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A statement from Peter Pannu

Posted: Mon 06 May 2013
Author: Peter Pannu

Following recent media reports, Birmingham City Football Club’s Acting Chairman Peter Pannu today wishes to clarify his position on several matters.

Consultancy Agreement

Recently there has been quite a few articles in the local and national UK media that has caused me concern. It has come to our attention that these were possibly prompted and/or instigated by some of the ex-directors of Birmingham International Holdings Limited. 

These directors, including Mr. Li Yiu-tung, were disqualified under the Articles of Company and removed from the group due to continued absence from the group’s board meetings and due to other allegations which are subject to inquiries by the Hong Kong authorities.  Likewise, the previous INED and the previous company secretary had to move on due to criminal prosecutions against them. Their removal was part and parcel of the resumption exercise that required the clearing of dead wood from the system and for rectification of the past shortcomings in the group based on internal control reviews conducted by the new board in Hong Kong.

You may all recall that Mr. Li was the director who executed the Xtep deal that produced zero income for the club and the associated problems with that contract that led to us finding a new shirt sponsor where income was finally brought back into the club. These were all identified in the auditor’s report once I became the director at the club in our YE 2012 accounts.  It was not easy to go against the tide in protecting the interest of the club particularly when I only joined the UK board in July 2011 and the HK board in September 2012.

The disgruntled ex-director(s) are now passing out internal confidential document(s) to the press, who are unfortunately being used to make frivolous allegations and it is clear that they have an axe to grind and simply want to disrupt our operations. 

Frankly, we have better things to do and I can actually ignore all the scurrilous reports. However, I feel it has come to the point that I need to briefly point out where the reports are not clear and perhaps misleading.

The local media report on the consultancy agreement, which is often termed as a “secret” deal, is so out of order that we are seeking legal advice on the matter. The consultancy agreement was constructively known to the board members. For directors in HK, who claimed salary but did not come to work and stayed permanently in China most of the time and were disqualified as a result of that, they may have been aloof to it and that is not at all surprising. 

Legal advice and tax advice both in the UK and HK had been sought during the audits which confirmed the validity and binding nature of the agreement and the arrangements and Mr. Yeung’s authority, express and ostensible had been confirmed. The previous board members all had actual and constructive notices of the agreement as well before the agreement was signed by Mr. Yeung; the board members having met with the consultancy in HK many times before September 2009.  I was not privy as to how BIHL operated at the time when the consultancy was entered into in September 2009 as I was not in any employment with BIHL/BCP/BCFC at that time and neither was I bothered about their indoor management style.

Even Mr. Li himself was involved in various projects with the consultancy that entailed discussion and co-operation with China Southern Airlines on a project in the UK and other business flights to Shenyang as well as the preliminary studies regarding the redevelopment of the club’s stadium.  It is absurd to suggest they were not aware of it.  

The parent company’s announcement on the consultancy, which is open to the public, extensively deals with the disclosure points regarding the consultancy and it is clear the parent company passed various resolutions (including the INEDs) ratifying the agreement. 

People must understand, which the report chose not to disclose, that there is nothing “secret” about the agreement and, as announced by the company, Mr. Yeung had personally paid for the consultancy fee from the start in 2009 until his arrest in 2011 whilst the vast sums and benefits generated by the consultancy had gone to the club. Could the shareholders have asked for a better deal? 

It is rather disappointing that the local media failed to clarify these matters with the parent company and proceeded to publish a piece which is quite inaccurate and scandalous. Guess these facts will not make the report that juicy and I can understand that.

Email to the previous auditor

A subsequent report regarding the previous auditor, BDO UK, is also misleading regarding a perceived “threat” said to have been sent to them. Again this report was based on the leakage of confidential internal documents from HK by the same party. The club is seeking legal advice on the theft and usage of internal confidential documents and may take appropriate action against those involved.

It was open knowledge within the group that since the previous auditor, Edwards LLP, who was the auditor for a long time during the David Sullivan/David Gold era, were removed by the previous directors in charge in HK and replaced with BDO UK, BDO HK being the parent’s auditor, there was some strain amongst the parent and the subsidiary. This became worse upon my appointment as the director in the UK as I was unhappy with the delays in the audit in HK and in the UK and the escalating costs associated with it. Add to that the pressures from the footballing authorities for the late filings that led to an embargo. We then had to work hard to have that lifted.

I wished the leakage also demonstrated, which unfortunately was not reported, that I was pushing the previous auditors to probe into the Xtep deal vigorously and complained about the lack of funds coming into the club and on other matters that I felt required more probing. 

To be fair to BDO UK, they did seek answers from those concerned in HK but nothing was forthcoming. I was only fighting hard for the club’s interest and trying hard to bring in more funds. These were mentioned in the YE 2011 audit reports and the single director mentioned in the audit report, and as quoted in the captioned press article, was myself who queried the Xtep deal and the arrangements.

There has been no ‘threat’ made to anyone and the reference in the email, and as explained to BDO, related to dealing with an internal inquiry at the BDO HQ upon my return to the UK. The report in the paper is completely out of context.

I suppose this sets the matter straight now.

I am glad to say that we have re-appointed Edwards LLP as our club’s auditors and as a result YE 2012 and other accounts are now all published efficiently. Upon my appointment in HK as the MD/CEO in September 2012, we have within a very short period of time chased up and published three sets of accounts which were stalled for the last few years. This is absolutely vital for the group’s survival, for the resumption of trading and for any disposal of the club. If the fans want the club to be sold, this is step number one to be done, which we did, to secure the necessary approvals from the shareholders and the Hong Kong Stock Exchange.

Piece on Mr. Liu Xingcheng

I have no comments regarding this personality and simply wish the fans to note that he is married to Mr. Yeung’s ex-partner’s sister, a de facto brother-in-law, whose family stayed at Mr. Yeung’s house in London and his kids went to school in the UK, all courtesy of Mr. Yeung.  Mr. Yeung now has a new wife and a family and I do not wish to get in to domestic arguments amongst them. 
Suffice to say that, Mr. Yeung is initiating legal actions both in China, Hong Kong and in the UK emanating from their past domestic dealings.  Mr. Yeung is also concerned that his frozen assets in the UK may have been dissipated whilst he was stranded in Hong Kong and he is looking at that as well. 

Mr. Liu is most welcome to attend the shareholder’s meeting on the scheduled date. It will be a good time to highlight to him how we have made sure that the club is still afloat over the last two years in this environment and how we have made enormous progress in HK to get the accounts out to ensure the value of his shares is still there.

As far as I know, having met him in China and in the UK, Mr. Liu does not speak any English and I want to compliment the UK press for being able to speak to him in Mandarin and to get his points across accurately, I hope, as reported.

Progress report on the sale

Mr. Yeung had procured an interested party from China and is personally leading the discussion there. I would have preferred someone from the UK, even a Bluenose owner, but it appears we are not making as much headway there as I would have wished.

The clearance of all the outstanding accounts will make a disposal easier and I am hopeful we can find some new owners who can take the club forward as the fans very much deserve a change. If there are any updates  they will be posted here but for those who prefer the other media reports, please carry an open mind when reading these and await clarification on our official site.

I understand owners at other clubs, for instance, just to name two, Wolves and Leeds, are facing a similar outpouring of passion from their fans. This is football and the drama is part and parcel of the game and we gladly all accept it. However, at some point I wish the fans can carry a cool head and look deeper to identify the core issues and not just what appears on the surface.

Very soon new season ticket prices will be announced and I am optimistic that you will all be happy with the arrangements. We shall also promote some new initiatives for your children to come in for free so that the whole family can have a nice outing while supporting the team.

Whilst discussions with the potential new owners are ongoing, we are also actively preparing for the new season. I have maintained close contact with Lee Clark and his team and we have somewhat mapped out our course going forward on players and the strategies that we shall adopt.

In this window, we shall adopt Lee’s recommendations on players to retain and players to procure and I wish to thank all the backroom staff for their efforts during this season. Had we been a bit more stable with our home games earlier on in the season, we could have made it to the play-offs. In any event, we did stick together and we shall try again next season.

Best regards,

Peter Pannu