Portsmouth administrators investigate missing millions
Published 12/03/2010 | 15:25
Portsmouth's administrators are preparing to investigate unexplained payments totalling at least £1.5m made by the club during the four-month ownership of Ali Al Faraj.
Multiple sources with direct knowledge of the club's finances during Al Faraj's tenure have confirmed that the money flowed out of the club as they battled to stave off administration.
"A number of transactions have been highlighted as unexplained in the process of the club's accounts being reconciled," said a source. "They are unexplained and it is a bit of a jigsaw. The total so far is about that £1.5m but it may not stop there."
As well as the unexplained payments a further £4m was paid to present owner Balram Chainrai as part-repayment on a £17m, taking the total that left Portsmouth at the height of their financial crisis to more than £5m.
The disclosure comes 48 hours after 85 staff were made redundant at Fratton Park as administrator Andrew Andronikou attempts to stabilise the club.
Speaking on Wednesday he repeated his pledge to supporters to investigate how Portsmouth became the first Premier League club to enter administration.
The unexplained payments were made between October 2009 and the end of January. During that time the club faced a winding-up order from Her Majesty's Revenue and Customs over £7m in unpaid tax, was subject to a transfer ban because of transfer fees, and player and administrative staff wages were paid late repeatedly.
The disclosure that large amounts of money flowed out of the club despite these pressures casts new light on the opaque ownership of Al Faraj.
Al Faraj was only able to complete his purchase of the club in October because of Chainrai's £17m loan, and he never visited Fratton Park nor spoke publicly.
The club were run on his behalf by his brother Ahmed Al-Faraj and a consortium of Israeli businessmen, some of whom have links to Arcadi Gaydamak, the father of former club owner Sacha Gaydamak.
The payments were made while the club's finances were under the day-to-day control of Daniel Azougy, a disbarred Israeli lawyer with four fraud convictions who was appointed by Al Faraj on a short-term contract.
Sources have confirmed that the payments in question were made via Ali Al Faraj's client account at London law firm Fuglers. The account was used to run the club's finances because Portsmouth's account with Barclays had been frozen under the terms of the HMRC winding-up order, which was served on Dec 31 last year.
The unexplained payments were only discovered by senior executives at the club in January after former finance director Tanya Robins asked to see a statement of transactions from the Fuglers account.
When those transactions failed to tally with her record of the club's approved payments, she resigned from the club board. Her resignation was filed with Companies House on Jan 19. Robins declined to comment when contacted on Thursday.
Chainrai is understood to have been informed of the discrepancies at the same time as Robins was alerted. It prompted him to take a closer interest in the management of the club and to take control.
Fuglers are understood to have concerns about the payments and have conducted their own investigation. Mark Jacob, the partner at Fuglers who represented Ali Al Faraj, left the company earlier this month but remains a director of the football club.
Jacob declined to discuss the matter in detail on Thursday. Asked about the payments he said: "That is inaccurate."
Asked about the payments last week, David Berens, a partner at Fuglers, told Telegraph Sport via email: "The matters of which you ask are subject to client privilege and obligations of client confidentiality on Fuglers. This precludes Fuglers from discussing any of the matters further. We do not wish to be obstructive but our hands are effectively tied."
The unexplained payments came to the attention of administrators from UHY Hacker Young when they began reconciling the club accounts in response to a legal challenge to their authority from HMRC.
HMRC had challenged Chainrai's right to take the club into administration, a move that makes him the preferred creditor and first in line to recoup his loans.
On Thursday afternoon HMRC withdrew its objection to the administration, though concerns over the exact nature of the relationship between Chainrai, and Al Faraj remain.
"Despite HMRC continuing to have a number of questions and concerns around the relationships of various parties, and the lack of detail of financial affairs, HMRC has advised the administrators that we will no longer challenge the validity of the administrator's appointment," a spokesman said.
With the legal challenge from HMRC lifted Andronikou is focusing on finding a buyer for the club. Two interested parties have demonstrated proof of funds with one seeking to enter a period of exclusive negotiation.
Andronikou, who values the club at £30m, has said that he is in no hurry to complete a sale and wants to establish that potential buyers have the money and will pas the fit-and-proper persons test.
Portsmouth's total debts are £84m, with HMRC owed about £18m and Sacha Gaydamak around £30m.