by Terry Lovell
Wright himself was under no illusions about his failure to deliver. He said: ‘You need a different kind of person to be chairman of a football club. You need a real, cut-throat businessman who would probably be very good running a used-car lot, that kind of mentality. The trouble is a lot of people when they buy football clubs leave their brains at the reception desk. You want to deliver. Being a fan of QPR was a disadvantage in that I was very committed to making the club successful and very committed to getting the club back in the Premier League, and all the decisions I took were based on that. I wasn’t dispassionate enough, and I wasn’t hands-on enough, absolutely.
‘I tried to run it like a proper business with a chief executive and a finance director. A football club like that can’t be run on that basis. You can’t trust anybody … I mean, football is a very dodgy game. There are a lot of financial shenanigans that go on, as we all know about. You can’t leave it to paid employees to run it. It’s hard to find good executives in sports management, anyway.’
What would he do differently today? ‘The first thing I would do is I wouldn’t do it. But if I was going to do it, I’d make sure I had nothing else on in my life of any significance. I would move into the offices myself and I would run it very hands-on.’
With debts totalling about £13 million – £11 million owed to Wright and about £2 million to other creditors – Loftus Road plc applied for administration in April 2001. Queens Park Rangers was at its nadir.
The company appointed to oversee the administration, which formally came into force on 2 April 2001, was BDO Stoy Hayward, a nation-wide audit, accounting and business services firm. It was recommended to the directors of the QPR club board – Blackburn, Ross Jones, chief executive of a specialist market money bank, and chief executive David Davies, whose expertise was in managing entertainment venues and ice hockey in the UK and the USA – by Charles Levison, and represented by business restructuring partners Ray Hocking and Simon Michaels. The events that followed left the supporters’ trust, QPR 1st, formed in April 2001 to represent the fans’ interests in the administration process, far from happy, and suspecting that the club was about to be short-changed.
Within days of the suspension of shares dealing, Chris Wright made an offer to buy QPR’s 24-acre training ground in Twyford Avenue, Acton, for £2.5 million, and the Wasps rugby team for £2.5 million, which was set against the £11 million he had loaned to QPR. Wright claims his motive was to reduce the club’s debt level by £5 million to make it more attractive to a buyer. He certainly appeared to be generous in agreeing to pay £2.5 million for QPR’s training ground, particularly as he had put up the money for the club to buy the land from British Gas for £1 million just 18 months earlier. At the same time, though, it seemed a very good deal for Wright.
Hocking had publicly stated two days earlier that the combined value of the Loftus Road ground and the Twyford Avenue training ground was well in excess of £15–20 million. With Loftus Road valued at approximately £15 million, Twyford Avenue was therefore potentially worth as much as £10 million. Situated in a prime residential area, its residential development potential was quickly recognised by Sorbon Homes Ltd, of Beaconsfield, Buckinghamshire. It stumped up half of the £2.5 million in return for joint ownership with Wright. But the supporters’ trust, QPR 1st, was concerned that the land could rocket in value, without any real benefit to QPR, if planning permission were to be granted by the local Ealing Council.
As a result of pressure from Trust representatives at a stormy extraordinary general meeting in May 2001, Wright, who initially offered to give QPR 10 per cent of any future windfall, agreed to put the proposal of a three-way split – with a third also going to Wasps Rugby Club – to Sorbon Homes Ltd. But Ealing Council dashed any hopes of Wright and Sorbon Homes Ltd cashing in. It designated Twyford Avenue training ground a Community Open Space, killing at a stroke its residential redevelopment potential for the next 15 years. A formal objection against the proposed designation was made by RPS Consultants, a company specialising in planning applications and appeals, on behalf of Wright in March and December 2002, but was rejected.
Sorbon Homes Ltd and Wright decided to cut their losses and sell the training ground to the trustees of Wasps RC for just under £2 million, which was paid out of the money they had received in High Court damages awarded against Lambert Smith Hampton in respect of the sale of the rugby club’s former ground at Sudbury. Wasps continue to own an adjoining four acres, comprising derelict tennis courts and a bowling green, which is not part of the training ground. Wright estimates that his little dabble in property development, with loss of interest factored in, left him more than £250,000 out of pocket.
His links with QPR effectively came to an end when, to help the club get out of administration, he agreed two things. The first was to write off £3.5 million of loans now totalling £6.7 million. The second was to hand back all but 14.9 per cent of his majority shareholding to Loftus Road plc to help facilitate a highly controversial deal brokered by Hocking with a Panama City-registered company called the ABC Corporation, which agreed to a loan of £10 million over ten years, secured against QPR’s Loftus Road ground, to pay off creditors, not least Wright himself. Wright had been unable to agree terms to sell QPR to any one of several potential buyers, ranging from a fans’ consortium to a bid from the boardroom, comprising Blackburn – who, on exit from administration, was to become club chairman of QPR – Davies and Jones.
QPR had also been under considerable pressure from the Football League, which wrote to the club in March 2002 to state that, before it could be allowed to start the 2002–3 season, it would have to prove that it had sufficient money to complete it. At that point the club couldn’t. The Bank of Scotland had come close to agreeing a loan of £10 million at 8 per cent, but pulled out at the credit committee stage, wary of loaning money to a football club. An Irish bank responded similarly.
The situation had become desperate. QPR had survived largely because of the sale of Peter Crouch to Portsmouth in July 2001 for £1.25 million, the £1.25 million from Sorbon Homes Ltd through Wright’s purchase of the Twyford Avenue training ground, and a £1-million loan arranged by Hocking through London United Properties Ltd.
The ABC Corporation loan appeared to be the only deal in town. Without it, Blackburn, who, with Davies and Jones, worked with Hocking throughout the period of administration to find investors, believes QPR would have gone under. Such was the club’s plight that when Hocking told Blackburn and Davies at the last minute that the interest rate would be 10 per cent instead of 8 per cent, they could do nothing but acquiesce. With the loan from the ABC Corporation in place, Hocking made an application in the High Court for the order of administration to be lifted. It was granted on 27 May 2002.
The £10-million loan went, said Blackburn, in paying Wright the balance of money owed in loans – £3.2 million; the £1-million loan arranged by Hocking; a £1-million fee to Hocking’s employers, BDO Stoy Hayward; and about £2 million to creditors, totalling £7.2 million. The rest was banked to give the club a season’s working capital.
The man behind the ABC Corporation was Michael Hunt, a convicted fraudster who, as a former managing director of Nissan UK, conspired with his Romanian boss, Octav Botnar, to siphon off £149.2 million from Nissan UK and cheat the Inland Revenue of £53.6 million. The money was laundered through bogus companies and charitable trusts overseas, principally in Panama. He was jailed for eight years in 1993 for his part in the biggest tax fraud ever perpetuated in the UK. Botnar fled to Switzerland, out of reach of the Inland Revenue, where he died in July 1998.
Hunt owns a portfolio of property, including the East Sussex National Golf Club in Uckfield, East Sussex. One of its directors was Philip Englefield, who in May 2002 was appointed by Hunt as his representative on the QPR board, where he remained for two months, until it was discovered that he was a debarred solicitor who, between July 1988 and June 1990, had taken nearly £900,000 from the clients’ bank acc
ount in 91 separate payments of ‘a personal nature’. The discovery forced him to stand down from the board, although for a while he continued as Hunt’s representative in the ABC Corporation’s dealings with QPR.
Hocking himself also had fallen foul of his professional body, the Institute of Solvency Practitioners, in November 1999, when he was severely reprimanded and fined £37,000, plus six-figure costs, relating to his work as liquidator of four companies. Charges included that he ‘drew remuneration without obtaining the appropriate authority to do so’ and that he ‘drew remuneration in excess of the authority he was given to do so’. He also admitted failing ‘to take independent expert advice prior to accepting proof of debt from a major creditor in liquidation’.
While Hocking’s work at Loftus Road had come to an end, it seems his relationship with the ABC Corporation continued to an extent that he ended up on the company’s payroll. It came to light about two years later when QPR Holdings Ltd, which succeeded Loftus Road plc, fell behind in its monthly payments of £83,333, which, for a club that hadn’t shown a profit in more than five years, was proving to be the proverbial millstone. Even though a clause stated that the ABC Corporation could take ownership of the Loftus Road ground if payments fell three months in arrears, the club was still regularly two months in arrears.
In the hope of acquiring a loan elsewhere on more favourable terms, the ABC Corporation was asked how much it would cost to buy out the loan. The information was requested by wealthy businessman Bill Power, appointed chairman of QPR Holdings Ltd following the resignation of Blackburn in July 2004. The operations director of a communications company in which he was a principal shareholder, Power joined the board in July 2003 after acquiring £200,000 worth of shares, followed by a further stake totalling £650,000 when he bought 14.6 per cent of the shares returned to the club by Chris Wright.
The man sent to deliver the ABC Corporation’s reply was none other than Hocking, with a request of his own for information. He wanted to see the company books, claiming that there was concern at ABC over the arrears of payment. Power said he was astonished to discover that Hocking now represented the company with whom he had negotiated the loan on behalf of QPR. He said: ‘He was the last person I expected to walk through the door. His virtual opening line was: “I’m here to look at your books”, to which I responded, “Oh, no, you’re not.” He said, “Right, I’m going to be appointed a director of the club to watch what you’re doing.” I said, “You’re not, my old friend.” It was a very short meeting.’
Power said he was surprised by the size of the loan agreed by Davies, Blackburn and Jones. ‘Why they needed £10 million was beyond me. When I came along, it seemed to me that they had no clue about how they were going to stop the losses and turn the club around.’ He and his co-directors, he said, found it increasingly difficult to service the £10-million loan, on top of meeting day-to-day operational costs which well exceeded the annual interest on the loan. ‘We were getting further and further into the mire,’ he said. ‘Every penny went into servicing that interest at the expense of creditors, whose goodwill we were dependent upon. Any amount of people could have said, “Look, we want our money.” Some of our large debts were to people who had a soft spot for the club, and who, I might add, never, ever put us under pressure.’
Blackburn angrily refutes Power’s criticism: ‘[A loan of £10 million] was the last thing we wanted to do. We knew what we needed to pay off the debt, plus a year’s capital. But, technically, it wasn’t us who borrowed. It was the administrator. The administrator borrowed what we thought was the right sum and [also to] give us a year’s working capital.’
But Power would soon have more to worry about than the club’s bills.
20
THE ITALIAN CONNECTION
For some 18 months Blackburn, Davies and Jones tried without success to find an investor with deep pockets and driven by a divine mission to bring a football club on its deathbed back to life. The best to come out of the pack was a charm-oozing, sharp-suited former Italian football agent named Gianni Paladini, who was said to have had a promising career as a footballer until an injury ended his ambition to play for Napoli, the home team of the city where he was born in 1946. He later became an interpreter in transfer deals and went on to manage the careers of Fabrizio Ravanelli, Benito Carbone, and the Brazilians Emerson and Juninho. In the 1960s he moved to the UK and lived in Solihull, near Birmingham, with his wife, Olga, and two children, where he became involved in property development.
In April 2004, through a Leeds-based property company called Moorbound Ltd, of which Olga was the sole director, Paladini paid £650,000 for a 22 per cent stake, later diluted to 14.8 per cent, in QPR, which enabled the club to pay off part of its hefty tax bill. He was described in the media as a multi-millionaire saviour, which was a well over the top: in order to raise the cash he had to remortgage a property.
Paladini was quick to make his presence felt, thanks to what was seen by board members as an aggressive temperament and a zeal to assume responsibilities beyond his authority. His enthusiasm to involve himself in the club’s day-to-day operations resulted in Paladini revealing an unorthodox method of doing business that alarmed Nick Blackburn, and which, he said, led to his resignation in July 2004. It came to light in two incidents, said Blackburn, the first during a phone conversation with team manager Ian Holloway over Fulham striker Barry Hayles, whom Holloway rated highly and was keen to sign for QPR.
The player was on a salary of £8,000 a week at Fulham, which, with QPR’s top earners on no more than £3,500 a week, was out of the question. The situation had been discussed by Holloway with Paladini, who, said Blackburn, had suggested a solution that might persuade Hayles to sign for QPR. ‘Ian Holloway told me that Paladini had suggested that part of the salary offered to Hayles could be paid off-shore to make it more attractive to him because it would be tax-free. It would also help the club to match the salary he was looking for.’ This irregular solution, which would have been a clear breach of tax law, and which was also known to a senior official of the club, went no further.
Blackburn also protested at Paladini’s actions in holding, without the recollection or authority of the board, separate negotiations with chief executive David Davies about a redundancy pay-off of £95,000 following his departure in July 2004, which, said Blackburn, were being handled formally through the board. ‘It was for a bigger figure than the board was negotiating because he was keen to get rid of Davies,’ said Blackburn, who raised his concerns at a board meeting in June 2004, and which was attended by Paladini. ‘Paladini made no comment,’ said Blackburn, who saw these incidents as the final straw in Paladini’s confrontational attitude. ‘He wanted to get hold of doing the transfers and everything. I then found out about his past reputation as an agent, which was doubtful, to say the least.’
Paladini takes deep umbrage at Blackburn’s claims: ‘You show me the evidence of that. I never said nothing [sic] to Ian Holloway.’ The claim was also denied by Holloway himself. Through his agent, Robert Segal, he said: ‘I don’t remember this situation at all. The only thing I remember about Hayles and QPR is that Paladini never, ever, wanted to sign him. Paladini also vehemently denies Blackburn’s claim that, without authority, he interfered in the daily running of QPR. ‘Nick Blackburn tells you I was always trying to get involved? Not true! When he was here, I didn’t get involved in anything. In fact, what upset me most, that the moment my money went in – £650,000 – for me that’s a lot of money… I wanted to come here and enjoy myself and try to give them some advice on the football side. What annoyed me … and Bill Power, I can phone him now and he will confirm … that the day my money went in, I was not allowed to come into the ground any more. I was trying to ask questions to find out what our position was financially. It was Nick Blackburn and Ross Jones, they were asking questions, phoning Bill Power and saying things.
‘The fact that he [Blackburn] says he didn’t like my confrontational attitude, I ne
ver had any chance to speak with him. He was just running the cub with Chris Wright – y’know, they were Mr Wonderful, but the club was in the shit. They didn’t have any money and they were spending money left, right and centre. They wanted to give a half-a-million [pounds] budget to the chief executive when [the club] couldn’t pay the wages.’
He adds: ‘I was very silly in a way. I just put the money, come to see QPR football club. They only have a £10-million debt, no other problem. I come here to the club and there is 17–18,000 people here … how can this club go [forward]? I never look… I never had the due diligence. I never had any of that. I just went on the fact that I liked what I saw, and we can put [it] right. The moment I went in to find out, when Bill was telling me, “Y’know, we had to pay this and we had to pay this,” I say, “I just put the money in. Where did the money go?”’
Paladini’s suspicion that he was being ostracised led to a heated but humorous incident in the club boardroom. Davies and Jones had been working on a three- and a five-year business plan, which, they felt, did not require any input from Paladini. The Italian, who to this point had taken no interest in the plan, nevertheless convinced himself it was clear that evidence was being plotted behind his back. He arrived one evening at Jones’s flat in Notting Hill Gate, west London, where the two men were putting the finishing touches to the plan. He unloosed his hair-trigger temper to angrily express his suspicions. Jones told him to cool down and remain, or to leave and make his comments at a board meeting where the plan was to be presented later that week. Paladini decided to leave.