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Sunday, October 07, 2012

Article : Revealed - The true story behind Ali Al Faraj

Ever since the name Ali Al Faraj was first revealed as a potential billionaire owner to an expectant Pompey public, the questions about who he is, what his motives were and even whether he exists have abounded. Today, pompey-fans.com can reveal the truth behind Ali al Faraj.

He does exist. His passport was passed to the Premier League in August 2009. The league checked with the Saudi-Arabian embassy and the Saudis investigated and confirmed that Ali al Faraj did exist and lived in Riyadh. He has since been used as the straw man in several small London property deals with Yoram Yossifoff and allegedly been sued by his lawyers in Saudi Arabia for non-payment of fees.
However, there is not one shred of evidence that at any point he exercised control over Pompey.
So who did? Our story begins in 2007 when Arkadi Gaydamak (father of Sacha Gaydamak) purchased a property company, Ameris Holdings, from Balram Chainrai and Levi Kushnir in a deal brokered by Ron Mana and Yoram Yossifoff.
By 2008, Arkadi Gaydamak was under pressure with the French courts investigating his involvement in the Angolan civil war and a crash in Israel's property market. The Israeli property market was under assault from two directions: the crash in asset value and the man who had loaned money to several Israeli property CEOs - Shelley Narkis, the King of the Grey Market and Israel's biggest loan shark. Narkis is a convicted extortionist, jury tamperer and is feared throughout Israel. One of his non-motorbike riding, machine gun-toting employees is our old friend Daniel Azougy, debt collector extraordinaire.
In the financial whirlwind which followed, various CEOs fled Israel. Boaz Yona of Heftsiba to a hideout in Italy and Arkadi Gaydamak, who owned Ocif investments, to Moscow.
The domino effect destroyed Heftsiba and OCIF investments, and left Gaydamak unable to finish paying for Ameris Holdings. Arkadi's many many creditors from his Israeli businesses included Ron Mana, Yoram Yossifoff, Daniel Azougy and Balram Chainrai and Levi Kushnir. Azougy was a long time friend of Mana and Yossifoff.
Mana, Chainrai and Kushnir were awarded a lien on the assets of Betar Jerusalem, but Israeli insolvency law being very different to UK law, they had trouble extracting any money. In January 2009, Daniel Azougy attempted to convince the Betar general manager to transfer all the club's money out of the club claiming to be working for Gaydamak. A swift phone call to Moscow later, and this attempt to extort money from Betar was quickly and very publicly rebuffed. Azougy got a flea in his ear and no money.
The following month, Azougy and Narkis, visited Arkadi Gaydamak in Moscow to try and get their money back.
As with Azougy's visit to Betar, he came back from Arkadi empty handed.
In September 2008, when his creditors were wrangling over the remains of Ocif, Arkadi Gaydamak had listed Portsmouth FC in a court submission as one of his assets claiming it was worth £300m. It was the Gaydamak family's last known tangible asset. It was deep in trouble, for sale very cheaply and he had just told his creditors that it belonged to him. It was a tempting prize, with tens of millions of TV money due to come into the club and a forthcoming transfer window in which quick cash might be realised.
Just five months after the abortive Moscow trip by Azougy and Narkis, Chainrai, Kushnir, Mana, Yossifoff and Azougy were involved in an attempt to take over Pompey using the unfortunate Ali al Faraj as a smokescreen.
Balram Chainrai admitted to being a close friend of Yoram Yossifoff and transferring £2.5m, 50% of the proposed purchase fee, to Yossifoff in London in July 2009. Although Chainrai claims this was just a loan, his and Levi Kushnir's names were passed to the Premier League as prospective owners by directors of Portsmouth FC. However, Sacha discovered the involvement of his father's creditors, as Peter Storrie later lamented in public, and decided to sell to Sulaiman Al Fahim instead - for £5m and a promise to pay £9m in January 2010 and a further £20m by 2011.
Sacha's suspicions had been raised when the 'billionaire' Arabs Ahmed and Ali al Faraj were able to produce proof of funds of less than £750k, and the answers to questions about what their business interests and 'connections to royalty' were turned out to be 'negligible' and 'none' respectively. Clearly, Ali and Ahmed weren't football takeover material.
However, Ahmed knew Yossifoff from their minor property letting businesses in London, and for the purposes of being the untraceable, uncheckable, unreachable straw-man figurehead, his brother Ali was perfect. A hermit in a country which refuses to allow Israelis in, or even those with an Israeli stamp in their passport. No wonder none of them ever met him.
As all Pompey fans remember, al Fahim's disastrous regime lasted just 40 days before the club ran out of money and was forced into the hands of the five creditors, still hiding behind the "billionaire brothers" Ali and Ahmed al Faraj.
Azougy, Mana and Yossifoff had placed their interest in a company called Falcondrone, while Chainrai and Kushnir, according to sources, formed Portpin Ltd through their solicitor Mark Jacob.
Jacob was an old friend of Yossifoff, having worked in a London law firm of his as far back as 1998.
On October 6th 2009, Chainrai and Kushnir loaned Pompey £6m, and according to the evidence given in the High Court in August 2010, were to be repaid £7m in two months, an interest rate that is in excess of 130% APR.
In return they took a fixed charge over the club's major asset, Fratton Park and proxy control over the 90% shareholding in Pompey held by Falcondrone. There was already an unpublicised winding up order in place from HMRC which stemmed from a failure to pay any tax for the last two months, in breach of an instalment plan offered by al Fahim.
A winding up petition automatically freezes the company bank account, so all the initial transactions went via Portpin's client account at Fuglers. Normal practice is for a company to seek a validation order at the High Court to unfreeze the account and allow the company to trade if it can, with the consent of the petitioner, in this case HMRC. That gives the petitioner the right to see all transactions in and out of the account. Normally, the account balance is monitored by the Premier League to ensure football debts can be paid. So using the client account had the effect of limiting scrutiny by HMRC and the Premier League. In this case, HMRC agreed a new instalment plan and withdrew their winding up order.
Although the club now had access to its own account once again, the regime continued to do business via the Portpin client account. Mark Jacob had been added to the board on October 5th and Daniel Azougy was given complete control of the finances at what seems to have been the first and last board meeting of the al Faraj era - with Ali al Faraj not present.
Peter Storrie was informed by the regime that he was to deal only with the football side of the business and Tanya Robins was informed, apparently much to her disgust, that she now effectively reported to Azougy.
However, Azougy could obviously not access the Fuglers client account. Only one man could order the accounts team at Fuglers London HQ to transfer money and that was Mark Jacob. And although he had the title of Executive Director of Portsmouth FC, Portsmouth FC were not paying him. Nor were Falcondrone. Only Portpin Ltd paid Jacob, via their fees to Fuglers.
This arrangement meant that Portpin had control over the shares, fixed asset, bank account and executive director of the business. In August 2010, during HMRC challenge to the CVA, Gregory Mitchell QC argued that this amounted to control of Portsmouth FC as shadow directors. The term 'shadow director' is defined in the Companies Act 2006 as a person 'in accordance with whose directions or instructions the directors of the company are accustomed to act'.

So did Portpin ever tell Jacob what to do, and, if so, did he do it?
Well, as was revealed in the HMRC challenge, Portpin wrote to Jacob in December 2009 and demanded a solicitors' undertaking that he send the next Premier League TV payment, which the Premier League were insisting went to football creditors, to them instead. He agreed. However, the Premier League contacted Jacob and, when he revealed the undertaking to them, they directed the money straight to football creditors. The Premier League also placed a transfer embargo on Pompey.
On December 23rd 2009, HMRC once again issued a winding up order to Portsmouth FC. The club had immediately failed to fulfil any part of their new instalment plan, with the tax and national insurance on wages not being paid in October, November and December, let alone arrears of tax, VAT etc. This had the effect of once again freezing the club's bank account. Money can be paid into a frozen bank account, and indeed this is where the club's ticket revenues and merchandise sales continued to go. However, it couldn't be accessed by the club. Had a validation order been sought, the approximately £2m in the club's account could have been paid to creditors, and repaid the small creditors and charities many times over. However, it sat there, unused.
The reality is that while visibly the Premier League appeared to be doing nothing, behind the scenes they were playing a blinder. Their refusal to allow TV money or transfer revenue into the club meant there was no quick way for the five creditors to get the money they were owed by Arkadi back. This is the main reason no players were sold until the end of January, because at any other time the revenue would have gone straight to creditors.
In early January 2010, when they realised it was going to be near impossible to recoup any money they had put into Pompey from the TV rights payments or transfers that had brought them here, Portpin asked Jacob to supplement their fixed charge with a floating charge over all the assets, enterprise and monies of Portsmouth FC. This was retrospective, as any money from Portpin had already been and gone. Therefore, this charge is invalid. The reason can be found in the maxim; "past consideration (for a debenture) is no consideration".
To obtain a valid security you need to provide a new consideration (ie you need to lend new money). However, Jacob issued the charge retrospectively, giving them absolute control over everything of value at Pompey. (Jacob's actions were above board here, he issued the charge, but it's not up to him to determine its validity). So when Portpin put Pompey into administration in February 2010, there was a valid fixed charge, but the floating charge was never valid, and has never subsequently been tested in court. The fixed charge should have been released when Pompey came out if administration, as Portpin were given the asset on which it was secured.
However, the rest of their secured debt is a myth, and the January 2011 transfer of the whole £17m charge was plainly invalid and should never have occurred without £17m of new money being loaned to Pompey at the same time.
On February 2nd 2010, following the sale of Younes Kaboul and Asmir Begovic to Spurs and Stoke, Pompey were finally up to date on their currently owed instalments to Football creditors. Football rights (TV) payments and incoming transfer revenue channeled directly from the Premier League to football creditors had wiped out the arrears.
This meant that although the club had run up crippling debts during the period to non-football creditors, the club could finally receive the transfer money and the Premier League, bound by their own rule book, could do nothing about it. Portpin saw their chance and requested the money be sent to them by Jacob from the client account and £2m was wired, apparently to Switzerland.
Falcondrone, Azougy, Yossifoff and Mana were furious. Some of whatever sums of money had come into the club also belonged to Falcondrone. From their perspective, Portpin were no longer partners, but rivals for whatever could be salvaged from the wreck of Pompey.
The same day, Azougy sent a forged letter [click here to see a copy of it] claiming to be from Ali al Faraj demanding that Jacob in future only repay money to Portpin with the permission of Azougy. So did Jacob comply with this instruction from the nominal beneficial owner of Portsmouth FC? Of course not. He was a solicitor and his clients told him to transfer more money, so he did. A few days later, a further £2m was transferred to Portpin.
Section 127 of the Insolvency Act says that: ‘In a winding-up by the court, any disposition of the company’s property, and any transfer of shares, or alteration in the status of the company’s members, made after the commencement of the winding-up is, unless the court otherwise orders, void’.
As the £4m was transferred to Portpin after the commencement of the winding up order it is highly likely to be unlawful. Baker Tilly are investigating transactions of PCFC Ltd and we await their report with interest. Certainly Andrew Andronikou confirmed publicly to the Pompey Virtual Alliance in 2010 that the transfer would probably have to be reversed as it appeared to fall foul of section 127.
One interesting feature of this controversial money transfer is the situation of Mr Jacob. As a solicitor, he had to be careful which legal persona he adopted, either acting as Portpin's solicitor or Portsmouth FC executive director. Jacob is no schmuck. He knew that if he transferred the money as Executive Director of Pompey, he was likely to be called to account later. But no one can hold him accountable if he transferred the money as Portpin's solicitor, acting purely for Portpin. This would mean that Jacob's higher loyalty to his client took precedence. But he could only transfer the money if a director or appropriate authority acting on behalf of the football club told him to. And an appropriate authority did: the people who really ran the club - Portpin. So it looks like Jacob is rightly free and clear.
So what we have here is a company in Portpin that controlled all the shares, assets, money, bank account and Executive Director of Portsmouth FC. They repeatedly told him what to do and he did it, even when ordered not to by the 'owner' of Portsmouth FC, even when insolvency law seems to prohibit it.
Multiple sources have confirmed that in fact the operation of the bank account leaves little room for ambiguity. In accordance with the Solicitors Regulatory authority rules on the operation of client accounts, Jacob needed authorisation to transfer funds out of the account, from Portpin. What greater level of control could anyone have over a business than the shares, assets, director and payments? Ali al Faraj, controlled NOTHING.
In order for a creditor to be selected for payment during this period, department heads submitted lists of who needed to be paid to Tanya Robins. She was then required to hand this list to Daniel Azougy, who would forward it to Jacob and the directors of Falcondrone and Portpin. The list would come back from the shadow directors representing Portpin and Falcondrone to Jacob with asterisks next to those who should be paid. No asterisk, no payment. This lead to the club's website being shut down for non-payment in December 2009, as all the lobbying from the department heads and even nominal CEO Peter Storrie, to have the very small bill paid had fallen on deaf ears. Jacob reportedly said: "I can't authorise it". Storrie apparently paid the bill from his corporate credit card.
In early February 2010 Jacob and Fuglers were 'uninstructed' by Portpin following the discovery of £1.5m in unauthorised payments to individuals who are still unknown. Portpin removed their business to Balsara and Co and Jacob left Fuglers shortly afterwards.
Once again, this is a clear demonstration of control by Portpin over the business. When payments were made from Portpin's client account that they had NOT authorised, action immediately followed.
Sources close to the situation at the time claimed that Jacob was entirely blameless in this and that Azougy, a convicted forger, had created a fax which fooled the accounts team at Fuglers to send payments to a number of still undisclosed bank accounts.
Pompey were fined £1m by the Premier League following rule breaches concerning Daniel Azougy during this period. He was revealed as a fraudster and forger in a national newspaper during December 2009, and Jacob was forced to defend the situation in another national newspaper interview shortly afterwards.
Azougy was present in the directors box with representatives of Portpin and Falcondrone including Chainrai, Kushnir, Mana and Yossifoff on numerous occasions during this period and all were seen to arrive together and leave together by numerous sources. Azougy was also responsible for creating fake accounts, which were released to prospective buyers during December 2009 and leaked to The News. These accounts created £40m on Pompey's balance sheet and removed large tranches of debt. They showed a 'Premier League receivable facility £22m' on the balance sheet, to be paid in January and represented as an agreed advance payment of Premier League TV revenues. In fact, no such advance had ever even been asked for and the Premier League told interested journalists in no uncertain terms that they weren't trusting Pompey with any money, let alone advancing them any.
It was the creation and distribution of these faked accounts that apparently lead to Tanya Robins resigning from the board of Portsmouth FC, although she had always been very uncomfortable working with Azougy, who was harsh, abrasive and nakedly corrupt. An eye witness reported a stand up row between Robins and Azougy where Robins told the fraudster he could not do things like that here, and Azougy responded "that's the way we do things where I come from", which probably explains his multiple convictions.
On another occasion, an eye witness also reported that Jacob had to be summoned from his London office, where he was desperately trying to keep his legal property practice going, to Fratton Park to avoid Peter Storrie and Daniel Azougy resorting to a fist fight. Storrie was furious at the way Azougy was controlling the finances and the inability of any director to get a clear picture of the accounts. Jacob might have been processing payments and known what was in the bank account, but the real picture of what was due to be paid or received was kept from him.
In fact, whilst history will have much to say about the running of Pompey before October 2009, the picture that emerges from numerous conversations with those closely involved is that Peter Storrie, Tanya Robins, Mark Jacob, Paul Weld and Lucius Peart did their absolute level best to try and ensure the club was run the right way. But they weren't running the club. They had no real say at all.
On 10th March 2010, the Pompey Virtual Alliance and other supporters groups met with Administrators from UHY Hacker Young. Hacker Young said that the amount of debt the club owed was, as yet, impossible to determine because "there was a black hole in the accounts". Administrators demanded this be excised from the minutes or there would be no further meetings, and after much debate it was removed. UHY ended the meetings subsequently in any case. However, it's important that fans know that there are serious question marks over all the financial transactions at Pompey between October 6th, 2009and March 2010, and that this is almost certainly why the Baker Tilly investigation is taking so long.
Despite their history of related business transactions, their close friendships with other members of the group, their close proximity at matches, national newspaper articles and the presence of their own solicitor in the same building, staying in the same hotel and being forced to work closely with Azougy, it remains Portpin's claim that they had no idea what he was doing or what his role was. Their contention that they had sleepless nights worrying about how they would get their money back in 2009 and not knowing who ran the finances just leads to the obvious question: why didn't you ask your solicitor who ran the finances? Why didn't you ask your friend Yossifoff? Why didn't you ask Azougy when you were sat next to him? Are you really saying that his role and status as a fraudster was confirmed in two national newspapers in December 2009 but your solicitor didn't inform you of it?
Pompey-fans.com has asked Portpin to comment on the entirety of this article but Portpin "decline to comment".
Ali al Faraj never did have anything to do with Pompey. The people who ran Pompey during this period were Balram Chainrai, Levi Kushnir, Yoram Yossifoff and Daniel Azougy, with Ron Mana more distantly interested. None of them joined the board, but all acted as shadow directors.
The Premier League have always been adamant that anyone who acted as a Shadow Director during Azougy's tenure at Fratton Park would not be a fit and proper person. At every stage, Portpin's man on the board obeyed their instructions on key financial matters. There is no room for doubt that they were shadow directors.
Ali al Faraj has as much to do with Pompey now as he did in 2009-10. The reality was that lurking underneath the Arab khefiyeh of Ali al Faraj were Balram Chainrai and Levi Kushnir; creditors of Arkadi Gaydamak, who came looking for his assets and have since refused to leave.
Micah Hall is a Portsmouth supporter who blogs regularly at FansNetwork (access an archive of his work here) (He’s on Twitter here)

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Russ Taylor said...

08/10/12 : Trevor Birch described the above article as very interesting! Unfortunately, that's the only question he'd give a clear answer to.

Russ Taylor said...

This article alone could yet blast Balram Chainrai & his cronies out of the water. Let's hope so.