Part 1 - Part
3 - Part 4 - Fixtures
The financial crisis that engulfed Leeds United Football Club
at the start of the 21st Century is one of the most amazing stories
ever of money in football.
The April 2004 edition of Four Four Two magazine
contained a detailed and in depth analysis of the story by Chris
Britcher, which painted a tale of misjudgement, negligence and
ineptitude beyond belief, and is reproduced here in full, sickening
February 5 2003. In the upstairs of a crowded Leeds
city centre pub, Leeds United fans have gathered to hear news
of the club's emerging financial dilemma. Dr Bill Gerard, a professor
at the Leeds University Business School, has been invited by the
Leeds United Independent Fans Association to provide his expert
analysis of the problem and address the audience.
The crowd of several hundred are concerned. The team's form has
slumped and key players are being sold. What is more, the financial
situation at the club is becoming increasingly serious.
Gerard is a season-ticket holder and small shareholder in the
club he has followed since moving from Glasgow in the '70s. His
expertise in economics, and football finance in particular, has
made him well qualified to explain what is going on.
back to top
Just before he is due to appear, he is handed a letter, signed
by the club's operations director David Spencer. Having worked
for the club on a number of issues over the years, he assumes
it is reminding him to respect confidentiality agreements he has
signed. Gerard, who had no intention of breaching such terms,
duly opens the envelope.
To his surprise, it is not a gentle reminder, but a stark warning:
should he decide to use this platform to suggest that the sale
the week before of Jonathan Woodgate to Newcastle United was a
result of financial problems at the club, he will be sued.
Gerard is stunned and insulted. His speech is centred on publicly
released documents. His speech will pull no punches. His speech
warns of impending apocalypse.
One year on, events have proved him absolutely right. So just
how did Leeds United end up in the perilous position they find
In 1996, thanks to the summer's Euro 96 tournament,
football bubble was still being inflated. With Sky money buoying
the marketplace, and transfer fees promising high returns on top
talent, owning a leading football club seemed like route one to
untold riches - especially if it was led by successful businessmen
who could exploit the numerous revenue streams available.
Yet for Leeds United the past three years had been a struggle.
The Championship-winning team of 1991-92 had not only failed to
build on victory but slipped away.
The fans were growing restless, and after Leeds lost 3-0 to Aston
Villa in the 1996 Worthington Cup final, the man who had led them
to Championship glory, Howard Wilkinson, found himself being booed
by Leeds fans at Wembley.
Later that summer a small but ambitious media rights company
called Caspian, whose portfolio included the rights to Paddington
Bear and The Wombles, identified Leeds as a perfect example of
where a bit of investment and a buoyant market could result in
After checking out a number of other clubs, Caspian chairman
Chris Akers and his partners, Jeremy Fenn and former QPR chairman
Richard Thomson, presented the club's owners Bill Fotherby, Leslie
Silver and Peter Gilman with a £16m takeover proposal. The deal
Caspian set about revolutionising the club, heralding their arrival
as a 'new dawn' for the club. Said Fenn at the time: "The club
wasn't in the best shape when we bought it. Like a lot of football
clubs it was populated by people who were friends of friends;
there was no discernible management structure."
Although many fans were anxious about the takeover, the Caspian
plan was grounded in sound business sense. Build the club up slowly
but surely, increase revenue streams off the pitch by investing
in Elland Road, and then allow profits to be sensibly spent on
building a strong team both on the pitch and in the boardroom.
back to top
That August, Caspian took the club public, changing its name
to Leeds Sporting to reflect a multi-faceted future. Floating
on the stock exchange is a good way of raising funds in the short
term, securing equity in the long term and becoming more transparent:
a public limited company must publish its accounts and make key
news and developments that may impact on its share price available
to the marketplace. As a result of the greater transparency and
assumed tighter business discipline, banks and lending institutions
are more likely to do business. It also gave Leeds United fans
the chance to own a piece of the club - albeit a sliver.
Said Caspian chairman Chris Akers at the time: "I took the view
we had to build a broader base and only those clubs which had
the development potential on site would be capable of that. They
had to be big sites, big brands with the opportunity to build
something beyond pure football." For Leeds that meant turning
the Elland Road site into a major commercial hub, with a 250-bed
hotel, entertainment and leisure facilities, a conference centre
and even a hockey pitch to expand the sports platform.
But for many fans, Howard Wilkinson was not a name that sprang
to mind when you considered the idea of a new dawn. Despite assurances,
his time at the club was running out. When Caspian first took
over it gave him a modest kitty to prepare for the 1996-97 season.
Among those Wilkinson lured to Leeds were a young Lee Bowyer from
Charlton for £2.6m and goalkeeper Nigel Martyn for £2.25m from
Crystal Palace. Both were to play key roles for the club. One
would be instrumental in one of the key moments in the club's
long history and play a significant role in the biggest crisis
it has ever suffered. The other just kept goal.
But the new season continued in much the same vein as the last,
and after a thumping 4-0 home defeat by a Cantona-inspired Manchester
United, the P45 was dug out of the filing cabinet and presented
to Wilkinson. George Graham was drafted in to take the reins -
his first managerial position since leaving Arsenal in disgrace
following the bung scandal.
Though Graham transformed a leaky defence, his team closed up
at the other end, too, scoring just 28 goals in 38 league games
and ending in 11th place. The fans, sensing this cautious approach
was worth their patience, remained positive.
Off the pitch, the new management team were taking things equally
cautiously. Caspian knew a sensible approach to the books would
provide a firm footing for investment and scope for redevelopment
of the Elland Road site. They had also appointed a long-time Leeds
United board member to the position of chairman. Peter Ridsdale,
a man well known locally, grasped his new position with gusto.
Finally he was in a position to really shape the future of his
beloved Leeds. He was charismatic, enthusiastic and had an uncanny
ability to make people see things his way. A former managing director
at Burton's Top Man chain, he was vital to securing sponsorship
from the retail brand. He sold himself to the supporters as a
life-long fan, but crucially one with strong business sense in
whose hands the club was safe. With the added promise of developing
a team of which the fans could be proud, he had little difficulty
winning them over.
back to top
The 1997-98 season saw Graham's dour defensive tactics change
and suddenly Leeds started looking like a team going places. Doubling
the previous season's goal count, Graham steered them to fifth
in the league and a UEFA Cup spot.
It was just what the new regime had hoped for. The club got a
bigger slice of Premier League sponsorship and Sky revenues thanks
to their final position, and had Europe to look forward to. It
was all money in the bank. And the youth system was producing
some seriously mouth-watering talent under the protective wing
of former playing favourite Eddie Gray.
At board level, it was all painting a very positive picture for
a management team spearheaded by Fenn as finance director and
Adam Pearson as commercial director, both well-respected businessmen
with a key grasp of the basic 'grow slow and steady' strategy.
(Akers had already taken a back seat to move on to his next project
- exploiting the dot.com boom with his Sports Internet Group.)
They set about trying to forge a real brand value in the Leeds
United name - a common mantra on the administrative side of modern
football clubs and not an easy task for a club like Leeds. With
a rogue element of supporters who had dragged their name through
the mud on numerous occasions, for many the Leeds team of the
'70s with its 'bite-yer-legs' reputation still epitomised what
the Yorkshire club stood for. But if the hardly squeaky-clean
Manchester United and Liverpool could generate sizeable incomes
from enhancing their image and global appeal, Leeds reasoned they
could too, and started wooing businesses and investing in community
projects in a bid to establish Brand Leeds. Playing the community
card was not only a wise move to get more fans through the turnstiles
and spending more money on club merchandise, but also ensured
a positive reaction for ambitious stadium plans in the pipeline
- a crucial part of its long-term strategy.
On the pitch, meanwhile, the 1998-99 season was disrupted early
by the departure of George Graham back to north London with Spurs.
As assistant to Graham, David O'Leary had shown promise after
assuming the caretaker-manager position and he was offered a full-time
contract with Eddie Gray as his assistant. Unlike Graham, O'Leary
was not afraid to introduce young blood to the Leeds team. At
his disposal were the likes of Lee Bowyer, Harry Kewell, Alan
Smith, Ian Harte and Jonathan Woodgate as a balance to experienced
squad members such as David Batty, Lucas Radebe and Gary Kelly.
For the plc, the double-edged bonus was that the young talent
would eventually either deliver riches on the pitch or profits
off it courtesy of the still booming transfer market. Ideally
With a team performing well and playing attractive football,
Leeds were emerging as a major force again. Ridsdale and co. seemed
to be vindicated.
back to top
By the end of the 1998-99 season, O'Leary's first in charge,
Leeds finished in fourth place, qualifying for the UEFA Cup. More
crucially for the directors, turnover was rising and profits were
on the up.
Although the stated strategy was to grow slowly over the long
term, the team seemed now only one or two league places away from
a potentially lucrative Champions League spot, which offered a
huge temptation to force the pace. In short, Leeds were drifting
towards the verge of a dash for growth.
According to Jeremy Fenn, Ridsdale - encouraged by an ambitious
David O'Leary - started the push for more player investment: "In
the summer of 1999, I was still running the club but Peter Ridsdale
was getting more involved in the transfer deals, and it was quite
clear there was a desire on the part of Ridsdale and the manager
at the time to spend more money on players. Things came to a head
when there were some stories in the paper about myself constraining
progress at the club through a lack of desire to open up the chequebook,
and I used that as an opportunity to say this is not for me."
It is believed that Fenn, shy of the limelight and more content
with simply handling the behind-the-scenes business operation,
was made to feel particularly uncomfortable when O'Leary stated
publicly that some of his moves for certain players were being
stifled by elements on the board. Fenn, who remains proud of his
reputation as a tough negotiator and book balancer, was to become
the first victim of what many saw as Ridsdale's move to have more
control of the club. He quit to reunite with Akers on his Sports
It was to prove a major turning point in Leeds United's boardroom
set-up, heralding the beginning of the Ridsdale revolution.
"There was a gradual shift in the board," says Bill Gerard. "It
was not a coup in the sense of a sudden ousting of Caspian, but
there was a move away from those directors associated with it.
I presume Ridsdale was behind that."
"The club was in fantastic shape at the end of 1999," says Fenn.
"We had a small debt, the club was profitable and we were performing
well on the pitch. We were trying to build the club carefully
and sensibly and part of that plan was to enhance the stadium
in conjunction with the development of an arena and widen the
business perspective of the club. I think we would have continued
with a careful approach to building the club in much the same
way as Charlton have achieved with the consolidation of their
position within the Premier League."
back to top
Adds Gerard, "If the Caspian board had remained at Leeds, then
I think today we would not be in the financial situation that
we are. I think we would be financially stable, but I doubt we
would have yet achieved Champions League football. I think Fenn
and Akers' objectives would have been much more long term with
respect to getting the quality of the squad that we had in 2000.
"Peter Ridsdale realised that the future of football was going
to be a few top clubs who had a massive fan base and were able
to maximise their media income by playing in the Champions League.
He felt that if Leeds did not get into the Champions League and
establish themselves quickly, they would be left behind."
Adam Pearson followed Fenn out of the gates of Elland Road just
18 months later. Today chairman
at Hull City, he is convinced this period was crucial in Leeds'
financial downfall: "It was a change of culture. Obviously I had
been appointed by Jeremy Fenn as commercial director at the football
club and we had built the club up on basic business premises which
were to build the business and keep the costs low. And obviously
that culture changed considerably over the coming years. I think
we had just about maximised the turnover. But then I could see
the costs started to creep up and, after Jeremy's departure, the
way the club was run changed."
That summer of 1999 Ridsdale became master of all he surveyed.
As CEO, and chairman of both the plc and the club, he was in control.
Following the departure of Fenn in July he recruited to the board
those loyal to him - in particular promoting Stephen Harrison
to the post of finance director and David Spencer to operations
director. Soon to join them as non-executive directors would be
Allan Leighton and Richard North, both highly respected in the
City. A former chairman of Royal Mail and non-executive director
at BSkyB, Leighton's role at the club reinforced the image of
a strong, ambitious management team, driving Leeds into a profitable
future. "The fans thought the club was in safe hands," says Gerard.
"They completely trusted Peter and the other board members."
Other reasons to be optimistic were a £13.8m partnership with
BSkyB, whereby the media giant took a 9.9 percent stake in the
team. Strongbow signed up as shirt sponsors for 2000 in a £5m
three-year deal, and Nike agreed a new four-year kit and licensing
By the time the team kicked off for 1999-2000
the strength of the side was obvious. They made it to the semi-finals
of the UEFA Cup before losing to Galatasaray, and finished third
in the league after spending many weeks on top, ensuring entry
into the next season's Champions League. But then events began
to overtake the plan.
In January 2000, Lee Bowyer and Jonathan Woodgate, along with
friends, had attended the Majestyk nightclub in City Square, Leeds.
Outside, trouble had broken out and the pair found themselves
arrested after student Sarfraz Najeib was left in a bloody heap
with a broken nose and cheekbone, fractured leg and a bite on
the cheek. Both protested their innocence. The
court case would not finally conclude until almost two years later,
with devastating results for all concerned.
Meanwhile, the stabbing to death of Christopher Loftus and Kevin
Speight after innocently getting caught up in running battles
in Istanbul before the Galatasaray match in April 2000 generated
more negative headlines. The football world united behind Leeds,
with both Ridsdale and O'Leary winning praise for their handling
of the situation. Thrust into the spotlight, Ridsdale became more
synonymous than ever with the club.
back to top
Off the pitch, Ridsdale's strategy appeared to be working to
perfection. In October 2000 the club published figures which showed
annual pre-tax profits up a whopping 75 percent courtesy of the
good UEFA Cup run and sell-out crowds. Leeds Sporting reported
pre-tax profits of £1.24m compared to £0.7m the year before. To
the outside world, Ridsdale was on a roll, especially when the
2000-01 season maintained the momentum.
With a good run in the Champions League as the prize, the push
for more players picked up pace. Before the end of the year, O'Leary
had brought in Mark Viduka (from Celtic) for £6.5m, Olivier Dacourt
(Lens) for £7.2m, Dominic Matteo (Liverpool) for £4.75m and, the
piece de resistance, Rio Ferdinand (West Ham) for £18m - a deal
six months in the making and at the time a world record price
for a defender.
Crucially, the purchase of many of these players was conducted
through a company operated by former Manchester City full-back
Ray Ranson. Registered European Football Finance (REFF) allowed
clubs to buy players on a hire-purchase style agreement, which
effectively saw Leeds rent their services. Although Ferdinand
was owned outright by Leeds, according to Ridsdale, Viduka and,
it is assumed, others were not. Leeds were not alone in using
REFF, but when the transfer market slumped they were suddenly
left massively out of pocket. Today Leeds still owes REFF some
But with a strong team built on homegrown talent and reinforced
with expensive young acquisitions, the view of the Leeds board
was that should they stumble, they could at least recoup the money
through reselling their players. Despite warning signs elsewhere
in Europe, Leeds were not alone in assuming the transfer market
would continue booming.
On the pitch, meanwhile, a strong Premier League season was enhanced
by a Champions League campaign which will stay long in the memory
of fans. After victories against AC Milan, Besiktas, Anderlecht
and Deportivo, they blazed a trail for English clubs, going one
step further than Arsenal and Manchester United to reach the semi-final.
For the board it was proof the investment was all worthwhile.
They had started out on a route to riches - their Champions
League success generated close to £10m from prize money and
UEFA's lucrative marketing pool alone. Brand awareness across
Europe and increased sponsorship could multiply that by several
But despite the great performances in Europe, Leeds failed to
make an immediate return to the Champions League after coming
fourth in the Premier League. A blip rather than a disaster, the
club would simply ensure that by the end of the next season it
was again preparing to kick-off a Champions League campaign.
When the 2000-01 financial figures were released in October 2001
they painted an interesting picture. Turnover was up 65 percent
to £86.3m with operating profits prior to player trading up a
colossal 273 percent to £10.1 m. But after taking into
account the big buying, Leeds United plc - it had switched from
its Leeds Sporting name during the summer - posted a £7.59m loss
against a £1.24m pre-tax profit.
The results were good news for the directors. Richard North and
Allan Leighton rewarded Ridsdale with a £270,000 bonus on top
of his £320,000 salary. Ridsdale took the opportunity of the finance
figures to make it clear what the club's future strategy would
be: "The absence of Champions League football this season will
inevitably have a short-term impact on operating profit. Rejoining
the Champions League at the earliest opportunity is our top priority."
back to top
It was a blinkered all-or-nothing approach, a gamble on immediate
and continuing Champions League football, whose stake was a massive
£60m loan secured on the back of future season ticket and corporate
hospitality revenues predicated on a money-spinning new stadium.
There was no Plan B.
So the scene was set. Ridsdale and O'Leary had spent heavily
on players. There would be no Champions League in 2001-02, but
everything would be done to achieve it by the end of the season.
The cracks were beginning to appear in the Ridsdale boardroom.
Some suggest North and Leighton were kept out of the loop when
it came to the reality of the situation. They would find out too
"The board all bought into the strategy and we put our trust
in the executives, whose day-to-day job it was to do these things,"
explains Leighton. "We all thought the strategy was right at the
time. Sometimes you get things right and sometimes you don't."
Falling into the latter category was a £20m punt on two players
who would embody all that was wrong with the inflated transfer
market. Seth Johnson was snapped up for £9m from Derby and Liverpool
released Robbie Fowler for £11m, bringing O'Leary's spending close
to £100m in just three years, much of it financed by funds raised
for the proposed new stadium. Said Ridsdale at the time: "A lot
has been made of whether this club is being run effectively as
a company. This is a public company and is being run for its shareholders.
The plc board are ensuring that the club is on a sound financial
footing and we are only investing in players who can keep us near
the top of the Premiership and in Europe."
But by the turn of the year, all the investment still appeared
to be delivering the goods and the boardroom continued to buzz
with anticipation of what was to come. They were, said Ridsdale
famously, "living the dream". Inspired, the Leeds team took to
the top of the table and all was well.
"Football is all about performance on the pitch, and performance
had been good," recalls Allan Leighton. "We'd strengthened the
squad and the view of the manager was that we would secure Champions
League. But that's the frustrating thing about football - unlike
any other business, you cannot control the bit that makes the
difference. All you can do is invest in the strategy and hope
What was not needed at this delicate stage in proceedings was
the attention generated by the
Bowyer/Woodgate trial. With one trial already called off after
a Sunday newspaper was guilty of contempt of court, it was not
until December that the jury got to make a decision - close to
two years after the incident involved. Ridsdale had decided to
stick by the players until a verdict. While Bowyer was cleared
at Hull Crown Court of causing grievous bodily harm with intent
and affray, Woodgate was given 100 hours of community service
after being found guilty of affray. Their friend Paul Clifford
received six years for GBH. Evidence during the case painted a
less than pretty picture of both players.
For all the efforts of the Caspian management board and subsequent
development, the brand name and image of Leeds United was once
again tarnished. This would cost more than anyone could have anticipated.
back to top
If that was not bad enough, David O'Leary then published a book
just days after the verdict. Leeds United On Trial was
a look back at the 2000-01 season - but its timing and comments
on the team and the Bowyer and Woodgate case were devastating
to both the club and dressing-room morale. It seemed Leeds were
pressing the self-destruct button.
With a number of big name absences, and Bowyer being transfer
listed after a contract row, form started to slide. From being
top at the turn of 2002, Leeds eventually finished fifth - once
again missing out on Champions League football. With the transfer
market now in a slump, it was a catastrophe which left the club
stranded with no way of recouping its outlay. For the first time
the boardroom atmosphere dipped. "The original strategy, if the
marketplace hadn't changed, was robust," says Leighton. "It was
a combination of missing the Champions League, investing in a
squad we thought would put us in the Champions League and then
the change in the transfer market - the introduction of transfer
windows and fees dropping."
Worse, the wage bill was sky-high. Determined to keep a strong
squad together after the first Champions League success, Ridsdale
had got many of the highest paid squad members to commit to long-term
deals - again, all paid for with the money secured on the Elland
Road redevelopment. To make matters worse, the fans were beginning
to sense something was up, especially after transfer rumours about
a string of their biggest stars - Mark Viduka, Danny Mills, Harry
Kewell, Olivier Dacourt and Robbie Keane - started appearing in
the press with increasing frequency.
Behind the scenes, O'Leary was being told to sell. The gamble
he had bought into and initiated was not delivering. He had spent
too much and another season without Champions League income was
too much to bear. Rio Ferdinand and Manchester United started
being mentioned more and more often in the same breath. Alex Ferguson
had made no secret of his interest in the player. Ridsdale saw
the chance of making some cash.
O'Leary, however, was anxious not to break up a team he still
felt was capable of delivering the goods - in particular he wanted
Ferdinand to stay.
Ridsdale was at the point of no return. In June, while everyone
was watching the World Cup in Korea and Japan, Ridsdale sacked
O'Leary. After four years and close to £100m spent in the transfer
market, Leeds' trophy cabinet had not been opened once.
The terms of O'Leary's settlement
would run into seven figures and rumble on for months to come.
For now, Ridsdale had to focus on hiring a new manager. A phone
call to his Spanish holiday resort pulled Terry Venables out of
TV punditry and back into management as Leeds confirmed him as
O'Leary's successor just 11 days later. He would become Leeds
boss in an initial two-year deal. His first mission was to talk
to Bowyer who had put himself on the transfer list following his
trial and turned down a five-year deal. Venables also had to persuade
Ferdinand to stay. Said Venables at the time: "This is a team
destined for greatness and maybe this season we will witness the
O'Leary Babes coming of age."
Ridsdale was finding the balancing act of increasingly desperate
chairman and friend-of-the-fan more and more difficult to maintain.
Despite peace talks with Venables, Bowyer was committed to leaving
- and was given permission to discuss a £7m (rising to £9m on
appearances) deal with Liverpool. As for Ferdinand, Ridsdale publicly
announced he was not for sale, a position that was repeated in
his first press conference as Leeds boss by Terry Venables - while
admitting that he would still have to raise £15m, a sum he expected
to bring in by off-loading the likes of Bowyer, Dacourt and Keane.
He added that he hoped "sooner rather than later" he would be
able to start spending again.
Just two weeks later Ferdinand was sold for another record fee
- this time an astonishing £30m to Manchester United. It was a
rare piece of fantastic business for Leeds. "I remain amazed that
United paid that much for Ferdinand," says Bill Gerard. "They
must have known the situation Leeds were in; they must have known
they could have got him for less. It was a great deal for Ridsdale."
back to top
Gerard is convinced Leeds United would not have survived as long
as they have without that sale. Rivals they may be, but Manchester
United's money may have saved Leeds.
The required £15m was generated and Venables prepared for the
new season. The breakdown of talks for both Dacourt and Bowyer
was suddenly not so crucial, Venables believed. An August sale
of Keane generated £7m - some £5m less than Leeds paid.
Ridsdale, meanwhile, was preparing to man the emergency pumps
while maintaining that the club was waterproof. "We set ourselves
targets via a cash injection and we have exceeded those targets,
post these numbers, by selling Rio Ferdinand and Robbie Keane,"
he said in September 2002. "There is therefore no further requirement
to reduce those players Terry Venables sees as part of his ongoing
But Leeds were about to have their cover blown.
That month Bill Gerard saw the figures for the financial year
ending June 30 2002 and started doing the sums. What he discovered
frightened the life out of him.
"I just could not believe what I saw," he says. "I looked at
the balance sheet and I looked at the cash flow, and I was astounded
to work out that just to make it to the end of the 2003 season
would require £14m."
The key headline figures Gerard focused on made sober reading:
"The figure that was most frequently quoted in the media was net
debt of £77.9m. This represents the total borrowings net of the
cash reserves. So what was the problem? The bottom line was that
the club's debt was not sustainable given its operating losses.
The year before, the club had a net operating deficit of £5.7m
before transfer expenditures and interest payment. Any business
that cannot generate operating surpluses to at least cover its
interest payments is in a very precarious position."
Gerard took his findings to the City and showed them to the investors.
They immediately demanded a change in the board, telling him in
November 2002 to consult with Allan Leighton to ensure the board
Though Gerard believed that Ridsdale was probably more responsible
than anyone for the mess, the majority of fans still trusted him,
and just weeks after the City was alerted to what was happening,
Ridsdale was re-elected to the board at the club's AGM with 96.7
percent of the shareholders' votes.
On the pitch the 2002-03 season
had not started well and by October pressure was beginning to
build on Venables. When in November Leeds were hit by two injury-time
goals to have a 1-0 lead overturned by Sheffield United,
thus ending their Worthington Cup campaign, the fans began to
Just over a week before the AGM, Ridsdale told Venables that
a January buying spree must be paid for by the sale of at least
six players; the club, he said, could not support a squad of 36
and the playing staff had to be slashed to 30.
Days later, after losing at Spurs made it six defeats out of
nine, Ridsdale warned Venables results must improve or he must
face the consequences. And he had to do that with a squad including
11 players out injured and whose big names were unsettled by transfer
But Ridsdale's own power base was now threatened by shareholders
insisting a new chief executive was hired in the New Year.
With Bowyer leaving for just £100,000 to West Ham, and Robbie
Fowler to Manchester City for £3m in January 2003, Ridsdale was
at pains to reassure Venables that at least Woodgate, at the heart
of the defence, was going nowhere. Until, that is, Newcastle made
a £9m bid, accepted at the end of the month. Woodgate's departure
was a hugely significant one. It publicly undermined Venables,
and publicly exposed not only the perilous state of Leeds' finances
but the quality of Ridsdale's stewardship.
back to top
"I didn't go public with my findings initially because Ridsdale
still had huge backing," explains Gerard. "By January nothing
had changed and the situation was getting worse so I finally made
my concerns known after the Jonathan Woodgate sale."
It was at this time that Gerard received his letter from the
plc warning him not to suggest the Woodgate sale was a sign of
a bigger problem. A devoted fan, Gerard takes no pleasure in being
proved right and still bristles at the nerve of the club to pen
him such a letter. "It was absolutely stupid. Because everything
I was talking about was based on the publicly released figures."
Gerard carried on regardless and made it clear to the gathered
audience where he believed the blame lay: "Ultimately there has
been a governance failure by which I mean a failure of accountability
and transparency with respect to key decisions. Control of the
club and the company has been vested in the senior executive management.
We as fans are now having to deal with the consequences of their
actions. It is not a question of the chairman's sincerity as a
fan. We know he loves the club. But ultimately he must accept
responsibility for the business failures that have resulted in
the enforced sale of Woody. The business has been run honestly
but ultimately wrong decisions have been made."
Behind the scenes the board was responding to the shareholders'
demands. A detailed review of the organisation and structure of
Leeds was completed: a managing director was to be appointed,
David Spencer was to leave the company with immediate effect,
and Professor John McKenzie, a non-executive director with responsibility
for pushing the Leeds brand into the Far East, was to play a more
hands-on role. Non-football costs were to be cut by £3 m a year.
But by March, frustrated at being fed a line by Ridsdale and
the board and with a team failing to perform on the pitch, Venables
quit just eight months after taking over. Leeds were just eight
points off the relegation zone. Peter Reid was drafted in with
the express purpose of avoiding relegation, his success in this
being rewarded by a permanent contract by the close season. But
the message was now clear. All the excited talk of new dawns and
Champions League in the end amounted to this: avoiding relegation.
back to top
Ten days after Venables left, Peter Ridsdale bowed to the inevitable
and quit as chairman. With the fans now aware he was at least
in part responsible for gambling with their future, he had few
allies. "Ridsdale had gambled the house, but it wasn't his to
gamble," says Gerard. "The Leeds fans trusted him. When they realised
what he had done, it fuelled their hatred towards him."
Ridsdale blamed others for forcing him out and turning him into
a non-executive director. And he turned on the fans: "In a high-profile
role, when results are not up to expectation levels, you rightly
expect criticism. This comes with the territory. But when this
becomes so intense that it affects your family and health it requires
clear reflection on the right way forward. The intensity of personal
criticism has led me to conclude that the best decision for myself,
my family and the company is that I step down as chairman of the
plc and football club and relinquish all executive responsibilities.
This I am doing.
"The ongoing challenge will continue to be to get the cost base
into line with anticipated revenue streams. Further action will
be needed in the coming months to achieve this."
Weeks later Stephen Harrison quit too. The Ridsdale power base,
it seemed, was finally at an end.
One of the new chairman John McKenzie's first major moves was
to reveal publicly the extravagant spending which had led to their
mounting losses. The interim finance figures for the second half
2002 showed the club lost £17.2m before tax, while the total net
debt to the end of the year was £78.9m. Among the headline-grabbing
- 5.7m in compensation pay-outs to former managers O'Leary and
- £70,000 for private jets for directors and senior management
- in one year alone
- £500,000 a year on the wages of former striker Robbie Fowler
- despite his sale to Manchester City
- £20 a month on goldfish for Peter Ridsdale's office
Yes, even Ridsdale's pets enjoyed the high life at Leeds.
McKenzie described the scale of the operation as "like an oil
tanker heading straight for the rocks and now the shareholders
have put someone else on board to turn it around". To help cut
costs, McKenzie made a mass of redundancies. A new chief financial
officer, Neil Robson, from accountancy giants Ernst & Young was
brought in. The mission now was simple: survival.
Back on the pitch, Peter Reid was not having the best of times
either. As the set-up of the club collapsed around him, he had
a huge falling out with striker Mark Viduka, who had played such
a crucial role in keeping the club from relegation the season
before. By November, and following a 6-1 thrashing by newly promoted
Portsmouth, Reid had his name added to the 'managers requiring
compensation' list. Loyal servant Eddie Gray was drafted back
in as manager. The previous month, Leeds United made what many
believe to be their best signing throughout the whole sorry affair.
Having been instrumental in bringing Roman Abramovich to Chelsea,
former Liverpool player Trevor Birch was brought in as chief executive
officer. He would run the day-to-day business while McKenzie would
concentrate on the strategic development of the club, working
part-time as a non-executive chairman with new financial chief
Neil Robson on refinancing and restructuring. With his good relationship
with the City, Trevor Birch was immediately able to open negotiations
to try to give Leeds more breathing space.
"Thank God we got Trevor Birch," says Gerard. "He knows what
he is doing and is working for the good of the club. If anyone
can get us out of this situation then Birch can."
But it's a very big if. For the year ending June 30 2003, Leeds
made pre-tax losses of £49.5m, while debts remained at £78m. The
club was at least buoyed by a £4.4m cash injection split between
Allan Leighton and the ARM Holdings Group.
By December the newspapers were full of stories about possible
takeovers of the club. In particular speculation was rife that
a member of the Bahrain royal family was considering a bid.
back to top
By the end of December, McKenzie announced he would not seek
re-election to the board, heightening belief he could be about
to mount his own bid.
Without at least £5m the club would not survive until the end
of the season. Creditors began closing in and a number of deadlines
were put in place to avoid the club being forced into administration.
As we go to press, the story is not over, nor may it have a happy
ending. So who is the villain of the piece?
"As chairman you have to take responsibility," says Peter Ridsdale,
now chairman of Leeds' neighbours Barnsley. "I was the representative
of the board and have to
take the rap for it. But what upsets me is that it is assumed
every decision, every spending decision, was taken by me on some
personal crusade or emotional whim, which is simply not the case.
Every decision to buy or sell a player was taken after consultation
with every board member. Only with approval did we proceed."
The £60m gamble
When Caspian took over Leeds United they were partially attracted
by the redevelopment potential of the Elland Road site. Their
vision included a hotel, indoor hockey arena, exhibition centre
and a range of other leisure facilities. All the revenues would
drive monies back into the club and provide long-term security
for the group.
As the original Caspian management team left, Peter Ridsdale
took over the reins of the project. By 2001 he had changed the
plan from refurbishing Elland Road to moving to a new site altogether
and building a state-of-the-art 50,000-capacity stadium on the
outskirts of the city.
Ridsdale's plan was simple. To finance the new stadium Leeds
United would sell Elland Road for £20m. It would then find a naming
rights sponsor for the new venue who would secure a long-term
deal for £40m.
The club would then secure a loan for £60m - with funds coming
from a bond secured against future season ticket and corporate
hospitality sales - with which to invest in the squad. The securitisation
deal would see banks lending Leeds the money over 25 years, with
repayments accruing from ticket and hospitality package sales.
The benefit of this type of financing for the borrower is that
the rates are low, and the risks for the lender are reduced as
existing or forecast revenue streams are utilised and channelled
to repay the loan.
It was fundamentally a good business move. It meant an injection
of funds to help them push towards constant Champions League qualification,
while allowing the club to develop value bricks and mortar assets
in terms of the new development. After putting the £60m proposal
to shareholders, Ridsdale won support to push ahead with his plans.
The group issuing the bond include M&G, MetLife, Teachers and
Crucially, however, Ridsdale and the board believed they could
sell the all-important naming rights to the stadium themselves,
rather than recruiting a specialist agency. They failed, blaming
the economy post-9/11, but a more likely cause is the bad publicity
surrounding the Woodgate/Bowyer case.
But at some point during 2002, the board quietly dropped plans
for the new venue. With no new stadium, there are no new revenue
streams. Nor did Elland Road ever become the entertainment centre
of Leeds. So with no revenues to repay the debt, the future of
the club now rests with its major creditors, the fund managers
of the bond.
"The bond issue, you must remember, was agreed by our shareholders,"
says Allan Leighton. "But the point is that in hindsight we can
see it did not work. The issue now is to deal with the future."
That's assuming, of course, that Leeds United has a future.
The Four Four Two feature emerged at a key point in the story
of United's financial crisis, as the very future of the club hung
in the balance. Eventually, administration was avoided, but only
after one of the most fraught periods in Leeds United's entire
back to top
Part 1 - Part
3 - Part 4 - Fixtures