“Whoever is careless with the truth in small matters cannot be trusted with important matters,” Albert Einstein
Football, to paraphrase the former Liverpool manager Bill Shankly, is a very important matter. Most would agree that paying your debts should be at the forefront of everyone’s minds too, but for years some of those involved in the game have played it fast and loose with their obligations to the tax authorities.
Last week in Germany the Bayern Munich president, Uli Hoeneß, quit the European champions after being jailed for three-and-a-half years for non-payment of taxes on funds held in a Swiss account. Also last week Carson Yeung, a significant shareholder in Birmingham City, began a six-year sentence for money laundering. This week Massimo Cellino, the owner of the Serie A side Cagliari for more than 20 years, was fined €600,000 by an Italian court for evading import duties on a luxury yacht, which has also been confiscated. (He will appeal a decision his lawyer describes as “absolutely unjust”.)
While Hoeneß receives outpourings of sympathy from Bayern Munich supporters who have watched their side grow into the dominant force in European football under his stewardship, few Birmingham fans lament Yeung. The former hairdresser may have been in charge when the Blues landed their first major trophy in almost 50 years, but he also presided over their relegation from the Premier League. Meanwhile Cellino’s situation does not affect fans of Cagliari alone. His situation is being closely monitored by Leeds United supporters in their desperation for him to take over their club. They should beware what they wish for.
It is not the first time Cellino has been found guilty of acts of dishonesty. He had announced his confidence of passing Football League rules on fitness and propriety to take over one of its clubs despite his past convictions for fraud, in 1996, for which he was cleared on appeal, and false accounting, in 2001. This is because the convictions were considered legally to be “spent”; if his appeal fails this time it will be harder to argue they were ancient peccadilloes to be ignored.
Even if he were to persuade the Football League that he is a fit-and-proper person to take over a club in the world’s oldest football competition, some Leeds fans might wonder why his past brushes with the law should concern them. They would be wise to consider Birmingham as a shining example of what can go wrong.
With Karren Brady as their astute managing director, David Gold and David Sullivan had been running Birmingham prudently for 17 years when in October 2009 they sold to Yeung. They had taken over a club in the third tier of English football and took it to the Premier League 10 years later. Although they never invested sums of money they did not think they would earn back, the success was worth celebrating and no one should have begrudged them the £55 million they made from the sale to Yeung.
What was more troublesome was how Yeung subsequently financed the club. In the first eight months of his ownership he had injected £12.1m in loans, rising to £13.75m by the end of the financial year to June 2011. It seemed clear that the model would be for deficits to be run and covered by shareholder-loan finance from Yeung. But, with Hong Kong police investigating his affairs, the tap was soon turned off and, although deficits were still being run, the club had nothing to cover them with but their own assets. In the two years to the end of June 2012, players with a book value of almost £21 million were sold. (What cash the club took in is unknown: despite signing off the accounts, Yeung chose conveniently not to provide a cash-flow statement.)
Inevitably, Birmingham’s football fortunes have suffered. Three years since winning the Carling Cup, the Football League’s knock-out tournament, they now sit only three places above relegation to the third tier of English football. This is despite the tens of millions of pounds in income from the Premier League’s solidarity payments to relegated clubs, which will come to an end at the end of next season. Then Birmingham’s very survival as a solvent entity will surely be called into question, especially if the Hong Kong authorities prove Yeung’s loans were laundered funds and demand the club repay them.
The fact is, the deficit model works for many teams when the owner is good for the money. But if a man is in trouble with the law and the life-giving funding dries up, the club and its fans are left to pick up the pieces of a shattered balance sheet. It now turns out that apparently Yeung’s non-disclosure of shares had brought him a criminal conviction in Hong Kong a few years previously. It seems to me that if he has been a serial offender in the past then there is good reason not to let him take a position of responsibility in a club in future.
Leeds fans are disappointed by the failure of the Bahrain-listed Gulf Finance House Capital to deliver against plans to repurchase the club’s stadium and return to the Premier League. Given the parent company’s lack of funds, I was always sceptical of GFH’s promises when its chief executive made them to me less than two years ago [http://www.telegraph.co.uk/sport/football/teams/leeds-united/9597049/Leeds-United-buyer-Gulf-Finance-House-shrugs-off-800m-cash-loss.html], and the truth on the assertion that “there is no two- or three-year exit plan” is now out. Now another man with suave talk of bringing back the good times to Elland Road has pitched up. Leeds fans might rail against the Football League if it prevents Cellino from completing the takeover. But the blues of Blues fans show it has its owners-and-directors rules for good reason.
To quote Shankly more accurately, he said: “Some people believe football is a matter of life and death… I can assure you it is much, much more important than that.” And as the old joke goes, the only sure things in life are death and taxes. So to paraphrase Einstein, those who are careless with the truth in matters such as taxes cannot be trusted with something as important as football.
Journalist and broadcaster Matt Scott wrote the Digger column for The Guardian newspaper for five years and is now a columnist for Insideworldfootball. Contact him at firstname.lastname@example.org.