Managers face huge losses over film deals
Date: November 22, 2015
Originally featured in The Sunday Times
Like their players, club bosses stand to lose fortunes over schemes the taxman now has in his sights
SOME of football’s leading managers face potential losses running into millions of pounds after investing in film schemes and property deals recommended by two financial advisers operating at the heart of the game.
Three former England managers — Howard Wilkinson, Steve McClaren and Stuart Pearce — and Martin O’Neill, the Republic of Ireland manager, are among investors in film schemes that are being challenged by HM Revenue & Customs (HMRC).
Leaked documents seen by The Sunday Times reveal substantial investments that could trigger huge tax bills if the film schemes are successfully challenged.
The documents show that other managers, including Dave Bassett, who is best known for taking Wimbledon to the top tier of English football from the then Fourth Division, invested in property deals in Spain and Florida that have suffered significant losses.
The managers were advised by David McKee and Kevin McMenamin. The documents show that their company, Kingsbridge Asset Management, made more than £1m in commission on the managers’ investments over a four-year period before the investments failed or were challenged by the tax authorities.
Stuart Cotton, a former HMRC tax inspector who runs the Investor-Rescue website, estimated the managers’ losses at up to £20m.
Cotton described the situation faced by many former Kingsbridge clients as financial “carnage”.
He added: “It is clear that the advisers’ repeated failure to grasp the consequences rendered much of their advice inept and many of the products were highly inappropriate and mis-sold. Significant specialist tax expertise now has to be deployed in order to unwind this mess.”
The Sunday Times revealed this month that scores of footballers, including Rio Ferdinand and Wayne Rooney, face estimated total losses of £100m after following investment advice provided by McKee and McMenamin.
Kevin Campbell, a former Arsenal and Everton striker who is fighting bankruptcy, claims he and other players have been victims of “appalling mis-selling”.
McKee and McMenamin say that the allegations, which they strongly deny, have been made by disgruntled former clients.
The two men say they warned clients about the risk of schemes “without exception” and their clients “were always advised of the suitability and risks . . . and were advised that such investments needed to be part of a balanced portfolio”.
One veteran football coach who invested in a film partnership following advice from Kingsbridge said, however: “It was sold as a government scheme to help the British film industry. I was never told that it might be challenged by the Revenue. If that had been explained to me properly there is no way I would have taken out that investment. Now we are all suffering.”
It is understood that another manager, who is also a former England international player, has made a formal complaint about the investment advice provided by the company.
Kingsbridge, which in- vested and managed almost £400m of its clients’ money, including loans, boasted in 2005 of representing 15% of Premier League players and dozens of leading coaches.
Not all the clients are disgruntled. David O’Leary, the former Leeds United manager, spoke up for McKee last week.
When asked by The Sunday Times about a large investment indicated in the leaked documents, O’Leary said: “Your figures are totally incorrect. I am still a client of David McKee and happy to be so.”
Wilkinson — who has been chairman since 1992 of the League Managers Association (LMA), which had a “business partnership” with Kingsbridge’s holding company — confirmed that he had received a large sum in part compensation for a financial loss.
The documents show that in 2003 McKee wrote to Wilkinson to tell him that Kingsbridge would pay him more than £97,000 following his agreement to hold on to his Kingsbridge shares “during a falling market”.
The letter said: “It is recognised that the decision not to sell was made solely in the best interest of the LMA’s business partnership with Kingsbridge Holdings.”
Wilkinson, 72, who was caretaker-manager of England for two games and led Leeds United to the first division title in 1992, said this weekend there was “nothing untoward or wrong” about the agreement. It had partly compensated him “for a financial loss for which Kingsbridge accepted responsibility”.
The LMA’s website once described Kingsbridge as “synonymous with financial management in the world of football for many years”. Until this year, the website carried endorsements of it by Wilkinson, O’Leary and Bassett.
Wilkinson wrote: “In my position as chairman of the LMA, Kingsbridge’s support has been vital to me. I’ve put my trust in Kingsbridge and they play a major part in my team.”
Richard Bevan, chief executive of the LMA, said this weekend that it“does not provide financial services or advice to its members and nor is it authorised to do so”.
He said the link between the LMA and Kingsbridge ended in 2004, adding: “To the best of my knowledge the LMA have not taken down any pages or references during my time at the LMA since 2008. However, if I had seen a reference to Kingsbridge on the LMA website I would have asked for this to be removed as we do not have a relationship with them.”
McKee and McMenamin became familiar faces in and around football grounds in the early 1990s and recommendations for Kingsbridge spread largely by word of mouth.
The film schemes offered by Kingsbridge involved clients putting in some of their own money which was then supplemented with bank loans. These investments generated tax rebates which are being challenged by HMRC.
As well as the film schemes, some managers invested in property ventures recommended by McKee and McMenamin.
O’Neill, whose Republic of Ireland team qualified last week for the Euro 2016 tournament, bought five condominiums and two boat docks in Charlotte Harbor, a property venture in Punta Gorda, Florida, in 2003. He faces losses of $2.3m on his American properties at current prices, according to US public records .
Pearce, who managed Manchester City and was later caretaker manager of England for a game in 2012, also invested in Charlotte Harbor, as did Wilkinson and John Rudge, who managed Port Vale for 16 years.
Wilkinson also bought a Florida boat dock for $70,000. The moorings are now regarded locally as worthless after a land dispute.
McKee and McMenamin say they both personally acquired property in Charlotte Harbor on the same terms as their clients. It is understood that their investment has also fallen.
O’Neill also bought a flat in Monte Resina, an apartment block in the hills above Marbella, Spain, on the advice of Kingsbridge. It is understood that the value of the Spanish investment has since fallen more than 50%.
A spokesman for the two advisers said: “David McKee and Kevin McMenamin have a 25-year career track record offering financial advice and guidance to over 1,000 satisfied clients, which has only been possible through maintaining the highest levels of integrity and trust.
“Both Kevin and David refute any suggestion to the contrary. In particular, they deny in the strongest possible terms that their interests have sat anywhere other than alongside their clients. Neither have ever sought to benefit financially at the expense of those valued clients.
“They were entirely transparent and reject any notion that clients were ever misled with regards to risks associated with specific investments.”
With the exception of O’Leary and Wilkinson, none of the managers contacted by The Sunday Times wished to comment on the record.
Reuben Berg, a senior commercial litigator, said: “The Sunday Times investigation supports our continuing concerns around the general sales culture of IFAs [independent financial advisers] in relation to financial products and services, including tax schemes.”