It's marker now. So once it's happened, one place at one club, going to be a little easier to do it somewhere else....And harder to justify why NOT doing it elsewhere when appropriateJust reposting the story - and a second David Conn/Chester Chairman piece.David Conn/The Guardian
Chester City chief becomes first owner to fail fit and proper person test• Stephen Vaughan will have to sell or give up his majority stake
• Liverpool businessman bought the club in 2001 Chester City owner Stephen Vaughan will be forced to sell or give up at least 70% of his stake in the club. Photograph: Rick Matthews
Stephen Vaughan has become the first owner of a professional football club required to reduce his shareholding because, according to FA rules, he is no longer a "fit and proper person". Vaughan, a Liverpool businessman who bought the Conference club Chester City in 2001 and owns 100% of the shares, was last week disqualified from acting as a director of any company until November 2020, following his involvement in a £500,000 VAT fraud.
The FA's rules, which apply to Conference clubs, state that anybody disqualified as a company director cannot hold 30% or more of a club's shares. The FA will write to Vaughan requiring him to sell or give up his majority stake in City within 21 days of the disqualification taking effect on 25 November. If he does not comply, the club could ultimately be expelled from the Conference.
Relegated from the Football League last season and in administration over the summer, City already have the threat of expulsion hanging over them, unless they pay money owed to the Professional Footballers' Association, Wrexham and Vauxhall Motors FC by 30 November.
According to an undertaking Vaughan signed with the Insolvency Service, he committed the VAT fraud while a director of Widnes Vikings rugby league club, which was then in administration, in October 2007. It stated that he "caused" Widnes to buy clothes from a UK company in three transactions worth £2.9m, plus VAT of £505,265.
Payment for the clothes was not made to "the alleged supplier", but to an account at the First Curaçao International Bank, based in the Netherlands Antilles. The clothes were sold on the same day to a company based in Spain; overseas buyers do not have to pay VAT, and Vaughan tried to reclaim the £505,265 for the club from HM Revenue and Customs.
HMRC refused to pay, and proceedings were begun against Vaughan which led to him admitting the transactions were a "carousel" in which the VAT was fraudulently claimed from HMRC.
In a statement, the FA said: "We are aware of the Insolvency Service decision and will be taking necessary steps under the requirements of the fit and proper person test."
The case could test the rules' effectiveness, however, because according to City's managing director, Bob Gray, Vaughan may hand the shares to one of his sons. "He has to relinquish his shares," Gray acknowledged, "but who he gives them to is up to him. He could keep them within the family." If that happened, the FA would have to be satisfied that Vaughan was not still "exercising direct or indirect control" over the club's affairs, which the rules prohibit for somebody declared not "fit and proper".
www.guardian.co.uk/football/2009/nov/18/chester-city-fit-proper-person-testDavid Conn/The Guardian - Chester City owner told by FA to surrender his majority sharesChester City's Stephen Vaughan has become the first major scalp of the fit and proper person testChester City supporters are hoping that a torrid period for their club can be brought to an end and a new beginning embarked upon by the requirement that Stephen Vaughan, the owner since 2001, must reduce his majority stake after admitting a £500,000 "carousel" VAT fraud and being disqualified as a company director for 11 years.
Vaughan, a Liverpool businessman whose time in charge of City, and the Conference club Barrow before them, was marked by early success then insolvency and controversy, will become the first majority owner of any professional football club declared not "a fit and proper" person while still in charge.
The FA's "fit and proper person test", which applies to Conference clubs, states that anybody who has been disqualified as a company director cannot hold 30% or more of a club's shares, and Vaughan will be required to reduce his shareholding within 21 days of the disqualification order taking effect on 25 November.
In a statement, the FA said: "We are aware of the Insolvency Service decision and will be taking necessary steps under the requirements of the fit and proper person test."
On the face of it, this will bring to an end Vaughan's eight turbulent years at City, although he is likely to transfer the shares to one of his sons, according to the club's managing director, Bob Gray. If that happens, the FA will have to be satisfied that Vaughan senior no longer exercises "direct or indirect control" over the club's affairs as stipulated by the rules.
Ever since he first bought Barrow, then in the UniBond League, in February 1995 and began to put money in, Vaughan has been one of lower-league football's more controversial figures. While at Barrow, Vaughan declared publicly that he had been arrested by HM Revenue and Customs as part of an investigation into Curtis Warren, the Liverpool drug dealer who had been sentenced to 12 years' imprisonment in the Netherlands for trafficking hashish, heroin, cocaine and ecstasy.
Vaughan, then a boxing promoter, wrote to the magazine Boxing News saying: "The allegations centre on the laundering of millions of pounds of supposed drug money."
The investigation is understood to have turned to Barrow partly because of an incident related in Warren's biography, Cocky (Milo Books, £14.99), in which Warren, before his arrest, was said to have been flown round the north-west in a helicopter, pointed down to Barrow FC, and said to the pilot: "I own that."
Vaughan always said that was untrue, "categorically and strenuously" denied any involvement in money laundering and was never prosecuted for any offence arising out of the Warren investigation. However, he always remained loyal to Warren, who was a childhood friend, and publicly acknowledged that he knew him.
As at Chester, Vaughan put significant money into Barrow in the early years, and in May 1998 the club won promotion to the Conference. But he then pulled out financially and in January 1999 Barrow were plunged into a traumatic liquidation, before they were rescued by a consortium of local businessmen.
Vaughan took over at Chester in October 2001, when City, owned by an American, Terry Smith, had been relegated out of the Football League for the first time since their election to the Third Division (North) 70 years earlier.
Vaughan's investment, which Gray puts in the millions, saw City promoted back to the Football League in 2004 under the management of Mark Wright, and comparative good times trickling back, although intrigue was never a stranger at the Deva Stadium. In November 2007, the fans were asked to honour a minute's silence for a man, Colin Smith, described as a friend of Vaughan's and a benefactor to the club. Supporters bewildered about Smith's identity would soon read he was a major Liverpool cocaine dealer – although he was never actually convicted of any drug-related offences – who had been killed the previous month in a shooting widely described and reported as a gang execution.
Gray, asked about this yesterday, said Smith had been well-known at City and his son played in the junior section, but he had "never put a penny" into the club.
"We knew him as a lovely and very friendly man," Gray explained. "We didn't know what he did outside the football club; that didn't come into it. The minute's silence was to sympathise with and honour his family."
Vaughan, Gray said, has been: "A very generous owner, probably too generous," but last season City ran into financial problems, were relegated and in May collapsed into administration with declared debts of £8m. Of that, £1.8m was stated by the administrator to be owed to Vaughan personally, and £2.2m to Vaughan's company, Cestrian Group.
HMRC, owed £983,000 in unpaid tax and VAT, challenged the agreed Company Voluntary Arrangement (CVA), which had seen Vaughan take charge again. The tax authority severely disapproves of football's insolvency rules, which insist that "football creditors" – other clubs and players – must be paid in full, but other debts can remain unpaid. In July, His Honour Judge Pelling QC ruled in the high court that the CVA should indeed be cancelled because of a "material irregularity" in Cestrian Group's £2.2m claim, which he ordered be reduced to £590,089.
After that, Vaughan bought the club from the administrator again, this time without a CVA being agreed or its debts paid in full as required by Conference rules. The Conference imposed a 25-point deduction, 10 for the club being insolvent, 15 for the failure to agree a CVA, but the FA still fined the league itself £5,000 for accepting City, a breach of the league's own rules.
On the field, City have accumulated 21 points which, without the deduction, would place them in the relatively safe place of 17th in the table, but they remain rooted to the bottom on -4.
Budgeting to lose more than £600,000 this year with a wage bill including several players on about £1,000 a week, City have fallen behind with their payments again, and have been threatened with expulsion from the Conference if they do not pay money owed to the Professional Footballers' Association, Wrexham and Vauxhall Motors, by 30 November.
The club is seeking parachute payments from the Football League, which were withheld because of the administration, but the league board is taking advice about whether the money should be paid and if it is, whether to the old club company, which remains in administration, or Vaughan's new company. "We hope the Football League will pay us," Gray said, "but if they don't, we'll have to find it."
Mike Poole, 39, a senior civil servant and chair of the campaigning group City Fans United, lamented the club's plight: "Chester City were formed in 1885, it is in our blood and part of the city's fabric like the Roman walls and cathedral. It is heartbreaking, as if 125 years of effort have come to this."
Poole said he hoped the current management can pull the club round, but the fans are raising money in case they have to take it over themselves.
"We want to help preserve professional football in Chester," he insisted. "The club is too important to lose."
www.guardian.co.uk/football/david-conn-inside-sport-blog/2009/nov/18/chester-city-fit-proper-person-test