Birmingham City, in financial difficulties due to the imminent trial of their chairman Carson Yeung for alleged money-laundering, face further serious questions about the club’s governance and transparency, based on internal information seen by the Guardian. Major concerns are prompted about what appears the total power wielded by Peter Pannu, appointed acting chairman while Yeung is absent, and the way Pannu and other Hong Kong-based individuals have been paid large amounts of money by the club.
Lawyers acting on behalf of Pannu and Yeung made clear that their clients had “absolutely nothing to hide”.
According to internal documents the Guardian has seen, in June 2010 Pannu claimed by email to Birmingham City finance staff that Yeung had given him complete, sole authority over the club and its business dealings. At the time, Pannu was not even a director of the club, or the parent company, Birmingham International Holdings Limited.
Pannu also claimed that he had an agreement with Yeung, from June 2010, which entitled him to be personally paid 10% of “whatever I bring into the club by way of earnings and profits”. Pannu asked that the club’s finance department pay him £300,000 under this commission arrangement into his personal HSBC bank account in the UK. When a finance officer requested further details, Pannu said his arrangement had been agreed in the presence of Steve McManaman, the former England winger, then a director of BIHL.
Asked about this, McManaman told the Guardian no such commission for Pannu was agreed in his presence. “This is the first I have heard of it,” he said.
The club’s finance officer told Pannu he needed a direct authorisation to make the payment, to which Pannu replied he would “get something in writing” and said: “this is not theft, ok.”
Pannu, a Hong Kong former policeman turned barrister, arrived at St Andrew’s shortly after BIHL’s 2009 Yeung-led £81.5m takeover of the club from the previous owners, David Gold and David Sullivan. Pannu was not formally appointed a director of the club until July 2011, or of BIHL until September 2012.
In May 2010, BIHL agreed to settle a legal action they had taken to recover money from Sullivan and Gold which had been paid out by the club. The settlement was never made public but in his email to the club’s finance department, Pannu said it was £3.1m. Other reports at the time said the sum was in the region of £400,000. He then instructed: “Transfer 10 per cent of the sum I managed to recover from DS and DG as per my agreement with carson [sic] … into my HSBC account in UK.”
Pannu asked for £300,000, which he said was his 10% of the £3.1m, “rounded off” –so waiving £10,000.
A letter from lawyers acting for Pannu and Yeung stated that in June 2010 when Pannu demanded the money, he was “not an officer of BCFC and was not on the payroll”. However, “given his legal expertise” Pannu had been asked to deal with the claim against Gold and Sullivan, and “he was remunerated for this”.
After receiving Pannu’s email, the club’s finance officer requested direct authorisation for the payment from Yeung or BIHL, and an invoice, and advised there were possible PAYE tax implications for Pannu. He explained to Pannu he wanted to get the tax position right because “the Revenue … are attacking the club on enough fronts as it is”.
Pannu forwarded a copy of an email he wrote himself, four days after the settlement, to Yeung and Yeung’s personal advisor. That email said: “This is just to place on record in writing my arrangements with carson [sic] where we have an agreement that he will reward me 10 per cent of what ever [sic] I bring into the club by way of earnings and profits.
“This was agreed in the presence of steve mcmanaman in birmingham and on a few occasion [sic] in HK.
“In fact we spoke about this yesterday and re confirmed [sic]. As a lawyer and administrator, I like these things to be formalized and thus this email to record this.”
McManaman told the Guardian he had agreed to be on the board of BIHL for a role which was “more of a PR exercise”. He said he had no involvement in any financial dealings, and “stepped away” after June 2011 when Yeung was arrested in Hong Kong and charged with money laundering offences, for which the trial is reported to be starting next month. McManaman formally resigned as a BIHL director in June 2012.
“I told them, I don’t want anything to do with it,” he said. “I can’t get involved in anything that would muddy my name.”
Of Pannu’s claim that his 10% commission arrangement was agreed in McManaman’s presence, McManaman said:
“That is the first I’ve heard about it. I don’t know anything about that. It wasn’t agreed in my presence.”
Pannu told the club’s finance department he would “produce an invoice” for the payment. He also requested money for other BIHL and Blues staff based in Hong Kong:
“Also,” he wrote, “the monthly expenses (cash 7000) for the staff from HK. Advice me [sic] as to how these should be entered as expenses.”
In the email exchange which followed, the club’s finance officer told Pannu that VAT was due on the £3.1m settlement, leaving a net figure of £2.65m. That reduced Pannu’s claimed 10% commission to £265,000.
The emails suggest Pannu reacted impatiently to the finance officer’s explanation that an invoice and direct authorisation were needed to cover the club under bank procedures and “corporate governance”. Pannu claimed he had authority as “acting chairman” although he was not then even a director, according to filings at Companies House.
He argued that his email, which he himself sent to Yeung and Yeung’s advisor describing his 10% arrangement, was sufficient evidence.
“There are no problems on corporate governance based on [my] authority as acting chairman,” Pannu wrote. “But to put your mind at ease, if you are feeling uncomfortable, I will get something in writing. Did you not get my email to carson (royce) [Yeung’s PA] I sent earlier recording our agreement. Can you print that out with these email [sic] and my invoice (which I will provide) to the expense form? That protects you enough and don’t worry, this is not theft ok.”
In a further email, Pannu complained to the finance officer: “This makes me feel you are questioning my integrity.”
Just hours later, Pannu wrote again, this time attaching a document: “Please note the absolute authorisation from carson yeung,” he wrote. The document, dated the same day, signed by Yeung on BIHL notepaper, purported to give Pannu unlimited authority to act on Birmingham City’s behalf.
“I hereby certify,” it said, “that I authorize Mr Peter Pannu, the Acting Chairman of BCFC, to enter into, execute, deal in or with any contracts in relation to loan agreements, property deals, and any businesses deals [sic], any financial arrangements, in relation to the football club whilst in the capacity as Acting Chairman or Vice Chairman.”
Pannu then presented an invoice on notepaper of his own Hong Kong-registered company, Asia Rays Limited, for £265,000 for a “legal service charge” arising from the settlement with Sullivan and Gold. On the bottom he hand-wrote that the £265,000 should be transferred to his personal HSBC bank account in the UK. Pannu asked for his own email to Yeung and Yeung’s personal advisor, and “Carson’s general authorisation” to be attached to the invoice.
“This is the agreement I have with Carson,” Pannu wrote. Emphasising control over “every aspect of the club, even if I wanted to sell the whole club”, Pannu wrote to the finance officer: “We have a happy working relationship so I expect it to flourish and expect you not to question my authority in the future.”
The Guardian asked Pannu about his request for £300,000, his claimed 10% commission on “earnings and profits”, whether he had any formal authorisation for it, and whether Yeung had the authority to personally bestow such control. Pannu declined to answer.
The lawyers said Pannu was appointed acting chairman in October 2010 “at which time he became part of the payroll”. That contradicts Pannu’s internal emails, and the purported authorisation from Yeung, which described Pannu as “acting chairman” in June 2010.
The lawyers said apart from the payment linked to the legal settlement, he had not received commission for work at Birmingham – despite the emails’ claims that he had a 10% commission agreement on “earnings and profit”.
The lawyers said: “His sole source of remuneration from BCFC is his salary which he receives as Acting Chairman.”
Referring to the £7000 expenses for Hong Kong staff, the lawyers said: “This refers to legitimate expenses” and “Mr Pannu was simply organising this/acting as a conduit. This was fully disclosed to the auditors.”
Pannu’s legal representatives also said references in the emails to the tax authorities “attacking the club on enough fronts” in fact referred to a “general review in relation to tax on agents fees and image rights contracts” similar to that conducted at other clubs. They said there had been no “‘stand-alone’ investigation” into Birmingham City.
Supporters have long been concerned about the running of Blues and payments to Pannu and Hong Kong-based staff, particularly after Yeung’s money-laundering charges led auditors to express doubts about the club’s ability to continue as a going concern. In January, the supporters trust, Blues Trust, wrote to Pannu expressing outrage at the “lack of transparency” after Pannu’s 2011-12 salary package was revealed to be £687,611. Pannu told the Birmingham Mail that only £250,000 was actually his salary. He said he had paid the remaining £437,611 in “pocket expenses” for Hong Kong staff.