Ally Pally developer is a pounds 1m bankrupt

Complex problems: Concerns over financial past of consortium head who won go-ahead for ambitious leisure project

The businessman chosen to redevelop Alexandra Palace in north London is an undischarged bankrupt with debts of around pounds 1m.

Derek Sheldon, 51, who was declared bankrupt in July 1994, has put together the Alexandra Palace 1999 consortium to develop a leisure complex at the birthplace of BBC Television.

His proposal, which includes a multiplex cinema and a broadcasting museum, is backed by construction group Alfred McAlpine and Pillar, a property investment company. The development has been billed by Haringey Council, trustees of the palace, as an important step towards securing the long term future of the 123-year-old site, which faces losses of pounds 55m.

However, Mr Sheldon, who describes himself as both chairman of the consortium and project manager, denies suggestions that his financial problems affect his position. "All I lost in 1994 was my money, not my vision," he said. "I do not underestimate that this fact will be used by our opponents. Quite clearly it is unfortunate, but it is not significant."

However, Malkins, solicitors for the trust, have written to the board of trustees, voicing concerns about Mr Sheldon. Last night, a Haringey councillor, who would not be named, claimed that the authority failed to investigate the financial background of Mr Sheldon. "This is typical of their ham-fisted approach to Ally Pally. I am not surprised at all at their selection of a bankrupt as developer."

Questions have arisen about whether Mr Sheldon has the experience to run the project, but he refutes them. One achievement he lays claim to as a leisure developer is the prestigious Loch Lomond Golf Course.

He was a director from 1987 to1990 of developers Stirling Investments, but the company ran out of money, leaving debts of pounds 3.5m, and administrators were called in when only two holes had been turfed. After Stirling Investments collapsed, Mr Sheldon set up Golf and Leisure International, which was wound up by Customs and Excise two years later. He then developed three bowling alleys in Scotland and one in Harlow, all of which were later sold and the companies involved dissolved.

Last night, Haringey reiterated its support for the Ally Pally development and said the companies involved were being assessed. A spokesman for Alfred McAlpine said: "McAlpine and Pillar will carry the project through. We do not know it what will mean for Mr Sheldon and his future involvement." Pillar has reassured Haringey of its commitment to the development, but was unavailable for comment last night.

Until now, any development has been prevented because liability for the pounds 55m debt had not been resolved.However, last month Haringey accepted liablility for pounds 50m after its chief executive, Gurbux Singh, received a letter from the Treasury Solicitor accusing the council of failing to provide evidence to prove expenditure was properly incurred.

The pounds 11.8m bid for the 125-year palace lease, drawn up by Mr Sheldon, was chosen last week. He said: "It is very ambitious, but the response from leisure operators has been such that we could let the available space twice over." The project will need to be approved by the Charity Commission, a public planning inquiry and eventually Parliament.