David Conn: Selling Saha the price of Fulham's return home

Mohamed Al Fayed must find £16.8m to repay property developers if agreement to build on Craven Cottage collapses

As Fulham continue to play poker over whether or not they will sell their prize asset, the striker Louis Saha, to Manchester United, a High Court trial at the end of last year has quietly exposed startling details about the severity of Fulham's financial position and the background to their agreement to sell their much-loved Craven Cottage ground to a housing developer, Fulham River Projects, for £50m. Fulham were said by the judge in the case to have "desperately needed" the £15m deposit Fulham River Projects paid the club in September 2002.

The deadline for the deal to complete and the other £35m to be paid was 30 September this year, but Fulham are now preparing to move back to Craven Cottage for the start of next season, and the deal looks highly unlikely to go through. If it does not, Fulham will have to repay the £15m deposit to Fulham River Projects, together with interest, which has been running at 12 per cent annually - a total over the two years of £3.6m. The court was told by one witness that Fulham "needed the money, and needed it quickly", and the judge, Mr Justice Peter Smith, said "every conceivable door" was knocked on in August 2002, before a financier was finally found to do the deal with them.

The case, heard at the Royal Court of Justice on the Strand at the end of November and the beginning of December last year, is a dispute between Nicholas Sutton, one of Fulham River Projects' two shareholders, and his former employers, a Bahrani-owned property development company, Crown Dilmun, who accuse him of "an outrageous and dishonest breach" of his duties as a director because he did the Craven Cottage deal himself, not through Crown Dilmun. Sutton and Fulham River Projects themselves deny the claim and have defended the action. Mr Justice Smith is due to deliver his judgment this coming Friday.

Crown Dilmun's barrister, Charles Hollander QC, told the court that there was "apparently considerable doubt" about whether Fulham would in fact go through with the sale, but nevertheless argued that Fulham River Projects should have to pay to Crown Dilmun the interest on the £15m deposit, which he described as "a significant profit because of the very advantageous 12 per cent interest".

The case revealed the identity of the other, majority shareholder of Fulham River Projects as a group of investors including the property developer Mark Steinberg. He is said to have brought in the financial institution Irish Nationwide to provide the cash for the deal. Fulham River Projects, an anonymous company set up through a firm of solicitors, Forsters, was formed, the court heard, partly to hide the identities of Sutton and Steinberg so that, as the judge put it, "fans did not knock at their door".

Steinberg and his fellow investors in the property development company Worldmade were also behind the deal at the same time, July 2002, to buy Watford's Vicarage Road ground for £6m. The stadium was then leased back to Watford, who were at the time also desperate to raise money. Steinberg also wanted then to keep his identity private, and the deal itself was done through another of his companies, CGIS Group.

Mohamed Al Fayed's agreement to sell Craven Cottage to Steinberg and Sutton was conditional on Harrods obtaining planning permission to knock down the famous old ground and build houses on the site, by September 2004. The planning application was due to be submitted to the local Hammersmith and Fulham council by 31 December, 2002. However, no such planning application has been made yet or apparently started. Fulham are now moving back to occupy Craven Cottage and have said they intend to stay for three years to consider their options, so it appears almost certain that when September ends, the deal will lapse and the club, rather than receiving another £35m and losing the ground, will stay but have to find £18.6m to pay to Fulham River Projects.

That will constitute the latest episode in one of football's longest-running stadium soap operas, which has seen Fulham first bought in 1997 by Fayed, the owner of Harrods, who is now based in Switzerland after an argument with the Inland Revenue. He then spent £5m on architects, lawyers and planning consultants to design a grandiose 30,000-seat proposed redevelopment of Craven Cottage which he vowed would help make Fulham the "Manchester United of the South".

Fayed has also provided a massive £100m to fund Fulham's climb from the Second Division to the Premiership, without spending anything much on the ground at all. In July 2002, the club moved out of Craven Cottage to become tenants at Queen's Park Rangers' Loftus Road ground, apparently so that Craven Cottage could be rebuilt according to the designs which had gone through a long and bitterly contested planning application process.

However, that plan was first delayed, then abandoned, after Al Fayed said the costs had become prohibitive. Before any alternative plan had been presented to Fulham fans, they discovered that the club had actually agreed in September 2002 to sell the ground to Fulham River Projects, and they were not very happy.

There was a palpable sense of betrayal because the club's supporters are emotionally attached, if not dependent, on Craven Cottage, and they had resoundingly backed Fayed's takeover as it appeared finally to bury the longstanding worry that the ground, in its highly desirable riverside location, would be wiped away and sold for lucrative housing.

In fact, it emerged, he had done a deal which proposed doing exactly that: Harrods was to put in the planning application and the sale would go ahead if permission was granted for a scheme to build mostly expensive flats. Fulham River Projects expressly sought to limit the proportion of the development which would be "social housing", built at affordable prices for people of more modest means, rather than the high six-figure sums for which property in the area routinely changes hands.

Hammersmith and Fulham Council told me they have a standard target, that out of all new residential developments across the borough, 65 per cent of the resulting homes should be social housing. "We have a pressing need for affordable housing for the poorer people of the borough," Louise Raisey, a council spokeswoman, said.

The Craven Cottage sale agreement provided that the deal would be cancelled if the council imposed an "onerous" social housing proportion, which they put at 30 to 35 per cent depending on the development's ultimate size. Clearly the developer would make less money out of the site if a sizeable part of it was to be sold to people of more modest means.

Fulham may have been taken over by Fayed through his company based in the British Virgin Islands, apparently for reasons of vanity, PR, the football bug and as a speculative investment, but the club has been praised for the cultured character of its renaissance, including promoting women's football and running a very well respected community programme in an area which is not all penthouses and million-pound terraces. The discovery that the Craven Cottage deal specifically sought to limit the amount of affordable housing, so that Fulham could clear £50m and the developer could maximise its profits, will not strike harmonic notes with the people of the area, nor the fans.

However, the court case revealed that when, in July 2002, Harrods approached Sutton with the idea of selling Craven Cottage, Fulham, as Justice Peter Smith said, "desperately needed £15m". The club's accounts for that year were pretty horrible: they lost £40m, following £23m in 2001, and owed £125m, including £100m to Fayed. He also had a bad year at Harrods, making only £6m profit compared to £22m the previous year, and the company's debt increased by £21m. One witness, Simon Gawthorpe, said of the club's approach: "It was clear Fulham had a problem. Fulham wanted money, they wanted it quickly."

Sarah Brookes, a Fulham spokeswoman, would not comment on the current stadium plans, but accepted: "We were clear at the time that we did desperately need money to fund the club."

In a statement, Steinberg stressed that he and his fellow investors were really property developers and not primarily interested in developing "sports sites". They are, without doubt, very aware of Fulham fans' sensitivities over losing what they have cherished for many years: their quirky, charming, creaking home. The investors may be as relieved as the supporters themselves that the deal is now unlikely to go through.

Fulham are going home, and on top of £5m for the required, Premiership-standard ground improvements, Fayed, already in for £100m, will somehow have to find £18.6m to repay Fulham River Projects. All of which surely points to a desperate need for money again this summer. That, in turn, makes it almost guaranteed that behind the poker face the club know that they will be kicking off at Craven Cottage next season having sold Louis Saha.