Acquittals leave campaign to tame English football's 'casino capitalism' in tatters
Verdicts are not just an embarrassment for the tax authorities but a major blow for the City of London Police
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For the detractors who dismissed the multimillion-pound investigation into football corruption as a witch hunt against the sport, yesterday was vindication. After inquiries on both sides of the Channel, the attempts to hold the casino capitalism of English football to account lay in tatters with the failure of convictions against two high-profile targets.
The acquittals of Harry Redknapp and Milan Mandaric for tax evasion over payments into an offshore bank account were an embarrassing failure for tax authorities investigating the secretive world of Premier League football. It was also a major blow for officers from the City of London Police, whose credibility to investigate sporting wrongdoing had been damaged over the collapse of a £10m trial in 2007 of champion jockey Kieren Fallon and five other men for alleged race-fixing.
But the faultlines in the football case were clear before yesterday's verdicts. What started out as a major inquiry into alleged false accounting, fraud and money laundering – and led to raids at Birmingham, Rangers, Newcastle and Portsmouth football clubs – ended as a case over an alleged unpaid tax bill contested at being £30,000 or £65,000. By contrast, Mr Redknapp made £4.2m over three years at Portsmouth.
Nine people were arrested during Operation Apprentice. But only three men were brought to trial, the one-time triumvirate at Portsmouth FC – manager Harry Redknapp, chief executive Peter Storrie and chairman Milan Mandaric.
One of the charges against Mr Storrie related to an alleged "golden hello" for the prized Senegalese midfielder Amdy Faye when he moved from Auxerre to Portsmouth in August 2003.
The money was paid through the Monaco account of his agent, Willie McKay, and then fed into the player's account in Senegal, the prosecution claimed. Mr Mandaric and Mr Storrie strenuously denied wrongdoing.
That was the deal that led to the arrests of the player, the agent, the two executives and Mr Redknapp in November 2007. It was initially assumed the arrests related to "bungs" – illegal payments to facilitate transfer deals – since an inquiry commissioned by the Premier League had reported eight months earlier its concerns over 17 transfers involving five clubs. But the inquiry was subsequently narrowed to alleged tax evasion driven by HMRC.
Redknapp took the police to court over the raid on his home and won a High Court case in May 2008. The judgment revealed the genesis of the British inquiry: a French probe into transfer deals from 1998 at the French club Paris Saint-Germain. Mr McKay gave evidence to the inquiry headed by Parisian judge Renaud van Ruymbeke.
It is understood that the results of Mr van Ruymbeke's inquiries were passed to the British tax authorities and to the separate Premier League bungs inquiry. It "stimulated" the inquiry that resulted in the November 2007 raids.
The effect of the raid at Mr Redknapp's £10m Dorset home was professionally devastating. He had been favourite to take over the England job from Steve McClaren. After the raid, his odds tumbled and Italian Fabio Capello was installed in the job. Mr Redknapp had already been the subject of a two-year civil tax inquiry over a £300,000 "gift" he received from the £18m transfer of England defender Rio Ferdinand from West Ham United (while Mr Redknapp was manager) to Leeds. That inquiry found that he had paid the tax owed, as he had claimed.
A few weeks after the end of that inquiry in October 2006, he made the statement that led to the latest trial. The Premier League had ordered its "bungs" inquiry at the start of 2006.
The league commissioned a private company, Quest – a team of forensic accountants under the leadership of former Metropolitan Police Commissioner Lord Stevens – to investigate transfer deals and payments involving agents in the two years from January 2002.
Mr Redknapp voluntarily told the Quest team about his offshore Monaco account in November 2006. The manager flew to Monaco in 2002 to set up the account Rosie47, named after his pet bulldog, which received payments of some £189,000 over two years from Mr Mandaric. The prosecution claimed that it was in part his cut of the profits from the sale of Peter Crouch to Aston Villa.
The account was revealed to the City of London Police when authorities secured the papers from the Quest inquiry. Prosecutors believed they had powerful corroborative evidence from a taped 2009 interview with Mr Redknapp conducted by former News of the World reporter Rob Beasley with Mr Redknapp. The manager told him the payments were linked to the sale of Crouch – a bonus that was subject to tax. Mr Redknapp, then manager of Tottenham Hotspur, admitted he had misled Mr Beasley – but the phone call was made on the eve of the 2009 Carling Cup Final, and he wanted the reporter off his back.
The inquiry into other high-profile arrests came to nothing. Karren Brady and David Sullivan, executives at Birmingham, Amdy Faye and another footballer who used Willie McKay as an agent, Pascal Chimbonda, were all told they would not face charges. Mr McKay was also told no further action would be taken against him.
And yesterday it was the turn of Mr Redknapp and Mr Mandaric.
Taxman in the dock: Other recent own goals
Vodafone
The mobile phone company has finally settled a dispute with the UK taxman after nine years, paying £1.25bn. However, whistle-blowers have claimed the bill should have been £8bn, and HMRC has been accused of striking a so-called sweetheart deal with the company to keep the bill down – something both HMRC and Vodafone deny. Dave Hartnett, the Permanent Secretary for Tax – in effect the country's top tax official – faced calls to resign. He has said he will retire this summer.
Goldman Sachs
The giant American investment bank was allowed to waive millions in tax, estimated by HMRC to be between £5m and £8m – although an HMRC whistle-blower claimed the figure could be as high as £20m. (HMRC rejects this.)
'Misleading' taxman
Following the revelations on Vodafone and Goldman Sachs, MPs on the Public Accounts Committee condemned "cosy" deals between HMRC and big business last December. They accused the taxman of misleading Parliament and lifted the lid on a suspected £25bn of outstanding tax which could be owed by major corporations. HMRC rejected the criticism saying MPs had misunderstood the cases. Downing Street insisted that HMRC "supports all taxpayers even-handedly".