Leeds United face uncertain future after Football League blocks takeover

It was not so long ago that Leeds United were one of the most exciting teams in English football. Leeds were a team with a seemingly perfect mix of exciting products of the Leeds academy and players signed from other British clubs for what were, at the time at least, sizable fees. They seemed to be poised to be in a position to be challenging for the Premier League title in years to come. In 2001, they even reached the semi-finals of the Champions League.

However, it soon became apparent that Leeds’ on-field performances had come at the cost of any sort of financial stability. Leeds were spending big to chase the dream of Premier League and Champions League success, with some extreme profligacy in the transfer market coupled with some rash spending in other areas of the club.

That spending was just about sustainable, so long as Leeds kept qualifying for the Champions League, and receiving the millions in TV revenue that qualification brought. Unfortunately, that Champions League qualification didn’t last long.

In the season where Leeds made the Champions League semis, they finished fourth in the Premier League. In those days fourth place didn’t bring a Champions League place (that came in the following season). The following season, Leeds were hoping to get back into the Champions League. They spent a lot of time at the top of the league, but collapsed in the second half of the season and eventually finished fifth, again one place below the Champions League places.

It became apparent that Leeds were in terrible financial shape, and players started to be sold to make up the shortfall in cash. Robbie Keane went for £7m, much less than he was signed for, and Rio Ferdinand was sold for a then-British transfer record £30m.

The next season, the extent of Leeds’ financial problems became clear. The club lost £49m, and was estimated to be over £78m in debt. The team which had challenged for the title just the previous season was broken up, with many players leaving for far less than they were worth, and Leeds finished 15th in the league, narrowly avoiding relegation.

By the end of the 2003-04 season, Leeds had been relegated, and were in financial freefall as a result of their overspending (‘doing a Leeds’ has entered the lexicon as a phrase describing financial mismanagement taking a club to the brink of destruction).

As a result of Leeds’ spiralling debts, they sold their Elland Road stadium, and Thorp Arch training facility. Even that wasn’t enough, and Leeds seemed to be heading for administration, when a consortium headed up by former Chelsea owner Ken Bates stepped in.

Leeds almost made it back to the Premier League in 2006, when they lost the playoff final, but the next season suffered the ignominy of being relegated to League One, the third tier of English football. Leeds’ financial problems hadn’t eased in that time frame, and they entered administration.

Bates bought the club out of insolvency, but Leeds were handed a fifteen point penalty because Bates’ purchase of the club had violated League rules on insolvency. In the meantime, things had gone from bad to worse on the pitch, with Leeds repeatedly failing to get out of League One. In fact, it took until 2010 for Leeds to gain promotion back to the Championship.

In 2012, Bates, who had become a deeply unpopular figure amongst Leeds fans, who accuse him of terrible financial mismanagement, sold the club to GFH Capital, a Bahraini-owned company based in Dubai. The Leeds fans hoped that this would mean an influx of money into the club, à la Manchester City. Those hopes turned to dust almost immediately as Leeds sold their top scorer, Luciano Becchio to Norwich (who have also bought Robert Snodgrass, Bradley Johnson and Jonny Howson from Leeds in recent seasons); then, only a few weeks after buying the club, GFH Capital announced they were in talks to sell a majority share, a sale which didn’t pan out, but didn’t inspire confidence that GFH Capital were at Leeds for the long haul.

Towards the end of last season, with Leeds having a disappointing season, Leeds fired Neil Warnock and replaced him with Brian McDermott, who was somewhat harshly fired from Reading a few weeks before. This led to a weird situation in Leeds where the head coach of two of the city’s major sports teams, Leeds United and Rugby League side Leeds Rhinos, were both named Brian McDermott (and, also, both teams had a winger called Ryan Hall!).

Despite the takeover, Leeds’ finances were still bad, with the club losing an estimated £1m a month. Due to the Football League’s own Financial Fair Play rules, which means for the 2014-15 season, clubs cannot lose more than £8m (clubs can lose £3m, and directors can put up to £5m in to cover losses), or they will face a transfer embargo.

GFH were looking to sell, and in late January, following the collapse of a possible sale to GFH director David Haigh, Massimo Cellino, the owner of Serie A side Cagliari, emerged as a likely buyer of a 75% stake in the club.

The takeover descended into farce almost immediately, as on transfer deadline day, McDermott was fired by a lawyer acting for Cellino, even though the Italian hadn’t completed his takeover; and the CEO and a lot of the club executives were fired too. Nobody really knew what was happening; one story alleged that Cellino tried to sign players before the deadline, but none of those transfers went through because there was nobody around to complete the required paperwork as he’d fired them all!

The fans reacted with fury at the news, and two key sponsors of the club immediately pulled their money out in protest about what was happening.

Three days later, McDermott was reinstated, with Cellino insisting that his lawyer had acted without his consent, and he had no plans to replace McDermott with former Internazionale and Middlesbrough defender Gianluca Festa.

Cellino’s potential takeover was also complicated by the fact he was under investigation in Italy for charges of tax evasion. Cellino had a previous conviction for false accounting, but that would not have immediately caused him to fail the Football League’s ‘fit and proper persons test’, as a sufficient length of time had passed since his conviction.

Last week, a court in Italy found him guilty of not paying import duty on a yacht, and fined him 600,000 euros. Today, the Football League ruled that Massimo Cellino had failed its ‘fit and proper persons’ test and, as a result, will not be allowed to take over Leeds United. A Football League statement read:

“Having fully considered the matter, the Board agreed unanimously that the decision of the Italian Court does constitute a disqualifying condition under its Owners’ and Directors’ Test. The relevant disqualifying condition being that Massimo Cellino has been convicted of an offence involving acts that would reasonably be considered to be dishonest.”

Cellino has 14 days to appeal this decision.

Under Italian law, a defendant who appeals their conviction is considered innocent until their appeals are exhausted. So, Cellino could argue that, as an innocent man (at least for the time being), he should not have failed the fit and proper persons test, but he has previously stated that he would respect the Football League’s decision, no matter what that decision was.

This decision presents a huge problem for Leeds, as it is estimated that Cellino has put in about £10m into the club so far, indeed, Cellino’s money has been propping up the club, and he’s going to want that back if his takeover doesn’t happen, which seems likely at present.

So, what will happen to Leeds now?

About the time Cellino’s proposed takeover was announced, there was another interested buyer, a consortium, which could possibly try to take over the club. However, this consortium’s potential involvement was met with a lukewarm reception from Leeds fans due to concerns about the level of funding they could provide.

The nightmare scenario for Leeds could be another spell in administration. I don’t think that’s too likely, as even though GFH were trying to sell the club months ago, it still makes more sense for them to keep putting money into the club and sell it, rather than put the club in administration and lose any chance of getting any money back.

So, once again, Leeds United faces an uncertain future. The financial problems which have bedevilled them for over a decade now, show no signs of abating. Sadly, it seems as though the off-field turmoil and uncertainty has had an effect on the team, who have won only twice in the last 16 matches and seen their playoff aspirations all but disappear.