Secrecy and deception: Extensive breakdown of Watford and Bassini's misconduct charge (From This Is Local London)

Secrecy and deception: An extensive breakdown into Watford and Laurence Bassini's misconduct charge

11:54pm Monday 18th March 2013 in Latest Sport By Frank Smith, Deputy Group Sports Editor

Pictures: Alan Cozzi/Watford FC - Holly Cant - Pippa Douglas - Action Images

Secrecy and deception. False and misleading. A reckless disregard of the regulations. And inexcusable. These are just some of the terms used in the Football Disciplinary Commission’s findings into the misconduct charges against Watford and their former owner Laurence Bassini.

An extensive report from deputy group sports editor Frank Smith based on the documents released by the Football League this morning.

Watford and Mr Bassini were charged with misconduct by the Football League last summer due to breaches of the governing body’s regulations regarding two separate transactions that took place in 2011 between the Hornets and a finance company called LNOC Limited.

The Football Disciplinary Commission (FDC) today released its findings into the Football League versus Watford and Mr Bassini case.

Mr Bassini has been banned from owning or holding any position of authority in a Football League club for a period of three years.

Watford did not receive a points deduction or fine but have been placed under a transfer embargo until the end of the summer transfer window, which should be on August 31.

However, the Hornets released a statement this morning which explained that whilst a transfer embargo is in place, the club could still sign players as long as they have the written consent of the football authorities.

The club statement read: “This is not an absolute bar on transfers, but rather a mechanism by which transfer business can be conducted by the club provided that the prior authorization of the relevant football authorities has been obtained.”

The Football League regulations go into very little detail, simply stating clubs “shall not be permitted to register any player with that club without the prior written consent of the executive”.

A Football League spokesman has been unavailable to comment today.

The FDC released two documents this morning relating to the misconduct charge. It confirmed that Watford should have been under a transfer embargo for 11 months, starting from September 26 2011, due one of the loan agreements.

However, Watford continued to sign and register players during that time and retained the services of eight new players, according to one of the reports.

The FDC said: “It is not possible to say to what extent, if at all, the club derived sporting advantage from those transactions, but it is appropriate to assume that it probably did to some degree, because the purpose of the transactions was, self-evidently, to maximise the club’s sporting performance. It is noted that the club finished the season in a mid-table position.”

“The FDC concludes that, even if unwittingly, the club had an advantage over its fellow competitors in the Championship, which it would not otherwise have had,” the FDC added.

“We take the view that the registration embargo referred to above is a sufficiently serious sanction to mark all the club’s breaches of the regulations, in particular having regard to the club’s current position in the Championship and the prospects of its promotion to the Premier League next season.”

The FDC confirmed our reports in the summer that Watford had indeed been under a transfer embargo between June 12 and July 31 this year due to previous to the matter.

Watford and Mr Bassini were charged by the Football League in August and the Football Disciplinary Commission was set up in October, but the story didn’t break until we reported on the situation in November.

The hearing began on January 28 and both sides finished given evidence to the panel three days later.

The Football League has this morning released two documents from the FDC titled ‘Determination Following Substantive Hearing’, which was issued on February 11, and ‘Determination Of Sanctions’ Watford were accused of breaching regulations 44.2, 48.1 and 19. Mr Bassini was accused of misconduct based upon his activities in relation to those alleged breaches.

Regulation 44.2.2 states the Football League secretary should be notified if there is “any contract a club proposes to enter into (save for a representation contract with an agent) which gives the club or any other party to the proposed contract the right to receive payments in respect of a player.”

The Football League brought the misconduct charge because it entered into a contract with LNOC without providing the governing body with a copy of the contract and without seeking the League’s approval.

Watford breached regulation 48.1 because LNOC was not a financial institution and no approval had been obtained, which could have made the club exempt from the provisions.

Regulation 19 states that entering into loan agreements for payments from the League’s Pool Account should result in a transfer embargo until the money is repaid.

Watford should have notified the League within 24 hours of the forward funding arrangement and failure to do so meant they were able to sign players when they should have been under an embargo.

The League decided to bring a case against Mr Bassini as he was the owner and director and was deemed to be directly involved and responsible for the club.

Mr Bassini has subsequently left Watford but the League brought charges under regulations 76.1.3 and 80.2.

The FDC said: “His activities in each case caused or facilitated the breaches, and each case this is alleged to amount to “misconduct” on his part.”

In the first document, it starts by confirming Mr Bassini was a director at Watford and that “at all relevant times represented himself to the League and to the club as the beneficial owner of the shares in the club.

However, it adds that in his second witness statement, he claimed he subsequently held 50 per cent of the shares on behalf of Valley Grown Salads Unlimited, which is currently being disputed by its owners the Russo brothers, who are former directors of the club. For more information, see here.

Mr Bassini claimed he had arranged for due diligence to be completed before he purchased Watford in 2011 but accepted that he had not used accountants to perform any checks upon the club’s finances and confirmed he was not an accountant himself.

The League highlighted that a meeting between Mr Bassini, his advisor Angelo Barrea, and the League’s director of legal affairs, chief operating officer and finance director took place on March 28 2011, where the League regulations and scrutiny of finances were explained.

Mr Bassini claims the club’s financial status and cash-flow situation was worse than expected when he took over the club so, alongside Mr Barrea, started to look into means of increasing the club’s cash-flow.

It was then that they contacted a company trading as “Good For Sport”, whose directors were Nigel Weiss and Mark Wollner.

Mr Weiss and Mr Wollner suggested the club consider ‘forward funding’, which effectively means loans secured against money being loaned or sourced from elsewhere in the future, such as anticipated part-payment from player sales or distribution of money due from the League’s Pool Account.

Such agreements are not prohibited by football’s governing bodies but they do come under the Football League’s remit and would need ratifying. Watford had used such agreements in the past and so had long-serving directors and members of staff at the club.

At the beginning of the 2011/12 season, the League introduced a regulation which meant that clubs would be placed under a transfer embargo if they agreed loans against money they were due to receive from the League Pool Account. Emails showed Mr Craig and Mr Weiss were aware of this change.

In the summer of 2010, the League also created rules, under Regulations 44 and 48, which stated forward funding must be preceded by approval from the League.

Mr Weiss met with Mr Barrea to discuss funding options on July 8 2011 and Mr Wollner wrote to Mr Barrea on August 11 with proposals. Mr Wollner then met Mr Bassini six days later and it was confirmed via email later in the day that the Hornets owner would be using their company. The issue of League regulations was not addressed at this time.

Good For Sport proposed the use of LNOC Ltd, which is wholly owned by Nicholas Francis and Lesley Francis. LNOC was incorporated in September 2010, operated out of a business centre in Egham and had not returned any accounts to Companies House at the time a search was carried out. No other significant details about LNOC was provided to the FDC and neither of the company’s owners was a witness before the panel as part of the misconduct hearings.

And importantly, the company is not a “financial institution” as defined by the Football League’s regulations, and it didn’t claim to be, so forward funding with LNOC would not have been allowed by the League.

Danny Graham was sold to Swansea City on July 1 2011 and £2.5m of the £3.5m transfer fee was paid by September 1 2011.

The remaining £1m was due in two instalments of £500,000 on January 1 2012 and March 1 2012.

Mr Weiss, Mr Wollner, Mr Bassini and Mr Barrea met on September 5 2011 and a draft letter was provided to the club representatives for them to complete and return. It was designed to accompany two promissory notes, and to be addressed to LNOC.

It also referred to a letter from the Hornets to the League which was to be held “in escrow” by Mr Weiss and would only be sent to the League in the event of default in payment by Swansea. It was dated September 13 2011.

The draft letter envisaged payments direct to LNOC, and not via the League Transfer Accounts, and the letters were both ‘executed’ by Mr Barrea on behalf of the club.

The League argued that the club must have realised it was deliberately flouting regulations by entering into this transaction due to the letter and promissory notes being held in escrow, as the governing body would have only been made aware of the agreement if there was a failure to pay – with the letter used as a threat of disciplinary consequences.

Mr Weiss apparently went to Swansea in person to collect and return the signed promissory notes, which were dated September 13 2011. At no point during this process did Watford inform the League of the arrangement and no other person within the club were asked to play a role in the events.

The documentation sent to LNOC required the signature of company secretary Peter Wastall. The FDC document explains: “Mr Wastall gave evidence and stated that he recalled having attended the club on a couple of days in mid-September 2011, specifically the 16th and the 19th.

“He had some recollection of being asked by Mr Bassini to sign documents, but stated that he did not read them and took them on trust.

“He had some recollection of signing documents for earlier player transfer funding deals and thought nothing of this. These documents were handed straight back to Mr Bassini who retained them, and Mr Wastall was not given copies.

“No evidence has been shown to us to suggest that any written record of the arrangement was placed on the files of the club.

“Apart from Mr Wastall’s limited role just mentioned, the only persons from within the club structure to play any part in the arrangement or correspondence were Mr Bassini and his representative, Mr Barrea.”

Mr Barrea is a solicitor who is a sole practitioner and had worked with Mr Bassini for ten years. He was described by Mr Bassini as a consultant and was made a signatory to the club’s bank account and on his own admission, had effectively become chief executive, although he was never an employee of the club.

Mr Bassini claimed he told the other directors about the forward funding for the Danny Graham transfer but directors Stuart Timperley, David Fransen and Andrew Wilson gave evidence stating the former owner did not discuss the arrangements with them.

LNOC paid Watford £951,041 on September 21 2011, with the company set to receive £1m. The money was not paid into the club account but that of Mr Bassini’s holding company Watford FC Limited.

The FDC said: “Whatever the reason for using that account to receive the funds, one effect of this arrangement is that no funds arrived in the club account which might have alerted the finance staff or other directors to the LNOC agreement.”

The documents do not go into detail but Mr Bassini regularly transferred money from his Watford FC Limited account intothe Hornets’ club account.

Mr Bassini and Mr Barrea gave evidence claiming they believed Mr Weiss had made all the necessary arrangements with the League, highlighting the fact Mr Weiss was a solicitor. But it is claimed Mr Weiss did not suggest he was acting as solicitor on behalf of the club.

It is claimed other members of staff at Watford first became aware of the name LNOC in December 2011 when Swansea were asked by Mr Weiss to contact the Premier League or Football League to request that the £500,000 due to Watford on January 1 2012 was paid directly to LNOC.

Swansea contacted the Premier League who subsequently spoke to the Football League, where staff were unaware of LNOC as no prior information had been provided.

The Football League passed the message on to Watford’s club secretary Michelle Ives and then head of finance Katie Wareham. The pair said they were unaware of LNOC so there was no reason why the funds should be paid to the finance company.

Swansea subsequently put the money in the Premier League Transfer Account and LNOC’s first payment was made on January 19 2012 from Watford FC Limited. The club’s board were not notified and neither were the members of staff it is claimed.

The final £500,000 was again paid to the League account by Swansea and then given to the club directly instead of LNOC, who are still waiting for the payment.

Watford wanted additional future funding following Marvin Sordell’s sale to Bolton Wanderers in January 2012 and Mr Bassini and Mr Barrea asked Mr Weiss to contact the League.

The League rejected requests for agreements with JG Funding Ltd and then Jordan International Bank as it was unclear whether the companies were the ultimate beneficiaries as per the governing body’s regulations.

The funding therefore didn’t proceed but the League were not notified of the previous arrangements with LNOC, as they would have expected.

Whilst the Swansea forward funding was being agreed, further documentation was drawn up for £1.8m of money the club were due to receive from the League’s Pool Account.

Mr Weiss and Mr Bassini both had dialogue with the League in September 2011 where it was made clear that entering into such an agreement would results in a transfer embargo.

In a conversation with the League, Mr Bassini said he would not enter into the agreement if it would result in an embargo but four days after the phone call, he entered into a forward funding arrangement with LNOC for the Pool Account money and the League were not informed.

Both Mr Bassini and Mr Wastall signed two promissory notes and other documentation on club-headed paper for LNOC, with the company secretary again signing “without reading or querying them”.

In a letter to LNOC, it was suggested once more that documentation for the Football League be held in escrow.

FDC said: “The League advances the argument that this arrangement was in the nature of a threat to Mr Bassini and the club, which would only have been effective if Mr Bassini were aware that League Regulation 19 was being broken by the nonnotification to it of the Pooling Account forward funding agreement with LNOC.”

LNOC subsequently paid Mr Bassini’s company Watford FC Limited £1.660,595 on September 26 2011. It is claimed the former owner and Mr Barrea were the only individuals from the club involved in negotiations, apart from Mr Wastall’s signatures on the documentation.

The £1.8m owed to LNOC was to be paid in two instalments, the first of which was due in February 2012.

Mr Barrea made a request to Ms Wareham for a cheque of £900,000 payable to LNOC for “SW corner works” and “stadium redevelopment”. He later added “so far as I am aware it’s a payment on account for the stand inc VAT”.

Ms Wareham raised the issue with Mr Bassini as the club account could not afford to cover the cheque and the Stanmore businessman said the funds would be transferred to cover the sum.

Mr Bassini told the FDC that when the £1.66m was loaned, it was originally for stadium redevelopment work but that existing debt and cash-flow requirements had absorbed the money by February 2012.

Mr Barrea claims to have consulted with the accountants and they said to include the payment under that heading for accounting purposes as it could be sorted out before the end of the accounting year.

Mr Bassini claimed to have told other directors about the forward funding but at the February 25 board meeting, there was no indication in the meeting’s minutes that he reminded them of the LNOC payment or used the opportunity to link the payment and the agreement.

The directors recall asking for additional information about the “development” payment, which was promised by Mr Bassini.

The former owner didn’t attend the March 14 board meeting but Mr Barrea did and because he knew of the LNOC agreement, the FDC claimed “he chose to keep that information to himself”.

The FDC added: “No evidence has been produced that suggests that the board of the club was at any time provided with the information requested of Mr Bassini and Mr Barrea – at any rate prior to the League investigations.”

Swansea paid the final Danny Graham instalment but it is claimed no arrangements were made to repay LNOC the second sum they were due. In May 2012, LNOC wrote to Swansea requesting the money and so did Mr Weiss on June 6.

Swansea then forwarded documentation to the Football League and that was the first time the governing body had seen the letter from Watford dated September 13 2011.

The League’s director of legal affairs, Mr Craig, looked into the matter and his evidence suggested the governing body had not been notified of the agreement, so he asked for a transfer embargo and a suspension of further Pool Account payments to the club.

The FDC said it relied upon and accepted most, if not all, of the evidence provided by the witnesses acting on behalf of Watford.

The Hornets’ defence started with the claim that “Mr Bassini acted without board knowledge or consent in much of what he did, and that the club was and is not bound by his actions because he was not acting in the best interests of the club in committing it to the transactions in question.”

The Hornets also argued that “LNOC was not acting in good faith in entering into both sets of forward funding transactions with the club, because it had knowledge through Mr Weiss acting as its agent that Mr Bassini was obviously acting to the detriment of the club he claimed to represent and that he could not and would not have obtained the consent of the board of directors to those transactions. “ Watford argued the transactions were void, the actions of Mr Bassini were not those of the club and therefore could not be placed in breach of the regulations.

However, the League responded with: “Whilst it did not dispute that Mr Bassini may have misled, or at least bypassed other directors, he remained the undisputed owner of the club and was at all material times a director with authority to enter into transactions of the type in question. It would follow that he was entitled to bind the club.

“The transactions he entered into on behalf of the club were not of their nature unlawful or for an improper purpose. They did however involve regulatory consequences for the club in terms of an embargo and disciplinary measures. Whilst Mr Weiss may well have known - as the League conceded - that the transactions as undertaken would place the club in breach of the regulations, that was a position which was open to the club. Moreover, Mr Weiss was not an adviser to the club, which had its own legal advisers.”

The FDC added: “This was not a situation in which it was suggested that Mr Bassini was personally enriching himself at the expense of the club. The entry into the arrangements was not plainly contrary to the best interests of the club, just because there may be some element of regulatory disadvantage to the club. The motive behind the transactions was to benefit the club by providing necessary cash-flow to fund its various activities.”

Mr Bassini’s defence was that he “did not know or understand the full detail of the League Regulations”.

The former owner also stressed he had “relied” upon Mr Weiss as his adviser and that he was entitled to do so considering Mr Weiss’ description of himself.

The FDC acknowledged Mr Bassini’s evidence was “at odds” with the Hornets as he claimed to have informed the other directors of his actions and that Mr Weiss should have notified the League. He denied receiving an email from Mr Weiss on September 20 2011 which would have “placed him on notice” about the problems with the regulations.

The documentation released today explained: “The League’s response to this defence was twofold - that knowledge of the regulations on the part of an owner and director of a league club is to be presumed, and in any event that there was ample evidence that Mr Bassini did in fact know that his actions were placing the club in breach, and that his behaviour was sufficient to demonstrate actual knowledge on his part.

“The responsibility which comes with that could not be avoided by seeking to blame a third party, particularly when that third party obviously acted for another. Mr Weiss was not the agent of Mr Bassini or any company controlled by Mr Bassini, but for LNOC, and at no time offered to or purported to advise Mr Bassini as his solicitor.”

The League “conceded” that the FDC could not find Mr Bassini guilty of misconduct if the club were not punished as well because “if there were no breaches by the club, there could be no misconduct by Mr Bassini”.

Watford had argued the transactions showed Mr Bassini was acting for his own benefit but that was rejected by the FDC.

The commission accepted the state of Watford’s finances were worse than he initially expected and that the club may have been in jeopardy had the cash-flow not improved.

The FDC added: “We were somewhat surprised at the wholly inadequate nature of the “due diligence” performed prior to his purchase, but that was a commercial decision which was his to take.

“Our conclusion is that Mr Bassini believed that he was acting, in entering into the forward funding transactions on behalf of the club, in the club’s best interests.”

Further down in the document, it adds: “If Mr Bassini is deemed to have failed in his fiduciary duties to the club, then the club would be entitled to take action against him. That is not what this FDC has to decide upon and we make no finding in that regard. It does however mean that recourse against Mr Bassini is available to the club if it views his actions as having failed it.”

A large part of Mr Bassini’s defence relates to him being new to football and that he had no knowledge of the regulation’s ‘intricacies’. However, the FDC highlight the previous meeting with several League officials and stated copies of the regulations would have been available to him and the club.

The FDC highlighted the “reservoir of skill and experience among several long-standing directors and staff members” at Watford who could have provided advice and guidance.

Mr Bassini claimed there was “resentment and obstruction from that quarter” but the commission stressed that if it was the case, then he should have sought independent advice.

It is claimed the Stanmore businessman’s only due diligence when he bought Watford was his use of solicitors Howard Kennedy and the club also had access to the firm SA Law, so the FDC described his failure to seek independent legal advice regarding the regulations as “inexcusable”.

On Mr Barrea, it said he “had no football experience, denied he was acting as a lawyer, and does not seem to have provided any clearly identifiable expertise”.

The FDC claim “neither Mr Bassini or Mr Barrea told the truth” regarding seeing an email from Mr Weiss in September 2011, which highlighted the potential arguments the owner should raise with the League over the agreements.

On the claims of notifying the other Watford directors, the FDC findings stated: “We find as a fact that Mr Bassini did not, as he claimed, inform his fellow directors of the arranged forward funding from LNOC. We found the evidence of Mr Fransen, Professor Timperley and Mr Wilson to be cogent and persuasive on this point.

“There has been no evidence placed before us as to why the three men should conspire to lie about this topic, whereas Mr Bassini has an obvious reason for claiming that he had told them. In addition, we would have expected any information of the type which Mr Bassini says he passed to them to be followed up by some written correspondence and to be recorded in the board minutes, but it was not.”

It continued: “If that were not sufficient, our view is reinforced by Mr Bassini’s assertion in evidence that he had informed Mr Fransen about the forward funding by telephone at Mr Fransen’s home in Switzerland.

“Mr Barrea, who had apparently not been present when that evidence emerged, was to say on the second day of our hearing that he had been present when Mr Fransen was told at a football match “around a table”. This contradiction, asserted with certainty, left us with the very clear impression that Mr Barrea was prepared to say whatever he thought would assist Mr Bassini, without concern for the truth.”

The fact Mr Wastall signed the documents did not amount to disclosure to the board in the commission’s view. It said Mr Wastall signed documents without reading them “simply trusting to the integrity of Mr Bassini”.

The FDC said Mr Wastall did not read most or any of the documents he was asked to sign and suggested this indicates “a failure to grasp the role and obligations of a company secretary”.

Mr Wastall highlighted the fact he was “an occasional visitor” to the club who worked around 40 to 50 hours per month. He said he wouldn’t necessarily know if a document had already been submitted to the board for approval.

The FDC had strong words for Mr Bassini and Mr Barrea when it made its judgement.

It described the information provided in the February 2012 board meeting as “false and misleading” – adding the commission believed the pair intended for it to be so.

It followed that up by saying the claims that the £900,000 LNOC payment was being used for stadium redevelopments, when it was used for cash-flow, was “a smoke-screen to hide the earlier transaction from the board”.

It added: “The secrecy and deception practised by Mr Bassini and Mr Barrea are not, of course “misconduct” per se, even if they constitute disreputable behaviour. They are pointers, however, to the state of mind of Mr Bassini, and factors which we must weigh in the balance when considering the explanations given for his behaviour. They are in our view clear indicators that he knew that his actions placed the club in breach of the regulations, and that he chose to hide this from his staff and fellow directors.”

The FDC stated it was satisfied that misconduct could be demonstrated because at the very least Mr Bassini showed a “reckless disregard of the regulations” relating to the two transactions and believed he took “positive steps” to keep the regulation breaches hidden from the League and his colleagues.

The commission added: “We are satisfied that Mr Barrea knowingly and actively assisted him in this, although Mr Barrea is not subject to any “misconduct” charge, precisely because his position at the club was not regularised.”

The League withheld £1.2m of the transfer money Watford were due following the sale of Adrian Mariappa due to the ongoing situation with LNOC.

The Premier League were reimbursed the £606,302 it paid Swansea City so the club could discharge its liability to LNOC.

The other £593,698 was retained to offset potential liability to LNOC but it was gradually released back to the Hornets as it withheld a further £900,000.

Watford have an ongoing issue with LNOC and the League have withheld £900,000 in payments and says it is “considering whether to intervene in the current litigation between the two parties”.

Both Watford and Bassini have to pay their own legal costs and the League’s costs were split, with Bassini being ordered to pay 75 per cent and Watford 25 per cent.