and beyond, but it’s also worth remembering that much of what has happened at Pride Park began before any of this. The extent to which it has exacerbated Derby’s already dismal position, however, isn’t a question that can be easily or accurately answered because the club is so behind on filing its accounts.
What Derby County need is a complete clean sweep, and a spell in administration might even be the only way in which it can achieve this, as it would at least allow for a complete restructure of the club and for the debts to be reduced to a level that would be attractive to buyers with an ounce of common sense about them. This, however, would likely leave a large number of suppliers – and in particular small, local suppliers – considerably out of pocket at a time when few can afford to lose any more money, and it wouldn’t affect secured or football-related debts, while HMRC has had preferential creditor status again for VAT, PAYE and National Insurance contributions since December 2020. The closer you look at it, the more intractible it all starts to look.
It’s likely that the biggest reason why a club the size of Derby County is only being courted by people like Khaled and Alonso, who seem happy to announce that deals are complete and only then start thinking about how on earth they’re going to ever pay for them, is that the asking price is simply too steep, when debts and running costs are also factored in.
Even for those who’ve had a disastrous season, this time of year usually allows for some degree of optimism. Some new players, a new manager, a new owner, the possibility things being better than they were last time around. At Derby, though, this doesn’t seem to be the case. There’d been barely 36 hours of relief after avoiding relegation before this week’s episode of the soap opera started over again, and at this stage no-one can even say for sure which division they’ll be playing in next season (personally, I doubt that any points deduction will be applied to this season’s league table, but that’s certainly not been decided yet). It’s an unholy mess, a living embodiment of everything that is wrong with the way the game is managed in this country at the moment.