David Conn: Bates' associate denies ownership of Chelsea shares as probe continues

Ken Bates scoffed at The Independent's story this week that he had lunch with Sebastien Sainsbury at the Dorchester - where else? - to discuss taking over Leeds United, saying instead they accidentally bumped into each other in the hotel's lobby. Bates, who has networked prodigiously to drum-up support from Sheffield Wednesday fans for a £10m takeover of that other stricken Yorkshire club, said he was forever being linked with clubs, some 38 in total, thereby conjuring the image of a game still mired in financial crisis reaching out to the man sitting in Monaco with his fortune from selling Chelsea to Roman Abramovich, plotting his next, final fling in a football directors' box.

Ken Bates scoffed at The Independent's story this week that he had lunch with Sebastien Sainsbury at the Dorchester - where else? - to discuss taking over Leeds United, saying instead they accidentally bumped into each other in the hotel's lobby. Bates, who has networked prodigiously to drum-up support from Sheffield Wednesday fans for a £10m takeover of that other stricken Yorkshire club, said he was forever being linked with clubs, some 38 in total, thereby conjuring the image of a game still mired in financial crisis reaching out to the man sitting in Monaco with his fortune from selling Chelsea to Roman Abramovich, plotting his next, final fling in a football directors' box.

At a time like this it is worth remembering that the Financial Services Authority's investigation following the sale of Chelsea to Abramovich in July 2003 is, as the FSA confirmed to me this week, still ongoing. When it originally launched the inquiry the FSA was unusually explicit, announcing that it was acting on:

"Information from a number of sources suggesting that the publicly disclosed shareholding of certain parties may have been inaccurate. The FSA is concerned that as a consequence the market may have been misled as to the true ownership of Chelsea Village plc."

This is a serious business; shareholders must, by law, disclose the full extent of their shareholdings, and failure to do so is potentially a criminal offence. The FSA has never commented further or made it clear which shareholders it is investigating.

Ever since Bates's 1982 takeover of the then-financially decrepit Blues for, famously, £1, and his flotation of the club as Chelsea Village in 1996, a large chunk of the Chelsea shares were always held anonymously, offshore. More recently, 26.6 per cent were held by Swan Management, based in the tax haven of Guernsey, and administered by the financial firm, Harbour Trustees, whose director at the time, Patrick Murrin, represented Swan on the Chelsea Village board.

For years, Chelsea Village gossip had it that the anonymous shareholder was Stanley Tollman, a hotelier in the United States, originally a South African, and a very close friend of Bates, with whom he ran a travel company, Trafalgar, here in the Seventies. The two socialised together with gusto, shared a flat in Monte Carlo for nine years, and when Bates took over Chelsea, Tollman became a director, for the next 10 years.

More recently, Tollman was charged in New York with multi-million dollar bank frauds and tax evasion. He remains in London, contesting extradition proceedings, but in his absence, five other men charged alongside him were convicted following a trial in which Bates gave evidence for the prosecution. All are awaiting sentence.

Now, Tollman has highlighted the longstanding question marks over the Chelsea shares, by telling me categorically, on the record, that he was, in fact, never the owner of the offshore shares.

"People said I was, and some quite hurtful things were written," Tollman told me. "I wish I had denied it publicly, but Ken Bates always said there was no point because people would still believe it. However, I can state, 1,000 per cent, I never owned those shares."

In June 2002, a period when Chelsea were laden with massive debt taken on by Bates to build Chelsea Village, Swan Management suddenly sold its whole 26.6 per cent shareholding. Bates declared that he himself bought 12 per cent, via his company, Mayflower Securities, based in the British Virgin Islands, taking his stake to 29.5 per cent. If a shareholder buys 30 per cent of a company, he must offer to buy all the shares in a company, so Bates was just below that threshold. The destination of the remaining 14 per cent was not then revealed.

Then, in July 2003, when Abramovich, the Russian oligarch, turned up to take Chelsea off Bates's hands, paying £17.5m for his 29.5 per cent shareholding, sale documents revealed that the same number of shares as the other 14 per cent of the former Swan shareholding had been held by five companies registered in offshore tax havens: Ecspress and Catstone in the British Virgin Islands, Cervantes in the Cook Islands, Kalbarri in Samoa and Yellowpark, in Mauritius. Each held just under three per cent, the threshold at which a shareholding must be publicly disclosed to the Stock Market.

Bates's solicitor, Mark Taylor, whose office was at Stamford Bridge, also acted for those five companies - whose ownership is anonymous - and two smaller holdings which, combined with the family of the late shareholder Matthew Harding, took the agreed sale to Abramovich to over 50 per cent of Chelsea Village. The money was paid to Taylor's account at the Co-Op Bank, on Balloon Street in Manchester, and he told me that he paid the money out to each seller. That, he said, was:

"Normal practice in a commercial transaction."

Three weeks later, the FSA announced its inquiry, into "the nature and status of certain shareholdings" in Chelsea Village, adding that its information was that "certain parties" may not have disclosed their shareholdings fully, and so "misled" the market.

The FSA will not reveal how their inquiry is progressing. Taylor told me they did interview Bates, but that was 18 months ago and they haven't spoken to him again. Taylor himself, he said, was not interviewed.

The FSA is understood to have flown to Guernsey, and interviewed Patrick Murrin, the former Swan administrator and Chelsea director.

Murrin's firm, Harbour Trustees, was also said to have attracted the interest of Guernsey's Financial Services Commission, which, in February last year, issued this statement:

"The Commission has been discussing with Harbour Trustees various issues relating to Harbour's management and operations. These discussions are now complete. Mr Patrick Murrin has since retired from Harbour and its regulated subsidiaries."

Murrin, 50, a former pillar of the island's financial community, is said to be devastated but has not commented publicly. Harbour Trustees continues in business under his former partners.

Tollman told me the FSA has not contacted him: "Why would they? I never owned the shares."

Mark Taylor confirmed to me late last year that that was correct, explaining why Bates had never denied the stories:

"As far as I am aware, Mr Tollman has never been a major shareholder in Chelsea Village. But if the press speculate, Ken's position has always been not to comment on the more outlandish claims, as to do so only gives them credibility."

Tollman's reason for finally talking publicly is that, after 30 years of friendship, he has fallen out with Bates. This follows the US fraud and tax evasion trial in which, amongst a welter of other evidence, Bates gave key, damning testimony. He was drawn into it because his name appeared as the owner of a company, called Chelsea Acquisitions, which was found to have defrauded Chemical Bank of $20m.

Giving sworn evidence at the US Embassy in London in September 2003, which was videotaped and played to the New York jury, Bates, flatly, emphatically denied he had anything to do with Chelsea Acquisitions or knew anything about it.

Tollman, who was not tried because he refused to go to the US, believes Bates's evidence formed a crucial part of the prosecution case. He told me the defendants, although they pleaded not guilty, did not give evidence themselves because their lawyers advised them the prosecution's case was weak. Had they given evidence, he told me, he is confident that the result of the trial could have been different.

Tollman, following the trial, decided to put the record straight about the Chelsea shares, with which he feels he was always unfairly associated. He told me he enjoyed his time on the Chelsea board, but it was an honorary, social position, with no executive power:

"Chelsea were in the Second Division and we went away to some funny places - Leeds, Sunderland," Tollman said. "I loved it, but I think I only ever went to one board meeting. People who deduced from that and my friendship with Ken that I owned those shares were completely wrong."

Bates would not talk to me this week, but he is understood to have told people around Sheffield Wednesday that he has nothing to fear from the FSA.

If Tollman never owned the shares, and the FSA investigation is centred on allegations that certain shareholders may have misled the market about the extent of their true shareholdings, eighteen months on, the question remains: who?

davidconn@independent.co.uk