Capital loss: United owner Massimo Cellino has lost his High Court fight against Sport Capital. Phil Hay looks at the background to the dispute.
The dispute between Sport Capital and Leeds United – settled in Sport Capital’s favour by a court in London yesterday – arose during forensic analysis of the club’s finances.
United’s owner, Massimo Cellino, followed up his takeover in April by instructing specialist accountants to wade through the many contracts and debts at Elland Road with the intention of establishing which liabilities were legitimate, which could be negotiated and which might be avoided altogether.
The investigation into Sport Capital’s disputed loan, made to Leeds in November 2013, produced a list of reasons used by Cellino’s legal team to argue that the sum of £950,000 need not be repaid.
The skeleton argument put forward by United’s barrister, Rory Brown – a copy of which has been seen by the YEP – claimed among other things that Sport Capital, an offshore firm in Guernsey, had never paid money to the club and at the time its loan was recorded “did not exist, except in the barest form.” Leeds’ case alleged that as of November, Sport Capital did not have so much as an active bank account.
It further stated that the loan was taken by United without full approval of the club’s board and that David Haigh’s interest in the money conflicted with his duty as a director of Leeds. United suggested throughout their legal fight with Sport Capital that any money received by Leeds last November came directly from Haigh, the club’s former director and a man with close links to Sport Capital.
Haigh was unable to provide evidence in person at yesterday’s hearing in London having been arrested in Dubai on May 18. The 36-year-old is accused of financial irregularities by Leeds’ previous owner, Gulf Finance House, and is being detained by police while Dubai’s public prosecutor decides whether to bring charges against him.
Leeds used the allegations – all of which Haigh contests – in their case against Sport Capital, saying it was possible that the £950,000 loan had a “fraudulent provenance.” Witness statements were given by Daniel Arty, Cellino’s financial advisor, and Jinesh Patel, the current CEO of GFH Capital, Gulf Finance House’s private equity arm.
United believed that Sport Capital’s decision to serve a winding-up petition on the club was an “abuse of process” since the firm had never stated its intention to see the club liquidated. From Cellino’s perspective, the case was not about his ability to raise £950,000. His attitude was won’t pay, rather than can’t, and the High Court heard that Leeds have £1.6m sitting in their account but deputy registrar, Christopher Garwood, rejected United’s submissions and ordered Cellino to repay the loan.
Removing Sport Capital’s winding-up petition has, for the past three weeks, been a priority for Cellino. Served on April 25, it led Barclays to freeze the club’s bank account, preventing Leeds from meeting the playing squad’s salaries for May. United will have the account restored if they complete payment to Sport Capital before June 23.
The removal of the petition would eradicate Sport Capital’s claim from the chain of issues in front of Cellino. The 57-year-old has been in Italy during the early part of this week, dealing with the proposed sale of his Serie A club Cagliari to a group fronted by Tommaso Giulini, the ex Inter Milan director.
Having planned to unveil a new head coach at Leeds in the past 48 hours, the appointment of Brian McDermott’s replacement at Leeds is expected to wait until the ownership of Cagliari has been addressed.
Reading’s academy boss, Eamonn Dolan, remains the leading candidate for the job with Cellino due back in England tomorrow.
The Italian is continuing to operate without a typical management structure at Elland Road, minus a chief executive or a managing director.
He pulled out of last week’s Football League AGM in Portugal at short notice, leaving United without a representative at the gathering, and the club are likely to receive a small fine as a result of their failure to attend.
Cellino, however, has a number of advisors around him, some of whom are attempting to tackle the outgoings at Leeds. Among those advisors is Graham Bean, the former Football Association compliance officer who has been working for United since May. Bean’s LinkedIn profile says he is “currently advising and assisting Leeds United in football administration, governance, and regulatory issues covering all aspects of close and pre-season matters.”
The YEP understands that one of the matters being looked at closely is the three-year contract which winger Cameron Stewart is due to sign on July 1.
Stewart signed for Leeds on loan from Hull City in January and negotiated a permanent transfer at the same time, a deal pushed for by McDermott. It is not clear if Leeds intend to honour that agreement, though Stewart attended the meetings held by Cellino with individual players at Elland Road last week.
Stewart’s agent was contacted by the YEP but did not respond. He is believed to have approach the Professional Footballers Association (PFA) for advice.
Haigh, meanwhile, remains in custody without charge almost a month after his arrest. His global assets were frozen by a court in Dubai last week following a successful application from GFH, and a civil claim made by the Bahraini bank against him outlined what GFH says is an extensive list of fake invoices created by Haigh in his role as GFH Capital’s deputy chief executive.
The four companies named on the disputed invoices – Lincoln Associates, Millnet Limited, GPW and Fountain Court Chambers – provided GFH with a range of legal, IT and investigative services, some of which related to GFH’s ownership of Leeds.
Lincoln Associates and GPW told the YEP that they are aware of the case against Haigh but unable to comment while the allegations were “sub judice”. James Sinclair, the managing director of legal firm Lincoln Associates, said he had submitted a statement to the DIFC Courts in Dubai.
Millnet Limited and Fountain Court Chambers have not responded to requests for comment.