Inside Football: Divided they stand: Leicester's men at war

ASKED BY Gary Lineker on Saturday's Match of the Day about the ongoing soap opera in Leicester City's boardroom, Alan Hansen shrugged and said: "Wherever you have internal strife there are only ever losers." He then reverted to seemingly more comfortable footballing matters such as refereering decisions and Liverpool's difficulties defending the high ball.

With a crucial public inquiry pending into a proposed new 40,000-seat stadium, Leicester City is in the throes of more than strife. The club is bitterly divided, personally, culturally, even geographically, between its football and commercial operations. Latest position in the tangled saga is that four directors - Roy Parker, Gilbert Kinch, Philip Smith and the chief executive Barrie Pierpoint - have taken legal advice which they claim allows them to accept verbal resignations they say were given last Friday by two others, John Elsom and Sir Rodney Walker. Elsom and Walker both deny they quit, and have refused to resign in writing. The highly-regarded finance director Steve Kind has been edged off the fence to side with the embattled two, who work closely with the manager Martin O'Neill, who does not speak to Pierpoint, whom fans blame for the clubs' problems.

To make matters murkier, the club is undergoing two external investigations, by the Stock Exchange over the alleged resignations and by the Football Association, which has charged 27 members of the playing staff over alleged misallocation of tickets for the 1998 Worthington Cup final.

Hansen's reaction was strange, not merely for the absence of illuminating punditry, but in the light of his own previous involvement in Leicester's affairs. Only two years ago, Hansen was employed as a director - alongside Walker, and the Manchester United director and major shareholder Mike Edelson - of a company, Soccer Investments, the vehicle for Leicester City's flotation on the Stock Market. Hansen said yesterday that he spent three days, two in London and one in Edinburgh, helping to raise money from financial institutions. Then, when Leicester was targeted, he advised Soccer Investments on the quality of the manager and players. When Leicester floated, on 24 October 1997, Hansen was paid pounds 15,000, given 10,000 shares, then worth pounds 1.10 each, and 100,000 share options, to which he is still entitled.

As with all football flotations, then just passing their fashionable peak, Leicester formed a holding company, Leicester City plc, making the football club a subsidiary, each company having its own board. This was done to bypass longstanding FA rules designed to preserve football clubs as sporting, not purely financial, organisations, restricting dividend payments and directors' salaries. As at other clubs, the sitting directors, who had bought shares years before for undisclosed but comparatively small sums, made overnight fortunes. Ken Brigstock and Martin George, two long- serving directors, now departed, made pounds 2.9m and pounds 2.7m respectively. Two of the directors now at loggerheads, Parker and Elsom, saw their shares revalued at pounds 2.4m and pounds 2.5m. Tom Smeaton, the chairman who left last year, made pounds 850,000.

Since then, like all football plcs except Manchester United, Leicester's shares have slumped; yesterday's value was below 40p, around a third of the flotation price. Supporters encouraged to buy shares have all lost significant sums.

The flotation, which raised around pounds 10m, predominantly for new players and the planned new ground, brought the split between the plc and the football club to a club already beset by boardroom politics. Led by Pierpoint at the Filbert Street HQ, where the plc staff and commercial operations are based, Leicester have been financially successful, introducing innovative merchandising and hospitality operations, paying out pounds 297,000 in dividends to shareholders this year. O'Neill and all the football staff - including Elsom, the football club chairman - are based wholly at the Middlesex Road training ground, where their autonomy is guarded fiercely by O'Neill. When Pierpoint became chief executive last May, it was written into his contract that he is not allowed to involve himself in any way in footballing matters.

O'Neill and Pierpoint do not speak, communicating through Elsom, who works at the training ground. Elsom's animosity with the so-called "Gang of Four" directors on the plc board has its roots partly in festering personal politics, but there is also a cultural divide at Leicester, between football and business.

O'Neill, a football man to his soul, is considered by some on the plc side to be, at best, uninterested in the club's commercialism. Similarly, Elsom, despite having himself made a fortune from the flotation, is regarded as a football traditionalist. The other directors see themselves as modernisers, responsible to the Stock Market and to maximising returns to shareholders.

The deepening divide, which the plc chairman Walker has been unable to heal, erupted at last Friday's meeting called, according to sources close to the board, to discuss two matters. The first was the Worthington Cup tickets debacle. Despite headlines implying widespread touting, in fact only Andy Impey and Tony Cottee have been charged with misconduct by the FA, with Cottee protesting his innocence.

The other 25 have been charged after failing to fill in a form by a 27 August deadline given by Graham Bean, the FA compliance officer, on the telephone to Charles Rayner, Lecester's commercial director. Rayner told the board he had sent memos about the deadline to the training ground on 13 and 16 August. O'Neill and the players deny having received the memos, leaving Elsom, as the football club chairman based at the training ground, to take intense criticism from the other directors for the deadline not having been met.

After Memo-gate - a tale of non-communication - the second item was an internal investigation, apparently overseen by Walker, into Pierpoint himself, who was alleged to have had a conservatory built at his house for free by one of Leicester's sponsors. Pierpoint and the sponsors were totally cleared, but the four directors were, according to sources, incensed that the investigation had taken place without their knowledge.

Depending on whose account of last Friday's board meeting is given, the questioning of Walker was either merely "vigorous" or personally abusive. He walked out, followed by Elsom, leaving the two sides in dispute over whether their departures amounted to resignations.

With the dispute raging over the alleged resignations, Sir Rodney has invited shareholders to call an Extraordinary General Meeting, where presumably confident shareholders will back him and Elsom, who is close to O'Neill, Leicester's most cherished asset.

Pierpoint, believed to feel aggrieved at fans' anger vented against him last Saturday, is due to embark on his own PR campaign today, in which he is expected to stress his achievements, willingness to work to O'Neill's requirements, and desire to find a solution.

One of the few subjects on which there is unanimity at Leicester is about the way flotation has exacerbated tensions. Its advantages are acknowledged: introducing new funds, and, according to Leicester's Independent Supporters Association, a measure of transparency and shareholder influence.

But the constitutional separation of football club and plc, and the higher commercial stakes of Stock Exchange status, have reinforced the conflict between a football culture and the financial demands of a plc. Even at board level, sources say a view is forming that: "FC and Plc don't match".

Hansen acknowledges the part played in exacerbating Leicester's problems by the divided structure which he was paid to help introduce:

"I recognise there may be some downsides to flotation, particularly if it hampers the football club," he said yesterday. "But it is not something I concerned myself with when advising Soccer Investments."

Last week's leak of a report written to the Football Task Force by the football authorities suggests they still see no inherent conflicts in floated football clubs, and have no plans to introduce regulation. While talking sternly to the players about alleged impropriety over ticket allocations, the game's governing body should have a word with Leicester's manager, directors and concerned supporters over the long-term effects at their club of the FA having allowed its own rules to be bypassed, in the rush to cash in on the Stock Market.

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