David Conn: Richmond fall a lesson for League

There was eerie timing in the revelation that Geoffrey Richmond, until two years ago one of football's more notably successful chairmen, was made bankrupt on Monday, owing £3.3m to the Inland Revenue, in the same week that the Football League agreed in principle to introduce the long-delayed "fit and proper person test" for football club directors. If, as expected, the League's clubs pass the test into their rulebook at this summer's Annual General Meeting, and Richmond does not succeed in any appeal against his bankruptcy, he will be barred from becoming the director of any League club for the course of his bankruptcy.

There was eerie timing in the revelation that Geoffrey Richmond, until two years ago one of football's more notably successful chairmen, was made bankrupt on Monday, owing £3.3m to the Inland Revenue, in the same week that the Football League agreed in principle to introduce the long-delayed "fit and proper person test" for football club directors. If, as expected, the League's clubs pass the test into their rulebook at this summer's Annual General Meeting, and Richmond does not succeed in any appeal against his bankruptcy, he will be barred from becoming the director of any League club for the course of his bankruptcy.

The "fit and proper person test", aimed at preventing unsuitable or unscrupulous directors from taking over clubs, was first urged on the Football Association back in 1997, in a report it commissioned itself, from Sir John Smith, the former deputy commissioner of the Metropolitan Police. A majority on the Government's Football Task Force came to a similar conclusion in 1999, that it was a minimal, common sense protection for clubs not to be run by criminals, bankrupts or people who have run companies into insolvency. The football bodies, however, met the recommendations with a string of limp objections, and did nothing.

With dozens of clubs having gone bust since then, leaving a trail of miserable creditors, football has finally faltered into introducing some regulatory measures. The FA last year responded in time-honoured fashion - by setting up a committee. It, the Financial Advisory Committee, produced a report recently, which painted a generally awful picture of club management and promised, among other initiatives such as a code of good practice for directors, to establish a "fit and proper person test" this year. The League, however, insisted it wanted to set up its own test, and its clubs agreed at their meeting at Walsall on Thursday for the basic principles (see panel) to go through to their AGM.

Sir Brian Mawhinney, the League's chairman, said: "This huge and important step shows that we are addressing poor governance in football, and the unflattering view many people have of the game."

All quite encouraging, if hardly lightning quick - and, in its detail, not as tough as it might have been. The tests apply only to directors, not shareholders, even though major shareholders pull the strings. A starker deterrent would have been to bar directors who have run any insolvent company or club, but the League has shied away from that and will be giving them a chance to do it twice.

The Geoffrey Richmond saga prompts more questions about this than it answers. Any such rule would not have applied to him. Under Richmond's stewardship, his club, Bradford City, was driven to the brink of liquidation with £36m debts in 2002, when he was still apparently a rich, talented businessman who would have swanned through any test with the relevant committee falling over themselves to welcome him into football. He was running the Ronson cigarette lighter business when he took over Scarborough in 1988, a club he steered very capably, before he took over Bradford in 1994. He sold Ronson for £10m that year, so had a conspicuously good record in business and football, the platform for him to transform Bradford inspirationally and steer the club into the Premier League in 1999 as everybody's favourite underdog.

Had they gone down, he might still be there, a hero in the city; it was only after they dramatically stayed up via David Weatherall's header to beat Liverpool 1-0 that Richmond borrowed copiously and took on fantastical players' wages during his self-confessed "six weeks of madness", in an attempt to establish Bradford in the Premier League. Bradford collapsed so spectacularly only because they were relegated, to a Football League parched of television money compared to the minted, millionaire Premiership. The administrator then revealed that Richmond and his son, David, had shared with Bradford's co-owners and directors, David and Julian Rhodes, dividends of £8.125m plus VAT in 1999 and 2000.

None of that, according to the principles agreed by the League, would have barred Richmond from becoming a director of Leeds United, rather than acting as the "unpaid advisor" to the consortium which took over the club, until he left earlier last week. The consortium, chaired by the accountant Gerald Krasner, cleared Leeds' main creditors' debts of £82m with £15m borrowed via the property developer Jack Petchey, and cobbled together £5m more to work with. However, their mooted ways to make money, from a sale and leaseback of Elland Road and 2,000 20-year season tickets at £4,000 apiece, do not look like the plan of the century so far. Leeds, staring at relegation, are still in trouble, saddled with an outsize wage bill amassed during the regime of the former chairman Peter Ridsdale, which, as he memorably admitted, "lived the dream".

Bradford, too, are a long way from safety, in administration again, and relegated to the Second Division. This Friday, unsecured creditors face another Company Voluntary Arrangement settlement proposal, in which they are being asked to completely write off their £14.4m debts from the first administration, plus £10.4m debts now - £24.8m in total. Of that, Julian and David Rhodes account for around £12m, having spent fortunes trying to shore up the club after the first administration, while Richmond left, saying he was unable to put money in. If the creditors vote in favour, Julian Rhodes will put in another £1.1m, to pay off the most recent £965,000 trading loss, the rest to the finance company Lombard, the remaining secured creditor. He believes he will then have to stump up another £2m to steady the club:

"It has been a nightmare," Rhodes, perpetually chipper, admitted this week. "These proposals give us a chance to start afresh and give the club a future."

The biggest danger is an appeal from the Inland Revenue, which has taken exception to the "football creditors" rule, whereby football debts are paid in full, and challenged CVAs at Exeter and Wimbledon. The taxman is owed over £1m at Bradford but being asked to accept nothing. Rhodes said that if the Inland Revenue appeals, Bradford will be out of business - although the club has drunk at more than one last chance saloon and staggered on.

It should give the football authorities food for thought that the issue which came back to bite Richmond this week had nothing to do with football. It originated from the very sale of Ronson 10 years ago which apparently established his fire-proof credentials. No test then could or should have picked up that Richmond had not paid the tax on the sale, but instead sought to "roll it over" into another business, and anyway Richmond contested the Inland Revenue's claim for years until he lost a High Court case last May, in which the judge ruled that he and a fellow director had not acted "in all respects honestly and reasonably". They were ordered to pay the £2.3m tax, plus interest from 1994, which now adds up to £3.3m. For a man who loved the profile of success, this is a very hard landing.

Richmond's case highlights how limited the effect of a fit and proper person test is likely to be. It is difficult to think of more than one director of any club recently who would have been barred by this test. The clubs are falling not because of rogue directors, although scrappy management is clearly a problem, but because in varying degrees they suffer "madness", or "live the dream".

The huge rewards at the top, which are monopolising Premiership titles in the hands of Arsenal or Manchester United, and the massive gap between the breakaway Premier League and the Football League, which makes relegation financially shattering, encourages directors, whoever they are, to gamble. The authorities' tiptoe towards new rules is welcome, but the fiercely unequal distribution of money in the game is the nettle they are all still too timid to grasp.