Examination of Witnesses (Questions 160
- 167)
MONDAY 13 MAY 2002
MR MICHAEL
CUNNAH AND
MR DAVID
JAMES
160. One final point to Mr James. You answered
my previous question about what you would recommend, belatedly,
and you raised the issue of a guarantee by the FA and obviously
that is quite an attractive option. I do not know whether you
can answer this or whether Mr Cunnah can, but presumably the bank
will not want to be too exposed, so is that part of the negotiations?
Is the bank looking for a guarantee from the FA?
(Mr Cunnah) You are right that, with
each of the banks we have talked to and negotiated with, support
from the FA is always one of the aspects they look very closely
at. Each time, particularly in the current negotiations, I think
the bank are happy with the support the FA has to offer.
161. Can you be a bit more explicit about what
you mean by "support"? Do you mean there will be a guarantee
from the FA?
(Mr Cunnah) The FA is able to commit
£100 million of equity that has always been on the table.
162. That will be the limit of its guarantee?
(Mr Cunnah) It then provides certain
on-going financial support once the stadium is open, in addition
to the £48 million of non-construction project costs I spoke
of before.
163. So £100 million of equity, £48
million, but no guarantee. Is that what you are saying?
(Mr Cunnah) There is a limit to the guarantees
that the FA does give and indeed can give.
164. I am not sure you are saying they are giving
a guarantee or not.
(Mr Cunnah) The FA is giving guarantees,
but they cannot be unlimited.
John Thurso
165. Gentlemen, as our Chairman often reminds
us, the only reason we are involved is because of the public money
and the involvement of DCMS. I actually think there are three
separate issues involved in this, two of which concern others
rather than us. One of them is the way in which sports businesses
tend to behave, and as we are private and privileged I have a
very low opinion of the PGA European Tour whom I had to do business
with once, and if some of the businesses involved are anything
like that I can imagine some of the problems there might have
been there, and possibly that might have been what you were alluding
to when you said where your torch could not quite shine. But that
is not our concern. The second issue is the one of corporate governance
which links into the third issue, which is our main concern, which
is the DCMS and how it has behaved and how the public money side
of it comes in. Can I pick up very quickly on that corporate governance
side so I am clear I understand what you and the Berwin Leighton
Paisner Report says. Can I say that I do understand the language
because until a few weeks ago I was chairman of a fully quoted
Plc. You make the distinction between what a limited company has
to do by law as opposed to what a Plc might do with regard to
corporate governance through the model code. I understand what
you are saying in the report to be very severely critical of the
way in which corporate governance was done. I do not think it
would be possible to be more critical of it. I think you are recommending
really something much closer to Plc guidelines and disciplines,
particularly with the independence of the finance function and
looking perhaps at committee structures and things like that,
and although that is not in your report, it is the implication
from it. Can I ask you to confirm I have got that broadly right?
(Mr James) You have very accurately understood,
sir. I was going to ask the Chairman at the end if I might add
a point on this very subject, because I believe the issue of governance
is so fundamental to everything we are talking of here that I
do not wish to leave anybody in any two thoughts as to where I
stand on this. We have already commented that I have been able
to watch the inside of a bankrupt body[22]
from the point of view of the NMEC over the past two years, and
through that time I was the Accounting Officer for that. I therefore
am aware of the responsibilities of the accounting officer for
anything where government money is spent, but here we have WNSL
where there is no such person in the structure as an accounting
officer and look what has happened. Had there been an accounting
officer, that man in these circumstances would have been held
to be heavily accountable to yourselves or to the PAC or the National
Audit Office and would have been in some serious bother. One of
the features going forward—and I think Mr Cunnah and his
colleagues have made, as I understand it, very great progress
and are much to be congratulated, indeed I think there is more,
from what I hear from Mr Cunnah, than you have heard him today—concerns
the structure of sub-committees which have been set up and created
in order to deal with a number of the issues of governance here,
but one thing I have not heard of anywhere in the WNSL structure
is whether they are going to have a compliance officer and what
the terms of reference for a compliance officer should be. Now
a compliance officer may be the poor man's accounting officer
but in this particular situation there was never a greater need
for somebody of very high calibre to be a compliance officer to
oversee this whole process and to be aware of the implications
of Government accountability and at least to have a dialogue with
the DCMS through that process to that effect. So I would give
you a very strong recommendation that you should give the WNSL
board every encouragement to make the appointment of a high calibre
compliance officer. That would be my first concern. I would also
draw attention again—forgive me, Michael—to the point
Mr Cunnah made earlier, that the improvement of governance had
concentrated so far on the improvement of bringing in construction
and marketing and other similar experiences at this time. That
is not ultimately where the accountability issues arise in this
case. They are in financial control, they are above all in legal
control. We have not heard of the application of a legal officer,
although I believe some are being made, but it is the corporate
structure with the independence of those departments to act which
is important, and that brings me to my biggest point of concern
about governance here, and it is the one to which I alluded earlier.
This is why I also said—and forgive the inconsistency of
this because I have said to this gentleman we should be looking
perhaps towards some indemnity which rather closes the gap with
the Football Association—that for me the thing which has
gone most wrong here is that the board of WNSL were so dominated
by the Football Association's overhang that they did not apply
themselves with the vigour of an independent body which was ultimately
going to have to be accountable to the ultimate sanction which
is insolvency and all that that carries with it. Therefore I think
this is a board which should be as clear as it possibly can be
in its independence of the board of the Football Association,
it should have its mandate to go and build the stadium if it is
to do so, but it should do so fully funded with an executive structure
and an effective compliance function which ensures they are able
to deliver governance in the widest issue.
Derek Wyatt
166. Chairman, I do not really have the authority
to ask this but I would like to ask Mr James if he might consider
an A-level essay on "Compare and contrast the Dome and Wembley."
You are the only person who could do it. Looking at the British
Library, looking at the overspend on various national projects,
it would really be helpful, but I cannot really demand it, Chairman,
but it just occurred to me it would be good to have a note. I
am sure it would be ten pages.
(Mr James) Alternatively await my memoirs!
Derek Wyatt: That might be a long time,
Mr James!
Chairman
167. We would love to read your memoirs, but
we are in a bit of a greater hurry than that!
(Mr James) Can I make one last point,
sir? It is very short and it is another one of my pieces of mischief.
On 9 January I met—the last occasion I had a meeting on
the subject—with Adam Crozier and I added at that time,
following earlier discussions which had taken place between the
scripting of this letter and 9 January, an extra recommendation
which does not appear in print anywhere. I think it is very important.
Bear in mind we are talking about a fixed term contract, a fixed
value contract here, given the nature of the contract and the
party with whom one is contracting here, I would offer you the
strongest possible recommendation that you should insist upon
a full disclosure to you of the corporate structure of the business
which is going to contract to ensure that the asset backing is
in the special purpose vehicle which is actually going to provide
the execution of the contract.
Chairman: Thank you very much indeed.
I would be grateful if members of the Committee could just remain
behind for a moment. Thank you very much indeed, we are most grateful
to you.
22 Note by Mr David James: I meant to say "potentially
bankrupt" in that NMEC would have been insolvent had it not
continued to operate throughout 2000. Back
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