Newcastle's bonnie lad has fallen from grace. And things might get worse for Freddy, say Ian Burrell and Tim Laxton
"IF YOU hate Freddy Shepherd, clap your hands," came the wave of venom reverberating around the stands at Newcastle United's St James's Park on Wednesday night. For the object of this derision, the new battlecry of the Toon Army was the stuff of nightmares.

Ever since he was a lad, when he had stood amid the swaying mass of the Gallowgate end, cheering on his black and white-shirted idols, the Geordie team meant everything to Shepherd. Now, as the club chairman, he has his name on the best seat in the ground. On Wednesday, he had chosen to leave it empty.

Three days earlier, a tabloid newspaper had reported that Mr Shepherd, and his vice-chairman Doug Hall, had luridly boasted to an undercover reporter of their sexual exploits with prostitutes in brothels around the world, and abused the club's followers. They also allegedly described Newcastle women as "dogs", insulted the club's star players and mocked the fans who paid pounds 50 for replica shirts which they claimed cost pounds 5 to make.

By Wednesday, after using a public relations firm to issue a meek apology to his family and the people of the North-East, he went into hiding.

But Freddy Shepherd is not a natural recluse. Inquiries by The Independent have revealed that the man from Newcastle's impoverished East End has acquired an astonishing network of influential friends and allies in national and local government. Just how influential was made apparent when Freddy and his brother Bruce hosted a New Labour fund-raising evening, hosted by Tony Blair, at Mitford Hall. The ancient Northumberland seat of the Mitford family - immortalised in Jessica's Hons and Rebels - had been acquired by the two Shepherd brothers for pounds 2.5m in 1992 and they both have homes there.

On that particular night in 1996, the great and the good were out in force. As well as Blair, there was John Prescott and Nick Brown, the Labour Chief Whip, who is considered a Shepherd family friend. Their company, Shepherd Offshore, which had given money to the Tories in 1993, made a pounds 1,000 donation to Labour. The brothers have also allowed government ministers visiting the North-East to use their company helicopter.

Another rich man's plaything which Freddy enjoys is his boat. The current president of the Newcastle Yacht Club, he shares ownership of a luxury motorcruiser, called Apollon, with Sir John Hall, his great friend and mentor. When Sir John, who has dominated sporting and business life in the North-East in recent years like no other, stepped down from Newcastle United - passing his 57 per cent shareholding to his son Doug - he allowed Mr Shepherd to succeed him as chairman last December.

By last week the fans were demanding his head. Newcastle supporter Sir Jeremy Beecham, former leader of the city council and now chairman of the Association of Metropolitan Authorities, was at Wednesday night's match. "They have said things which really make their position untenable," he said.

Last night Freddy Shepherd was holding on to his position by his fingernails. It's a long way back down to where he came from. He grew up amid the back- to-backs and outdoor toilets of post-war Albion Row in rundown Byker. Freddy's father Charles set up a one-wagon haulage business, and his uncle William was a rag and bone man.

In the 1950s, Charles Shepherd took his family to Australia but soon returned to Byker, where his boys, Freddy and Bruce, joined his firm. They did good business delivering equipment for the growing offshore oil industry, and renamed the family firm Shepherd Offshore.

But their real boom period was in the dark years of the shipbuilding industry, when swathes of riverside land became vacant. "The Shepherds were masters in getting hold of the derelict sites and the government regeneration grant that often went with it," said one Newcastle businessman.

By 1991, Freddy Shepherd had become a good friend of Sir John Hall, the new Newcastle United chairman, who made him a club director. As the club came within an ace of winning the Premiership in 1996, Freddy Shepherd's position was assured in Newcastle society - a small circle of businessmen and politicians who dominate the lives of 750,000 people.

Meanwhile, his business links with the Hall family grew. They purchased a property close to St James's Park for pounds 88,358 in 1993 and sold it to the football club in 1995 for pounds 203,000.

Shepherd Offshore now employs 85 people and has diversified into warehousing, property investment, farming and the provision of conference facilities. It also has a stake in Newcastle's rugby union, ice hockey and basketball clubs, which are controlled by the Halls. During the last four years, the brothers have made pounds 6m in directors' remuneration alone. Their shareholding in Newcastle United is worth just over pounds 10m.

But as the clamour for Freddy Shepherd's head grows louder, inquiries by The Independent have revealed that his business affairs could be about to make him even more enemies.

The regeneration of Freddy Shepherd's native East End depends very largely on the success of a pounds 55m project based on reviving shopping along the old Shields Road in Byker.

In December 1995, the council-backed plan - based around the building of a new food superstore - successfully bid for pounds 24m of government regeneration grants. But within two months, the Shepherd brothers announced plans for a rival 82,000-sq ft store, a mile away on an industrial site at Walkergate. The Shields Road developers were aghast and the issue split the ruling Labour group on the city council with a powerful lobby emerging in favour of the Shepherds.

In November 1996, council planners realised that part of the key site for their Shields Road superstore was to be sold at auction. They recommended a pounds 100,000 council purchase. But finance sub-committee chairman Colin Gray declined to convene a meeting. At the auction, Shepherd Offshore was the only bidder, snapping up the site for a bargain pounds 63,000. The uproar that followed provoked an internal investigation at the city council which concluded that the decision on whether to hold the meeting had been at Councillor Gray's discretion.

But since then, Shepherd Offshore has again been able to thwart council officials in buying up a key city site. Heaton House, a huge warehouse on the edge of the Shields Road project, was a potential blight on the scheme and planners recommended pounds 65,000 be spent on it.

Two weeks later, before the councillors had got around to approving the buy, the Shepherds clinched a deal with the owners, Allied Irish Bank. It meant that the success of the pounds 55m East End regeneration scheme is at the mercy of the Shepherds.

Stefan Cross, a lawyer and Labour councillor who chairs the Strategy Delivery Committee, is concerned. "If the events relating to these purchases undermine the East End regeneration strategy by preventing us or delaying us from getting the major supermarket development it would be potentially disastrous for the East End of the city," he said.

When he became Newcastle chairman, Freddy Shepherd said: "To be chairman is a great honour for someone who comes from the East End of the city and stood on the Gallowgate End."

He now risks letting down the people of the East End - as well as Newcastle United. As Kevin Miles of the Newcastle Independent Supporters Association puts it: "They have brought shame on the club, on the city. They will not be forgiven."