Leeds directors hit by `adverse' report

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The Department of Trade and Industry is considering whether to take action against five former directors of Leeds United, the football club that went into administration last year.

The Independent on Sunday has learned that a report sent to the DTI by the administrator, Brendan Guilfoyle of the P&A Partnership, gave an "adverse" view of the conduct of the five directors, who were on the board when Leeds ran up pounds 100m of debts in an attempt to bring success on the field.

These were Peter Ridsdale, the chairman who subsequently went on to run another football club, Barnsley; finance director Stephen Harrison; operations director David Spencer; and two prominent non-executive directors - the former Asda chief Allan Leighton, now chairman of the Royal Mail, and Richard North, who stood down last year as chief executive of Intercontinental Hotels.

The DTI is now considering whether to take any further action against the five. Under the law, it has until March 2006 to decide. The most likely move would be to apply to have directors disqualified. The maximum disqualification period is for 14 years.

So far there has been no indication of what action the DTI might take. It is understood to have made no contact with the directors since receiving the report from the administrator.

The Guilfoyle report said the directors were reckless in their stewardship of the finances of the Leeds, taking on obligations in transfer fees and wages that the company, which

at the time was listed on the London Stock Exchange, was unable to meet.

Leeds bought more than a dozen footballers in just two years, including England stars Rio Ferdinand and Robbie Fowler, Irish international Robbie Keane and Australian international Mark Viduka. The club raised over pounds 70m through a bond issue, secured on future gate receipts, and ended up owing over pounds 100m.

Mr Guilfoyle distinguished between the role of the executives and non- executive directors in this spending spree, pointing out that most of the deals were negotiated by Mr Ridsdale and the finances were masterminded by Mr Harrison.

Though Mr Leighton and Mr North were not centrally involved, the legal advice given to administrators was that under law they would still be held responsible. However, their lesser role means they are likely to avoid any further sanction.

This will prevent any embarrassment for Patricia Hewitt, the Trade and Industry Secretary, who appointed Mr Leighton as chairman of Royal Mail. Control of the agency, which owned the Post Office, has now passed to the newly formed Shareholder Executive, part of the Cabinet Office.

Two other non-executives joined the group in January 2003: Professor John McKenzie and Neil Holloway, the head of Microsoft UK. They are understood to have not been criticised.

Neither the DTI nor Mr Guilfoyle were able to discuss the contents of the report, which is confidential.

None of the directors contacted by The Independent on Sunday were prepared to comment.