Massimo Cellino and Leeds United: A Fit and Proper Breakdown

Every club, from the fans, to the playing and coaching staff, to the administrative staff all deserve solid, reliable and in-good-faith ownership. This doesn’t change club to club, but there are a few clubs out there who truly need that kind of ownership and Leeds United are one of those clubs.

As it stands, Leeds are expected to post almost $36 million (£22.93 million*) in losses for last season due to decreases in turnover and a high wage bill as well as owing money on loans from the Bahraini Bank, among others. This current state of affairs isn’t a new situation for Leeds having gone into administration before due to an inability to payback loans that had been taken out as well as tax debt, not to mention the fact that at one point, they had sold their stadium Elland Road and their training ground just before their administration period.

Previous Owners & Cellino

Despite these issues, the current one at hand has to do with the Club’s President and Chairman, Italian Massimo Cellino, now the former owner of Italian club Cagliari. Leeds has been sold on several occasions, but one of the more prominent sales was to Ken Bates following administration. This was in fact was a re-sale back to the former Chelsea FC owner, who owned the club just prior to administration and then promptly bidding on the club when administrators KPMG put it back up for sale.

Massimo Cellino, but more accurately Eleonora Sport Ltd., are the second owners of Leeds United since Ken Bates sold the club to middle-eastern Private Equity Group, GFH Capital. In January of this year there was a failed takeover attempt by a consortium group that included Managing Director of Leeds David Haigh and Managing Director of Enterprise Insurance Andrew Flowers due to a lack of financial backing. At this point Cellino’s family consortium Eleonora Sport Ltd. came in and agreed a 75% stake purchase, which according to Football League rules, triggered the Owners’ and Directors’ Test, commonly known as the ‘Fit and Proper Person’s Test’. The test is applied to anyone who is defined as a “Relevant Person” who is

operating the powers that are usually associated with the powers of a director of a company incorporated under the 2006 Act.”

In the rules there are twelve various situations/definitions that would qualify someone as a relevant person but there’s no real debate about whether Cellino qualifies – he openly does.

Cellino, due to an unspent Italian tax evasion conviction relating to the purchase of a Yacht, failed the test applied by the Football League and was consequently banned from controlling the operation of Leeds in any way.

Owners’ and Directors’ Test

As mentioned before it is known as the Fit and Proper Persons’ test but in the Football League rules it’s known as the “Owners’ and Directors’ Test”. The Football League put this test into place on March 10th 2005 with the purpose of establishing a standard for ownership of clubs in order to maintain a level of integrity within the game.

The criteria which Cellino had to satisfy in order to maintain control of the club are known as “Disqualifying Conditions”, of which there are thirteen. The one that Cellino did not satisfy was the following qualification:

  • (e) having an unspent conviction (or where the Rehabilitation of Offenders Act 1974 does not apply for any reason, having a conviction within the period that would have rendered that conviction unspent had the provisions of that Act applied) for any offence (including any attempt to commit the same) that can reasonably be considered to fall within the category of:
    • (i) an offence involving a Dishonest Act;
      (ii) corruption;
      (iii) perverting the course of justice;
      (iv) committing a serious breach of any requirement under the 1985 Act or 2006 Act;
      (v) dishonestly receiving a programme broadcast from within the UK with intent to avoid payment under Section 297 of the Copyright, Designs and Patents Act 1988;
      (vi) admitting spectators to watch a football match at unlicensed premises under Section 9 of the Football Spectators Act 1989;
      (vii) ticket touting under Section 166 of the Criminal Justice and Public Order Act 1994;
      (viii) conspiracy to commit any of the offences set out in paragraphs (i) to (iv) above; or
      (ix) any conviction for a like offence to any of the above offences by a competent court having jurisdiction outside England and Wales, whether such conviction occurred prior to or after 10th March 2005 (being the date of implementation of this Test);

The FA Decision, Appeal, and Process

As mentioned before, his failure to satisfy the noted condition, was due to being found guilty of tax evasion on import duties for a yacht. The judgement by a competent court in Italy of tax evasion constituted an offence involving a dishonet act and therefore qualified as a “Disqualifying Condition” for Cellino as a ‘Relevant Person’.

At this point, according to section 6.1, Cellino has the right to appeal within 14 days. Section 6.2 outlines what is necessary for any appeal to be successful and the most pertinent part states that his appeal will only be successful if he can satisfy the Professional Conduct Committee that:

(b) in respect of a conviction of a court of foreign jurisdiction or suspension or ban by a Sports Governing Body or suspension, disqualification or striking-off by a professional body, there are compelling reasons why that particular conviction or ban, disqualification, or striking off (as appropriate) should not lead to disqualification under this Appendix 3

Upon completion of his appeal, the PCC found that the conviction did qualify as a “Disqualifying Condition”, but found that there wasn’t enough proof that the act Cellino was convicted of constituted what would be considered dishonest and therefore was not subject to the condition.  A caveat though was that if an expanded court ruling in Italy were to be disclosed and it found that Cellino’s actions were in fact dishonest then he would be subject to the condition.

So his appeal was partially successful subject to the reissuing of the judgement. The Football League received the explanation and on Novemeber 27th assessed the translation of it along with notes from Cellino’s Lawyer to determine once again if this judgement constituted a conviction and whether it would be considered dishonest.

By virtue of the Italian Court’s release of the ruling as well as a relevant Italian Olympic Comittee’s Behavior code that allows for interim-disqualifications the Football League found it reasonable to accept that the judgement constitutes a legitimate conviction, which put the nail in the coffin for Cellino.

According to The Guardian, the six page court ruling clearly put forward the assessment that Cellino’s actions were intentionally dishonest, summed up perfectly in one sentence that stated there was

“no doubt as to the existence of an elusive intent on the part of [Cellino].”

That is that.  His appeal stated if he failed to prove that it was not a dishonest act, Cellino would be subject to the condition. He did not, and so the Football League has directed him to resign form his position as director and take the necessary steps to remove himself from any duties that would constitute him as a “Relevant Person” in relation to the Owners’ and Directors’ Test at Leeds within 28 days.

Going Forward

The fact is this disqualification lasts for a year from the time of conviction, March 18th 2014, which means he is able to take control on March 18th of 2015.  The Telegraph puts forward the notion that the Eleanora Sport Ltd could possibly remove Cellino and put into place a new management structure at Elland Road that would ensure Cellino never qualifies as a “Relevant Person”.

Cellino has said he would appeal this decision as well and has warned the Football League that they’ve made a big mistake. Another monkey wrench in this whole situation though, is that he currently has an open court proceeding in Italy for a similar tax evasion case regarding a different yacht which has been adjourned without a selection of a new date.

Conclusions

Ultimately in developing an opinion, it’s hard to say that the Directors’ and Owners’ Test is a bad thing.  The process is thorough and good for the game, but what it seemingly does is use certain conditions and factors as both predictors of a likelihood of future actions as well as indicators of professional character regarding club ownership.

An important detail to consider in this is not whether or not Cellino evaded import taxes on a yacht or how he is stringing this whole situation along since he bought the club, but rather, was his intent malicious enough in the tax evasion to where a comparable negative action seems possible from him in an executive role with Leeds. This should be considered regardless of whether he exercises that action to benefit the club.

The test is a screening and preventative measure to reduce the probability that illegal, disreputable, and negative events don’t occur at the club ownership level no matter the intentions. In the face of this the debate remains whether the results of such measures put the club into unstable conditions and therefore have a negative impact.  There are qualifications and arguments for both sides and there should be a common ground between benefit to the club’s stability and benefit to the league’s integrity.

 

*Figure calculated from current Yahoo Finance GBP/USD conversion rate, 1.5679

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