David Conn: Price of Leeds takeover may be just £5m

Click to follow
The Independent Football

What will it be for Leeds? Is the takeover, advised by Geoffrey Richmond, the deal of the century, or the road to ruin? Or both? Six other groups of business people inspected Elland Road's steaming financial morass, saw no possible way of saving the club, and drifted away.

What will it be for Leeds? Is the takeover, advised by Geoffrey Richmond, the deal of the century, or the road to ruin? Or both? Six other groups of business people inspected Elland Road's steaming financial morass, saw no possible way of saving the club, and drifted away.

However, this consortium of five mostly local businessmen, chaired by the previously little-known insolvency accountant Gerald Krasner, cobbled together £5m, borrowed £15m from the former Watford owner Jack Petchey, and used that to settle the £82m owed to the holders of a 25-year bond and the player-leasing scheme, Registered European Football Finance (REFF). Left still with £24m debts, a punishing wage bill and apparently little money to work with, they glowed nevertheless that they had a plan where others could see none.

This week they elaborated. They are to raise money by selling Elland Road and renting it back, which will bring them a lump sum of, Richmond hopes, over £15m, enough to pay back Petchey.

They also announced at a fans forum on Thursday a scheme to reap cash today by selling 20-year season tickets to supporters for effectively the cost of ten. Richmond told me they were limiting the issue to 2,000 fans, which - if enough fans feel comfortable that they and their club will be around for the next 20 years - could raise over £8m up front.

Richmond told me, in a long interview this week, that £11m worth of players' contracts are up at the end of the season, and he expects some of the higher earning players' contracts will be too - although he did not specify whether he thought the exit would include the strikers, Mark Viduka and Alan Smith. He said the consortium has a "sound, robust business plan" which they are confident will enable Leeds to survive whether they stay up this season or are relegated to the Nationwide League.

If they have, and the ground sale and fans' money enable the consortium to pay off Petchey, their own backer, they will have bought one of English football's biggest and most fiercely supported clubs for just a scrabbled-together £5m.

"In business terms," Richmond said, "it's an extraordinary deal - but also a brave one, because two of the consortium have re-mortgaged their houses and one has put his business on the line." For that, he said, they fully expect to get a major return.

Around football, the news, particularly of the long-term season ticket, has been greeted with some dismay. Although limited to a relatively small section of Leeds' 40,000 capacity, significant future income is being traded to deal with immediate financial demands. And there is a question over whether a club still in so parlous a state should be offering anything stretching as far as 20 years ahead.

Richmond has form here; at Bradford, his previous club, whom he left in administration in August 2002 with debts of £36m, the club had the previous year sold a 25-year season ticket at a major discount. When Bradford went into administration, the nearly 1,000 fans who bought them were merely unsecured creditors.

Bradford, taken out of administration by Richmond's former co-investors, the Rhodes family, did honour the long-term tickets, but this only means that a proportion of their most loyal fans will be coming in free for the next 22 years. At Huddersfield Town, however, four-year season tickets were sold to fans, then were not honoured in full after the club went into administration.

John Dewhirst, a Bradford fan and accountant with the firm Vincere, who recently reported on the club's still desperate finances, said of the scheme: "The club is mortgaging its future and the fans have no security for their money." Richmond rejected that, stressing the small proportion of Leeds' overall crowd who will be taken out by this proposal. "It's a sound plan," he said.

Having explicitly denied earlier this year that he was involved with any consortium, Richmond admitted more recently that he was acting as an advisor. In fact, he told me: "Ninety-nine per cent of the deal was down to me."

He was, he said, approached in January by Krasner and another consortium member, Melvyn Levi, a Leeds-based property developer who has worked with Krasner for some time. Richmond said he secured the money from Petchey via a contact, and also addressed the club's problems, and constructed their business plan, drawing on his expertise garnered from 14 years in football.

It is the tail end of that CV which has attracted intense hostility from Leeds fans, including the Supporters' Trust, to Richmond's involvement at Leeds. Richmond, who said he now wanted to rectify the mistakes he made, recounted that before his self-confessed "six weeks of madness" in summer 2000, signing players including Benito Carbone on crazy wages which ultimately forced the club into administration, he had been conspicuously successful, first steadying Scarborough, then from 1994 taking Bradford to the Premiership and rebuilding the club and its grounds.

However, when Bradford were relegated in 2001, everything, from catering equipment to players, was on hire purchase or sold and leased back. The club went into administration owing £7.4m to REFF, £6.7m to Lombard Finance, £4.6m to the HSBC Bank, and laden with unsustainable players' contracts. Just one and two years earlier, he and his son David had shared with David Rhodes and his son Julian £8.125m in dividends, and Geoffrey Richmond was also paid a £250,000 consultancy fee in October 2001.

Yet when money was then needed to keep the club alive, Richmond put nothing in. David Rhodes paid £400,000 to fund it through administration, and the Rhodes family have hardly stopped shovelling money in since. Gordon Gibb, the owner of the Flamingoland zoo and theme park, arrived, on Richmond's introduction, to invest £1.875m, and Richmond left, financially intact.

Richmond told me he had wanted to stay, and believed he had an agreement to split ownership of the club in thirds with the Rhodeses and Gibb, but instead the Rhodeses decided they did not want him. Julian Rhodes told me they had indeed discussed various ideas, but had no concrete agreement: "In the end we told Geoffrey if he was not prepared to put money in, as we were doing, he could have no part in owning the club in the future."

In May last year, Richmond's reason for being "unable" to do so was revealed; the Inland Revenue won a High Court case against him for £2.3m tax owed from when he had sold his Ronson lighters business for £10m nine years before.

Richmond had not paid capital gains tax, but instead sought to "roll it over" into another venture. The judge, Mr Justice Etherton, ruled that it was not a valid new business: "Its only purpose was tax mitigation."

Deciding that the £2.3m tax did have to be paid, the judge said Richmond and his former co-director, Martin Jones, "failed to satisfy the court that they acted in all respects honestly and reasonably." Richmond told me the tax bill is still not paid; he is hoping to settle it within a few weeks.

His problems with the Inland Revenue, he said, were why he could not provide money to save Bradford, and is not a shareholder with the consortium at Leeds.

He said he would, however, like to become the chief executive when Trevor Birch leaves in the summer. Richmond's son, David, who was also a director and shareholder at Bradford, and was paid proportionately £1.3m of the dividends, has become a paid commercial director at Elland Road.

Richmond stressed that his football record overall was good: "I had 14 tremendous years with two clubs I took over in severe financial trouble. I made a horrendous mistake in the summer of 2000, for which I took responsibility. I have learned from that and will not be doing it again."

The timing for West Yorkshire sensibilities could hardly be more painful. Bradford sank back into administration three weeks ago after Julian Rhodes ran out of time in renegotiations with the club's major creditors, and he has to decide whether to pay out yet another £400,000 this Wednesday to keep the club limping on.

"There has to come a point," he said, "where we just cannot go on if the club is not viable. The debts are far too big for the size of the club." Leeds, meanwhile, stagger into the future, advised by Richmond from his new office at Elland Road. He said that in three years the club will be healthy and the investors sitting on a fortune.

Others who have looked believe Leeds cannot pay their way with borrowed money and will yet collapse. For Richmond, looking to rehabilitate his reputation, this is a high stakes game, with the world watching.