Leeds United

Julian Sturdy Excerpts

Tuesday 21st June 2011 Westminster Hall

[Damian Collins]

I wholeheartedly agree with my hon. Friend. Supporters’ trusts play an incredibly valuable role in giving a voice to fans, particularly in clubs that are going through difficult times financially. We saw that at Kidderminster, which my hon. Friend has mentioned, and we have also seen it recently at Plymouth Argyle, which has a link to Leeds, in that Peter Ridsdale, the former chairman of Leeds, has been involved in advising Plymouth Argyle, although I am not entirely sure what on.

I want to comment on the events that led to Leeds entering administration. Following the collapse of the Monte Carlo or bust strategy pursued by Ridsdale, which saw the club try to sustain a massive increase in expenditure on playing staff, the club was sold in 2004 to the Yorkshire consortium of Gerald Krasner, Melvyn Levi and other business men. The consortium sold and leased back the Elland Road football ground and the Thorp Arch training ground, and it settled more than £95 million of debts, but the club was relegated from the premier league in May 2004 and the consortium could not keep it financially solvent.

Investors represented by Ken Bates, as the chairman, took over Leeds in January 2005. The ownership vehicle was Forward Sports Fund, which was registered in Nevis and administered from Geneva. From the beginning, it was said that it had no connection to Ken Bates and that he owned no shares, but FSF had appointed him as a director and as the chairman of the club. It is a curiosity that the record of FSF’s incorporation in Nevis shows it was incorporated on 27 January 2005—six days after the Leeds takeover. If the company had not even been formed, where did the £5 million to buy Leeds come from in the first place? That question has never been answered.

Bates and FSF could neither salvage Leeds financially, nor prevent its being relegated from the championship in 2007 and entering administration in May 2007. In administration—I hope colleagues will forgive me if I go through some technical numbers—FSF had an outstanding indebtedness of £2.4 million. Astor, another offshore company, claimed to have an outstanding indebtedness of £12.8 million, while Krato claimed to have an outstanding indebtedness of £2.5 million. Those last two debts were consolidated, and the total owed to Astor when the club was sold back to FSF in July 2007 was stated to be £17.6 million.

When Bates and his co-directors put Leeds into administration in May 2007, the total debts were said to be £37.5 million. The debt to HMRC was said to be £7 million, and HMRC opposed the company voluntary agreement under which FSF would buy the club back, because it disputed the debt claims made by Yorkshire Radio, which was owned by Leeds, and those made by Astor. However, the administrator sold Leeds directly to FSF, with Bates as the chairman, for £1.8 million. Leeds then had 25 points deducted by the Football League—10 for going into administration and 15 for emerging with no company voluntary arrangement.

The mystery here is Astor’s offer to waive its debt if FSF, with Bates as the chairman, was given control of the club, even though it was not connected to FSF or Bates. Astor insisted that its debt had to be included with that of the other creditors to be repaid by any other bidder if FSF and Bates were not given the club. Even though there was no connection, Astor would not waive its debt, unless Bates was given control of the club and FSF was made the owner.

At the time of the sale in July 2007, the total owed to creditors stood at £30 million. All other bids would have had to pay a proportion of that, but Astor’s decision to waive its £17 million meant that FSF and Bates had to pay only £12.5 million. Other bidders offered more money, but they lost to FSF. One offered £3.5 million immediately; one offered £7 million; and another offered £5 million, once Leeds’s participation in the Football League was assured. FSF offered only £1.8 million, but with Astor’s £17.6 million not included, the FSF bid was accepted as the highest proportionate dividend to creditors, giving l1p in the pound. The taxman therefore received about £750,000 of the approximately £7 million he was owed—a loss of £6 million. The administrator stated that Astor and Krato were “unconnected” to FSF. The significance of that was that Astor’s votes counted in the administration vote, where it had more than 50% of the vote, when 75% was required for a decision to be taken.

Ken Bates swears on oath that he does not know who the new owners—the FSF investors in the club—were at the time and that he has never known. In his affidavit to the Jersey court, he said:

“Having made due inquiry, neither I, Mark Taylor or Shaun Harvey are aware of the ultimate beneficial owners of the participating shares, save to say that each of us can confirm that we have no interest in the participating shares.”

The judge, Sir Charles Gray, referred to Astor, waiving the £17.6 million that it was owed and that it was not connected to FSF. He said, “I am exceedingly puzzled” about why Astor would “kiss goodbye” to so much money if it had no connection with Bates and FSF.

Bates replied that he could only “presume” that Astor wrote off its £17.6 million because

“there would be the option for business in the future”

if he and FSF remained in control of the club. It should be noted for the record that no such future business has ever been transacted between Astor and Leeds.

Moving on to the Select Committee inquiry, we looked at the unanswered question of the ownership of the club and the challenge that that gave to the football authorities. How could the FA and the Football League enforce their own rules on club ownership of the fit and proper person test, if they did not know who the ultimate owners of the club were? Following our evidence hearing with the Premier League, it was clear that it would require disclosure of this information if Leeds were to be allowed to compete in its competition. At the time of the hearing earlier in the year, there was still a possibility that Leeds United would be promoted. Lo and behold, on Tuesday 3 May, Leeds announced that Ken Bates had bought the club. The club statement said:

“The scaremongering arising out of the football governance inquiry has not been helpful and, whilst the board were always confident that there were no issues, they recognise the concern the unknown outcome of any Premier League questions may have on our members. To address this issue and in the hope that this brings an end to the speculation, the chairman Ken Bates has completed the purchase of FSF Limited for an undisclosed sum.”

Why would the company feel that it had to sell a club that was on the brink of being promoted to the premier league?

[Julian Sturdy (York Outer) (Con)]

As a Leeds United supporter myself, I agree with my hon. Friend’s opening statement that Leeds United is a great football club and that the fans deserve answers. That is crucial, and it is welcome that he has secured today’s debate. Given what has happened with Leeds United, is not the problem the fact that there is not enough openness in the process and that too much is decided behind closed doors? Football clubs are part of the community, and the community deserves the answers that we are not getting at the moment.

[Damian Collins]

My hon. Friend is absolutely right, which is why the issue of the rules concerning the ownership of clubs is so crucial here. Fans have the right to know who owns their clubs. It was incredible that the FA and the Football League maintained a situation in which they did not know who the ultimate owners were. Such information is the least that the football fans should expect. I have no objection to overseas investors bringing in money to English football, but we have a right to know who they are and where that money comes from.