Sheffield Wednesday - An Inside Job!

Cast:
 Scum, cretins & venomous bastards
 Football crooks & asset strippers
 The fake good guys
 The good bank (I know it’s hard to believe)
 The victims
 The Fool
 The (blue &) white Knights

Contents
1. Intro
2. £1.5m stitch up > regain control > set up for admin > make the club un-buyable to external
parties> buy the whole thing on the cheap
3. Lies. Damn lies, and the most awful of liars
4. The £20m deal & the bidders
5. Conclusion
Intro
This past Wednesday (it just had to be a Wednesday), a day when our once proud Club found itself
before a judge again, I ended up feeling almost physically sick. This was down to the shameful spin
that was Nick Parker’s rant after the hearing and also down to the words of the judge who said on
record “You are clearly trading insolvently and it would appear you are using HMRC’s (Tax payers’
money) money to do so”, and finally due to what I had heard about the disgraceful goings on that
unfolded on the Monday and the Tuesday prior to the court hearing.

So what went down on Monday / Tuesday???

Well it was supposed to be a process where all of the loan note holders and the bank agreed the
basis under which they would do a deal and also an opportunity for the interested parties to commit
to the terms that were being offered. This is not what happened though.

The Co-op bank caused a real problem for the loan note holders, and by extension Nick and Howard,
by agreeing to terms (more on that later) that truly do reflect a situation where the club can be
bought for what you could get after admin with a slight premium that fairly reflects the value of not
having to pick a club up that has suffered the disruption of an admin process. The loan note holders
however did not agree to these terms…

The bank were incredulous, the investors were amazed and confused, and the people who caused
the problem went away and celebrated their achievement including boasting of it to people they
think are their friends.

It’s my understanding that the obstacle took the form of the one person who would not
subsequently be directly linked to one of the takeover proposals and who I know has architected
everything that has happened at our club this past year or so and for that matter for the past 20
years.

Now, I know that not all Wednesdayites understand this but the reality is that due to the way the
bank and the loan note holders’ debts are contractually tied together, and also to the PLC and finally
to the LTD company (which is wholly owned by the PLC) that holds the football club and its assets
then the only way to effect a deal at Sheffield Wednesday is to agree one with the bank and all of
the loan note holders. It is not possible, or sensible, to try to do anything that bypasses the debt. The
shareholding itself is irrelevant at this point and has been for years. The only relevance of the
shareholding is in relation to approving a deal that all shareholders would be nuts not to do i.e.
approving a new equity investment.

This internal (a loan note holder who is a PLC director) blockage meant that the clear and
understandable, if not hard to stomach, public negotiation that Dave Allen was clearly engaged in
was rendered moot as there would be no deal agreed in advance of the court date… unless of course
one particular deal was to be successful…

The sickness in my gut was manifested when I watched Parker spit out his bullshit, which was clearly
designed to deflect the fans anger away from the board and direct it to parties that this board has
deliberately allowed to waste our time and as a result allowing the building up of false hope, all in
the effort to make their own plan acceptable to the general fan base. This feeling was confirmed by
the knowledge that the incumbents had finally done what I had been predicting all along and had
shown their hands by launching their own takeover while blocking any attempts for anyone else to
take the club forward.

[2] £1.5m stitch up > regain control > set up for admin > make the club un-
buyable to external parties > buy the whole thing on the cheap
Thanks to the combination of sheer arrogance, absence of any evidence that within the boardroom
of SWFC PLC there is any adherence to the concept of fiduciary duty, and the true nature of all
involved being shown, it is now clear that the priority of the incumbents is maintaining their control
over our club no matter what damage is done to “our” club.

I can tell you now that if on wednesday, the Judge had been made aware that the current board,
which he had determined was deliberately running a business that was trading insolvently, had
blocked all other investment deals and was trying to get their own deal done, he would have made it
clear that he was going to reject the request for an extension, therefore forcing the bank to put our
club into administration.

So what led to sitting PLC director / shadow directors launching their own bid to buy the club?

There is no doubt that the financial decisions made prior to the club plummeting down and out of
the Premier league created the situation that resulted in the current predicament. Looking back it’s
easy to see where the original debts of approaching £30m were accumulated during a period of time
when lots of players with poor injury records and reputations for being poor professionals were
signed for high transfer fees and put on high wages. Looking back it strongly suggests that someone
made loads of money out of those ridiculous deals and they were clearly nothing to do with the
positive development of a professionally run football club.

The catalyst however was the £1.5m stitch-up last season, which put the club in a position where
cash needed to be raised this past summer through player sales in order to retain the support of the
bank and also put the club in apposition to have an automatic promotion wages budget for this
season.

Now I am going to share more new information with you guys which will give you the full context of
events leading to this point.

On Friday the 14th Of May, Nick Parker and I had a meeting with the Hulleys with the agenda being
looking for Bob Grierson to stand down quietly and also putting in place a new board that the fans
would support. Prior to the meeting starting I told Nick that they were only really going to be
interested in the answer to two questions: Firstly If I were to leave would Parker leave also and if
Bob were to leave would Nick be able to manage the relationship with the bank. I reminded Nick
that it was his own opinion given to ICS and various investors that the current bank deal was nothing
special and he could have negotiated better terms, and also that he was actually managing the bank
relationship now notwithstanding Bob Grierson having a very long standing relationship with a
senior person at the bank.

The Hulleys turned up and immediately refused to read the document

(http://www.scribd.com/doc/43599604/LS-Response-Redacted) that I had produced in response to
the document that Bob Grierson had brought to the March board meeting (to be clear, that’s a PLC
Director and also major shareholder refusing to read an authoritative document produced by the
Chairman in defence of serious allegations made by the FD)

The Hulleys then asked their questions as predicted and Nick gave his answers.

To the first question he paused then said that he served at the pleasure of the board and to the
second incredibly he said that he could not manage the relationship with the bank and Bob needed
to stay and then turned to me and said that I needed to go. This was only a few short weeks after I
had told him I needed to resign for personal reasons and he implored me to stay and restated his
belief that Bob would be resigning.

That was the point in time when I realised that I had made the one of the biggest mistakes in my life.

On the morning of May 17th I was sitting in Howard Wilkinson’s kitchen discussing what was going to
happen next. I told Howard that he must use the leverage he had at that point to get the board to
agree to the plan going forward and for Grierson to stop dictating what happened within the
boardroom, and lastly and most importantly for the support of the bank to be obtained subject to
circa £2m being raised through players sales and for all this to be agreed BEFORE agreeing to
become Chairman. I pointed out that Alan Irvine would not be in any position to do any business
until June anyway due to holidays etc and it would do the old Directors some good to come under
pressure for a week or two from the fans. Howard told me he would sort it and finish my task of
getting rid of the old board and get new owners in place that were going to operate the club in a
proper professional manner, he also told me to forget SWFC and get over the recent major personal
difficulties that my family and me had experienced. He asked me what I planned to do and I told him
I was going spend some time with the family and give him the time to get things sorted and then
start a whistleblowing process to expose the corporate malpractice within the boardroom. He asked
me to give him time to get things sorted and I promised to hold off for some time and keep in
communication.

I then headed into S6 to meet with Parker and agreed the final terms of my resignation, namely the
public statements and the signing off of the march board minutes including Bob Grierson’s
document and my response document (which was all agreed and signed off). Parker then fatefully
said to me “Well at least I won’t be as bad as the last CEO”, I then said what was a very difficult and
emotional goodbye to most of the staff at the stadium and training ground thanking them for the
honesty and hard work during my time.

I called Howard in the run up to the Sheffield Star stories being run and asked him if things were
sorted and he told me that the budget was sorted and the bank were fully on board and Bob was
under control if not being a bit painful. I told him that my process was about to start and that there
would be some media coverage. He asked me to not disrupt what he was doing and I assured him
that nothing I would do would harm investment in fact it would empower investors (as the obstacle
to investment has always been the loan note holders) and also nothing would reflect on his
Chairmanship.

I did not know, and none of us knew at that time, that what Howard had indicated above was not
true, or that Howard was not even a director of SWFC when we had all been told that he was
Chairman of the board. Crucially though, the board had already set the club on a path where HMRC
would issue the first winding up petition which landed only a few days later on the 21st of June.

This was also a time when I popped back to the club to see the people that I had missed on May 17th,
starting at the training round, at which point I was told that I had been banned by the club
(something which is still in place today). This was something very difficult to take given what I had
sacrificed on behalf of and invested into “our” club and I could also see was difficult for the person
who told me about the ban, given that this was before I contacted the Co-op and Wednesdayite in
relation to my whistleblowing process and also before the Star ran the stories. At the time I just put
this down to the old Director[s] being vindictive.

As I have previously remarked on in another publication, we then had the HMRC issue come into the
public domain (not from the club but from the press), and we all had to watch the embarrassing
show of Parker showing off in a video about “playing the taxman” and also losing a player for half his
true market value as well as ending up with bids for other players that were below their true value
as a result of us operating under the threat of admin due to the winding up petition.

Following this I contacted Howard again and asked him what the <delete expletive> was going on
and stating that clearly Nick and Bob had screwed everything up again to which he said that
everything would be fine because the “wealthy Americans that had done loads of work including due
diligence over the summer” were going to buy the club before the end of August”. I asked him if he
was dealing with the Americans and he said that it was being handled by Nick, Bob and the bank and
I told him that I trusted him but he knew that I did not trust Nick and Bob and warned him that the
deal would not happen because of Bob’s agenda of maintaining control of the club and Nick’s
compromised position. This was the point at which I first asked Howard to appeal to the fans as a
back-up plan as the funds needed to get the club back to the Championship were accessible from
within the fan base (if the fans saw regime change as part of the deal), and we needed a back-up
plan as we could not afford the season to be disrupted. He told me he would not risk his reputation
by appealing to the fans and that it was not needed anyway because of the Americans. I told him
that he would lose nothing, because if the Americans came through he would not need the help and
if they did not do the deal and he had not appealed to the fans, then the club would be right in the
proverbial at which point his reputation would be shot.

August came and went and no deal was done with the mystery Americans.

Then we faced the court date on Sep 8 in the run up to which I tried to convince Howard to only do a
deal with the bank which removed the other directors i.e. He could have told the bank to only offer
to put more money in if they stepped down and fresh blood and importantly “independent” people
was brought onto the board, and he stopped the old directors using the boardroom to control the
club in order to run their own agenda. This point and also May 17 were massive opportunities for
Howard and for that matter all Wednesdayites to not be in the current situation. Howard was
having none of it.

Then we had the offers from David Blunkett, Paul Potts and Dennis Hobson to join the board and
help Howard resolve the current situation, which were rejected.
Then we had the “I am the board” video after the Southampton match including the statements that
the bank was running the club and the old directors were no longer involved.

Then I spoke once more with Howard and repeated my plea for him to look to the fans to solve the
short to mid-term funding problems. I pointed out to him that he was ideally placed to appeal to the
fans and that if as part of the process a new board was established, enough money would be raised
to sort the club and get it back to the Championship. At this point it would then be easy to raise
funding from third parties as we would be willing to incentivise new investors to buy new shares as
we would want the investment. I also pointed out to Howard that the completely understandable
meltdown in the fan base mentality was resulting in pressure being directed at the staff and the
players when the blame lay in the boardroom and that Howard should have made sure that the
players and staff were shielded from this pressure and again he could have taken the opportunity for
the real culprits to feel the pressure. Howard was still having none of it.

I decided to try and persuade as many influential fans as possible to work towards a process that
unified all of the fan groups, attracted wealthy Wednesdayites and took control of the club as part of
a rescue strategy. I did so while explaining to everyone concerned that i could not be involved in any
meaningful way because of the impact that had been had on my family and me by everything that
happened between Oct 09 and May 2010. I was offering to help and advise as much as I could but
formal action had to be taken by others.

Then we had the Nick Parker Q&A on September 29th where I had to watch Parker take the piss out
of all of us by telling us about a new winding up petition but also telling us all it was ok because a
new investor that had not proven funds was willing to pay the tax bill (this was completely breaking
all the PR and corporate finance rules and this demonstrated that Parker had lost it completely and
was not the same person I brought into the club. This and his failed attempt to convince fans that he
and Howard were against the old directors which backfired when one smart chap asked him if he
was willing at the next AGM to recommend to shareholders that the long standing directors which
were up for re-election were not re-elected. This was where he was exposed as he had to back track
and he backed the old directors even saying that he would actually recommend their re-election.
The thing that worried me most though was when another smart person asked Parker if he would be
willing to go after investment had been secured to which he responded “Yes I would happily leave in
fact I would be delighted if I was to be leave following investment”. Now this truly horrified me as I
knew full well that until I left, Parker had no incentive related to investment (despite asking for one
repeatedly which I blocked each time) and the only agreement he had was a two way 12 month
notice period as part of his CEO contract. I knew that what he had arrogantly confirmed in the public
domain was that he now had an incentive related to investment!

Any such deal would have been put in place after I left on May 17th…

Then on Oct 8 Howard went on radio Sheffield and told us all the deal was done.

There is no denying this.

Like all Wednesdayites I believed the deal was done but unlike most Wednesdayites I knew that in
any normal circumstances the only reason you would make a public statement about £2m going into
our bank over the weekend, was if signed high level agreements were in place with the bank and
loan note holders, and lawyers had been instructed to draw up the detailed agreements, investment
money was in an escrow account and had been proven to be so. i.e. for all intents and purposes the
deal was done. This was followed up on with Football Focus, then there was a major climb down on
Skysports on Sunday morning, which had me worried.

No money on the Monday was enough for most fans to know that they had been played and it was
enough information to conclude that in fact this board had gone public and Howard had put his
name to a deal that was not done at all.

The only logical explanation was that there were no credible offers and the board wanted one last
failed deal in order to be able to present themselves as the saviours of the club. A process through
which they would go from their current ownership (including their associates) of circa 22% of the
club to owning the whole club with a much reduced debt structure… and even if this happened after
admin they would be better off financially and, of course also from a control perspective.

It was then no surprise at all to hear from the Mandaric and Colin Hill / Spencer Fern camps that
there was no appetite for their proposals with the board / loan note holders and also that the
various fan movements had had zero encouragement from the board, including Howard and Nick, in
regard to developing solutions to the club’s problems.

We then ended up with a sitting PLC director and a shadow PLC director confirming to the local press
their participation in a bid to buy the club with each putting £1m in to the deal. One of the
participants being someone that had spent the last couple of years telling me his business was
struggling and who has put his only home up for sale earlier this year, thus suggesting to me that he
was in fact fronting on behalf of some friends or associates…

Finally we had to watch the crocodile tears of our CEO blaming time wasters (thus appealing to the
love of the massed fans and the natural reaction of wanting to protect their club) for the club being
in the current position when the cause is and always has resided within our boardroom.

What has Howard had to say about all this?

He finally got round to telling all the fans that the current situation was a massive disruption to the
club and would affect on pitch performances and we should not put pressure on the players and
manager. No comment on trading insolvently, no comment on directors ignoring their fiduciary duty,
no tackling of the very clear conflicts of interest. No resignation with a public statement that
exposed the rest of the board for what they are…

[3] Lies. damn lies, and the most awful of liars

Moving past all of the lies told to the fans when the board were busy putting in place loan notes and
then repaying them all while Sturrock and then Laws struggled to operate in an unprofessional
working environment working with a relegation budget, and ignoring the lies I was told when I tried
to help the board.

From May 17 onwards we have been lied to about:

1. Howard Wilkinson being Chairman (he did not become a director until just before the season
kicked off and did not attend board meetings until becoming a director)
2. What happened around the £1.5m hole last year.
3. HMRC.
4. Why the American investors pulled out just before the Brentford match.
5. The bank running the club.
6. The loan note holders not being a barrier to investment.
7. The long-standing directors having no influence in the boardroom.
8. The done deal.

What kills me, is that Howard ended up being involved right up to his neck after being one of the
people that educated me most about the awful people in our boardroom.

[4] The £20m deal & the bidders

So what did the Co-op want to achieve this past Monday / Tuesday?

Now I know that they have the most to gain financially from administration as they have no doubt
written off most of the clubs debts (as any prudent lender would have done over recent years) and
they would collect the vast majority of the proceeds raised in an administration (more on that later).
But from a PR perspective, the best outcome is a deal that secures the short to midterm and
importantly also enables future investment into the Club thus given the Co-op very positive PR in
what is a very high profile situation.

With all this in mind, the Co-op proposed to write off £16.6m of the £23.6m owed to them if
someone were to come forward and invest, via new equity, a minimum of £4m pounds. This
representing the funds needed for this year and also for next year if the club remained in league 1
next season. This represents a 61% write off of the amount owed excluding interest!

This is where the recent headlines of “£20m deal” have come from; it is made up of a £4m cash
injection valued in new equity (new shares being sold by the company) and also the bank writing off
over £16m.

Sounds great, huh?

Well this meant that at the very least the loan note holders would have to accept the same terms
and in fact if you strictly applied the “ranking” of the debt structure they should accept less as a %.

This is because under the original agreements and more importantly the subsequent “deed of
priorities” document which was signed by all the loan note holders and the bank determine that the
bank have first call over the stadium and training ground and they also rank as the highest placed
secured creditor.

What does this all mean?

It means that in admin, the football creditors will be paid (I estimated circa £100k is owed to other
football clubs), and then the bank will be paid and possibly the A loan note holders at the same rate
as the bank with the “B” loan note holders receiving nothing and also the unsecured creditors
receiving nothing.
Given that our board has made so many noises about the club currently being available for the same
price as would be available in admin then you have to assume the £7m and £8m offers which have
been made for the club and all its assets would be the applicable valuation under admin. If you
assume that the appointed administrator raises a million or so in player sales which go to funding
the club operations and also the administration costs then the creditors will be fighting over circa
£7m.

What impact does this have?

Co-op Bank as
at Nov 2010 £23.6m
Loan note Total
holders A Notes B Notes Notes
£ £ £

DED Allen 850,000 650,000 1,500,000

KT Addy 150,000 150,000 300,000

GK Hulley/Angelbell 150,000 150,000 300,000

K Cooke - 500,000 500,000

MG Wright 100,000 500,000 600,000

RM Grierson - 150,000 150,000

Total 1,250,000 2,100,000 3,350,000

The above table excludes the accrued interest of over £1m on the loan notes.

Based on the table above if £7m were available to the secured creditors then at best the “A” loan
note holders will get a share of these proceeds at the same pence in the pound rate as the bank i.e.
circa 29p in the pound. This would explain why Dave Allen was reportedly offered £250k against his
“A” loan note.

The bidders?

[A] Spencer Fern / Colin Hill / Lee Power

I understand that these guys have offered the bank £7m but have not made any proposal to the
board or the loan note holders. Serious questions have been raised about prior history specifically at
Peterborough UTD and in relation to separation of the stadium ownership from the club. Public
noises have also been made about Spencer not paying for the South stand sponsorship.

[b] Milan Mandaric

Milan has publicly confirmed that he has made a comparable offer to the first guys [A] and also
made a proposal to the board / loan note holders which was dismissed out of hand and has
subsequently talked about walking away which for me signals that he has no reason to up his offer
as he will probably be able to pay less than the current offer in admin. Milan has some work to do to
get all Wednesdayites behind him as although many see Milan as being associated with the on field
development of the clubs he has been involved in recently, there is no hiding the disastrous off field
issues that have afflicted Portsmouth and the financial hole that Leicester were in until the recent
investment.

[c] The current board & their associates

Ignoring the clear conflict of interest issues, I understand that these guys have pooled approaching
£2m between them but this leaves them £2m short of what the bank are looking for to avoid admin.
They have no chance of raising the additional funds from the fan base as even though most people
are not familiar with the detail of what has gone off in and around our boardroom this past nearly 20
years, they know enough to know these guys have been a collective disaster and have been
responsible for dragging the club’s name through the mud as well as mistreating the club’s own fans
repeatedly. The reality also is that most of the hard-core fans, who are therefore the strongest
influencers of the fan base, do have a decent handle of the goings on in the boardroom that have
driven the on-field fortunes (or misfortunes) of the club and they will not tolerate their on-going
involvement at the top of our club. This is something that they may have picked up on with recent
media coverage and fan feedback and I know this being something that these guys used to think was
irrelevant i.e. the view used to be when I was dealing with these people that the fans will turn up
and support the club no matter what they do in the boardroom and no matter where the club sits in
the professional league pyramid.

[d] WTID & Wealthy Wednesdayites

Despite there being zero call to arms from Howard and there also being a lot of dirty tricks employed
by our board preventing fan groups from unifying and putting a fundraising process in place, this has
in fact happened, albeit late in the day. These guys have done a lot of work in a very short space of
time and they have been in active dialogue with Wealthy Wednesdayites in order to put enough
together to make a wider push for the whole fan base to get behind them. They have met with the
bank and the bank have told them if they can get some real traction and then pull the fan base along
with them then their proposal sits well with the Co-op’s agenda for SWFC. I am hoping that this push
comes in the next week or so or this will end up being a play to get the club out of administration.

Any reference to other bids at this point is just going to be spin from the board designed to influence
the exiting players.
[5] Conclusion
The board have proven beyond doubt that there is no interest in fulfilling fiduciary duties and
avoiding conflicts of interest as well as doing what is in the best interest of the company and ALL
shareholders. Last year’s accounts have not been filed, I think it would have killed the board to have
to admit the huge revenue growth that was delivered under my tenure as Chairman (excluding the
increased monies from the league and TV). I also suspect that the auditors may not be willing to sign
off on the accounts and definitely would not sign off on the club as operating “as a going concern”.
This year’s AGM has also not yet been called, which has happened at this time in the year previously.

The bank I am sure would like to have the last 10 months back and to have handled things differently
given the understanding they now have in regard to our club’s board. The only viable step they have
left in the absence of a deal being agreed prior to December 1, is to put the club into admin and
make sure that a clean and professional admin process is run.

Like just about every Wednesdayite I have given my club everything I possibly can in my time and
never asked or expected anything back other than hoping that everyone involved in our club did
their best for it. I have always put the club first, sometimes even at times when I should have put my
family first. Given that, I find it impossible to accept what I have witnessed, up to and including
recent days. The lies, disruption, taking club staff and Wednesdayites for mugs, conflicts of
interests, non-compliance with fiduciary duties, and the complete arrogance of deflection of blame
while blocking rival bids and also mounting their own bid, all adds up to behaviour which is beyond
contempt and no one in our boardroom or their associates are free from blame on this anymore.

I wish the bank had reacted to my request to effect change in the boardroom last February, I wish
they had reacted fully to my whistleblowing process in June. I wish that Wednesdayite had acted on
my whistleblowing and listened to my repeated requests to call an EGM to formally hold the board
to account to their actions and thus maybe preventing the current situation developing.

I would dearly like to see the WTID process come to fruition and gain enough support to control the
club’s destiny until further funding is raised to support the club as it ultimately seeks to gain entry to
and become established in the Premier League. Failing that I would strongly advise the other bidders
to hook up with the fan groups and agree to terms that would create strong partnership between
the fans and any 3rd party investors and use the combination of cash and strong PR to get a deal
done (Cash fans and Co-op all working together will get a deal done if one is going to get done in my
view) and put in place a new structure at the top of the club that is not tainted by the past.
My only fear for admin is the disruption the club will face which will remove the possibility of gaining
promotion this year. It is not possible in the current environment and also with the way the league
rules now work to have a fire sale of players and it is also unlikely that, following what happened in
Crystal Palace’s most recent administration process, that a club would exit administration with any
control over its ground going forward.

I do believe that Dave Allen will do a deal if he is dealt with respectfully and also he sees that the
club would move forward with none of the issues from the past (or his past) moving forward with
the club. Dave is a very smart business man and his priority is his other businesses in Sheffield and
also his new mission to make Chesterfield a success. This means that the real problem is the other
loan note holders.

My concern is that the incumbents and those that have clearly become compromised by association
keep behaving the way they have thus far and our club suffers more and more damage as a result.

Whatever happens I see no scenario where anyone throws lots of money at the club until it is close
to the Premier league, which means that whoever controls our club going forward will have to have
the support of the fans and work to a long term plan in a true partnership with the fans. I know that
it will be impossible to achieve for anyone that is associated with the board in the past.

Regards

Lee

PS – The fool was me if you hadn’t worked it out, I made my mistakes (Family grandstand change
communication, allowing over optimism last season, not blocking certain player deals, expecting too
much of an apathetic (after 20 year of pain) fan base), but only a fool would offer to help people
who did not want help, and only a fool would expect all of the fans to not mimic the behaviour of
the cancerous types at the middle of all of this (you all know who you are – thankfully this is only a
handful of people).

If you still have the will to live after the long read and depressing content and if you haven’t already, this document is probably best read
while referring to the other documents which I have also posted on www.scribd.com/lee_strafford