However, although the three-man commission upheld Southend United's complaint that Birmingham breached regulations to lure the three to St Andrew's, they were unable after nearly 12 hours of talks to agree on a punishment.
When the meeting finished, shortly after 11pm, the commission, chaired by Newcastle's Gordon McKeag and also including Lincoln's chairman John Reames and Swansea City's Glyn Hammond, said that 'further consideration will be given to the question of penalty, compensation and costs and the commission will notify their decision to both parties as soon as possible'.
The Southend chairman Vic Jobson had demanded that Birmingham, three points off the bottom of the First Division, should be stripped of points. But precedents suggest a fine is more likely. Watford had to pay a pounds 10,000 fine and pounds 30,000 compensation after a similar case over a move by Glenn Roeder from Gillingham last November.
Earlier in the day, the dispute between Birmingham and the city's Evening Mail newspaper escalated, with the club's multi-millionaire owner, David Sullivan, warning that he might withdraw his backing from St Andrew's.
Overnight, the Mail's publishers, Midland Independent Newspapers, issued a writ for libel against Sullivan and the First Division club's managing director, Karren Brady. The action arises from documents faxed to City institutions and newspapers which, MIN claims, contained damaging allegations about its business affairs. MIN is shortly to be floated as a public company.
Responding to the development on local radio, a flu-ridden Sullivan said: 'I'm a bit horrified about the whole thing. It makes me feel like packing up, saying goodbye and going back to London. After what they've done to me and Karren, I think I'll leave the local paper to run the club.'
The feud became public last Saturday after the paper ran extracts from letters by Brady to MIN. In them, she suggested the company should sponsor the club, and threatened to organise a readers' and advertisers' boycott unless it did so. Brady also accused the publishers of 'financial rape' and said that the club were tired of being 'ripped off'.
Announcing its decision to sue, Chris Oakley, MIN's chief executive, said: 'The first letter from Karren arrived out of the blue suggesting that 1 per cent of our profits would be a suitable amount for sponsorship. In return, what we'd get is them not messing up our flotation.'
Meanwhile, the chances of Peter Johnson, Tranmere's chairman, gaining control of Everton improved yesterday. John Moores Jnr, the son of the late majority shareholder, John Moores, made it clear that, contrary to reports, his father's will contained no clause stating that the shares had to go to a 'true Evertonian'. Johnson's rival, Bill Kenwright, is on the Goodison board.