Italian courts sink Massimo Cellino’s takeover of Leeds United TSS March 18, 2014 Leeds United 50 Comments Massimo Cellino’s attempt to takeover Leeds United looks to have been thwarted by a yacht after the Italian businessman was convicted of “falso in bilancio” (false accounting) and ordered to pay €600,000 in fines, while the yacht in question was seized by the Italian government. The decision came early this morning and appears to give the Football League grounds to reject Cellino’s takeover under a rule in the Owners’ & Directors’ test which can disqualify anyone for an “unspent conviction for dishonesty,” which is a rather vague term but must surely apply here. Unspent, by English law, is usually five years for a conviction which results in a fine so that’s not going to help Cellino any. He could of course appeal the conviction and probably will since there seems to be an endless appeals process in Italy which makes a mockery of their legal system, but it’d likely take months for an appeal to be prepared and for the case to reach court again. All of this leaves Leeds United waiting for confirmation from the Football League that the verdict bars Cellino from completing his takeover. In the meantime, the club would be wise to start considering a Plan B. The only remaining party known to be interested in a takeover of the club is Mike Farnan’s consortium who’ve maintained interest throughout. There are questions to be answered with regards to the level of funding this consortium can bring to the table, but they do have relevant experience working in football so should be aware of what they’re getting themselves in for (Leeds United are hardly unique when it comes to football clubs losing vast amounts of money). But money remains the primary concern for Leeds United, which is the only reason Massimo Cellino became a preferred choice of fans in the first place. The club is haemorrhaging money at an alarming rate, so any new owner would have to have considerable backing to cover Leeds United’s operating losses while also servicing the debts, this is before they even start to consider squad improvements. Those debts have only increased while the club has been in limbo waiting for the Football League’s decision on Cellino. The Italian has invested around £10m into the club since reaching an agreement with GFH which will have to be paid back if/when the Football League reject his takeover. Worrying times for Leeds United then. Or ‘business as usual’ you could say. On and on… Update: Short statement issued by The Football League which says they’re in “ongoing discussions with [Massimo Cellino’s] legal representatives” following the outcome of the court-case this morning. Jordan Wright Administration still not possible Mr Haigh? Alex The fans need to buy out the club or we will forever be talking about ownership……… when will leeds fans cotton onto this fact ? We can now look forward to a summer of limbo and no transfer activity, lots of PR spiel from GFH and co and years of bickering and due diligence….. At least with Cellino it would have been simple ! TSS Fan ownership would be chaos at Leeds, we never agree on anything. And where would all the additional funding come from? One thing to raise money to buy a club, but you have to invest in it thereafter. It’s too complicated at Leeds and the figures involved would never be realistic enough for fan ownership. Tim Absolutely correct. Not a chance of this happening. Just watch out for the useless LUST getting on the bandwagon pretending to be heirs apparent! I cannot believe GFH don’t have a backstop buyer other than Farnan if as I expect the Cellino deal falls apart. TSS I’m hoping all the press coverage from Cellino’s attempt caught attention of other would-be buyers because I’m not convinced by Farnan et al. Tim Farnan would be another disaster. You need one well healed owner that can treat a football club as a hobby. Let’s hope there is something in the background. Anyway scummer Farnan is involved with that gangster from scouseland who owns Aintree and has been involved with drive by shootings and other crap! TSS Might need someone like the Scouser to handle the bailiffs though… Alex That’s the argument I always hear and its born of ignorance……… please actually research fan ownership before slamming it. Lots of clubs have managed it and they are not in a mess, Swansea, Portsmouth…. German clubs managed it and they are not in Chaos….. Barcelona manage it…..etc etc You need a group of business owners / celebs / councillors as the focus point, the fans make promises of money, negotiate for the club and democratically elect the board based on their usefulness to the clubs running. It isn’t rocket science. Or… we could all just sit around moaning and do nothing…is that preferable ? TSS Barcelona are basically funded by the state, their debts are astronomical so that’s a terrible example. German clubs aren’t wholly fan-owned, the more successful clubs are actually part-owned by large corporations who bankroll them. People’s ignorance of that never ceases to amaze me. That leaves the only valid examples you’ve given, Portsmouth and Swansea. Portsmouth was bought VERY cheaply out of admin and Swansea fans only own 20% (which they too acquired cheaply at the a club low point) Any fanbase could raise a million or two, but if you think Leeds United can raise the £50m+ it would take JUST to buy the club and keep us going for the next 12 months, you’re living in a fantasy land. Alex So you think every fan earns the average wage of 21k ??? Some are wealthy, a few of which have already been connected to the club. They can afford to invest more than others Leeds are supported by hundreds of thousands of fans, some of which are wealthy , so yes I certainly think Leeds fans base could find 50 million easily…. As for it happening….no it is unlikely as most fans seem to be like you….preferring to moan and whine about a perpetual state of bad ownership, due diligence and stagnation rather than actually do anything about it……… TSS No, most fans are realistic. If we had fans wealthy enough to buy the club outright, they’d have done so already. Mike “people like yourself just throw it out there as the miracle cure with no thought given to the complications and legitimacy of it” Just like people like you throw it out without undue thought or consideration………. as for debt and losses, A) you run the business properly and B) if required you ask shareholders to pay monthly payments at an agreed level to help the club. It can be done and has been done but I guess it depends if your a glass half empty or glass half full kind of guy…. Death Actually the way it has been done in the past is partial take overs. A consortium separate from the Supporters trust buys a percentage and the Trust buys the remainder. This also means the Trust can control what owners come and go into the club. Its important to have some wealthy board members in case you get relegated or fan interest wains…. That’s when you need a rich owner to dip his hand in his pockets. john “German clubs aren’t wholly fan-owned, the more successful clubs are actually part-owned by large corporations who bankroll them. People’s ignorance of that never ceases to amaze me.” REALLY ? Bayern Munich eV (the fans) owns 81% of the club. The rest was sold to Adidas and Audi to help pay for the Alianz Arena. Bayern Munich generated profits in nine of the last ten seasons, with revenues of around €360 million. Stephen This might be as big a stumbling block as people think. Massimo cant buy the club….but Massimo has a big family Ev Why would the FL wait till the end of this court case if they didn’t think it would be an issue ?? Stephen Because at the moment the principle bidder is Massimo Cellino. Not his family. His son or brother(who have no convictions) could easily front a bid and he could sit in the background until his convictions are “spent” TSS That’s not true, the ownership structure they proposed is split evenly between his family. Massimo’s individual percentage was <10% as he revealed in an interview a while back. All that matters is who makes decisions and who provides the funding so Cellino would have to pass no matter what the setup is. Marc Butterworth Not totally true TSS. If the money given to Eleanora Sport is via a Loan, there is nothing in the FL rules that say the company/person providing the loan has to pass the test. He has after all ALREADY loaned money to the clubs owners. If Eleanora bought the club and borrowed money from Cellino, this would be no different. TSS They’d reject it. FL examine funding as part of the process and aren’t going to accept Cellino is loaning money to this company with no power gained as a result. TSS FL said early on they now have provisions in place which aim to prevent such actions. O&D test covers everyone with decision-making ability, not just those who own a stake on paper. They’d reject any such attempts. mrbigwheels I certainly expected Cellino to be found guilty and previously stated so… His time was up in his homeland with his various misdemeanours. The immediate question I have is… What are GHF going to do now, as most other options are of a longer term… like this week and next?… £1m is needed, at least. Thommo Ludicrous that a man like Bates who used loopholes to avoid paying Chelsea’s staggering debts while holding on to assets is “fit and proper” yet someone who fails to pay due tax on a yacht in Italy is seen as unfit to run the club. Whatever else he’s done at Cagliari, the fact this makes him not fit & proper compared to other football league owners & ex-owners is just idiotic. maxwatson If I were Cellino’s lawyer (which I’m not) I would point out that this is purely (in Italy) a civil conviction and the 1974 Act used by the FL to govern spending of sentences “apply to convictions in a criminal court, findings in a juvenile court, certain offences in service disciplinary proceedings and hospital orders under the Mental Health Act 1983.” At which point you then get into an argument (since the FL rules include a principle of equivalence) about whether the Italian judgement is equivalent to an English criminal conviction or an English civil conviction. Unless there is some kind of finding of intent in the Italian judgement I would think an argument could be made for the latter. But equally we are in the realms of the subjective and I think the FL will see this as a potential out from a difficult situation. Certainly the press narrative over the last few weeks has seen this ending in tears and this morning’s press assumption is “game over”. Paddling in the opposite direction would require some courage from the FL, so I can see how this will play out. mrbigwheels Even though admin is a reality… there is always the argument that the FL wouldn’t want Leeds entering administration again… for various reasons. You never know, some paddling in the oppo… may well happen. Dfooster Thank you. This is the post I’ve been looking for. Some actual journalism Colin I said Cellino was dodgy right from the off, while being lambasted on here by people convinced he was the saviour and going to buy Elland Road a month ago. Meh. This is the out that the Football League needed. No need for Shaun Harvey to have to make a tricky go/no go decision on Cellino’s takeover anymore. The Italian courts have made the decision for the Football League already. But now this leaves Leeds in an awful place. Ask yourself this – if you were Farnan or any other bidder, would you buy Leeds right now? Not only have you got to buy the club, you also have to pay back loans to Haigh, GFH and now Cellino, and then find cash to fund McDermott. Or… do you wait and see what happens? Administration perhaps? If that happens, you could could pick up Leeds for a fraction of the current price tag. And bear in mind there’s no need to rush in and buy now, because you might lose all the assets if the club goes into admin. Leeds’ real assets, ER and TA went a long time ago. Only option now is for GFH to start paying the cheques, otherwise, they’ll lose the vast majority of their investment should Leeds go into administration. Irving08 Does this mean another year or two of Brian ? Who knows ? But It probably means many more years of championship football at Elland Road. oldschoolbaby It`s probably time to accept that Ridsdale left the club floundering in the water and the simple truth is that the sharks have been gorging and circling ever since. We waste a lot of time and energy discussing the relative merits of the sharks wilfully ignoring the fact they would rip off one of your limbs in a heartbeat. I`ve no idea where salvation can come from but we have to be level headed sceptics until it arrives. Flashing our tits at any passing suitor is making us look cheap and stupid. Looks like we may be stuck with McD. The tragedy being that devoid of “quality” the argument for a motivator over a kindly tactician becomes ever stronger Tim Baker Is it time to focus on how we’re going to stay in the Championship? I can see this spiralling downward. Marc Butterworth Everybody seems to be forgetting that it isnt Massimo Cellino who was buying Leeds United. Eleanora Sport are the buyers, of whom Cellino only owns about 10% of the shares, the rest being owned by the “Family Trust”…. Nothing has happened here that would stop Eleanora Sports form completing thier purchase. Just that Cellino would not be able to own 30% of Eleanora or be allowed to be a director or be in control of Leeds United…. I still fully expect Eleanora Sport to be our new owners. TSS As I said below, it doesn’t matter about percentages and who owns what any more, it’s who finances the deal and who makes decisions – Massimo Cellino HAS to pass no matter how the company is structured. Dfooster Like how the Russian maffia pay for Chelsea. Like that I presume? TSS Roman’s money can be traced back to sale of an oil company, it’s clean as far as the courts are concerned else he’d be behind bars. The trick is, not to get caught, Cellino seems to get caught a lot. maxwatson That’s technically not permissible under FL rules (or rather, the FL would treat MC, as pater familias, as directing the trust and therefore subject to the test, irrelevant of what percentage was strictly in his name). It has been used as a get out by existing directors who technically fail the test – most recently at Birmingham – but that’s because the sanctions against existing directors are difficult to deploy. In the case of someone applying to be director, it’s far easier to say no. Having said that, it was reported in the Italian press a few weeks ago that Cellino had been told he had a couple of options, one of them a non-executive position. Colin The FL don’t just look at the people involved, they look at where the money is to run the club. The money is Cellino. The questions the FL have to ask is ‘is the money ‘good’? where is it? (Barclays Bank good, Tax Haven bad). And there’s some worrying signs – he’s evading tax in Italy (fact). Leeds have had run ins with the taxman (HMRC) before, so could that happen again? It would be a massive risk for the FL to class Cellino as fit and proper. If Cellino is approved, what’s to stop Cellino bunking off to Miami once he owns the club, selling the big players and bringing misery to Leeds United? I’m not suggesting he would do that at all, but the risk is there. henrymouni Where did they look for Ken Bates’ money Colin?? Or GFH’s money? Under the bed?? Marc Butterworth Everybody seems to be forgetting that it isnt Massimo Cellino who was buying Leeds United. Eleanora Sport are the buyers, of whom Cellino only owns about 10% of the shares, the rest being owned by the “Family Trust”…. Nothing has happened here that would stop Eleanora Sports form completing thier purchase. Just that Cellino would not be able to own 30% of Eleanora or be allowed to be a director or be in control of Leeds United…. I still fully expect Eleanora Sport to be our new owners. Matthew I’m hoping the football league look at the big picture and note that we’re fucked without his money. What good would it do to have the biggest club outside of the Premier League to go into admin again? Arguably one of the biggest clubs in the country by the name too. TSS Has to be fair across the board. They can’t ignore their own rules when a club is in financial trouble and just accept anyone or the whole process becomes utterly pointless (which it usually is already, but even more so) henrymouni Why not? They have accepted so many plonkers before! If he pays his fine, it is all settled, surely. The FL use the rules for their own ends. You could not make it up!!! Dfooster I’m hearing under Italian law you are classed as innocent until after the appeal process. Will the football league stick by Italian law in this case or just cherry pick the bits that suit them the best? BigBob This is all a bit random but … I’m finding it really hard to believe that Cellino will (most probably) fail now. Does anyone think people like Mr Ken Bates paid all taxes owed? … for that matter does anyone actually think any player in the English Premiership (sorry not English as we allow teams in that aren’t even in England … probably UK Prem or League of Nations is more appropriate) actually pays what the state thinks he actually owes? … answer … probably not … Who own’s Birmingham? is it ther bloke currently serving a jail sentence? .. Vincent Tan .. good example of “it and Proper” .. If you dig deep enough you’ll find some dirt? … Example … I own a Removal and Storage Company … my accountant informs me if I make the Storage a separate co. (ie storage only) I save paying VAT on that part of the business (sorry new business), I’m not breaking any laws, just twisting them to my advantage. Irving08 I guess tax evasion (what Cellino is so far guilty of) and tax avoidance (what Bob does) are different things, legally speaking. spellz Anyone feel we will be heading in the same direction as Portsmouth, if we do not get an investor who will clear our building debts? I mean I really hope not but one after the other men come in to our club f*ck us and leave us, If someone finally does takeover I think they should rename the club to the Leeds United Brothel. Pete1980 I second those Portsmouth worries spellz Exactly we have been in administration already, with it looming over us again it is worrying times as Portsmouth are hanging on by a thread to there club being classed as a professional football club or semi-pro. Mick444 Is it not a fact that Cellino’s none payment of tax on his yacht is not considered a criminal offence? If he pays the fine he does not go to jail. People everywhere try to pay as little tax as possible and occasionally the tax man finds out and sends a tax bill to cover the areas “missed”. This seems no different to any businessman filling out his tax returns and forgetting to include part of his income. Cellino in fact purchased a boat in the USA and registered it in that country – ok he did it deliberately to avoid paying Italian taxes but so so would everyone else if that thought they could legally do so. Is that criminal or just wishful thinking? Not sure. Anyway the FL have been given a “get out if jail” card with this court ruling and will no doubt use it to show “strength of character” and not approve the Cellino take over. I would like to see Cellino sue the FL but my guess he will just disappear into the sunset (but not on his yacht!). Which leaves our club where? GFH need to show some previously unseen bottle and come out with a statement about the club ‘s financial situation and what they, S owners intend to do about it. There is more chance of me sailing Cellino’ s boat to Australia than any useful update from the GFH board of incompetents! mrbigwheels While we wait so to speak…. Can anyone offer any views on why the Club is supposedly losing £1m per month. Player wages have increased… yes… but what about GFH ownership fees?. TSS Management fees? I don’t know where people have come up with that one from, it’d serve no purpose as GFH would effectively be paying themselves since the club is losing money and doesn’t generate the profits to pay them itself. We’re losing money because of Bates. That’s why he sold. Season ticket mortgage, allowing Warnock to recklessly pay journeymen such as Kenny obscene amounts of cash, loss of catering income etc… The shortfall existed while Bates was here, GFH were covering it before they took over (like Cellino has been recently).