Latvian’s 12,000 word court submission reveals the breakdown between millionaire and Oyston family.
As fans eagerly await the decision of a High Court judge over the battle between the Oyston family and millionaire Valeri Belokon, today we can publish the Latvian’s skeleton argument in the case, which was put before the court.
In a submission totalling almost 12,000 words lawyers for Belokon highlight how his dealings with the Oystons began and how it ultimately turned sour.
The judge in the case - Belokon is claiming the Oyston family “improperly” extracted millions of pounds from the club when it reached the Premier League - is expected to deliver his judgement before the end of July.
Legal documents for Valeri Belokon’s company, VB Football Assets (VB), chart the way his initial friendship with Owen Oyston went down hill and ended up with the current court case.
The detailed allegations claim that Owen Oyston, his son Karl and Blackpool Football Club Properties withdrew vast sums of money “for their own benefit,” including a claim that £75,000 was used to buy bison for Owen Oyston’s stately home.
The parties did not agree on what to do with the cash
The papers before the court also round on the Oystons over claims relating to Mr Belokon and media coverage. Owen Oyston in his statement to the court branded the coverage as “a draconian media and legal onslaught.”
However, Mr Belokon’s papers say it was “self induced” by the Oyston’s decision to take money from the club and to sue fans who challenged what they did.
The papers say Mr Belokon never received any dividends, directors nominated by him never received salaries and he has only been repaid a fraction of £7.45 million he loaned Segesta Ltd, the predecessors of Blackpool Football Club (Properties) Limited.
Outlining the initial friendship between him and the Oystons, the 37-page document prepared and signed by Mr Belokon’s lawyers says he met the Oystons in 2005 and at the time, through their company Segesta Ltd, they owned 97 per cent of the club.
It says that in March 2006 Owen Oyston reported to his advisers that he and Mr Belokon had reached agreement in principle for Mr Belokon to acquire a 50 per cent interest in Blackpool Football Club Ltd’s (BFC) business through a new joint venture company and at a price of £4.5 million.
However, it was discovered that this posed a problem for the transfer of BFC assets to the new joint venture company, and that company’s ability to utilise BFC’s accumulated tax losses.
As a result, a new deal was drafted under which Mr Belokon would subscribe for 20 per cent of the shares in BFC for the £4.5 million and with an option to purchase a further 30 per cent on flotation of BFC.
Under that deal Mr Belokon claims football-related profits from BFC were to be split 50/50 between him and Karl Oyston.
A letter at the time from Owen Oyston is said to have told him that although total investments would be substantially unequal, he would receive the same capital gain as Mr Oyston.
The letter is said to have continued: “I have agreed to this because I really believe that you and your team and Karl and I can work together and create an exciting outcome and if we were successful in reaching the Premier League, the sums would be so substantial that I would not be concerned about the extent of my past investment.”
Ultimately Mr Belokon is said to have bought a 20 per cent stake in BFC for £1.8 million under an agreement that money was to be used exclusively to develop the club’s playing squad, and Mr Belokon advanced a further £2.7 million to to Segesta in two interest free loans.
A section of the statement headed ‘The honeymoon period, 2006 – 2010’ says that between those years the funds Mr Belokon made available for players bore fruit and the club was promoted to the Championship in 2007 and to the Premier League in 2010.
“Warning signs of what was to come” though, are said to have emerged when the Oystons are said to have caused £850,000 that should have been gifted from Segesta to BFC to be recorded as a loan to BFC from Segesta.
But the statement continues: “Generally, relations between the parties were warm and in Mr Belokon’s case, consistent with an understanding that BFC was to be run as an equal joint venture.”
However, the statement says it “quickly became clear” after the “unprecedented influx of cash” (some £106 million) to BFC over the five years following promotion to the Premier League, that “the parties did not agree on what to do with this cash.”
There was a meeting at London’s Dorchester Hotel at which Owen Oyston suggested that he and Mr Belokon should have a facility to borrow between £3m and £5m each but Mr Belokon had been non committal on this idea.
However, the submissions continue: “Owen Oyston’s enthusiasm for taking cash out of BFC was undiminished by that reaction. On the contrary: his need to raise cash was urgent, in light of his recent loss of a tax tribunal case.”
The statement says that in response to a note from Karl Oyston he wrote (on an internal document unseen by Mr Belokon): “I would like a minimum of £5m and maybe a couple of million more so you and I can buy a few things and not have to sell Travelodge, the apartment in Spain or anything else for that matter apart from the rubbish I want to get rid of such as Oyston Mill and certain properties.”
And at a later ‘summit meeting’ with his advisers, a decision is said to have been reached that BFC should make a loan to Segesta. Consideration was also given to whether a £1m charge could be made for Owen Oyston’s services in getting the club into the Premier League.
The papers refer to offers of Mr Belokon to stand down from his connection with the club and sell his shares to Mr Oyston but say that this did not happen.
However, they say that a series of financial transfers from BFC to Segesta raised the sum owed by May 2016 to £29 million “largely in the form of unsecured, interest-free, and frequently-undocumented, loans.”
The papers say that at times records show “use of BFC’s funds for a wide range of eccentric purposes.”
“These include the apparent expenditure of over £75,000 on bison for Mr Owen Oyston’s stately home, Claughton Hall,” they say, adding: “There was no justification for advancing any of these sums.”
The papers say that the defendant’s claim that £5.5million of the loans were held as “cash in bank” but they continue: “There was no justification for BFC to have removed from its own control such a substantial sum, simply so that it can sit with (and presumably earn interest for) Segesta.”
And turning to the £29m, they say that the defendants claim the balance was used to develop the club’s stadium. They say that it may be arguable that it was reasonable for BFC to have financed the £2m to build the East Stand and £3.3million to build the South East Corner but they say Mr Belokon’s company complains it was excluded from decision-making and information regarding this money.
And they add that Segesta received benefit from capital gain arising from the work that BFC had financed.
A third sum of £3.3million was used to finish the South Stand and South West Corner, but papers say that this was “of no benefit to the club.”
They say that the controversial £11m was paid by BFC to Owen Oyston’s service company, Zabaxe Ltd in 2012, but that there was no outstanding loan payment due from BFC to Zabaxe.
“In truth, the £11m payment was a classic instance of a disguised distribution of capital, in the form of plainly excessive director’s remuneration, in circumstances where profit would otherwise have had to be shared with a minority shareholder,” say the papers.
And they go on to claim that the defendants sought to unfairly exclude the claimants from profits “by choosing to extract monies from BFC by the loans, so-called ‘advanced management fees’ and excessive remuneration set out above, rather than by paying dividends.”
The papers say that the claimants and their nominated directors were “repeatedly excluded from decision making in respect of transfers of funds out of BFC.”
It is alleged that the claimants have suffered unfair prejudice as result of what happened, that Owen and Karl Oyston have “breached their fiduciary duties to the company as its directors,”
Mr Belokon’s company is seeking to be bought out by BFC at a price that reflects the “unfair prejudice suffered” and if that is not ordered then an order that the Oystons and their company pay “equitable compensation to BFC for the damage they have caused it.”
On the question of media coverage, the statement says the question has been raised of whether, as a result of alleged misconduct by Mr Belokon, any relief should be granted in the case.
It says the alleged misconduct was in the form of “unparticularised allegations of a media campaign” against the Oystons and their company.
It says that Mr Belokon’s position is that in so far as there was interest in the conduct of Owen and Karl Oyston “it was self induced” following their decisions to take money from BFC and to sue fans who challenged their actions for defamation.
It adds that matters came to a head in 2015 when the FA banned Karl Oyston from all football-related activities for six weeks and imposed a £40,000 fine on him for calling a fan a “retard.”