Written evidence submitted by James Wheeler
1. INTRODUCTION
1.1 My personal knowledge and experience in completing
this submission is through my support for Derby County FC and
my involvement with RamsTrust (the Supporters Trust for DCFC)
- as a member, Board member and ultimately Chair of the organisation.
I am no longer on the RamsTrust Board, but continue to be an active
member.
2. OVERVIEW
2.1 Just to give some background, I have been
brought up as a Football Fan - and specifically a Derby County
supporter. I was first taken to a game by my father when I was
six years old and have barely missed a home match in the succeeding
35 years - also regularly attending away matches. I now bring
both my young sons and we still attend with my parents and various
friends. Supporting Derby County is a way of life for many fans
and forms an intrinsic part of our lives. I do not claim Derby
County is any different to any other team (although clearly we
are superior), but to show how important football is to millions
of people like us in the UK and worldwide.
2.2 As a result, I believe football clubs need
to be treated differently to other organisations and - due to
their community importance - should be protected legally. Football
clubs are of great significance, not just locally (although they
are often the defining characteristic of many towns) but nationally
and internationally. Many towns and cities in England are known
throughout the world because of their team - and this has financial
and cultural benefits to the town, the region and the country
as a whole. English football is the envy of the world and its
success or failure reflects strongly on the entire nation.
2.3 The football club is the centre of the community
- it is a community asset, and club directors merely overseeing
its activities on behalf of that community. It is therefore imperative
that the directors keep supporters fully informed regarding what
is going on at the club.
2.4 To see clubs "fail" (or more often
be badly run or financially crippled for personal gain) is not
only devastating for the local community and supporters, but also
reflects very badly on the governing body and the government who
allow this to happen. Football clubs deserve additional protection
to prevent this.
2.5 Football clubs historically grew from their
local communities - they were genuinely "clubs" for
local people to play, support and attend. Initially, many of these
early clubs were run by committees for the good of the club and
the community. Some clubs did have businessman who supported their
local teams (financially as well as physically), but this was
always by putting money into the clubs to help them (and undoubtedly
gain local prominence and approval as a result). Football League
rules were in place to prevent directors running clubs for personal
or private profit. This meant clauses preventing directors from
paying themselves a salary, safeguards on the grounds where the
clubs play and measures to prevent directors paying themselves
any significant amounts in dividends from their shareholding.
In essence the League was ensuring that Football was NOT a business,
it was a sport and should be treated in a totally different way.
2.6 In many ways a "businessman" is
the LEAST appropriate person to run a football club. By their
very nature, treating a club as a business involves attempting
to make a profit - hopefully for the club, but often for personal
gain. For football clubs to succeed the last thing they should
seek to do is to make a profit that isn't retained within the
Club. Clearly the books need to balance, but any surplus should
be invested in improving the club - be it the team, the ground
or the facilities.
2.7 Many of the rules are now avoided by introducing
"holding companies" to own the clubs, which can pay
directors and can pay dividends. This has brought extra "investment"
into the game, but also began to attract elements who were purely
involved to make a profit for themselves - usually at the expense
of the club and ultimately the supporters. This has also allowed
some clubs to separate ownership of the ground from ownership
of the club - whilst still under the same overall company. This
has led to many clubs losing their own grounds after questionable
financial restructuring, much of it brought on by poor stewardship
of the club in the first place. In effect, directors have been
able to have a punt on making a club a success and the rewards
that go with it, but if success isn't forthcoming the club's main
asset (the stadium) is taken as payment. Owners can then move
on and the club is left with a crippling problem in the long term.
2.8 There are numerous other ways people have
found to take money OUT of football. Often money taken out will
be hidden - in agents' fees, "kickbacks" on financial
deals (such as commission on loan payments), expenses, cars etc.
To a large extent football supporters - and clubs - are easy targets.
Whatever happens at their club, a hardcore of supporters will
carry on spending money every week on match tickets, club shirts,
merchandise, programmes etc. Even fans that recognise they are
being fleeced are still very reluctant to sacrifice watching their
team. This does leave a real dilemma - the only action supporters
can take which can have any impact on the directors is to stop
watching the team they love. This really is a case of "cutting
off your nose to spite your face" - but is an action many
fans have been forced to take.
2.9 The Football League - partly following pressure
from supporters groups - has started to push for greater transparency
and regulation within the game. They now publish the figures for
payments to agents on a six-monthly basis. There is an important
first step, but there should be much greater transparency of where
supporters' money goes.
2.10 The creation of the FA Premier League as
a breakaway from the Football League was the ultimate result of
allowing money to rule the game. This was done purely in order
for the bigger clubs (and their Boards of Directors) to make and
keep more of the money football was attracting rather than sharing
it with the smaller clubs. The "Premier League" was
created by the greed of a small group of individuals, and the
weakness of the football authorities to prevent it. Whereas there
used to be a fair split of revenues coming into the game, the
vast majority of the money is now retained in the hands of the
few - creating an ever widening financial gap and a reduction
in competition.
2.11 There is now a massive dichotomy in the
game in this country which is weakening the sport for future generations.
At the "top" of the game a relatively small group of
individuals (chairmen, directors, managers, players and agents)
at a small number of clubs are making massive amounts of money
(ultimately from the fans) whilst many smaller clubs are struggling
for their financial lives. Many non-league clubs have folded altogether
and local communities have seen their infrastructure decline through
lack of investment. Many small clubs have failed due to debts
of less than a week's wages for a Premiership footballer. This
cannot be good for the game in the long-term.
3. SPECIFIC RESPONSES
In response to the individual points suggested
in the submission request
3.1 Football clubs cannot be treated in the same
way as other commercial organisations -they should not be allowed
to be commercial organisations in the first place. A football
club is not the same as a local shop or factory, towns and cities
are judged worldwide on the success of their football team. Children
grow up aspiring to be and inspired by the players on their team.
Indeed there is increasing evidence of the community benefits
of using the local football club to promote community groups (education,
health, young offenders) having much greater success by being
associated with the club. This again shows that football clubs
should not be allowed to "fail" without a higher degree
of protection - as this can lead to massive damage to the community
affected.
3.2 The Football Association (FA) has become
beholden to vested interest groups who are often involved purely
for personal benefit. The Premier League is now seemingly the
most powerful body in football in this country - and its members
are all "businessmen" seeking to make personal profit.
Indeed a number of the individuals involved have actually seen
their own businesses fail, but have retained their wealth and
influence purely as a result of making money from their clubs
- at the expense of the fans. There is never any chance of the
Premier League bringing in legislation to protect clubs from directors
- as this would be in effect "Turkeys voting for Christmas".
Similarly the "top" clubs will never vote for fairer
distribution of funds within the game - for obvious reasons. It
is therefore essential that the government acts to protect the
clubs and the fans.
3.3 Debt levels within the game are clearly too
high and threaten many - if not the majority - of professional
football clubs in the UK. However, I believe this is a symptom
of the problems within the game rather than a cause. Legislation
should be brought in to prevent clubs from generating such massive
debts (or from having the debt hoist upon them by unscrupulous
owners). I believe this needs to be done by preventing clubs from
being run in this way rather than specifically addressing the
debt. There are many examples of clubs being penalised for debts
caused by previous directors - so the previous director is unaffected,
but the club and supporters receive further punishment on top
of having been "ripped-off" already. Unfortunately (as
per my earlier point - turkeys voting for Christmas), too much
power rests with the member Clubs, so the prospect of regulation
such as HMRC debt monitoring being extended to all clubs is unlikely,
because they would need to vote it in themselves. This situation
reinforces the need for Government intervention.
3.4 The Supporters Trust model is to encourage
ownership of clubs by the supporters. In a utopian world this
is clearly the ideal, and should be encouraged. However, merely
"encouraging" ownership by Supporters Trusts is not
going to work for all clubs. Whilst the majority of supporters
clearly do have the long-term interests of their clubs at heart,
some are fickle and will seek short-term success and enjoyment
without considering the longer term. There are many examples of
clubs where the directors (even true fans) have "chased the
dream" - gambling short-term investment (or borrowing) in
the hope of long-term success - but actually achieving the opposite.
The pressure on the directors of a club to invest, to sign a star
player or to reduce prices is often immense from ordinary supporters.
With better communication, either through a supporter director
or supporter ownership, this pressure changes because people have
a better understanding of the circumstances and consequences of
overspending. Often with a "sugar daddy" owner the relationship
between fans and club deteriorates because there is an expectancy
that they will continue to fund the club as they have done in
the past. To have a situation where some clubs are "supporter-run"
whilst others still have a "sugar-daddy" approach will
mean the supporter-run clubs will struggle and will be put under
undue pressure from their fans. One solution is to create a more
level playing field; take out "financial doping" with
better regulation and incentivising community owned clubs.
3.5 Justification for Government intervention
- this has already been addressed above. Football by itself is
powerless to protect the clubs because of the power and influence
of certain individuals at the "top" of the game. UEFA
under Michel Platini is attempting to bring in legislation to
protect the game and the clubs but is still struggling to gain
authority over the big clubs (both in this country and abroad).
An extension of UEFA's licensing across the leagues seems like
a logical solution for the Government to explore. FIFA seems now
to be similarly succumbing to the influence of money on the game.
It is consequently essential that the government steps in to protect
the game and the clubs in this country. There will be criticism
- largely from supporters who will see their own clubs adversely
affected by such legislation without seeing the "bigger picture".
However, there will be more criticism should the government fail
to act - particularly after commissioning this review - and more
clubs fold. The game would continue to deteriorate as a competitive
sport in this country.
3.6 The "Fit and Proper Persons Test"
is a valiant attempt to prevent unscrupulous directors from getting
involved with clubs - but has had limited effect. There will always
be "loopholes" which they will seek to exploit. I therefore
believe a different approach is required. There would be less
of a requirement for a Fit and Proper Persons Test if there was
legislation to prevent individuals from making personal profit
out of football clubs.
4. RELEVANT EXPERIENCE
AT DERBY
COUNTY FC
4.1 Many of my views that reform is required
are from direct experience at DCFC. We were the victims of a lack
of a regulation over ownership of football clubs at great expense
to the club.
4.2 On 20 October 2003 Derby County was put into
"Administrative Receivership" due to debts following
relegation from the Premier League, and then taken over by a consortium
of "businessmen" for the sum of £3. The consortium
consisted of the Chairman, Mr John Sleightholme, a barrister and
Assistant Coroner for North Yorkshire; the Chief Executive, Mr
Jeremy Keith, from Oxford, a self-proclaimed business doctor,
who was previously involved with Leeds United - just before the
time where Leeds finances began to go into crisis - and previously
Portsmouth - from which he resigned a day before the Inland Revenue
issued notice of a winding up petition in December 1998; Mr Steve
Harding, a self-styled marketing entrepreneur and communications
expert from Wimbledon; and also linked to them was "Director
of Football", Mr Murdo Mackay, a former football agent, previous
business partner of Mr Sleightholme who was formerly sequestrated
for outstanding debts in Scotland; and the previous chairman's
Financial Director, Mr Andrew Mackenzie.
4.3 The club was purchased via a company called
Sharmine Ltd, whose shareholders were listed as - Cosmo Corp,
Belize City, Belize; Williston Consultancy, Road Town, Tortola,
British Virgin Islands; and Precision Finance Ltd, Belize City,
Belize. Sharmine's postal address was given as Beresford Lowe
and Co LLP, Craven Street, London - the contact address for a
solicitor called David Lowe, based partly in Monaco. Messrs Sleightholme
& Keith have always claimed these companies were owned by
them.
4.4 The consortium took the club on with a "business
plan" and paid off £15 million of the debt to the Co-op
Bank, by way of mortgaging the stadium, Pride Park, to the ABC
Corporation, of which little more was known than its PO Box in
Panama. This was the same ABC Corporation which has lent money
to QPR, and, according to sources, is backed by a family trust
registered in Switzerland linked to Michael Hunt, the former managing
director of Nissan UK, who was sentenced to eight years in 1993
for his role in the largest tax fraud ever perpetrated in the
UK, siphoning £149.2 million from the company and depriving
the Inland Revenue of £92.3 million in tax and interest.
4.5 Many supporters were immediately concerned
having seen what has happened at other clubs - where directors
have committed to massive loans which can never be paid off, clubs
have lost their grounds, clubs have gone into administration -
whilst directors have picked up a tidy salary, Company cars, bonuses
etc.
4.6 Jeremy Keith has claimed he got involved
because he "had always wanted to prove to himself that he
could run a football club using a particular business model".
The directors said that they never had any intention of putting
any money into the club - they believed the way forward was for
the club to be run as an efficient business which does not require
a "sugar daddy".
4.7 The debt grew by an estimated £10 million
over the first two years of their tenure - despite high profile
sales of some of Derby's best players. Ultimately, as the club
approached bankruptcy or administration and was almost relegated
from the Championship, pressure from supporters and local investors
lead to the Co-Op Bank ousting the consortium and replacing them
with local owners who were prepared to repay large proportions
of the debt.
4.8 Police investigations then took over and
Jeremy Keith, Murdo Mackay, Andrew Mackenzie and David Lowe were
eventually convicted and jailed for financial fraud and money
laundering in connection with the takeover of Derby County FC.
4.9 The club and the supporters were made to
suffer severely over a prolonged period because of the inadequacies
of regulation by the football authorities and the government.
Indeed, if it were not for supporter pressure - particularly
from RamsTrust members - the situation could have continued for
longer and the club may have been forced to fold completely.
4.10 It was clear from the outset that the individuals
involved had come to Derby County solely to make money for themselves.
There was no previous connection with the club or any indication
that they were here for the good of the community. It would have
been relatively simple for any regulator to identify whether these
individuals had the best interests of the football club at heart.
5. CONCLUSIONS
5.1 The government needs to act as the Football
Authorities are powerless to act themselves.
5.2 Without action, we will continue to see the
decline of many clubs in this country, and - ultimately - the
competitiveness of the league and the most popular sport in the
country. It could be argued that the league is already less competitive
than at any time in history with the gulf between the biggest
clubs and the rest widening all the time.
5.3 Regulation needs to be introduced to ensure
the supporters are consulted and involved in all major decisions
regarding their team. No individual should be allowed to take
over a community asset and sell its ground, strip its assets or
even move the club to another town without the full approval of
the supporters who have dedicated much of their lives and finances
to their team.
5.4 Similarly, regulation needs to be introduced
to ensure supporters and players are fully represented on the
governing bodies of the sport. Football is too important to this
country to allow financial self-interest to dominate governance
of the game.
January 2011
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