Article : The shape of Pompey's future debate...

The article below has been written in response to the following blog by P M Ryder Esq. It can (and should) be read here first to set the context.
 

It is a very well written and thought provoking blog which helps to further the debate.
 

My response would be as follows:-
 

During the period October 6th to February 10th 2010 Portsmouth FC operated entirely from Portpin's client account at Fuglers. The club's bank account had been frozen. Normal practice is to seek a validation order to unfreeze it. Preparations were twice made to so this but halted literally at the last minute by Daniel Azougy. When a validation order is obtained, it allows the company to trade normally but also allows the petitioner, HMRC, to see what comes in and out of the bank account. Clearly, rather than seek a validation order, Portpin decided to opt for using their own client account. This was described in the High Court as incredibly unusual, particularly as there was £3m in the bank account which would have paid all the small creditors many times over.

Access to the bank account was controlled by their solicitor, Mark Jacob who also held proxy control over 90% of the shares from Falcondrone, and had given Portpin a charge over the assets of the club. Portpin were the only people paying Jacob, Portsmouth FC did not, nor did Falcondrone. Following a decision to release money to members of Falcondrone (£1.5m according to sports journalist of the year Paul Kelso in the Telegraph), Fuglers were fired and the club's bank account moved to a similar arrangement at Balsara again by Portpin - their lawyers, their bank account.
 

So between October 6th 2009 and February 28th the club's income and outgoings were controlled by Portpin's solicitor who was running the club with their express written consent and presumably their authorisation for transactions from their bank account - there is no way a solicitor would transfer money from a clients account without a written authorisation to do so - hence Fuglers being fired when an unauthorised payment was made.
 

What has this got to do with the small creditors? Well, on February 2nd 2010 Jacob transferred £2m of the Kaboul money to Portpin, despite the fact that there was a winding up order in place - which is illegal under section 127 of the Insolvency act which prohibits the removal of assets once a petition is in place without the approval of the court. On February 2nd, Daniel Azougy wrote to Jacob pretending to be Ali Al Faraj and demanded no further transfers take place to Portpin. On February 8th Jacob transferred another £2m to Portpin. Only after it w'as discovered that £1.5m in payments had been made that Portpin had not authorised was the bank account moved.

 

So during that entire period Portpin controlled the club's finances. This is the period during which we were supposed to pay the charities and during which the majority of debts to small creditors had been run up - because whatever anyone says about Gaydamak, rightly, he did not sell the club with a mass of unpaid bills to trade creditors and charities.
 

So Portpin could have sought a validation order and paid the small creditors from the club's bank account which contained the club's money. They could have selected those creditors for payment and paid them from their bank account. They could have taken less than £4m out of the club and paid them. They didn't. This was opportunity one to pay the small creditors, when their claims initially began to press.

Opportunity 2 came when Portpin promised to pay them in the CVA. They made a massive PR splash of their promise to pay. During ten months of ownership they didn't do it.
 

Opportunity 3 came when CSI challenged them to pay. Instead Portpin elected to take the matter to arbitration and were successful in forcing CSI to take the legal burden of responsibility.

Opportunity 4 came when they put CSI into administration and took control of the company and its assets (Pompey) appointing the administrator Andrew Andronikou who had incredibly omitted to include any timescale for payment of small creditors in the cva. Despite Portpin having gone to law to force CSI to take the responsibility for payment, they were markedly less keen to pay after assuming control of CSI.

Opportunity 5 comes in the CVA offer to creditors offered by Portpin currently. Instead of taking this final opportunity to pay the small creditors, they opted instead to pay them the very small amount described in the blog.
 

The point about paying the players £8.6m is further cited.

The trust had no intention of making such generous settlements to players. They set aside a £2m pot to pay them. The remaining £6.6m would have been used to pay creditors and rebuild the club. However, Portpin had an outline deal and contract of sale back in July. They set the figure of £8.6m that Trevor Birch worked with. The trust clearly communicated to Birch in July that it would be prepared to pay only £2m. Birch negotiated compromises using the Portpin figure, not the trust one, because the trust had not provided proof of funds at that point.
 

Now when Portpin pulled out, PCC offered to loan the Trust £1.5m. Birch faced having to renegotiate the compromise agreements with the players. When Portpin returned to the table, falsely claiming to have been asked to do so by Football League, PCC, PFA and PKF, at a stroke they wiped out £7.5m of trust funding. The loan was conditional on there being only one bid and now the Trust would have to meet the player compromises if they wanted to stay in the game.
 

The Trust managed to do this. They leveraged the development opportunity to solve the ownership problem.

As for financial viability: the Trust has access to a large pool of cash funding - which probably amounts to something like £7m. I don't know precisely because I'm not part of the bid team and you don't negotiate by placing your cards on th table face up. £11m parachute payments plus £7m =£18m.

The Football League have approved the Trust's business plan. PKF have approved the Trust's business plan. The decision purely rests on which deal offers the best for creditors. Financial viability of both bids has been certified.
 

As I understand it, as the parachute payments, CVA offer and compromise agreements to players are the same, the bids are more or less the same. There are two key differences:

1. The Trust is offering Portpin £2.75m to release their charge. However, Portpin intend to transfer £5m of secured over to the club. Now although this isn't money, it has a value. Portpin are therefore offering to pay themselves more, and that, legally makes the whole thing arguable.

2. The Trust cannot sue anyone without approval from its members, who appear very much against the idea of using pledge money for legal action, although the high net worth individuals will probably have something to say about it. So only one party is near certain to resort to legal action. Although Portpin's legal action would have limited prospect of success it would drain the money in the club's bank account, making PKF liable for any losses. So other creditors would be be able to sue PKF for not selecting Portpin and draining their available funds by selecting the Trust.
 

So there are a couple of key points to remember here about financial viability. The trust's bid is every bit as financially viable as Portpin's and is demonstrably better for the club. Portpin's bid offers zero investment, £5m secured debt and an interest bearing overdraft. The trusts bid injects the money from the HNW individuals and pledges directly into the club and would represent the largest cash investment in Pompey for decades.
Secondly, the finance being offered by the Trust comes from Pompey fans, many of whom have made eye watering sacrifices to offer it because they love the club. It is highly relevant to discuss here Mr Chainrai's promise to spend whatever it takes to get to the Premier League. It's the second time he has made this promise. The first time he signally failed to spend a penny piece, in fact our squad lost key players at key times when promotion was an outside chance. If Mr Chainrai intended to invest this money into the club he could have included it in his offer document. He didn't - shame because that, unlike interviews to the BBC, would be legally binding. Had he put such an offer into his bid this would have been over weeks ago because the Trust can't match large scale investment in players. Still, it's a moot point, because less than 24 hours later Mr Chainrai was denying giving the interview at all. Another handy promise of largesse left on the record but denied, rather like the PR emanating from the Portpin camp that he never in fact promised to pay the small creditors, it was a mistake in the document. And in all the interviews he gave as well apparently.

 

As for Twitter, pack mentalities and so on; well a couple of points to be made here as well. The first is that I've received a lot of personal abuse from people who believe in Fahim and Portpin - this is not a one sided thing. Secondly, there is a large majority passionately in favour of the trust and passionately opposed to Portpin taking over. Now if you wish to discuss these things on public forum then be prepared to get the views of others, passionately expressed as football fans do. If the weight of opinion is so large that you feel it to be oppressive, well this simply suggests you are in a small minority.
 
Personally, I'm a vegetarian lib dem Buddhist and I quite often find my views on various topics are minority opinions. Now I'm faced with a choice here, I can either post my thoughts on a public forum and deal with the brickbats from the majority who don't share my opinions, or I can shut up, or speak to like minded people somewhere else. That's what free speech is. It doesn't enshrine your right to air your opinions publicly without challenge or argument, or even contempt and condemnation. It enshrines your right to say it, not to say it with impunity.

I hope this is a helpful response. People will no doubt contend there is Portpin bashing here. Yes. There is. They are the other choice to run the cub.
 

The Trust certainly does not envisage a Taliban style approach to community ownership. It doesn't preclude the possibility of working with investors who share its aim and objectives. The example of Swansea is a great one. The Trust will inject millions rather than £100k. If it can find an investor or investors willing to buy 80% of the club, then that offer would be out to members. The members could opt to take a possible profit on their shares or see new shares created and see the millions of purchase money go straight into the club.
 
Providing the investors were long term ethical investors and not short term speculators hoping to gamble on promotion and leave us with the bill that would be great. And all done democratically and transparently too.

However, no such investor has arrived yet, other than the HNW individuals. That is because no one, but no one, wants to get involved in buying Pompey if they have to deal with someone who wants an unrealistic sum and one day says they want to leave and are reluctant and the next says they are committed and want £12m. We have to get the club first, then make it open, transparent, build the crowds and fanbase and get a stadium and development project up and running. That gives something that people will invest in. Portpin have been trying to sell Pompey for three years and found one person willing to pay their asking price - and true to form they were bankrupt within six months.
 

This is a good debate and should be continued.

Micah Hall is a Portsmouth supporter who blogs regularly at FansNetwork (access an archive of his work here) (He’s on Twitter here)
 
Find out more about the Pompey Supporters’ Trust