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Financial Integrity, Football, Moral Integrity

Hearts Admin Part 1: Vlad, SPL & Media kept Schtum. Creditors stiffed out of £27.5m, £28.4m owed. Budge gets control for £2.5m.

Vladimir Romanov.PNG

As Scotland heads back to Lithuania today Friday, 1st September 2017, for a World Cup Qualifier the talk of Lithuania it must brings back memories of when Hearts was controlled by Vladimir Romanov, pictured above, via his Lithuanian companies which had propped up Hearts for many years before the company, Heart of Midlothian Plc (‘HoM’) went into administration on 19 June 2013.

Mr Romanov is in Russia being protected by his krysha (Translation: Roof) i.e. his protection being the Oligarchs friend that he helped move money overseas through his bank [detailed in a future post]. Vladimir has a sick note for a ‘stroke’ & Russian authorities will not approve his extradition to Lithiania, so he will not return to answer questions about the demise of his empire & where all the money went. It is claimed by Lithuanian authorities that he took £308m from the Ukio bank before it collapsed. 

A few posts may be required because Hearts administration is too complex to examine the many dimensions relating to Hearts fall & rise, including examining Hearts krysha/Roof, the SPL & Scottish politicians, & how they got away with prising control & assets from Lithuania. Vlad above is indicating to keep schtum, a very apt gesture given by the actions/in-actions of the cast of actors below.

HoM came out of administration in 11 June 2014 leaving creditors penniless while the company ended up in profit with more cash in hand and more amazingly getting out of the grasp of Vladimir Romanov.  The two Lithuanian companies that controlled the company carrying HoM’s debts of £23.5m debt were wiped for £2.4m paid for by Ann Budge in the form of her takeover vehicle, BIDCO (1874) to Ukio and £70k paid to UBIG:

UAB Ukio Banko Investicine Grupe (‘UBIG’) , as HoM Plc’s parent with 50% of their ordinary shares & debts owed to the parent of £8m, and

AB Ukio Bankas (‘Ukio Bank’) with 29.9% of HoM Plc and owed a debt of £15.5m secured against Tynecastle.

The only other debt which had to be cleared to continue operation in the SPL was to clear the Football debt of £535k which appears to have been cleared by the Foundation of Hearts (‘FoH’) funds. FoH comprised supporters pledging to donating cash to keep HoM operating. FoH was run under the chairmanship of Ian Murray MP. He was not the only politician aiding HoM.

Political Intervention on Behalf of Hearts

Lord Foulkes proudly admitted his efforts in this Edinburgh News article dated 17 April 2014 :

“A lynchpin in efforts to drive talks forward was former Hearts chairman Lord George Foulkes, who is understood to have convinced David Hunt, the UK Ambassador to Lithuania, to assert diplomatic pressure on the club’s creditors.”

Alex Salmond, Scottish First Minister and Hearts fan saw no conflict in contacting diplomatic personnel in Lithuania to pressure them to Hearts advantage while BDO were in Lithuania negotiating purchase of assets. 

From John McGarry’s Daily Mail article dated 16 April 2014:

Scotland’s First Minister, Alex Salmond, had entered the increasingly-fraught fight to save the club. The Hearts fan had spoken to Lithuanian politicians amid fresh delays in Vilnius.

Salmond’s dramatic late intervention was at the behest of Tynecastle administrator Bryan Jackson, of accountancy firm BDO, who was battling against the clock to seal a rescue deal.

Salmond said: ‘At the bequest of the Hearts administrators, I phoned the Lithuanian ambassador to try and facilitate the important moves that are being made.

‘I should say, I’m a Hearts supporter – I declare an interest – but I have made the same approaches when necessary with other football clubs in Scotland who have been similarly struggling.

‘I would always do that as First Minister because it’s part of the First Ministerial role to help Scottish Football and help Scottish clubs when you can, and I’m sure that everyone in Scottish football, whichever team they support, wants to see Hearts back fighting fit, and part of the firmament of our national game.

‘They were helpful conversations and progress has been made. We’re hoping that things will reach a successful conclusion.’

There seems to be no evidence Salmond helped Rangers or Dunfermline. Equality appears only to exist in the First Minister mind. Tag teaming with an insolvency administrator, BDO, for the benefit of Mrs Budge while the rest of the creditors got nothing is not a good look. In fact it’s the same model Vlad used to work with in Eastern Europe with preference for assets going to the Oligrachs. A bit like Celtic getting the same from Glasgow City Council.

Again from the DM article:

“Jackson spent much of last week in Vilnius, where he struck agreement with Hearts’ other major creditor, UBIG, to sign over its share in the Tynecastle club for £70,000. “

So UBIG’s shares cost & debt clearance of £8m only cost HoM £70k. Bargain. Was this due Salmond and Foulkes’s lobbying? 

Ukio’s shares, 29.9%, and debt of £15.5m cost £2.4m to transfer to BIDCO, this is BIDCO’s loan that still sits on HoM PLC’s balance sheet. The reason the Ukio transaction cost more than UBIG’s 50% of shares is that Ukio Bank held Tynecastle as security for their loan. In fact Ukio only got £2.075m because BDO took £375k as a fee for tying up the agreement & doing the negotiations. Not bad getting Tynecastle, valued at £13.75m (from BDO & 2012 accounts) for a bit over £2m.

Hearts as it turned out was very lucky both UBIG & Ukio were insolvent at the same time as they were in administration.

The question needs to be asked: Why would Ukio Bank not want to sell Tynecastle? Ukio Bank breakup was controlled with good assets going to another Lithuanian bank & the bad debts staying with Ukio. Hearts & Tynecastle were not moved to the new bank. Why? Sentimentality by Vlad, pressure from Scottish politicians? To be examined in another post in depth. On 18 February 2013 a Lithuanian website reported:

Ukio good bad bank Feb 2013

The SPL put their fingers in their ears, stuck their heads in the sand & chose not to see what was happening in Lithuania to UBIG, Hearts parent company in 2013 not to demote Hearts to the championship. This changed history so much that other clubs should be calling for an investigation of the SPL/SPFL board’s actions or in this case in-actions.

Once more we boldly go where SMSM won’t, in the attempt to find out where Scottish Football’s Holy Grail, Sporting Integrity went.

BDO Joint Administrator Statement 26th July 2013

Hearts went into administration and were deducted 15 points on 19 June 2013. The total owed to 200 creditors in the statement was £28.424m:

BDO Creditor Total

Most of the creditors saw nothing. Even the Lithuanian companies Ukio Bank and UBIG ended up with very little.

Unsecured creditors from BDO statement:

hearts unsecured creditors

HMRC, the taxmen, were owed £1.881m.

UAB Ukio Banko Investicine Grupe (UBIG)’s loan was unsecured and they had allocated the Floating Charge & Security over assets in HoM PLC to Ukio. Again from the BDO statement:

Transfer of shares between UBIG and Ukio

The latter two transactions, happened in Dec 2012/Jan 2013, when Hearts were having trouble paying the HMRC which had allowed them in a previous agreement to pay their obligations over 3 tranches. Hearts were failing for a long time and they screwed HMRC who gave them one too many chances. Looks like Vlad/Hearts were preparing for insolvency/admin well in advance.

Milson Capital Corp, £1.223m, and Ensco 165 Ltd, £509,464 were supposedly Romanov companies used to bail Hearts out when they could not meet players wages. As unsecured creditors were also unpaid.

The Football debt £535,180 had to be paid to continue to play in the SPL.

Heart of Midlothian PLC Accounts for 30 June 2014

To understand what happened look at Heart of Midlothian PLC’s accounts for 30 June 2014 after most of the ‘doings’ were over. I always love how accountants massage their figures to explain away contortions while using euphemisms for the items.

The following excerpts are from the HoM accounts for year ending 30 June 2014 from director Ann Budge who supplied £2.5m through her takeover vehicle, BIDCO(1874) which was used to acquire Ukio’s shares & security over Tynecastle:

Hom 2014 accounts 1

Hom 2014 accounts 2

Hom 2014 accounts 3

Out of the creditors total of £28.424m, £27.472m were written off. Plus Ann Budge charged HoM £552k for setting up the BIDCO and supplying the £2.4m loan used to do the Ukio deal:

Hom 2014 accounts 4

Somehow Ukio Bank, which could have taken Tynecastle, valued at £13.75m in BDO’s statement & Hearts 2012 accounts was persuaded just to take £2.075m. Very Strange.

‘Look Away Now if You Don’t Want to See the Result’ or SPL Board Bury Their Heads

16 May 2013: Announced by Lithuanian Ministry of Economy, Department of Enterprise Bankruptcy Management that UBIG is insolvent: source 

16 5 2013 Lithuanian Dept says UBIG insolvent

16 5 2013 GlobalInsolvency UBIG insolvency notice

‘Bloomberg reported’ https://www.bloomberg.com/news/articles/2013-05-16/hearts-majority-owner-ubig-is-insolvent-bankruptcy-body-says source (behind paywall) same date, 16 May 2013.

20 May 2013: SPL/SPFL claim they consulted Lithuanian ‘legal experts’ [never named] and consider UBIG not insolvent: source

20 5 2013 DT article Hearts SPL 1

20 5 2013 DT article Hearts SPL 2

Let’s run SPL Chairman Topping’s quotes through the BBC Scotland editing machine:

‘there were people in Lithuania defining the facts for us’ – people? Who? defining? Sounds like, smells like bullshit.

‘you can only muster the facts as they are’ Aye, if you were looking for the facts. UBIG were insolvent and the SPL board refused to see that fact.

‘because I can assure you I know nothing’ That’s true.

When asked if they would keep checking UBIG ‘I cannot envisage a set of circumstances where that might occur’. So SPL have ‘plausible deniability’, ‘I do not re-collect your honour’…

So here we have on 16 May 2013 the following reputable parties saying that UBIG is insolvent:

  1. Department of Enterprise Bankruptcy Management, part of the Ministry of Economy of the Lithuanian government
  2. Bloomberg Financial news

Versus, saying there was no insolvency event for UBIG, the

SPL un-named ‘legal experts’ pulled from the telephone book or worse imaginary lawyers.

Was it Renta-mobski Lawyers, Vilnius. Note: None of the Scottish ‘media’ asked any questions or followed up on UBIG & the un-named ‘legal experts’. They looked away and kept schtum too.

SPL Hiding The History

At time the SPL board consisting of:

Chairman Ralph Topping, Chief executive Neil Doncaster, Celtic director Eric Riley, Dundee United chairman Stephen Thompson, Aberdeen chief executive Duncan Fraser and Kilmarnock chairman Michael Johnston

did issue a statement. From the BBC 20th May 2013:

“The SPL board met today to consider reports from Lithuania in respect of Ukio Banko Investicine Grupe (UBIG). The board are not satisfied on the basis of information currently available to it that an insolvency event as defined by SPL rules occurred in respect of UBIG during 2012-13.”

Does that still exist on SPL/SPFL PR website. No. It has been erased.

SPFL PR 2013

There is a PR release about Dunfermline going into Administration in April 2013 but nothing about Hearts going into Administration on 19th June 2013 or coming out of administration on 11 June 2014? Persons suffering an accident and that erases their memory. When a whole organisation does that it’s called a cover-up.

 

What Should Have Happened

SPL didn’t want another major team dropping out of the Scottish Premiership with Rangers dropping down to the bottom division the previous season. It would have damaged the SPL brand & TV rights. SPL were also taking over the better run football authority the SFL to become SPFL and needed the funds to bribe certain SFL clubs to get the vote over the line.

Hearts kept their SPL monies for another year before they had to go down which gave them an advantage they should not have had. They should have had to go through administration in the Championship. In that extra year they reduced costs through cutting playing staff by a third in a controlled fashion. Although they had a signing ban there was no fire sale of players or players moving under the chaos of TUPE. 

What should have happened was Hearts should have been hit with an 18 point deduction (under SPL rules a third of last season’s total) due to the parent company, UBIG, becoming insolvent and been relegated to the Championship for the 2013/14 season.

Dundee should have stayed in the Premiership. But unfortunately History was corrupted.

Thanks go to the contributions of the fth team in the compilation of this post.

©footballtaxhavens.wordpress.com 2017 CC-by icon

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