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Last Updated: Wednesday, 28 June 2006, 11:18 GMT 12:18 UK
The murky world of football finances
By Chris Summers
BBC News

The trial of seven men accused of trying to blackmail Queens Park Rangers director Gianni Paladini at gunpoint has highlighted the parlous finances of many football clubs outside the Premiership elite. All seven were acquitted on Wednesday.

Chelsea v Man U
Football's millions are not trickling down from the Premiership

For the chosen few in the Premiership, football is a land of plenty.

Players get paid tens of thousands of pounds a week and multi-million pound sponsorship and TV deals are a given.

But for the vast majority of professional clubs in Britain the sport is a hand-to-mouth existence and the dreaded word "administration" is never very far away.

Dozens of clubs up and down the country are saddled with enormous debts and many of them are making losses of hundreds of thousands of pounds every year.

But fans of all these clubs have aspirations and this often puts pressure on directors to go for broke.

Gambling on promotion

QPR, a Premiership team until 1996, took a gamble in a bid to regain their membership of the elite.

They signed players like Chelsea's John Spencer and Stoke City's Mike Sheron - 2.35m each - and allowed their wage bill to balloon out of control.

In 2001 chairman Chris Wright was forced to put the club into administration.

The following year, threatened by expulsion from the Football League if they did not come out of administration, the club borrowed 10m from the Panama-based ABC Corporation.

With no high street banks willing to lend them the money they had been forced to go to ABC, a "lender of last resort".

But although QPR were now out of administration they now had to pay annual interest of 10% - 1m a year - and this for a club whose income was a fraction of Premiership neighbours Chelsea or Fulham.

QPR were not alone in begging for money from ABC.

Derby County, who were relegated from the Premiership in 2002, borrowed 15m from the company.

Fabrizio Ravanelli of Derby
Derby, whose wage bill grew, now has huge debts

A new consortium took over Derby earlier this year and discovered it had debts of around 45m.

In the summer of 2004, former football agent Gianni Paladini, whose client list had included top stars such as Fabrizio Ravanelli, Benito Carbone and Juninho, appeared on the scene as QPR's saviour.

While there is no doubt Mr Paladini was well connected - one of his friends was Brazil's World Cup-winning midfielder Dunga, who joined him on the board of QPR - he had no experience of running a football club.

Nor was he a millionaire, let alone a Roman Abramovich-style billionaire.

Mr Paladini had looked at investing in Northampton, Rotherham, Derby County, Burnley and Port Vale, before finally plumping for QPR.

But his 600,000 investment came from remortgaging his home and, under cross examination by Jim Sturman QC, Mr Paladini admitted he was in financial dire straits in the summer of 2005.

Mauro Milanese in action for QPR v Watford
Mr Paladini brought in players like Mauro Milanese (right)

"Yes, because I got involved with QPR. Everything I had was spent on QPR," he said.

Eventually, Mr Paladini deposed Bill Power as QPR chairman. Mr Power, a dyed-in-the-wool QPR fan, has since switched his allegiances and joined the board of directors at Swindon Town, promising to invest 1m.

Lower down the league there have been countless examples in recent years of clubs becoming involved in financial difficulties or boardroom power struggles which have proven more dramatic than anything seen on the pitch.

These include:

  • Derby County - last week police launched an investigation into payments totalling 375,000 said to have been made in October 2003. The club was taken over by a new consortium earlier this year.

  • Brighton and Hove Albion - who were bought for a pittance by Lancashire-based DIY millionaire Bill Archer. He decided it was in the club's best interests to sell their historic Goldstone Ground to developers in 1997. The club - FA Cup finalists in 1983 - still have no stadium of their own and have never recovered from the sale of the Goldstone.

  • Wrexham - who recently escaped being expelled from the league after spending 18 months in administration. Their problems revolve around the ownership of their ground, the Racecourse, and only last month property developer Alex Hamilton finally gave up trying to redevelop the stadium and sold the club to a new consortium.

  • Chesterfield - whose chairman Darren Brown was jailed for four years in September 2005 after embezzling 800,000 from the club to prop up his other businesses.

  • Exeter City - who dropped out of the Football League in 2003. Two men face trial later this year for alleged fraud at the club.

  • Darlington, whose former chairman George Reynolds was jailed last year for defrauding the taxman. The club went into administration in January 2005.

    Fit and proper person test
    People cannot be directors or controlling shareholders at Football League clubs if they have:
    Been banned by a governing body of any other sport
    An unspent conviction relating to fraud or dishonesty
    Been disqualified from acting as a director of a UK registered company
    Been made subject to a Bankruptcy Order
    Been a director of a club which has been in administration twice during a five-year period or a director of two different clubs that have each gone into administration in a five-year period

    So could the Football League be doing more to improve how football clubs are run?

    In 2003 the League introduced a "fit and proper person test" for all football club directors and controlling shareholders.

    Football League spokesman John Nagle said: "The test was part of a wider desire for standards to improve, to provide good governance for clubs. The Premier League followed suit soon after we brought the test in."

    Mr Nagle told the BBC News website: "A lot of clubs are still in financial difficulties stemming from the collapse of ITV Digital three years ago, which was catastrophic. There was a spate of clubs going into administration."

    One of those was Leicester City, who gained promotion to the Premiership two months after coming out of administration.

    But some of their rivals felt it was unfair and the League has since introduced a system whereby clubs going into voluntary administration lose 10 league points.

    Rotherham in action against Colchester
    Rotherham, playing in the red, has reached an agreement with creditors

    Mr Nagle said the number of clubs going into administration had fallen dramatically - Rotherham United, who entered into a Company Voluntary Agreement with creditors, were the only club to hit the buffers this season.

    "The situation is rosier now than for a long time and there is an improved TV deal next year and sponsorship from Coca-Cola," he said.

    "A lot of the worst effects of the ITV Digital collapse have been absorbed."

    But the league does not see itself as a nanny, looking after errant clubs, Mr Nagle said.

    "Ultimately clubs have got to run their own affairs. They have to take decisions and those who make the decisions have got to run the club."




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