WSC 200 Oct 03

Despite their latest move to investigate an initiative designed to rid the game of opportunist asset-strippers, the Football Association have been accused of dragging their feet over introducing a Fit and Proper Persons Test (FPPT). The 1999 Football Task Force report Commercial Issues recommended the introduction of a vetting procedure for those wishing to become large shareholders in a football club, but the proposal has remained on the drawing board. On the back of recent speculation about “mysterious” foreign in­vestors circling the game, the government has hard­ened its pressure on the FA to address the matter. Following the Chelsea takeover, a source from the Department for Culture, Media and Sport reportedly told the Guardian that Tessa Jowell hoped football would introduce a "fit and proper per­sons" test in the near future. By mid August the FA’s newly formed Finance Advisory Committee (FAC) met for the first time and pledged to introduce the test at next sum-mer’s FA Annual General Meeting, ready to be implemented at the start of the 2005-06 season.

Earlier this year, a report by Matthew Holt of the Football Governance Research Centre raised ques­tions about why it has taken so long. In the report – A Fit and Proper Persons Test for Football? Protecting and Regulating Clubs – Holt cites the case of Darren Brown, a former gas-showroom salesman, who three years ago brought a majority share in Chesterfield. In less than a year under the 29-year-old’s control, the club was found guilty of deceiving an FA transfer tribunal and under-reporting gate receipts. As is so often the case, the punishment impacted on the club and its supporters. Chesterfield were fined £20,000 and giv­en a nine-point deduction.

Holt also describes in the report “an even more worrying situation” that emer­ged at Doncaster under the ownership of Ken­neth Richardson. The “Save the Rovers” campaign’s submission to the Football Task Force explained how Richardson was responsible for a catalogue of mis­­demeanours, among the worst of which was his attempt in 1993 to sell the club’s ground, in spite of the fact that it was leased from the council and wasn’t his to sell. Additionally, in March 1996, shortly after three people were charged with arson following a fire in the club’s grandstand the previous summer, Richardson was himself charged with conspiracy in connection with the blaze, for which he was consequently sentenced to four years in prison. If a vetting procedure had been in place before Brown and Richardson took control, the damage inflicted on their respective clubs could have been pre­vented. “Brown would probably have been caught due to his activities in ice hockey at the helm of the Sheffield Steelers,” says Holt. “Rich­ardson also would have been detected. He had a criminal record and was ban­ned from the Jockey Club for 25 years following a conviction for conspiracy to defraud.”

Despite the evidence, Holt explains that there are rea­s­ons why the FA have been reluctant to act. “Any regulation that looks to cur­tail the rights of an individual to ownership of some­thing as high profile as a football club needs to carefully considered.”

The proposed test is likely to apply to directors and so-called “shadow directors”, but, most crucially, not to shareholders. People can expect to be blocked from being directors if they have recent relevant convictions, been banned for misconduct in other sports, or are undischarged bankrupts. However, much of the tur­moil that has happened at football clubs across the country has been due to the actions of major shareholders, rather than directors. Additionally, the behaviour of company officials is already legislated for in the Company Directors Disqualification Act 1986. The recent case involving Steven Hinchcliffe at Hull City suggests the existing law has been less than adequate in preventing major shareholders from being involved in the affairs of the clubs they own. Hinchcliffe, cur­rently serving an 18-month prison sentence for fraud, took over 38 per cent of Hull City in 1999, two days before being disqualified from acting as a director for seven years. He advised the club and attended board meetings and con­tinued to be the club’s largest shareholder, but was not officially a director. Hull went into administration in 2001. The FA couldn’t prevent Hinch­cliffe from being involved and would still not be able to in any future similar case.

The FA will try to counter this by vetting so-called “shadow directors”, but as David Conn of the Independent points out it’s notoriously difficult to prove that somebody is acting as a director if not officially on the board. While Conn concedes the proposed test format may add something to the existing law, he feels it has limitations. “Without targeting major shareholders it will probably be dram­atically less effective. In most cases they own the com­pany and control it,” he says. “If they have unlawful intentions, directors can’t do much to prevent that.” Under the proposed FPPT format the ironic thing is that Roman Abramovich, whose recent purchase re­ignited the calls for a public-interest test, would be immune from any scrutiny.

There is also a feeling that the FA need to embark on a broader strategy of governance and regulation. Some suggest a two-way pro­cess whereby potential investors are invited down to Soho Square to produce proof of their intentions and funding. In return the FA could explain some of the differences be­tween run­ning a business and running a football club – advice that might be appreciated by some of the previously successful businessmen (Pe­ter Ridsdale, Mark Gold­berg et al), who have been chewed up and spat out by football. The FA have argued in the past that they have lim­ited power to intervene in the football and commercial decisions of 92 separate businesses and that directors should be given as free a hand as possible. But judging by the amount of clubs keeping the administrators busy, this laissez-faire approach isn’t working. As a recent report by accountants PKF points out, unless some clubs are persuaded or forced to change their business models they face the threat of extinction.

The FA say their new committee is devising a framework to try to implement that broader strat­egy. But aside from the pledge to introduce the FPPT, details of the other policies that are to be included in this framework remain vague. The work of the committee over the coming months will reveal whether anything tangible emer­ges. There is an ac­cep­tance that the FA face some legally difficult issues in devising an effective FPPT. However, as one source told me: “If pub­lic confidence in the integrity of the game is to be in­creased, the FA need to put their back into finding solutions to these prob­lems.”

Introducing a watered-down ver­sion of the initial Task Force rec­om­mendation won’t stop dubious char­a- cters entering the game un­challenged by purchasing large share­holdings. As long as those with money and power are allowed to pull the strings from a dis­tance, clubs will al­ways be vulnerable to charlatans com­ing through the front door, all smiles and promises, then leaving through the back with a swag bag full of cash.

From WSC 200 October 2003. What was happening this month

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