Post by QPR Report on Apr 13, 2010 6:22:08 GMT
Guardian
Next Previous Blog home Ten questions about Portsmouth that remain unansweredReaching the FA Cup final was a great achievement but the club's affairs remain murky
1 Who was running the club between 4 October, when Sulaiman al-Fahim bowed out, and 3 February, when Balram Chainrai took control?
The club was nominally owned by the invisible Ali al-Faraj, who was never seen at Fratton Park. For much of that period Daniel Azougy, a convicted fraudster and former lawyer who had been disqualified in 2002 and just last year pleaded guilty to handing false documents to the Israeli stock exchange, was in charge of the finances. He was joined by a collection of "advisers" and "consultants" that included Yoram Yossifoff and Roni Mana, both familiar names in Israeli business and property circles. Mark Jacob, a City lawyer at Fuglers who had known Yossifoff as a client for 15 years, was brought on board as executive director. The enterprise was funded by a £17m loan from Balram Chainrai. His business partner Levi Kushnir was a familiar face at the club.
All had various links with Arcadi Gaydamak, the former billionaire whose assets have been frozen and is exiled in Moscow after being found guilty of arms trading in Angola by a French court. Kushnir and Chainrai had successfully sued Gaydamak Sr for £31m after he reneged on a share purchase, although they have yet to receive a penny. Mana, a middleman in many of Gaydamak's business deals, had also recently sued him over unpaid mediation fees and with his business partner Yossifoff had previously owned Maccabi Tel Aviv. It was Gaydamak's son, Sacha, who sold the club to Sulaiman al-Fahim after banks pulled their funding. Former chief executive Peter Storrie recently confirmed what many suspected at the time, but the Premier League was assured was untrue - that it was probably Gaydamak Snr's money that helped fund the club's reckless spending spree.
Between October and January, the situation is described by those at the club at the time as "chaotic" as they staved off demands for payment from angry creditors, received conflicting instructions from the group in charge and sent payment requests to Azougy only to have them knocked back. Insiders paint a picture of a group who were simultaneously naive about the world of football but headstrong in their insistence on their arbitrary decisions being followed through, while revelling in their ability to invite friends and family into the boardroom for the visit of Manchester United.
In the statement of affairs prepared by insolvency specialists Vantis at the behest of the high court in February, the company describes how it was originally called in at the beginning of January to try and get to the bottom of what was going on.
"Members of the executive board at the time, primarily Tanya Robins and Peter Storrie, asked us to re-attend the company's premises as they felt that their roles as executive directors were being undermined by a variety of consultants who did not have board positions but had Mr al-Faraj's authority to deal with financial affairs." Four days later Jacob, the solicitor installed by the al-Faraj regime as executive director, dis-instructed the company. Two weeks later, Robins resigned.
Azougy was described by insiders as acting like a "minister without portfolio" who had full control of the finances until Chainrai became aware that money was being taken from the club's client account but he wasn't receiving any repayments on his £17m loan. At that point the client account was switched from Fuglers to Balsara & Co, the solicitors for Chanrai's company, and the Hong Kong-based businessman went on to seize full control of the club. While Chainrai, the Falcondrone group and Azougy – who has links to a loan shark who is reported to have made an offer of a $50m loan to Gaydamak Snr in return for his frozen assets – appear to have had common cause at the beginning of their enterprise, as they failed to secure a quick exit through a sale or new investment cracks began to appear.
2 What was Chainrai's involvement?
Chainrai claims to have had no involvement in the running of the club in 2009, beyond providing the bridging loan, and recently said he regretted getting involved with al-Faraj and his "associates". "I must emphasise we had no personal or business relationship with Ali al-Faraj, Ahmed al-Faraj, Daniel Azougy or Mark Jacob, previously. And we only met them through Yoram Yossifoff after we had agreed to make the short-term bridging [loan]. I had no knowledge of who was in the consortium that owned Portsmouth," he recently told the Guardian. But the Premier League is understood to have retained suspicions throughout that chaotic period that Chainrai was more than just an arms-length lender. Portsmouth's administrator, Andrew Andronikou, said he was convinced that Chainrai was simply an unfortunate victim of circumstance and has no motivation beyond getting his money back.
3 Will HMRC get its money back?
Despite dropping its vigorous opposition to the administration, HMRC retains concerns about the process. It is understood to have been reassured by a preliminary meeting with Andronikou and the other creditors but is unlikely to support a CVA if there remains a chance of recouping the full amount it is owed, at least £15m. But as it holds less than 25% of the overall debt, it is likely to reluctantly support a CVA if it has no effective way of blocking it or feels there is no realistic alternative offer on the table. The court ruling that resolved HMRC's objections said an independent creditor's committee must meet by 26 March. It has yet to do so but informal meetings have taken place and HMRC is believed to feel reassured that it is "in the loop".
4 What is Sacha Gaydamak's position?
Gaydamak still owns key parcels of land around Fratton Park and claims to be owed £30.5m in loans he made to the club before selling it to al-Fahim, making him the single biggest creditor. Andronikou appears to have satisfied himself that the figure is correct and says Gaydamak has been working constructively with him.
5 How much money flowed out of the club?
The truth may never be known, given the opaque nature of the club's accounting between October and January. It is believed a sum of around £1.5m was paid out from the Fuglers account in January, and it was that which prompted Chainrai to take more of an active interest in the running of the club. Meanwhile, Chainrai has confirmed that he also took a sum of around £4m in part repayment of his loan from the club in January, weeks before it was placed into administration.
6 What is the true level of the club's debt?
Andronikou has claimed that the true figure for the club's overall debt is more than £100m. The highest previous estimate was £86m. But Andronikou said his figures were not inconsistent. He said he told a press conference on the day that he was appointed that the debts stood at around £85m and that once the money owed to Chainrai is added to the total it comes to just over £100m. But on BBC Radio 5 Live's Sportsweek at the beginning of March, a few days after the club had been placed into administration, he said the debt would "bottom out" at £78m.
7 Is Chainrai a secured creditor?
HMRC has interpreted the latest court ruling as meaning Chainrai's charge does not confer secured creditor status. But that will become academic if the CVA is agreed – his debt will simply remain within the club and he will be repaid in full if a new buyer comes along. Other creditors will have to accept a settlement. Some fear that Chainrai could reap further rewards by siphoning off the parachute payments (at least £16m), outstanding TV revenues and transfer income (up to £25m) that will be realised in the summer. But Andronikou insisted Chainrai only wanted to recoup his existing investment and would be unable to take out more than he has put in. "If he has put in £14, he will only be allowed to take out £14. I don't know where people have got this idea," he said.
8 Who is the mystery backer behind the proposed buyout?
Property tycoon Rob Lloyd claimed to be close to agreeing a takeover when he met fans several weeks ago. But progress has been slow, fuelling suspicions that the administrator has been dragging his feet and raising concerns over Lloyd's seriousness.
Lloyd has still not named the mystery investor who is backing the bid, but has apparently provided proof of funds. Last week, the consortium's accountants finally began the process of due diligence but Andronikou muddied the waters further by saying Lloyd's principal backer had changed. Today, he also claimed that their FA Cup semi-final success had raised the prospect of another rival bidder: "We had one party who had shown interest, they were hovering, a real significant consortium with sporting interests, and this morning they came to step up their interest."
9 Will the administrator conduct a full investigation?
On the one hand, Andronikou has promised to leave "no stone unturned" in investigating the murky events of the previous nine months. On the other, he has insisted that the club's past is "irrelevant" for now and far from a priority while he gets it back on an even keel. "We're not subscribing to any conspiracy theories, we are trying to appease everyone and trying to get people to focus on their football. There will be a time and a place to deal with those questions," said Andronikou. Fan groups are asking how he can be so sure that Chainrai "ticks all the boxes" as a reluctant owner when he has not investigated the complex transactions of the previous nine months. "The first priority is to get the club into an arena where it's considered to be safe and where I could turn around to the fans, the supplier base and creditors and say the club is going to survive. I'm there anyway, to be honest. That will only be rubber stamped when the CVA is approved in a few weeks time. When it's approved, everyone can breathe a big sigh of relief. As regards how we got here, that's another chapter." He says it will be a "few months" before there are any conclusions, which would be confidentially delivered to the Department of Trade Industry, as is standard practice.
10 Is the administrator independent?
After HMRC flagged up concerns over Andronikou's independence, noting in particular that Portpin, a company owned by Chainrai, and UHY Hacker Young, the insolvency practitioner of whom Andronikou is a partner, shared a solicitor in Balsara & Co, the insolvency practice was quick to insist that there were no prior links. Andronikou insisted there was "no stitch-up", arguing that the fact that it was Chainrai who had appointed him was "irrelevant". "There is no stitch up. My remit here is to get the best deal for the creditors. I'm not here to work for Mr Chainrai, I need to get the best deal for all creditors," he said.
www.guardian.co.uk/football/blog/2010/apr/12/questions-portsmouth-remain-unanswered
Next Previous Blog home Ten questions about Portsmouth that remain unansweredReaching the FA Cup final was a great achievement but the club's affairs remain murky
1 Who was running the club between 4 October, when Sulaiman al-Fahim bowed out, and 3 February, when Balram Chainrai took control?
The club was nominally owned by the invisible Ali al-Faraj, who was never seen at Fratton Park. For much of that period Daniel Azougy, a convicted fraudster and former lawyer who had been disqualified in 2002 and just last year pleaded guilty to handing false documents to the Israeli stock exchange, was in charge of the finances. He was joined by a collection of "advisers" and "consultants" that included Yoram Yossifoff and Roni Mana, both familiar names in Israeli business and property circles. Mark Jacob, a City lawyer at Fuglers who had known Yossifoff as a client for 15 years, was brought on board as executive director. The enterprise was funded by a £17m loan from Balram Chainrai. His business partner Levi Kushnir was a familiar face at the club.
All had various links with Arcadi Gaydamak, the former billionaire whose assets have been frozen and is exiled in Moscow after being found guilty of arms trading in Angola by a French court. Kushnir and Chainrai had successfully sued Gaydamak Sr for £31m after he reneged on a share purchase, although they have yet to receive a penny. Mana, a middleman in many of Gaydamak's business deals, had also recently sued him over unpaid mediation fees and with his business partner Yossifoff had previously owned Maccabi Tel Aviv. It was Gaydamak's son, Sacha, who sold the club to Sulaiman al-Fahim after banks pulled their funding. Former chief executive Peter Storrie recently confirmed what many suspected at the time, but the Premier League was assured was untrue - that it was probably Gaydamak Snr's money that helped fund the club's reckless spending spree.
Between October and January, the situation is described by those at the club at the time as "chaotic" as they staved off demands for payment from angry creditors, received conflicting instructions from the group in charge and sent payment requests to Azougy only to have them knocked back. Insiders paint a picture of a group who were simultaneously naive about the world of football but headstrong in their insistence on their arbitrary decisions being followed through, while revelling in their ability to invite friends and family into the boardroom for the visit of Manchester United.
In the statement of affairs prepared by insolvency specialists Vantis at the behest of the high court in February, the company describes how it was originally called in at the beginning of January to try and get to the bottom of what was going on.
"Members of the executive board at the time, primarily Tanya Robins and Peter Storrie, asked us to re-attend the company's premises as they felt that their roles as executive directors were being undermined by a variety of consultants who did not have board positions but had Mr al-Faraj's authority to deal with financial affairs." Four days later Jacob, the solicitor installed by the al-Faraj regime as executive director, dis-instructed the company. Two weeks later, Robins resigned.
Azougy was described by insiders as acting like a "minister without portfolio" who had full control of the finances until Chainrai became aware that money was being taken from the club's client account but he wasn't receiving any repayments on his £17m loan. At that point the client account was switched from Fuglers to Balsara & Co, the solicitors for Chanrai's company, and the Hong Kong-based businessman went on to seize full control of the club. While Chainrai, the Falcondrone group and Azougy – who has links to a loan shark who is reported to have made an offer of a $50m loan to Gaydamak Snr in return for his frozen assets – appear to have had common cause at the beginning of their enterprise, as they failed to secure a quick exit through a sale or new investment cracks began to appear.
2 What was Chainrai's involvement?
Chainrai claims to have had no involvement in the running of the club in 2009, beyond providing the bridging loan, and recently said he regretted getting involved with al-Faraj and his "associates". "I must emphasise we had no personal or business relationship with Ali al-Faraj, Ahmed al-Faraj, Daniel Azougy or Mark Jacob, previously. And we only met them through Yoram Yossifoff after we had agreed to make the short-term bridging [loan]. I had no knowledge of who was in the consortium that owned Portsmouth," he recently told the Guardian. But the Premier League is understood to have retained suspicions throughout that chaotic period that Chainrai was more than just an arms-length lender. Portsmouth's administrator, Andrew Andronikou, said he was convinced that Chainrai was simply an unfortunate victim of circumstance and has no motivation beyond getting his money back.
3 Will HMRC get its money back?
Despite dropping its vigorous opposition to the administration, HMRC retains concerns about the process. It is understood to have been reassured by a preliminary meeting with Andronikou and the other creditors but is unlikely to support a CVA if there remains a chance of recouping the full amount it is owed, at least £15m. But as it holds less than 25% of the overall debt, it is likely to reluctantly support a CVA if it has no effective way of blocking it or feels there is no realistic alternative offer on the table. The court ruling that resolved HMRC's objections said an independent creditor's committee must meet by 26 March. It has yet to do so but informal meetings have taken place and HMRC is believed to feel reassured that it is "in the loop".
4 What is Sacha Gaydamak's position?
Gaydamak still owns key parcels of land around Fratton Park and claims to be owed £30.5m in loans he made to the club before selling it to al-Fahim, making him the single biggest creditor. Andronikou appears to have satisfied himself that the figure is correct and says Gaydamak has been working constructively with him.
5 How much money flowed out of the club?
The truth may never be known, given the opaque nature of the club's accounting between October and January. It is believed a sum of around £1.5m was paid out from the Fuglers account in January, and it was that which prompted Chainrai to take more of an active interest in the running of the club. Meanwhile, Chainrai has confirmed that he also took a sum of around £4m in part repayment of his loan from the club in January, weeks before it was placed into administration.
6 What is the true level of the club's debt?
Andronikou has claimed that the true figure for the club's overall debt is more than £100m. The highest previous estimate was £86m. But Andronikou said his figures were not inconsistent. He said he told a press conference on the day that he was appointed that the debts stood at around £85m and that once the money owed to Chainrai is added to the total it comes to just over £100m. But on BBC Radio 5 Live's Sportsweek at the beginning of March, a few days after the club had been placed into administration, he said the debt would "bottom out" at £78m.
7 Is Chainrai a secured creditor?
HMRC has interpreted the latest court ruling as meaning Chainrai's charge does not confer secured creditor status. But that will become academic if the CVA is agreed – his debt will simply remain within the club and he will be repaid in full if a new buyer comes along. Other creditors will have to accept a settlement. Some fear that Chainrai could reap further rewards by siphoning off the parachute payments (at least £16m), outstanding TV revenues and transfer income (up to £25m) that will be realised in the summer. But Andronikou insisted Chainrai only wanted to recoup his existing investment and would be unable to take out more than he has put in. "If he has put in £14, he will only be allowed to take out £14. I don't know where people have got this idea," he said.
8 Who is the mystery backer behind the proposed buyout?
Property tycoon Rob Lloyd claimed to be close to agreeing a takeover when he met fans several weeks ago. But progress has been slow, fuelling suspicions that the administrator has been dragging his feet and raising concerns over Lloyd's seriousness.
Lloyd has still not named the mystery investor who is backing the bid, but has apparently provided proof of funds. Last week, the consortium's accountants finally began the process of due diligence but Andronikou muddied the waters further by saying Lloyd's principal backer had changed. Today, he also claimed that their FA Cup semi-final success had raised the prospect of another rival bidder: "We had one party who had shown interest, they were hovering, a real significant consortium with sporting interests, and this morning they came to step up their interest."
9 Will the administrator conduct a full investigation?
On the one hand, Andronikou has promised to leave "no stone unturned" in investigating the murky events of the previous nine months. On the other, he has insisted that the club's past is "irrelevant" for now and far from a priority while he gets it back on an even keel. "We're not subscribing to any conspiracy theories, we are trying to appease everyone and trying to get people to focus on their football. There will be a time and a place to deal with those questions," said Andronikou. Fan groups are asking how he can be so sure that Chainrai "ticks all the boxes" as a reluctant owner when he has not investigated the complex transactions of the previous nine months. "The first priority is to get the club into an arena where it's considered to be safe and where I could turn around to the fans, the supplier base and creditors and say the club is going to survive. I'm there anyway, to be honest. That will only be rubber stamped when the CVA is approved in a few weeks time. When it's approved, everyone can breathe a big sigh of relief. As regards how we got here, that's another chapter." He says it will be a "few months" before there are any conclusions, which would be confidentially delivered to the Department of Trade Industry, as is standard practice.
10 Is the administrator independent?
After HMRC flagged up concerns over Andronikou's independence, noting in particular that Portpin, a company owned by Chainrai, and UHY Hacker Young, the insolvency practitioner of whom Andronikou is a partner, shared a solicitor in Balsara & Co, the insolvency practice was quick to insist that there were no prior links. Andronikou insisted there was "no stitch-up", arguing that the fact that it was Chainrai who had appointed him was "irrelevant". "There is no stitch up. My remit here is to get the best deal for the creditors. I'm not here to work for Mr Chainrai, I need to get the best deal for all creditors," he said.
www.guardian.co.uk/football/blog/2010/apr/12/questions-portsmouth-remain-unanswered