Ken Bates, the Chelsea chairman, has been named as a key figure in a major criminal prosecution by the American authorities following an alleged $45m (£28.3m) fraud on five US banks. Bates has not been charged with any offence but has been asked to give sworn evidence which prosecutors believe is critical to the case.
A former Chelsea director, Stanley Tollman, who is a long-standing friend and former business associate of Bates, has been charged - along with five other defendants - with bank fraud and tax evasion. Bates has already been interviewed in the course of the investigation and, following a request by the prosecution granted by the US court, has agreed to give sworn evidence. Tollman is currently on the run, while the other defendants are due to stand trial in New York on 8 October.
The alleged bank fraud centres on the prosecution's claim that in the mid-1990s Tollman and another defendant, Monty Hundley, owed five US banks $52m when their hotel businesses ran into difficulties. It is alleged that they set up two "sham" companies, Chelsea Acquisitions and Paternoster Second Holdings, which approached the banks stating they had no connection with Tollman or Hundley, and bought out the debts for $7.57m. This deprived the banks of the difference, nearly $45m. In fact, the prosecution alleges, Tollman and Hundley were behind the plan and funded the greatly reduced amounts, $7.57m, paid to the banks.
Bates is named in prosecution documents, seen by The Independent, as one of two British businessmen alleged to have played key roles in the "sham" companies which were used by Tollman and other defendants as the vehicles for the frauds. Bates and Tollman's former son-in-law, Francis Raeymaekers, an antiques dealer based in London, are said to have "been enlisted to assume positions as owners or officers of the two sham entities used in the fraudulent debt purchase transactions. Both signed certain documents relating to the companies."
Raeymaekers, the document continues, "signed certain of the documents containing the representations that the government alleges were false." The document does not go into detail as to the alleged individual involvement of Bates and Raeymaekers, neither of whom have been charged with any offence.
The court document, filed by the US Department of Justice based in White Plains, New York, asks the court to allow evidence to be taken on oath in Britain from both men to "probe their involvement with the sham entities", evidence which the prosecutors say is "critical to the Government's case".
The indictment in the prosecution stated that Paternoster, one of the two "sham" companies, was established in New York in 1991, and that "two family relations of Stanley Tollman served as officers". Chelsea Acquisitions, the other company, was formed in Delaware in May 1994, according to the indictment, which says that Tollman's brother owned 90 per cent of the shares, and a "foreign business associate" of Tollman's was the other shareholder and the company's president. Chelsea Acquisitions, it is claimed, approached Chemical Bank - without revealing their connection to Tollman and Hundley - to buy out $21.7m owed by the two men for just $2.17m. Paternoster is alleged to have been the vehicle for the frauds on the other four banks.
The indictment states that "Tollman business associates and family relations signed certain of the contracts by which Paternoster and Chelsea purchased Hundley and Tollman's personal debt at steep discounts, without disclosing their relationship to Tollman." Another defendant, Sanford Freedman, is said to have "caused a foreign business associate of Stanley Tollman to sign a [false] document certifying to Chemical Bank" that neither Tollman nor Hundley was connected to Chelsea Acquisitions. The indictment does not name these business associates.
The latest document also names for the first time in connection with the case other people involved with Chelsea Village, the football club's holding company, including Patrick Murrin, a director of Chelsea Village from 1996 until this summer, when the club was taken over by the Russian oil oligarch, Roman Abramovich. The other two who the prosecution also says have significant evidence relating to the case are John Lord and Michael Evans, partners in Hargreaves, Brown & Benson, a firm of accountants in Colne, near Burnley, Lancashire, who acted for Bates when he ran businesses there in the late 1960s and were formerly the auditors of Chelsea Village.
The prosecution claims the firm prepared financial statements for a company, The Travel Corporation, from which Tollman's son, Brett, another defendant, received millions of dollars into Guernsey bank accounts which he did not declare for tax. Lord and Evans have also been interviewed; the prosecution says they "possess significant knowledge" about "accounting documents that demonstrate the payment of the income that went unreported."
Murrin, an accountant based in Guernsey, the Channel Islands tax haven, is alleged to have maintained bank accounts for Stanley Tollman, Tollman's wife Beatrice, son Brett and Hundley. The prosecution claims that millions of dollars the Tollmans received through these accounts were not declared to the tax authorities, and also that Tollman and his wife used the Guernsey accounts to fund Paternoster, which, according to the prosecution, "tends to prove" an alleged $7.7m fraud committed on Bank of America.
The indictment in the case, served in New York's Southern District Court last year, stated only that Tollman's accounts, held in various names at the Royal Bank of Canada's Guernsey branch, were managed by Murrin's then firm, Saffery Champness. The more recent document specifically identifies Murrin, along with four other former Saffery Champness staff, as the people who maintained the bank accounts. All have been interviewed by the authorities because, the prosecution says, their evidence is "central to the Government's proof surrounding the Channel Islands bank accounts." None have been charged with any offences and they are believed to be preparing to give evidence in Guernsey.
Murrin refused to comment this week. Bates' office said he was away and unavailable. His solicitor, Mark Taylor, confirmed that the Chelsea chairman has agreed to give evidence. He said that Bates "has been contacted by the American authorities and has voluntarily assisted those authorities. As the case has yet to come to trial it would be inappropriate to discuss the nature of Mr Bates' evidence. I would stress however there is no suggestion of any wrongdoing on the part of Mr Bates."
Raeymaekers said this week that he was formerly married to Tollman's daughter and confirmed he was the person named in the case, but said he did not want to discuss it. "It's a family matter," he said.