Four years after the Football Task Force recommended them, the FA still haven't produced rules on who can and cannot own a club. James McNamara explains why
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