Football Governance

Graham P Jones Excerpts

Thursday 9th February 2012 Westminster Hall

[Graham Jones (Hyndburn) (Lab)]

My hon. Friend is making a powerful argument on behalf of supporters. It can be seen in its purest form with FC United of Manchester, a club that started from nothing. It is building a multi-million pound stadium and gets regular decent attendances.

[Tom Greatrex]

My hon. Friend mentions another good example, of which there are many. FC United formed a club on the basis of issues around ownership of Manchester United and the takeover by the Glazer family. It would be much better if supporters were involved not at the point of crisis—not when everyone else walks away —but on a sustained basis. We have seen such examples. The Chair of the Select Committee mentioned Manchester City. In Scotland, the owner of Heart of Midlothian effectively persuaded fans to give up their shareholding and give it all over to him, because he had a great plan that was going to be the salvation of the club. Now look at the position they are in. That has happened on more than one occasion. The sustained involvement of fans will be much more valuable to the interest of clubs in the medium and long term, despite the difficulties and the misjudgments that different owners may make.

The other point that I want to make—again, it was in the Supporters Direct proposal, which is important—is about grounds. In many cases, football grounds and stadiums have strong links with the communities that the clubs serve and with the clubs themselves. Too often in the past we have seen situations in which teams end up, through different ownership structures, being separated from the grounds or moving out of their grounds for other reasons, and that creates all sorts of problems. As a Fulham supporter, I know about that. At various times we have come close to losing our ground, largely because the potential value of the ground’s real estate is higher than the value of running the club. That is due to an accident of geography—where the ground is.

There was a period in the mid-1980s when Fulham, Queens Park Rangers and Chelsea were owned by a property development company whose interest was not anything to do with the three football clubs, but to do with the potential value for development on those sites. At one point we were going to merge with QPR, but that got stopped. In 2001, the current owners of the club that was referred to earlier thought it would be a great idea for Fulham to move out and have a new ground near White City. In the end, that did not happen, partly because of the views of supporters who were able to persuade the club that its judgment was wrong. However, I am pleased to say that that position has changed and we are now on the same side as the club. Supporters are back at Craven Cottage and will hopefully be there for many years to come.

We need protection in the football licensing set-up that stipulates a club cannot leave a ground unless it has somewhere else to go.

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[Graham Jones (Hyndburn) (Lab)]

It is a pleasure to serve under your stewardship for the first time, Mr Havard. I declare an interest as a season ticket holder at Blackburn Rovers, where I have been attending regularly since 1978. Blackburn’s proud 137-year history and status as a founding member of the Football League are under significant threat due to the risks of poor foreign ownership. The club is in a sorry state, finding itself in the firestorm of the foreign ownership debate. I hope that lessons can be learned from my contribution.

Over the past 14 months, the club’s proud history has received little respect from its new Indian owners, Venky’s London Ltd. I must apologise at this stage; I was supposed to be joined by my right hon. Friend the Member for Blackburn (Mr Straw), who wanted to concur with a lot of what I am going to say. I would like that noted on the record.

The club’s sale by the Jack Walker Trust to the Indian company Venky’s in November 2010 has been followed by a series of damaging headlines, shock resignations, instability and regression of the club’s fortunes on and off the field. More recently, elements within and connected to the club have engaged in a damaging PR campaign against supporters that has been confrontational and, in my view, has highlighted significant failings of the owners, the manager and his expansive role and associated parties. They are at the centre of the shambles that is currently Blackburn Rovers, a club held up and respected by the football industry as an example of one of the best-run clubs in the premier league. Weekly protests, a plummeting league position, huge losses, dubious transfers, escalating agents’ fees and—more pertinently, and against league rules—the suggested involvement of agents in the running of the club have all undermined its authority and management.

I put on record the comments of Alex Ferguson, who seemed to echo that final point about the role of agents in football clubs. The role of the board of directors is now unclear, and their authority is now negligible or, at worst, undesirable. That is far removed from the mirage painted by the new owners: a Shangri-La of increasing transfer budgets, Champions League football and the promised continuation of a stable and well-run club.

The situation at Blackburn Rovers opens up a new set of questions about football governance, transparency, the fit and proper person test and the undermining of the Premier League itself. What concerns me and many supporters is the role of Jerome Anderson, a leading football agent, and of Steve Kean, manager and, more significantly, Anderson’s client in the running of the club under the Venky’s governance arrangements.

Following Rothschild’s failed attempt to sell the club, Mr Anderson was brought in to find a new buyer, and found Venky’s. After that takeover, he became an adviser for Venky’s at Blackburn Rovers. In his own words, that involved sleeping and eating at the training ground and advising and helping during the transfer window of 2011. I remind the House that rule H8b of the football agents regulations governs the behaviour of agents and their organisations and prohibits them from having an interest in a club, which includes

“being in a position or having any association that may enable the exercise of a material financial, commercial, administrative, managerial or any other influence over the affairs of the Club whether directly or indirectly and whether formally or informally.”

It could not be clearer.

Anderson has stated on his own website and reported on the Sky Sports website:

“In January 2011 I was requested by the owners to assist the club during that transfer window…At the conclusion of the January 2011 transfer window I ceased to assist Blackburn Rovers Football Club in any capacity and I can confirm that I have not had any role or influence in their transfer policy or any other business of the club whatsoever since that date.”

I wish to draw Members’ attention to a leaked letter signed by the former and respected chairman John Williams, currently employed by Manchester City, his equally able assistant Tom Finn and the finance director of Blackburn Rovers. The letter says:

“Finally, our Football Secretary”

at Blackburn Rovers

“has, this morning, been instructed by SEM”—

the company with which Jerome Anderson is involved—

“to issue a mandate to a third party without any reference or approval from the Board. We are not familiar with the player concerned nor is he one that has been mentioned to us by the Manager. Could you please, therefore, clarify the role of SEM in our transfer policy?”

That letter was sent to the owners last January. I will draw further on its contents later.

Those decisions have led to the resignation of an experienced and highly regarded set of administrators, risking the club’s ability to manage its own affairs. Notable and of grave concern is an agent’s admission that he has been involved in decision making within the club, that that has allegedly involved instructions to the club’s directors to make payments to third parties, and that the manager connected to that agent and given overall responsibility for all affairs at the club—on and off the field and above the board—has a conflict of interest.

[Mr Dai Havard (in the Chair)]

Order. May I advise the Gentleman? I need to be careful about privilege. I understand what he is saying, but I am listening carefully. Quoting from published material is fine, and I note the word “allegedly”. If he carries on with caution, I am happy, but I am listening carefully.

[Graham Jones]

Thank you for that advice, Mr Havard. I respect your latitude. The letter has been published in several national newspapers and online, just for clarity.

[Mr Dai Havard (in the Chair)]

It must be true, then.

[Graham Jones]

It is more than alleged; I think it is probably true, as nobody has come out and disputed it.

Clearly, there is a significant risk that Blackburn Rovers will regress rapidly while its owners have little understanding of football and the whole management of the first team and club administration rests with an individual as unqualified and inexperienced as Steve Kean. Mrs Desai, the club’s apparent owner and quasi-decision maker, confirmed in the Lancashire Telegraph that Mr Williams did not get on with manager Steve Kean:

“I know that he did not get along with Steve (Kean) and he had struggled to accept Jerome (Anderson)’s role at the club.”

Ian Battersby, a well-known supporter and local businessman, flew out to meet Venky’s in Pune, India. Blackburn Rovers football club is just one of 170 subsidiaries in the Venky’s group. Each has a business head who reports directly to the Venky’s board. In the case of the Rovers, that appears to be Steve Kean. Ian Battersby said:

“The notion of a board executing the owners’ plans on a day-to-day basis is a complete anathema to them and many of our problems flow from that…We have a sporting director who nobody would know if they were sat next to him, and that’s a high-profile job allegedly responsible for player recruitment. We have a deputy chief executive—but no chief executive—whose effectiveness is, in the circumstances in which he operates, negligible.”

I place on record the manager’s statement that he had an irrevocable confrontation with the outgoing manager and that important questions persist about his involvement, as a client of Jerome Anderson, in a coup to oust the former manager, Sam Allardyce, bypassing the board of directors. None of that serves the club well.

Questions remain whether proper due diligence took place and whether Mr Anderson or his associates had a predetermined managerial change in mind and were interested not in the club’s assets and liabilities, but in first-team managerial contracts. The FA must look into it. What we do know is that the current board tasked with the responsibility of managing the club seems powerless to act in the best interests of the club. Serious questions now have to be asked about the owners’ ability to manage an English premier league club; their awareness of Premier League rules; their future intentions for the club; whether foreign business practices bring the club into disrepute; and whether such practices should be prohibited within the framework of the Football Association Premier League’s fit and proper persons test.

Recent financial accounts have resulted in further destabilisation of the club, and newspaper reports have claimed that the club’s bank, Barclays, has initiated steps to protect its liabilities. Recent club accounts detail losses accrued up to June 2011 of £18.6 million; the previous year’s loss was only £1 million. The club’s value while it is in the English premier league is approximately £40 million. According to newspaper reports, Barclays is protecting its liabilities in the club by reducing credit facilities and discouraging asset sales of high-value players. In other words, the bank is determining transfer policy. That practice is not new. John Williams stated a year ago in his letter to the owners of the club:

“Brian Foreman from Barclays Bank is attending the Liverpool game tomorrow and has asked for a catch up meeting with us before the match. He will inevitably ask about our plans for the transfer window and at the present time not only are the Board unaware of these but it has been made clear that we will not have any input into the strategy. This is unacceptable and not in the best interests of the club.”

Why were Blackburn Rovers purchased by Venky’s? Were they purchased to promote football or to promote chicken burgers? Worryingly, during this period, fees paid to agents have risen approximately threefold. The £475,000 transfer of Ruben Rochina carried an additional agent payment of £1.65 million, which was during Jerome Anderson’s admitted involvement. Despite an alleged defensive injury crisis, an out-of-contract 28-year-old, Bruno Ribeiro—described by the manager as the next Denis Irwin—who had no caps and little top-flight Brazilian experience, was given a three-year contract and has yet to make a single appearance in the team or on the bench. Myles Anderson, who is Jerome Anderson’s son, was brought in despite having made only one appearance in the Scottish league. David Goodwillie, who is, to quote the manager, “the next Wayne Rooney,” was brought in from Scotland.

What has been destructive in this spiralling vortex is a smear campaign by the manager, his agent and other clients, which is aimed at ordinary Blackburn Rovers fans who seek only constructive dialogue with the club on the subject. To my knowledge, there have been no arrests or public disorder during the protests, which have always been conducted with the full consent of the police and dialogue with the club. The protests were suspended for seven matches to facilitate positive discussions, but those discussions have not taken place. Three pre-arranged meetings between the manager and organisers have been cancelled by the manager or by the club, the authority over which lies with the manager.

The Premier League is culpable in allowing the current trend of foreign ownership to continue without suitable safeguards; we have heard about Liverpool, Manchester United and Portsmouth. I welcome the comments of the Select Committee Chair that one can drive a coach and horses through the fit and proper persons test. That is clearly the case. This is coming from a completely different angle from Manchester United and Liverpool, and it should open our eyes to how we deal with football governance matters. As Mr Battersby, the Blackburn businessman, states:

“We hear an awful lot about the sham that is ‘fit and proper’…This is a major industry we are talking about here—it’s worth billions globally and there has to be something akin to licensing of owners. How can someone wing their way into the UK, take ownership of a club and within 12 months destroy a community? The warnings of Portsmouth, Notts County and now Blackburn must be heeded.

If the same had happened at Jaguar or similar, there would have been outrage in the House of Commons and yet we sit and watch this happening. In essence, the Premier League are watching one of their member clubs get savaged and haven’t batted an eyelid. It is nonsense.”

Venky’s management of Blackburn Rovers has raised a number of broader questions about the corporate governance of premier league clubs. The FA must look beyond its current ownership rules at arrangements for licensing prospective owners. Those arrangements must include, as Mr Battersby recommends, stricter compliance over financial strength and track record; the quality and strength of the management team; experience of delivery in the sector; the feasibility of the business plan and strategy; and corporate governance. There would need to be provision for the submission of quarterly or half-yearly accounts in addition to the annual ones. The fit and proper persons test in this case has failed. Dialogue with supporters has failed, because the owners have resisted all communication and have neutralised the board’s involvement.

I conclude with another remark from Mr Battersby:

“137 years of football heritage has been decimated inside 12 months. It is like watching a slow motion car crash.”

[Sir Roger Gale in the Chair]

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[Damian Collins]

I agree with my hon. Friend. When we have foreign ownership and we do not know who the owners are; when we have a largely unregulated transfer market bringing billions of pounds into and out of the country, which is largely unknown and uncontrolled at its source; and when communities bear the cost of the financial failure of a football club and taxpayers bear the loss through unpaid tax bills, Parliament should take an interest. We do not seek to take away someone’s right to run their football club badly. That is beyond the control of Parliament. The report of the Culture, Media and Sport Committee and the debate have thrown up legitimate public interest concerns, however. The events of the past seven days demonstrate that the Football Association has an obligation to be the moral guardian of the game in this country, not simply the administrator of football.

I am sure that hon. Members support teams in their constituencies at all levels. I am a lifelong supporter of Manchester United, but one of the most exciting football matches I have ever watched was when Hythe Town beat Staines Town last season to qualify for the first round proper of the FA cup for the first time in its history. That was the first time in more than 50 years that a side from the Kent league had qualified. That is a single competition in which a club in the Kent league can compete alongside clubs that are competing in the Champions League. When multiple clubs are playing in multiple formats and competitions, there must be a single governing body that can have some oversight over the whole of football in this country. That can only be the Football Association, which is the guardian of the game in all competitions.

I praise the chairman of the Football Association, David Bernstein, for taking a stand on the John Terry affair. David Bernstein rightly accepted that the captain of the England football team has a position in public life in the country, and millions of sport fans look up to him as a role model. If his position is put into question by a criminal charge that has been made against him, although he is not guilty of that charge, while doubt remains about his role it is not appropriate for him to be captain of the England football team. If the manager of the England football team, Mr Capello, could not accept that ruling, it was right for him to stand aside. Although we might not have wished for the outcome of the past seven days—the removal of the captain and the manager—the course of events was inevitable. It was right for the Football Association to take a moral lead on the case, and I commend it for doing so. There are real financial concerns about the administration of football and clubs in this country, and a real concern about the lack of powerful oversight and intervention. There are many areas of concern, and hon. Members have touched on a good number. I will limit my remarks to three issues—club ownership, the football creditors rule, and player ownership and the player transfer market.

During our inquiry the fact that Leeds United was owned by a trust whose investors were not known was highlighted, together with the fact that Mr Ken Bates was employed by that trust to be chairman of the club, but did not know who the owners—the investors in that trust—were. No one in football in this country believes that Ken Bates did not always control that club. There is no other way in which he could suddenly have completed the purchase of it within days, without any kind of tendering process, and assumed ownership. He blamed the political obsession of the Select Committee, which was simply standing up for the legitimate interest of Leeds United fans to know who owned their club, for its interest in Leeds United. Many hon. Members have spoken about the role of the fit and proper person test. How can that test be applied if we do not know who the person is? That has been a recurrent problem for the football authorities, and shows that the test, which should function as a guardian, works only if the person who is being investigated is the owner, and if that can be proved beyond reasonable doubt.

[Graham Jones]

On that note, does the hon. Gentleman think that somehow the fit and proper person test could include stupidity?

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[Damian Collins]

The hon. Gentleman makes a good point. I shall come on to my views on the solution to the problem, but many clubs in Coventry City’s position will have a management company—a holding company that runs the club—and a supporters’ trust may have a seat on that board. However, that is just a holding company. The ownership of the club is somewhere else completely, and that management company may not know who the owner is. It may deal with a businessman who represents the owners, but it may not know who the owners are.

I recently had conversations with a businessman who was involved in running Sheffield Wednesday from the moment it went into administration through to the period when it was taken over by Milan Mandaric. He described a series of potential investors coming forward, some of whom used fake names and identities. When non-disclosure agreements were signed, it turned out that the principal investors were based in the far east and were not who they originally seemed to be. The impression is created of a murky world where no one is quite who they say they are. People running clubs in this country who seek to sell them to a foreign investor to raise funds for the club may not know who they are dealing with.

When I wrote to the Football League about Coventry City, I had a reply from Nick Craig, the director of legal affairs, who made a telling point:

“We have for some time expressed our concerns as regards investment vehicles (often offshore) and the issue of the lack of transparency surrounding ownership of them. Indeed we have previously sought assistance from DCMS and HMRC in that respect but to no avail. We are left in a position where we can regulate and seek to require clubs to comply but are reliant on self-declaration with no official means of independent verification.

That the proliferation of offshore investment trusts means we will never always be 100% certain in all cases but we continually assess the appropriateness of our rules in a changing environment.”

There is not very much comfort there for any football fans concerned, because the Football League is saying that if a company is registered offshore and it buys a British football club, it does not have the authority or power to know who owns the club.

The Select Committee report contained a request to the Government for a retrospective examination of the Leeds United case. That would require powers beyond those of the football authorities to inquire what was the source of the finance to purchase the club out of administration, how much Ken Bates paid for it and where the money went, so that we could determine who controlled the club’s source of finance, even if it was impossible to determine who the owners were. The source of finance will take us to the owner of the club.

[Graham Jones]

The hon. Gentleman is generous in giving way, and makes an excellent point, which I want to add to, as well as supporting the Minister’s position. What would the hon. Gentleman say about a club such as Blackburn, however? The board exists, but it is being bypassed; the manager is directly responsible and flies out every month to Pune in India to run the football club. What would happen if the supporters’ trust sat on the Blackburn Rovers board? It now has no role within the club. Is that an issue that concerns the hon. Gentleman? How would he deal with it?

[Damian Collins]

I am grateful for that comment, but I will make that the last intervention that I take, if the House does not mind, as I want to make a few other points. I said at the beginning of my speech that I do not think it is the role of the House or the Government to stop people running a football club badly. It would be difficult to legislate that a club now in private ownership should be majority owned and controlled by the supporters, even if the supporters might want that. As the report says, the Government should—they have stated in their response that they will look at this—make it as easy as possible for supporters’ trusts to be set up, so that such representation exists, where the club wants that.

As to ownership, I do not have a problem with clubs being owned by foreign investors. If people want to spend their money on football in this country to improve facilities and the quality of competition, that should be welcomed. However, there should be a clear register of any individual, with any investment in a football club, no matter how small, and that information should be available. I would push for it to be publicly available, but it should at least be available to the football authorities. In response to what the Football League said to me about Coventry City, if a football body—the Football League, the Premier League or whatever it is—cannot be satisfied about who the owner of a club is, it should stop that club competing in its competition. It should not necessarily be for the football authorities to chase round the world trying to find the owner of a club. If the club cannot demonstrate it to the satisfaction of the competition, it should not be allowed to take part.

A way to carry out that policy would be to request clubs, perhaps as part of the licensing scheme, to allow the football authorities to inquire of their bank what the source of funding is, and who the club’s owners are. The bank should make that information available, and if it cannot or does not, the matter should be passed to the Financial Services Authority. The ownership of clubs is not just a matter of football competition. If money is being channelled in by businessmen whose identity is not known, that should be a matter for the tax and financial authorities, as it would be in any other business.

I want to make a couple of points about the football creditors rule, which other hon. Members have touched on. As the chairman of the Football League said when I questioned him in the Select Committee, there is no moral case to justify the fact that, when a football club goes into administration, the local printer who prints the match programmes or the local building firm that does ground maintenance should get 1p in the pound for its debts, while a football club at the other end of the country or a multi-millionaire footballer get their football debts paid in full. That is wrong. The taxpayer loses too, because owed tax is not covered by the football creditors rule. That is the subject of a court case between HMRC and the football authorities. If that is not resolved, it should be a matter for legislation, and the House should resolve it. There is no moral case for that state of affairs, and we should move on.

On player ownership and player transfers, concerns have been raised that third-party ownership of players, although outlawed in this country, is still part of the game. A magazine, Tipsbladet, in Denmark, published an article this week that raises concerns about third-party ownership. Players are channelled through clubs in Denmark and, ultimately, on to the premier league. Funds that seek to own and control players have a financial interest in moving those players between clubs. That financial interest is greater than the interests of the player, or the club he may go on to on an intermediary basis.

Bloomberg’s news website also raised a concern last week about what it called “letterbox companies”, which are set up for a matter of days to loan money to a football club to purchase a player, and are then closed down almost straight away. It highlighted a case with Porto, in Portugal, where companies set up in this country had loaned money—non-bank lending—to FC Porto to buy players. Those companies were then shut down straight away, making it almost impossible for the authorities to identify where that money had come from.

The flow of money in football is an issue of the utmost importance, and one that we touched on in our report. The football authorities have to get to grips with the matter. The Government should consider it in their response to our report, and in their consideration of the response of the football authorities at the end of the month.