Monday, May 10, 2010
Pompey head to Wembley under a cloud
Under normal circumstances, FA Cup final week should be about excitement, anticipation and being plunged into the spotlight for all the right reasons. But Portsmouth are no ordinary club as the last few months have starkly illustrated.
As the relegated Premier League club prepare for a most unlikely appearance in Saturday's end-of-season showpiece, Portsmouth's mountain of debt remains the focus of attention rather than the prospect of upsetting Chelsea and lifting the famous trophy at Wembley.
Anyone who attended last Thursday's creditors meeting - I was one of only a handful of journalists there - would have been alarmed by the atmosphere of confusion and distrust that pervaded the room.
Security officials in scary-looking yellow bibs kept a constant roving eye on proceedings, checking to see no-one present was recording the sessions or dictating down a mobile phone. At times a five-hour meeting that was only supposed to last an hour threatened to boil over as various creditors bombarded the administrators with questions about the actual level of Pompey's debts and how they were being managed.
At one point - unreported until now - the Premier League faced a damning accusation that it ignored its own fit and proper persons rule by doing nothing to prevent an alleged convicted fraudster from managing the club's finances. The meeting was halted in its tracks when one local trade creditor waved a letter that had come into his possession signed by former owner Ali al-Faraj giving Daniel Azougy (the Israeli lawyer employed by the club to raise finance but since removed from these duties) permission to take over the day-to-day running of the club from long-time chief executive Peter Storrie.
It typified the kind of spontaneous exchanges that characterised the meeting, as did an impromptu adjournment to change the make-up of a five-strong creditors committee to give it more local representation.
To make matters worse, it has emerged that a new £15 million claim for unpaid taxes issued by Her Majesty's Revenue and Customs involves payments for image rights rather than player salaries, a dangerous precedent that could have widespread ramifications for the entire Premier League.
The claim took Portsmouth's debt to a staggering £138 million, including £90 million worth of unsecured creditors, figures that will lead to a widespread clearout with as many as 11 players leaving the club following Saturday's FA Cup final.
"We understand the new claim is over image rights and we are not comfortable with it," administrator Andrew Andronikou said. "This is a deliberate effort by HMRC to try and get a stronger foothold. Why are Portsmouth being used as a test case? We have to appeal against this."
Image rights have traditionally been protected from substantial PAYE payments with special concessions and Andronikou said: "This sends out a definite warning sign to a number of larger clubs employing international players. If they are successful against Portsmouth, it will have a significant knock-on effect."
Confusion over the extent of Portsmouth's debt is further complicated by totally separate claim for a staggering £50 million filed by the Football League Pension Fund, which covers non-playing employees of clubs and which, if genuine, would take the amount the club owe close to the £200 million barrier.
An administrative error of such magnitude seems remarkable but Andronikou insists the claim is completely fictitious and that the real figure Portsmouth owe is £34,000. "I have a proxy of the proof of debt sitting on my desk but we have no idea why it has arrived. No doubt the media will make a meal of this but my impression is that is more likely simply a marker in case the club goes out of business."
Football League sources also laughed off the claim saying it could not possibly be genuine since the deficit of the entire fund, covering roughly 90 clubs, was less than a third of £50 million. "Clubs are involved in helping pay off the deficit depending on how many non-playing staff they have but there is no way Portsmouth could have been asked for that sum of money," said one insider.
About the only thing that seems clear is that Balram Chainrai, the club's fourth owner in a year, will remain in charge pending the outcome of the Company Voluntary Agreement agreed on Thursday. Details of the CVA will be circulated to creditors within the next 10 days with administrators offering, it has to be said, an unexpectedly generous 20 pence in the pound over five years, a repayment deal designed to take the relegated club out of administration, attract new investment and secure its future.
But what kind of future? The first tranche of Portsmouth's parachute payments, likely to be around £14 million, will be used to pay off larger football creditors. The wage bill will then be slashed by three-quarters to correspond to life in the Championship. Hardly encouraging signs with a major domestic trophy at stake in a few days' time.