The £750k and Khaled's Response

55&counting · Jan 21, 2022

Sheriff said: ↑

4) A BFCST update on the court case and other issue - 16/09/20 - BFCST Court Case Update

This article was written by Gally on the BFCST website, and provided a great deal of background information based on his discussions with a "club insider". Gally is obviously aware of who this is, and I've made no enquiries of him as to who this might be. I also don't expect that Gally should be expected to reveal the source. The only assumption I make here is that the source is reliable, and this would appear to be confirmed in the level of additional information provided within the article which, to my knowledge, has never been challenged by anyone as being inaccurate in any way.

This article gives information on the reduction in price reference in the Cryne statement. Originally, a sum of £6m would have been due if BFC had stayed up under Morais or been promoted from League One at the first attempt. This was then renegotiated, during Stendel's League One campaign, to be a £3.5m payment which was not subject to winning promotion. This amount is made up of the £750k payment on which we are focused, with the unpaid element being the £2.75m which is subject to the legal action.

The important point to note for the purposes of this post, is that everything within the statement is in the context of monies and liabilities relating to BFC Investment Company Ltd, not the football club.

So, taking the 4 sources as a whole, 3 of them are consistent with the debt being one related to the investment company, whilst the other (being the one issued directly via the football club) references the football club, including incorrectly identifying it as being the party subject to the court case.

Based on an overall assessment of this, my conclusion is that I would have concerns with regard to the accuracy of any reference coming internally from BFC senior management referencing 'the football club' as being conclusive evidence that this is the case contractually. This includes the response from Khaled, as it was a pre-prepared statement provided to him from someone within the club (hence my earlier query as to who exactly was the source of this statement).

Let's Assume That BFC Is The Liable Party
Arguably, all of the above could be regarded as speculation, which is why I've tried to reference it back to source data as far as possible to at least provide some context to it.

However, let's also take Khaled's response at face value as being accurate and think about this in more detail.

The very first part of his response referred to this, almost dismissively, as something that had been agreed 4 years ago (i.e. at the time the club was purchased). We now know that the contingent consideration originally agreed was £6m, and that the figure was only negotiated down to £3.5m at a much later date.

Let's think about that in the context of Barnsley Football Club Limited being the entity that is liable to make that payment, as is being claimed. This would mean that the original agreement made with Patrick Cryne, prior to his death, included a £6m liability potentially becoming payable by the football club based on it simply retaining Championship status, or upon being relegated and winning back promotion (i.e. simply doing nothing more than what it had achieved throughout his ownership and for which he'd had to invest several million pounds of his own money, in the form of loans to the club). Regardless of anyone's thought on how Patrick ran the club I would argue that even his fiercest critics would not believe that he would agree to sell it with such a massive contingent liability hanging over it.

Then we also need to consider the same agreement from the perspective of outside investors who's operating model we now know relied on the club being financially self-sustaining without any injection of capital from them once purchased. Their due diligence process (which we already know failed to turn up basic data about the covenants on Oakwell) would surely have identified that a £6m liability in those circumstances was not consistent with being able to sustain that model. A basic cash-flow analysis would have told them that and would undoubtedly have formed part of the due-diligence process.

So, if we apply the logical argument of this relating an agreement made 4 years ago, as Khaled states, then there is simply no logical reason as to why either party would be incentivised to have agreed for such a substantial sum to have been paid by the football club, in the certain knowledge that this would have a hugely adverse impact on the football club operations.

A Bit More Accounts Analysis
The final piece of information I want to review to scrutinise Khaled's statement is the content of BFC's own accounts, in particular with regard to the Contingent Liabilities shown within them.

Just by way of background explanation, for non-financial readers, a contingent liability is something that you typically have to disclose within your accounts if there's a potential for you to have to pay a liability at a future date, subject to a certain event taking place which triggers it. If the event doesn't occur, then no such liability arises, so it is treated differently to a debt which is certain as to whether it will fall due.

BFC's accounts regularly include a statement on contingent liabilities, as a very good example of these are payments that would fall due to other clubs due to them having "retained an interest in the future" of a player that we have purchased from them. This, as we all know, is a much used phrase when BFC sell players, but we also buy them subject to similar clauses. I've included below the statement from BFC accounts for the year-ending 31/05/18, which are the first set of accounts published after the takeover.

Now, unless I'm mistaken (in which case I fully anticipate that @Archerfield will be able to point this out), but an agreement for the club requiring it to pay a potential amount of up to £6m based on it's on-field performance, would also be something which it would need to disclose as a contingent liability. However, there isn't any such disclosure in those accounts.

Taking the argument further, I considered whether this might be due to the qualifying event of immediate promotion being considered too remote at the time these accounts were published. However, this would not have applied to the accounts for the following year, to 31/05/19, which were published after we had been promoted back to the Championship, at which point the £3.5m liability would have been certain.

Again, I can see no reference to any contingent liability relating to the purchase in the accounts to 31/05/19. Potentially, given that the debt had now become certain, this could be due to the liability being recorded as a normal liability falling due. However, there is nothing within the creditors analysis for that year to indicate a liability of £3.5m or £2.75m within the figures. It is relevant to note that these accounts were signed on 22 February 2019, which pre-dates the subsequent dispute over payment (which originated on 27/1/20 according to BFC's own statement regarding it) so any argument that the debt wasn't recognised due to the dispute would not have been relevant at this stage.

Consequently, from a purely accounting perspective, I can find no corroborating evidence in the club's published accounts which would support the fact that this debt is a liability of Barnsley Football Club Limited, as is claimed. If this did ultimately prove to be the case it would raised serious questions as to the accuracy of the published accounts and the subsequent audit of them. I have no reason to question the professionalism of Robert Zuk or Gibson Booth (the auditors) in this regard, so can only assume that the published accounts are accurate.

Conclusion
I think it's fair to say that I've been somewhat at the forefront of the criticisms regarding the £750k payment to date. However, I have attempted within this post to try to provide an objective appraisal of the comments made by scrutinising them against other sources of information, as far as possible.

Having done so, based on the available information, I find it extremely difficult to believe that Khaled's comments regarding the £750k payment as being an agreed liability of Barnsley Football Club Limited are accurate.

In fact, should this have been the case, then I have potentially greater concerns regarding the running of the football club, given that such a liability was agreed in the first place.

Consequently, I think we need to continue to apply pressure for the club to provide absolute clarity on this matter. The only person within the football club who is likely to be able to present the facts in an unambiguous and impartial way would be Robert Zuk, and my suggestion would be that BFCST now make representations for him to do so in light of the continuing ambiguity regarding this, so that we can get absolute clarity on the matter so that, as Ben stated in the interview we can "put this to bed" on behalf of supporters.
Click to expand...

As many others have said Curt....
Take a bow.
Thoroughly researched and articulated.
You are clearly a man who cares deeply about our football club and your war and peace on the 750 is testament to that.

Sheriff · Jan 21, 2022

55&counting said: ↑

As many others have said Curt....
Take a bow.
Thoroughly researched and articulated.
You are clearly a man who cares deeply about our football club and your war and peace on the 750 is testament to that.
Click to expand...

Thanks Steve.

You will know better than most that the biggest wrench to not renewing will be giving up my seat and the 'Oakwell family' who sit around it.

RedLeader21 · Jan 21, 2022

Sheriff said: ↑

4) A BFCST update on the court case and other issue - 16/09/20 - BFCST Court Case Update

This article was written by Gally on the BFCST website, and provided a great deal of background information based on his discussions with a "club insider". Gally is obviously aware of who this is, and I've made no enquiries of him as to who this might be. I also don't expect that Gally should be expected to reveal the source. The only assumption I make here is that the source is reliable, and this would appear to be confirmed in the level of additional information provided within the article which, to my knowledge, has never been challenged by anyone as being inaccurate in any way.

This article gives information on the reduction in price reference in the Cryne statement. Originally, a sum of £6m would have been due if BFC had stayed up under Morais or been promoted from League One at the first attempt. This was then renegotiated, during Stendel's League One campaign, to be a £3.5m payment which was not subject to winning promotion. This amount is made up of the £750k payment on which we are focused, with the unpaid element being the £2.75m which is subject to the legal action.

The important point to note for the purposes of this post, is that everything within the statement is in the context of monies and liabilities relating to BFC Investment Company Ltd, not the football club.

So, taking the 4 sources as a whole, 3 of them are consistent with the debt being one related to the investment company, whilst the other (being the one issued directly via the football club) references the football club, including incorrectly identifying it as being the party subject to the court case.

Based on an overall assessment of this, my conclusion is that I would have concerns with regard to the accuracy of any reference coming internally from BFC senior management referencing 'the football club' as being conclusive evidence that this is the case contractually. This includes the response from Khaled, as it was a pre-prepared statement provided to him from someone within the club (hence my earlier query as to who exactly was the source of this statement).

Let's Assume That BFC Is The Liable Party
Arguably, all of the above could be regarded as speculation, which is why I've tried to reference it back to source data as far as possible to at least provide some context to it.

However, let's also take Khaled's response at face value as being accurate and think about this in more detail.

The very first part of his response referred to this, almost dismissively, as something that had been agreed 4 years ago (i.e. at the time the club was purchased). We now know that the contingent consideration originally agreed was £6m, and that the figure was only negotiated down to £3.5m at a much later date.

Let's think about that in the context of Barnsley Football Club Limited being the entity that is liable to make that payment, as is being claimed. This would mean that the original agreement made with Patrick Cryne, prior to his death, included a £6m liability potentially becoming payable by the football club based on it simply retaining Championship status, or upon being relegated and winning back promotion (i.e. simply doing nothing more than what it had achieved throughout his ownership and for which he'd had to invest several million pounds of his own money, in the form of loans to the club). Regardless of anyone's thought on how Patrick ran the club I would argue that even his fiercest critics would not believe that he would agree to sell it with such a massive contingent liability hanging over it.

Then we also need to consider the same agreement from the perspective of outside investors who's operating model we now know relied on the club being financially self-sustaining without any injection of capital from them once purchased. Their due diligence process (which we already know failed to turn up basic data about the covenants on Oakwell) would surely have identified that a £6m liability in those circumstances was not consistent with being able to sustain that model. A basic cash-flow analysis would have told them that and would undoubtedly have formed part of the due-diligence process.

So, if we apply the logical argument of this relating an agreement made 4 years ago, as Khaled states, then there is simply no logical reason as to why either party would be incentivised to have agreed for such a substantial sum to have been paid by the football club, in the certain knowledge that this would have a hugely adverse impact on the football club operations.

A Bit More Accounts Analysis
The final piece of information I want to review to scrutinise Khaled's statement is the content of BFC's own accounts, in particular with regard to the Contingent Liabilities shown within them.

Just by way of background explanation, for non-financial readers, a contingent liability is something that you typically have to disclose within your accounts if there's a potential for you to have to pay a liability at a future date, subject to a certain event taking place which triggers it. If the event doesn't occur, then no such liability arises, so it is treated differently to a debt which is certain as to whether it will fall due.

BFC's accounts regularly include a statement on contingent liabilities, as a very good example of these are payments that would fall due to other clubs due to them having "retained an interest in the future" of a player that we have purchased from them. This, as we all know, is a much used phrase when BFC sell players, but we also buy them subject to similar clauses. I've included below the statement from BFC accounts for the year-ending 31/05/18, which are the first set of accounts published after the takeover.

Now, unless I'm mistaken (in which case I fully anticipate that @Archerfield will be able to point this out), but an agreement for the club requiring it to pay a potential amount of up to £6m based on it's on-field performance, would also be something which it would need to disclose as a contingent liability. However, there isn't any such disclosure in those accounts.

Taking the argument further, I considered whether this might be due to the qualifying event of immediate promotion being considered too remote at the time these accounts were published. However, this would not have applied to the accounts for the following year, to 31/05/19, which were published after we had been promoted back to the Championship, at which point the £3.5m liability would have been certain.

Again, I can see no reference to any contingent liability relating to the purchase in the accounts to 31/05/19. Potentially, given that the debt had now become certain, this could be due to the liability being recorded as a normal liability falling due. However, there is nothing within the creditors analysis for that year to indicate a liability of £3.5m or £2.75m within the figures. It is relevant to note that these accounts were signed on 22 February 2019, which pre-dates the subsequent dispute over payment (which originated on 27/1/20 according to BFC's own statement regarding it) so any argument that the debt wasn't recognised due to the dispute would not have been relevant at this stage.

Consequently, from a purely accounting perspective, I can find no corroborating evidence in the club's published accounts which would support the fact that this debt is a liability of Barnsley Football Club Limited, as is claimed. If this did ultimately prove to be the case it would raised serious questions as to the accuracy of the published accounts and the subsequent audit of them. I have no reason to question the professionalism of Robert Zuk or Gibson Booth (the auditors) in this regard, so can only assume that the published accounts are accurate.

Conclusion
I think it's fair to say that I've been somewhat at the forefront of the criticisms regarding the £750k payment to date. However, I have attempted within this post to try to provide an objective appraisal of the comments made by scrutinising them against other sources of information, as far as possible.

Having done so, based on the available information, I find it extremely difficult to believe that Khaled's comments regarding the £750k payment as being an agreed liability of Barnsley Football Club Limited are accurate.

In fact, should this have been the case, then I have potentially greater concerns regarding the running of the football club, given that such a liability was agreed in the first place.

Consequently, I think we need to continue to apply pressure for the club to provide absolute clarity on this matter. The only person within the football club who is likely to be able to present the facts in an unambiguous and impartial way would be Robert Zuk, and my suggestion would be that BFCST now make representations for him to do so in light of the continuing ambiguity regarding this, so that we can get absolute clarity on the matter so that, as Ben stated in the interview we can "put this to bed" on behalf of supporters.
Click to expand...

Thank you so much for considering and writing all this. It provides a logical path through a very intricate web of information.

The only logical conclusion to my mind is that Chien, Conway and Co have not paid their debts and are now trying to fob that off on the club, which is unacceptable.

The £750k and Khaled's Response

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The £750k and Khaled's Response

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