Always a Wasp
General Category => Wasps Rugby Discussion => Topic started by: stripey on December 19, 2023, 03:10:40 PM
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Does anyone have a subscription?
https://www.law360.com/articles/1776731/kennedys-faces-rugby-club-owner-s-73m-bad-advice-claim
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Nope but the is Derek is it not? Explains his enforced silence.
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Law360, London (December 18, 2023, 7:27 PM GMT) -- The former owner of an English rugby team has sued Kennedys and one of its former partners for more than ?73 million ($92 million), alleging that bad advice caused a cascade of financial problems that led to the club's collapse.
Derek Richardson, who owned Coventry-based Wasps Rugby Football Club, said in a High Court claim made newly public that advice from Robert Dawbarn and Kennedys led him into an investment deal that encumbered him with almost ?1.5 million in fees, caused the value of his ?71 million shares to plummet and forced the club into administration.
Richardson said in the filing, dated Dec. 4, that Dawbarn failed to properly advise him of the risks of transferring his shares to a Maltese fund in a bid to raise money for the club. He claims that he would not have entered into the transaction had Dawbarn made the dangers clear.
Richardson said that the deal stripped him of control over the company and left the club unable to secure critical funding needed to pay creditors and its tax bill.
"Mr. Dawbarn breached his duties to exercise reasonable skill and care to be expected of a solicitor with particular knowledge and skill as a corporate and banking partner in a City commercial law firm, for which breaches of duty, Kennedys are liable," the claim says.
The former insurance broker is suing around a year after the 156-year-old club plunged into administration in October 2022. The team exited administration weeks later under new management and has announced plans to begin playing again in 2024 or 2025.
Richardson, who bought the Wasps in 2013, said in his claim that the club's downfall came as a result of a 2017 deal to raise funds by transferring his shares into a Malta-based collective fund in exchange for so-called investor shares.
He alleges that Dawbarn failed to advise him that the deal would transfer control of the club to the fund, which was run by his financial advisor.
"Any legal adviser acting with reasonable care and skill would not have allowed their client to believe that they retained ultimate beneficial ownership, such a legal adviser would have corrected any statements that conveyed this message," the claim says.
Richardson said that his financial advisor soon began making demands for fee payments, which eventually totaled almost ?1.5 million between 2017 and 2022, according to the claim.
He also contends that the club's connection with the Maltese fund meant that lenders, including a bank and two local authorities, would not provide loans of up to ?8.2 million needed to square the club's finances following the construction of a training ground.
Richardson ordered his financial advisor to shut down the fund after lenders expressed concerns that Malta existed in a money laundering compliance "gray zone," but that his advisor raised obstacles that delayed the move, the claim says.
Richardson contends that the delay meant the club was unable to pay creditors on time, refinance a ?35 million bond or pay its taxes, prompting HM Revenue and Customs ? the U.K.'s tax authority ? to petition for the club's winding up.
A spokesperson for Richardson told Law360 that the former club owner "has been let down and had no option but to issue proceedings."
"Pursuing this court action has not been a decision Mr. Richardson has taken lightly," the spokesperson said. "Mr. Richardson relied on Kennedys' and Mr. Dawbarn's professional advice to fulfil his instructions."
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That fits with what I'd heard. I note that there is no detail as to why the financial advisor failed to do as Derek instructed and how that caused the cascade of fuck ups that killed our club.
I guess that'll come out in the case itself.
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That fits with what I'd heard. I note that there is no detail as to why the financial advisor failed to do as Derek instructed and how that caused the cascade of fuck ups that killed our club.
I guess that'll come out in the case itself.
Sadly, fuck ups generate a momentum all their own.
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Excellent. Hope it all goes your way Derek. Good luck.
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That fits with what I'd heard. I note that there is no detail as to why the financial advisor failed to do as Derek instructed and how that caused the cascade of fuck ups that killed our club.
I guess that'll come out in the case itself.
That?s interesting. See what comes out in the case.
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Can't help but wonder why an allegedly astute business man needed a financial adviser to tell him that scheme sounded a bit dodgy.
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Can't help but wonder why an allegedly astute business man needed a financial adviser to tell him that scheme sounded a bit dodgy.
I think you've missed the point. He instructed solicitors with a specialism of finance and on their recommendation set up a scheme. It turned out that either through malice or negligence it was less than appropriate. I don't think it's unreasonable to assume that a legal firm would actually put your interests first and foremost when they are acting on your behalf. Nor is it unreasonable to ask for specialist advice on a highly technical subject.
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Well put, VV. Good luck Derek.
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Nice to hear some news.
Only when this stuff is out in the open could anyone form a judgement, specifically ex players and non playing staff who lost their jobs.
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Can't help but wonder why an allegedly astute business man needed a financial adviser to tell him that scheme sounded a bit dodgy.
About 99% (plus or minus 1%) of corporate financial dealings sound very dodgy to me but banks, investors, charities, councils, beloved celebrities, and even members of the House of Lords seem perfectly happy to use them. I don't think Derek was overly naive to trust a legal firm and financial advisor about investing in an EU country with the regulations there. He's not sent his money to Panama, Belize or the Caymans for example...
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I know various people on here will not entertain the possibility that Derek was anything other than a saint so not much point in continuing this from my perspective.
Lets wait for the outcome of the case, then maybe we'll have a few more facts that will help either way.
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I would still like to know who vetoed the deal (and why) that would have kept the club in existence.
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We know that. It was DR. Obviously because of the above I?d imagine.
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If DR didn?t have control of the shares he couldn?t use them as collateral for the loan that fell apart at the last minute. That?s probably why it dragged on for so long.
It also looks why DR had no choice but to call the receivers in.
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I suspect that's why the attempt to do another equity release, and then the loans, and then a buyout.
Someone else had control, and that someone wanted to drown Wasps. Someone who wanted the stadium, cheap as they could. Someone bought the stadium, very cheaply. Was that the same someone, only the Devil will know. I certainly would not wish to point any fingers. But, always follow the money.
I think Wasps and Derek simply got in the way of some very bad people.
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Well we know who bought the stadium. Can?t see any way they had control of Wasps though ??
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That is hopefully what will come out.
I am most interested in the rescue plan and why it was vetoed- was that reasonable. . That will likely be beyond the remit of this action, but once it is out the way hopefully we can hear from Derek, who has been silent publicly on everything.
Also interested in Holland's role.
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Some more detail here: https://www.thebusinessdesk.com/westmidlands/news/2081004-former-wasps-owner-sets-out-100m-claim-against-legal-advisors
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Interesting.
No legal or business expert, but if funding was refused because the investment vehicle was based in Malta, not sure how having voting rights & control etc would have made any difference. Except perhaps it could have been moved somewhere else with a better financial reputation (& thus got extra funding) but because Derek had lost control he couldn't?
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Shafted by lawyers? Who'd have thought!
FWIW I have a very low opinion of lawyers. IMO they should stick to conveyancing and civil matters and avoid commercial stuff - about which they know little.
I hope their professional indemnity insurance is up to date!
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Interesting.
No legal or business expert, but if funding was refused because the investment vehicle was based in Malta, not sure how having voting rights & control etc would have made any difference. Except perhaps it could have been moved somewhere else with a better financial reputation (& thus got extra funding) but because Derek had lost control he couldn't?
My take is that Derek couldn't raise the loans because he didn't have control and therefore couldn't offer up the stadium or anything else as collateral. Once that came to light there was no way we could be saved.
I've been involved in a lot of high value financing due diligence work in the telecoms industry as a technical adviser. Our reports carried lots of warnings about carrying out your own due diligence and not relying solely on our reports because we couldn't be sure we'd been given access to all relevant information.
In this case its hard to see Derek's advisers using that excuse as they seem to have taken the scheme to him. I wish him luck.
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Wow - interesting news.
Because of the high legal costs I would have thought that Derek?s claim would be settled before it goes to court.
Good luck to Derek though.
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Yes - good luck, Derek. Stick with it and don't give up.
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It's interesting that when he was running Wasps Derek was hailed as an astute business man that knew a thing or two about success. There were many a post explaining you don't get to be as wealthy as Derek did without being on the ball, on top of your game etc etc. Now the majority view here seems to be support for the view that Derek was the unwitting victim of bad advice and couldn't possibly have known he had given up control of his business 'cause lawyers and advisors said it will all be OK. There's now't as fickle as folk I guess.
I for one hope it does get to court, only then will we get more detail about what went on. What was Derek hoping to achieve by moving the business to being based in Malta? There must have been an advertised upside to the move. I see Channel 5 have a programme about Malta on tonight, maybe that will shed some light on the benefits of being based there?
This isn't meant to be an anti-Derek rant, I was happy when he took over from Steve Hayes. I thought he represented vision and stability. However, I can't let him totally of the hook either, he was the owner when it collapsed and it would appear decisions he made contributed to it happening. If this case is to be believed he had no idea what he was doing, just following along with whatever he was "advised" to do. But there must have been a reason why.
Like a lot of people I'd just like to know why it happened, and see if there's anything to learn from it to stop it all happening again.
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I'm with you LWasp. If such dealings had been done by say, Sarries, plenty of people on here would be shouting about shady business deals etc etc.
But it was Derek, who can do no wrong even when he presided over Wasps going out of business, probably for good.
Derek saved Wasps & had a vision for a future which sadly didn't work out, but that doesn't mean he is not culpable for its demise.
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It's interesting that when he was running Wasps Derek was hailed as an astute business man that knew a thing or two about success. There were many a post explaining you don't get to be as wealthy as Derek did without being on the ball, on top of your game etc etc. Now the majority view here seems to be support for the view that Derek was the unwitting victim of bad advice and couldn't possibly have known he had given up control of his business 'cause lawyers and advisors said it will all be OK. There's now't as fickle as folk I guess.
Two things can be true at once though, Lwasp, perfectly plausible to be an astute business man, but on the receiving end from bad advice from experts brought in to provide insight and advice especially on a topic that he claims he wasn't familiar with.
It could be argued that doing the latter probably makes you more of the former.
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At the risk of teaching grandparents to suck eggs, those in business cannot be expected to be experts/know-alls in every single aspect and piece of minutiae involved in their work. They have to refer to experts. No-one can know absolutely every thing about everything.
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So what happened to the money invested in Malta?
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Of course Wonky that's correct, wouldn't suggest Derek should have known everything about everything, but I also find it hard to accept having admitted you know nothing about something you just go all-in on a say so. Lawyer liability insurance has already been mentioned on here, sometimes insurance has the effect of encouraging a no-risk, free option mentality.
Like I said the only way we get details is if it doesn't settle out of court. If it does Derek gets some money back and Wasps is still screwed. Good for him, no better for us.
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It's so complicated, isn't it. So many ifs and maybes. Completely understand what you mean, but some ''experts'' are expert at misleading other people, especially if they can present a good case and trouser a fair whack from it.
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So what happened to the money invested in Malta?
Ooh. Super point.
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I, for one, would be disappointed for out of court settlements.
Regarding Derek, at the end of all this I hope he can come out and say in full what happened.
He owes me no apology. People who lost their jobs might say otherwise. They might have a point, too, but until it comes out in full nobody can say if they do.
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Plus 1.
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So what happened to the money invested in Malta?
Ooh. Super point.
I don't think it was about hard pounds and pence sat in a Maltese account. More so, that ownership of the companies involved was moved out of there to reduce tax liabilities.
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I believe Derek's personal losses amount to 8 figures.
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Ouch. Expected, but ouch all the same.
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I believe Derek's personal losses amount to 8 figures.
From cash he injected into the Club, but couldn't get back due to going into Administration + 'fees' mentioned in the articles?
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I assume the purpose of these legal proceedings is for Derek to recover that 8 figure sum.
I'd like to understand what the claim is actually against and what any winning funds would be used for, as looking at the reports this is Derek vs the legal advisors, not Wasps vs the legal advisors, and it's for a sum of 100M+, whilst the reports state that Derek had loaned 20M to the club, so is Dereks claim actually 20M plus the 2M, plus it seems future profits from the new Hotel, and therefore remaining 80M-ish (taking a win as the scenario) goes where, the creditors, back to Wasps??? From the report the assumption of that 100M claim is around 67M against the value of Wasps, if he were to win the whole amount does that 67M go to Derek to do what he wants with, which I can only assume wouldn't involve Wasps, or am I being to cynical?
Or, being even more cynical, is the 100M+ an opening salvo in the negotiation tactics to allow Derek to recover his 22M+?
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andermt,
The 100 million is DR's estimate of his total loss. I imagine it includes not only the ?20 million but also his valuation of the Wasps Holdings shares, probably at the date he lost control of them.
Whatever winnings there may be, if any, would go to DR - as you say, to do with as he pleases.
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Don't suppose he fancies investing in a new rugby venture in Kent....
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Who knows?
He was very committed to Wasps from the very start - in fact well before then. I offered him my DVDs of the Gatland years when I met him at Adams Park but he said he'd already got copies!
His mate, Bill, was also similarly committed to us.
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Malta does not recognise UK insolvency laws, I think. I found this out during the pandemic when our wedding venue owner did a runner with all the money, folded his hotel business, then sold the property to a new one he'd incorporated in Malta, for a few hundred quid.
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andermt,
The 100 million is DR's estimate of his total loss. I imagine it includes not only the ?20 million but also his valuation of the Wasps Holdings shares, probably at the date he lost control of them.
Whatever winnings there may be, if any, would go to DR - as you say, to do with as he pleases.
I get it's an estimate, but with the Bond plus other loans, not all that 100M is actually a loss for Derek.
So my question, and I'm probably looking at it in a very overly simplified way, was around what happens to any monies won against, for example, the value of the club, a value that had loans/bond held against it. So if the club value was 57M and the Bond was worth 35M, shouldn't 35M be returned to the bondholders, not Derek? (I'm not a bondholder btw)
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It's a tricky situation, Derek cannot reclaim any money for or on behalf of Wasps. He no longer owns it. Chris Holand does.
The figure he is claiming I suspect is a combination of actual tangible losses, and lost future profits based on him losing ownership of the business.
I could be wrong though, I'm no legal expert. I have no doubt it will all come out soon. What I do know is that Deeek has been wanting to make this public for a long time. But has not been in a position to be able to do so. We have spoken a number of times about getting the truth out there, but legal advice has always been to hold fire for the time being.
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AFAIK the bondholders' only security was the long lease of the arena, which was sold to Ashley.
They have been paid out about 40% of their holding from the sale proceeds and I read somewhere that they're likely to get another 3-5%.
DR's action against Dawbarn centres around the value of his Wasps Holdings' shares, both present and future, together with the ?20 million loan he made. I don't think the shortfall on the bonds is involved in that action.
Any money DR gets from the action goes to him and of course his lawyers!
(I am a bondholder, btw)
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I have managed to talk to several of the "lesser" players since the demise, and one of the things that has been consistant is that none of them seem to blame Derek.
There is one person who everyone seems to blame, and it is someone rarely mentioned on sites like this, but he, basically, was one of the main people involved iin the move and was high up in Wasps holdings.
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Shorter post than normal.
Who?
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As a club Wasps seemed to have been courting the Ricoh/CBS for a few years prior to DR taking over by playing significant Heineken Cup home games there, so maybe someone who had been involved in the club during that time as well?
Feels like the end game was always to get the stadium and land, DR came aboard and provided the finance expecting some kind or ROI but got diddled, and the rugby side was just the cover for the whole thing.
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RogerE,
I've heard that a number of people rated Nick Eastwood as about as useful as a 3-speed trouser poultice, but it can't be him you're referring to because, IIRC, he was recruited after the move to Coventry.
So, to repeat WWW's question, who?
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Nick Eastwood was at the meeting that Wasps held for supporters at Marlow when the move was first announced, so was involved before the move happened, and yes he is the person most mentioned. Another name who has been mentioned to me as culpable is David (?) Armstrong, but I don't know what his role in Wasps was.
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Eastwood joined in 2102 as CEO : https://www.sportsmanagement.co.uk/Sports-features/sports-management-magazine/Nick-Eastwood/29740
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Eastwood joined in 2102 as CEO : https://www.sportsmanagement.co.uk/Sports-features/sports-management-magazine/Nick-Eastwood/29740
2012 methinks
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Nick Eastwood was at the meeting that Wasps held for supporters at Marlow when the move was first announced, so was involved before the move happened, and yes he is the person most mentioned. Another name who has been mentioned to me as culpable is David (?) Armstrong, but I don't know what his role in Wasps was.
Agreed - he was quite persuasive at Marlow.
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I stand corrected.
Wasn't he an RFU cast-off?
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Has anyone else read the D. Tel. ''Features'' pages 6 and 7, ''A stadium bigger than the 02 in our tiny village? No way''. I have to agree about the 28,000 seater size, and also if someone wanted to build any sort of stadium in our tiny village I too would object. Defo feeling of deja vue.
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Has anyone else read the D. Tel. ''Features'' pages 6 and 7, ''A stadium bigger than the 02 in our tiny village? No way''. I have to agree about the 28,000 seater size, and also if someone wanted to build any sort of stadium in our tiny village I too would object. Defo feeling of deja vue.
Somebody started another thread with the article! Reading the comments shows little support either. Slight sniff of CCFC?
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Thanks Neils; thought it felt familiar. The D. Tel has presumably lifted it for today's article.
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Its shown in full on the DT Today thread.
'A stadium bigger than the 02 in our tiny village?
This is a slightly disingenuous comment. Its proposed to build this within spitting distance of the M25 & M20. Anything within the M25 is a suburb of London these days not not a rural part of the Garden of England.
That said, pretty much the rest of the article is justified objections, especially the traffic issues. Although you do wonder if some of the objections are focusing on Wasps rather than the huge new build estate planned for the rest of the site which will have a daily impact on the area. Easier to object about a stadium than supposed affordable housing!