David Conn: FA's 'aggressive investigation' ends with former Hull directors in clear

Almost four years on from the start of a Football Association investigation into alleged financial irregularities at Hull City, which was then passed on to the police, the Crown Prosecution Service announced last week that there was insufficient evidence to charge any of six men arrested and questioned over the affair. Sarah Cleary, of the lawyers Irwin Mitchell, who represented the club's former chairman Nick Buchanan, Stephen Hinchliffe, the major shareholder at the time, the directors Richard Ibbotson and David Capper and the former commercial manager Andy Daykin, said charges of corruption and fraudulent trading had been considered by the police after Hull went into administration in February 2001, but her clients had always been adamant there was no case to answer. Philip Webster, the former finance director, will also face no charges.

Buchanan, who resigned as the chairman after the club went into administration, said this week: "I have been gutted by the whole affair and said from the beginning we had done nothing wrong. Far from taking money out, as alleged, I lent £55,000 and more to the club. The whole thing has cost me £150,000. It all came from an aggressive investigation by the FA, and their compliance officer, Graham Bean: I only assume because Stephen Hinchliffe was involved."

There is some truth in that. Hull were taken over on 2 November 1998 by four men: Hinchliffe and Buchanan, with 37 and 28 per cent of the shares respectively, David Bennett and Tom Belton, the former chairman of Scunthorpe, who became the chairman. Just two days later, Hinchliffe was disqualified from acting as a company director for seven years after he accepted the Department of Trade and Industry's case that while he was running an Astroturf pitch company, En Tout Cas, it had by various means paid over £1m to companies he controlled, while the company itself went bust owing creditors £3m.

He was also under a long-running investigation by the Serious Fraud Office for his running of another company, Facia, which included the high street names Sock Shop, Saxone and others, and went into receivership in 1996. Price Waterhouse, the administrators of the shoe shop parts of Facia, reported around £15m missing from Facia accounts, and KPMG, the receivers of other parts of the business, identified "suspicious" loans to connected companies without, according to the SFO, "logical justification or proper accounting records".

Soon, Hinchliffe was charged by the SFO with corruption and conspiracy to defraud, for allegedly having obtained £13m loans for Facia from the United Mizrahi Bank, by bribing bank officials.

With this background, the FA was always going to take seriously any stories of alleged malpractice seeping out of Boothferry Park. Hinchliffe, though the largest shareholder, was never a director of Hull, but on 11 May 1999 Tom Belton wrote to all the other directors expressing concern that though not a director, Hinchliffe was playing too central a role in the running of Hull, including doing deals with managers and other clubs. Acting as a director while disqualified is a criminal offence, as is knowingly allowing someone to do so. The directors, however, were adamant that while Hinchliffe was advising in football matters, because he was experienced and a good negotiator, the Board itself actually took all decisions. Belton quit shortly afterwards and Buchanan took over as the chairman.

Graham Bean went into Hull to launch an investigation, with Buchanan and all the directors protesting they were innocent of any offence. Bean amassed a file and the FA passed the papers to Humberside Police, which launched its own investigation. Among the allegations was that Hull City paid Hinchliffe £54,000, advanced by a finance company, for a coach owned by one of his companies, d'Elegance Travel, on the same day that the Professional Footballers' Association had lent Hull £50,000 to pay players' wages. Buchanan explained that the coach saved the club money by removing the need to hire one.

In March 2000, Hinchliffe was charged with conspiracy to defraud, 12 counts of false accounting and eight counts of theft following the investigation into Facia. Hull's local council was building the club a new stadium but were not willing to deal with them while Hinchliffe was involved. So, in February 2001, Buchanan put the club into administration owing around £1.8m. Famously, along with £800,000 owed to the Inland Revenue and VAT, they owed nearly £6,000 to Mr Chu's, a Chinese restaurant where board meetings and functions had been held. Coming before the string of football club collapses from 2002, there was still some shock value in the long list of unsecured creditors including St John Ambulance and £66,649 owed to the Humberside Police themselves for policing matches.

Two weeks later, Hinchliffe was convicted of the Mizrahi Bank corruption offences and sentenced to five years in prison. He was released on licence in March 2003. In April 2003, he pleaded guilty to conspiracy to defraud, admitting a £1,750,000 personal benefit arising out of it, and the SFO agreed to leave the other charges on file.

In July last year, following an appeal by the Attorney General against the original sentence, Hinchliffe was sentenced to 18 months in prison.

The football club itself, meanwhile, was taken over by the former Leeds United commercial director Adam Pearson, and has since been reborn in the new, 25,000 seat, £43.5m stadium the council built for them, crowds have been a Third Division phenomenon, and Hull are in the promotion stakes in second place.

The former Hull directors were arrested and questioned by Humberside Police as long ago as May 2002. Sarah Cleary, their solicitor, said the main element of the allegations was fraudulent trading, an offence if directors continue to trade knowing that a company is going insolvent.

Buchanan told me that the coach had been independently valued by the finance company. He emphasised that Hinchliffe had never acted as shadow director, "We wouldn't allow that." Furthermore, he said that they did not trade fraudulently because they kept creditors informed and went into administration as soon as they realised that they had exhausted all options and the club was insolvent.

"There was never any need to bring this investigation," he said, "and we are all absolutely delighted our names have been cleared. It's unfortunate how it's turned out: we bought Hull City as a hobby and a toy".

The FA said it would now review its files. Graham Bean, who left the FA late last year, said: "It would not be appropriate for me to comment."

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