Wednesday, November 18, 2009
The First Chairman To Fail the "Fit and Proper" Test
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David Conn/The Guardian
Chester City chief becomes first owner to fail fit and proper person test• Stephen Vaughan will have to sell or give up his majority stake
• Liverpool businessman bought the club in 2001
Chester City owner Stephen Vaughan will be forced to sell or give up at least 70% of his stake in the club. Photograph: Rick Matthews
Stephen Vaughan has become the first owner of a professional football club required to reduce his shareholding because, according to FA rules, he is no longer a "fit and proper person". Vaughan, a Liverpool businessman who bought the Conference club Chester City in 2001 and owns 100% of the shares, was last week disqualified from acting as a director of any company until November 2020, following his involvement in a £500,000 VAT fraud.
The FA's rules, which apply to Conference clubs, state that anybody disqualified as a company director cannot hold 30% or more of a club's shares. The FA will write to Vaughan requiring him to sell or give up his majority stake in City within 21 days of the disqualification taking effect on 25 November. If he does not comply, the club could ultimately be expelled from the Conference.
Relegated from the Football League last season and in administration over the summer, City already have the threat of expulsion hanging over them, unless they pay money owed to the Professional Footballers' Association, Wrexham and Vauxhall Motors FC by 30 November.
According to an undertaking Vaughan signed with the Insolvency Service, he committed the VAT fraud while a director of Widnes Vikings rugby league club, which was then in administration, in October 2007. It stated that he "caused" Widnes to buy clothes from a UK company in three transactions worth £2.9m, plus VAT of £505,265.
Payment for the clothes was not made to "the alleged supplier", but to an account at the First Curaçao International Bank, based in the Netherlands Antilles. The clothes were sold on the same day to a company based in Spain; overseas buyers do not have to pay VAT, and Vaughan tried to reclaim the £505,265 for the club from HM Revenue and Customs.
HMRC refused to pay, and proceedings were begun against Vaughan which led to him admitting the transactions were a "carousel" in which the VAT was fraudulently claimed from HMRC.
In a statement, the FA said: "We are aware of the Insolvency Service decision and will be taking necessary steps under the requirements of the fit and proper person test."
The case could test the rules' effectiveness, however, because according to City's managing director, Bob Gray, Vaughan may hand the shares to one of his sons. "He has to relinquish his shares," Gray acknowledged, "but who he gives them to is up to him. He could keep them within the family." If that happened, the FA would have to be satisfied that Vaughan was not still "exercising direct or indirect control" over the club's affairs, which the rules prohibit for somebody declared not "fit and proper". Guardian
David Conn/The Guardian
Chester City chief becomes first owner to fail fit and proper person test• Stephen Vaughan will have to sell or give up his majority stake
• Liverpool businessman bought the club in 2001
Chester City owner Stephen Vaughan will be forced to sell or give up at least 70% of his stake in the club. Photograph: Rick Matthews
Stephen Vaughan has become the first owner of a professional football club required to reduce his shareholding because, according to FA rules, he is no longer a "fit and proper person". Vaughan, a Liverpool businessman who bought the Conference club Chester City in 2001 and owns 100% of the shares, was last week disqualified from acting as a director of any company until November 2020, following his involvement in a £500,000 VAT fraud.
The FA's rules, which apply to Conference clubs, state that anybody disqualified as a company director cannot hold 30% or more of a club's shares. The FA will write to Vaughan requiring him to sell or give up his majority stake in City within 21 days of the disqualification taking effect on 25 November. If he does not comply, the club could ultimately be expelled from the Conference.
Relegated from the Football League last season and in administration over the summer, City already have the threat of expulsion hanging over them, unless they pay money owed to the Professional Footballers' Association, Wrexham and Vauxhall Motors FC by 30 November.
According to an undertaking Vaughan signed with the Insolvency Service, he committed the VAT fraud while a director of Widnes Vikings rugby league club, which was then in administration, in October 2007. It stated that he "caused" Widnes to buy clothes from a UK company in three transactions worth £2.9m, plus VAT of £505,265.
Payment for the clothes was not made to "the alleged supplier", but to an account at the First Curaçao International Bank, based in the Netherlands Antilles. The clothes were sold on the same day to a company based in Spain; overseas buyers do not have to pay VAT, and Vaughan tried to reclaim the £505,265 for the club from HM Revenue and Customs.
HMRC refused to pay, and proceedings were begun against Vaughan which led to him admitting the transactions were a "carousel" in which the VAT was fraudulently claimed from HMRC.
In a statement, the FA said: "We are aware of the Insolvency Service decision and will be taking necessary steps under the requirements of the fit and proper person test."
The case could test the rules' effectiveness, however, because according to City's managing director, Bob Gray, Vaughan may hand the shares to one of his sons. "He has to relinquish his shares," Gray acknowledged, "but who he gives them to is up to him. He could keep them within the family." If that happened, the FA would have to be satisfied that Vaughan was not still "exercising direct or indirect control" over the club's affairs, which the rules prohibit for somebody declared not "fit and proper". Guardian
