Examination of Witnesses (Questions 221
- 239)
TUESDAY 21 MAY 2002
MR MICHAEL
JEFFRIES, MR
MICHAEL CUNNAH,
MR ROGER
MASLIN AND
MR NIC
COWARD
Chairman: Gentlemen, thank you very much
indeed for coming before us this morning. I am going to ask Mr
Doran to start the questioning.
Mr Doran
221. You are obviously aware of the contents
of the Tropus report and you have heard the evidence which the
company has given. That, taken together with the work done by
David James and his legal advisers, paints a fairly devastating
picture of the way in which this project was handled, certainly
up to the end of 2001. Would you like to comment on what you have
heard?
(Mr Cunnah) We worked closely with David James and
Berwin Leighton Paisner in reviewing the allegations made by Tropus.
We do accept his findings that there were some deficiencies in
the procedures that were followed. However, we have also worked
very hard with our prime stakeholders, Sport England, and the
Government in order to put right the deficiencies that did exist
previously within the organisation.
222. So everything is all right now?
(Mr Cunnah) Since December 2001 we have addressed
the issues and particularly they have been reviewed in tests that
were set by the Secretary of State on December 19, so, for example,
the value for money of the construction contract has indeed been
established to be good value and indeed Cyril Sweett, the quantity
surveyors, described the contract as onerous on the construction
company. We have also worked very hard on the procedures within
the organisation and also we have had a restructure of the board
and the way that it works with the executive management. These
corporate governance areas have been reviewed and passed by Sport
England in association with PriceWaterhouseCoopers, and indeed
the National Audit Office as well. We also underwent a very extensive
review by the Office of Government Commerce who indeed declared
at the end of their review that the project was well managed,
well resourced, viable and should proceed to contract stage.
223. We may be coming back to that but let us
concentrate on a couple of specifics. You have heard discussion
in the earlier evidence about the purchase of the land and clearly
that is a major concern because £120 million of public money
was used. Quite clearly there are suggestions from Tropus that
you paid over the odds for the land. We have been given information
by WNSL that the purchase price was £106 million and that
for that you got the whole business. I understand that included
about 24 acres of land at Wembley plus another seven acres which
I am still a little bit unclear about, but in terms of the price
and the purchase of the business Tropus suggest, and I have to
say my information is, that you have paid considerably over the
odds. Can you tell me first of all what you bought?
(Mr Cunnah) When the national stadium was purchased
from Wembley plc in March 1999, the Wembley Stadium business,
that included the asset of the stadium, the staff and indeed the
land. The land was 24 acres and in addition there were another
seven acres as you allude to which, if it was not required by
the design of the stadium, would be returned to Wembley plc.
224. In the business asset there was goodwill,
I understand.
(Mr Cunnah) There was a small element of goodwill.
225. Can you tell me what the goodwill was?
(Mr Cunnah) In financial terms?
226. Certainly in financial terms, but what
was represented by the goodwill?
(Mr Cunnah) Goodwill in any business represents the
intangible value attached to the name.
227. I understand that, but what specifically
attached itself to the Wembley site?
(Mr Cunnah) £250,000.
228. Earlier we had an indication that the valuation
was £3 million. That was a wrong figure?
(Mr Cunnah) That has been corrected.
229. So a small amount for goodwill. Can you
give us an estimate of what the current value of that land is?
(Mr Cunnah) Like Mr Hudson, I am not an expert in
land values. When we acquired the business we had to work out
how to reflect the assets we had acquired in the books and the
valuation that we had at the time done by experts was £64.5
million for the land with most of the balance being attached to
the buildings themselves.
Chairman
230. Whose was the goodwill that was being purchased?
(Mr Cunnah) WNSL bought the goodwill of the stadium
business from Wembley plc.
231. But whose was that goodwill? Was that the
FA's goodwill?
(Mr Cunnah) Goodwill is a concept which applies to
the public at large.
232. I would be grateful if you could specify
it because, unless you correct me, I shall remain under the impression
that WNSL, which is a sort of subsidiary of the FA—we are
not clear as to its status even today—was purchasing the
FA's own goodwill, so the FA was buying its own goodwill. Am I
wrong to understand that?
(Mr Maslin) There was a small amount of basically
intellectual property assets with the Sale and Purchase agreement
to the tune of £250,000 and that is what was represented
by that figure.
233. If we can be forgiven in this post-sexist
age, that is like the housemaid saying that her baby was only
a little one. What I am asking you to do is to say I am wrong
in saying that in effect the FA was buying its own goodwill with
public money, however much it cost.
(Mr Coward) As I am here on behalf of the FA perhaps
I could answer that. No, it would not be correct to say that the
FA was using public money to buy the FA's own goodwill. The Lottery
money was given to WNSL and, as you have heard, WNSL purchased
the stadium business from Wembley plc. Part of that business is
the trading name and the reputation and goodwill of Wembley. We
all know the Wembley sign, the trade mark, the "W" with
the flags on top. That is something that Wembley National Stadium
Ltd, certainly from the FA's point of view, we think properly
bought from Wembley plc to support the business.
234. I think that is a less than convincing
amplification.
(Mr Jeffries) Chairman, may I add something in general
terms, although clearly I was not around at the time? I think
it is fair to say that there is probably some truth in what you
say but it was also a much wider agreement arising out of other
uses of the stadium for concerts and so on. The Wembley name is
a very attractive venue for artistes to perform at so the goodwill
is composed of a number of other things.
235. That is lovely, Mr Jeffries, but in one
of our earlier inquiries we went right back to the history of
this structure and the stadium was built as part of the British
Empire Exhibition between 1922 and 1923 for the purpose of staging
the FA Cup Final. Indeed, it was built in order to be ready for
the 1923 Cup Final. All of these nice concerts and stuff can be
additional but the real public estimation of Wembley National
Stadium has to be the staging there of the FA Cup Final and that
is the goodwill of the FA. Taking into account that we are all
now anxious to have a national stadium, many people wish it to
be at Wembley in order that the FA can go on staging the Cup Final
in its own premises or the premises of its subsidiary rather than,
say, in Cardiff, so to that extent surely the goodwill relates
to the FA?
(Mr Coward) Can I just clarify my answer because I
think we were talking at cross purposes, hence what you described
as my less than convincing answer. I would like to redress that.
If you are saying that in the business of Wembley National Stadium
an important part of that is the fact that it was the venue for
the FA's events, that has to be true. That is the issue which
we all acknowledged at the time and we still acknowledge now.
I understood goodwill as being those things which I described.
I am sorry if I was talking at cross purposes. I agree with you.
If you are talking about the value of the business that relates
to the FA's events then that is true of course.
236. But it is quite an important element, Mr
Coward. It is an indispensable element, is it not, because that
was what the stadium was built for specifically and solely?
(Mr Coward) Yes, it is certainly an important part
of the business plan.
Mr Doran
237. We were talking about the valuation of
the property. I have read the submission from WNSL so I know what
the route was to the purchase. One thing I cannot understand is
why you want the business and not the land which would have been
a lot cheaper, given the point the Chairman has made, that you
already owned the most attractive element of the goodwill.
(Mr Cunnah) In purchasing the stadium business from
Wembley plc, Wembley plc required compensating for the loss of
that business and the loss of the income stream that they had
from that business.
238. I asked you earlier if you could give us
a current valuation for the property and you were a bit reluctant
to do that. Another FA source advised the Committee that around
£30 million would be appropriate. Would you accept that figure?
(Mr Cunnah) I definitely would have to take—
239. Mr Jeffries, do you have a view of the
current valuation?
(Mr Jeffries) I think the valuation will vary depending
upon what it is used for. Clearly it now has the benefit of a
consent for a new stadium which will have altered its value. I
am not able to say what it is.
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