David Conn: Directors in Leeds' downfall expected to escape DTI action

The administrators' report into the conduct of Leeds United's directors leading up to the club's £100m collapse earlier this year has been delivered to the Department of Trade and Industry. The DTI is expected to take between two and four months to decide whether the report identifies misconduct serious enough to warrant disqualification proceedings against any of Leeds' directors in the previous three years, including the former chairman Peter Ridsdale and non-executive director Allan Leighton, the Royal Mail Group chairman.

The administrators' report into the conduct of Leeds United's directors leading up to the club's £100m collapse earlier this year has been delivered to the Department of Trade and Industry. The DTI is expected to take between two and four months to decide whether the report identifies misconduct serious enough to warrant disqualification proceedings against any of Leeds' directors in the previous three years, including the former chairman Peter Ridsdale and non-executive director Allan Leighton, the Royal Mail Group chairman.

Garry Wilson, one of the administrators, would not comment on the contents of the report and told me it was "too early" to speculate on the DTI's decision, but other sources suggested that although Leeds' meltdown was mighty it is unlikely to lead to DTI action against any of the directors.

In their Premiership and Champions' League semi-final heyday of 2000-2001, Leeds, according to Ridsdale's famous admission, "lived the dream", borrowing £60m from financial institutions and £22m from Registered European Football Finance in sale and leaseback arrangements on their players, to buy stars and pay galactic wages for an assault on sustained European success. Having failed to qualify for the Champions' League by a single place in 2001 and 2002, Leeds found they had very much less money coming in than draining out; they lost £34m in 2002, then £50m last year.

Ridsdale was paid £645,000 in 2001, £383,000 in 2002, and another £383,000, a year's salary, when he resigned in 2003. Leighton sat on the remuneration committee, which recommended the directors' salaries, and the audit committee, which monitored "the adequacy of the group's internal controls, accounting policies and financial reporting". Richard North, the Britvic chairman, was the other non-executive director on these committees, and he chaired the audit committee.

In March this year when the consortium led by the chairman Gerald Krasner picked up the football club, the main financial casualties were the bondholders and REFF, which accepted £20m to settle total debts of £82m. Krasner's consortium took over the wage bill, a reported £7m owed to the Inland Revenue and the football club's other debts. Leeds United plc went into administration; its handful of creditors ranging from a local newsagent's £50 bill to Caddick Construction, owed £120,000, are being settled in full.

Garry Wilson was giving advice to the Leeds board from January 2003, so when the plc went into administration, he decided his firm, Ernst and Young, should not carry out the investigation into the directors, and an independent accountant, Brendan Guilfoyle, was appointed. Guilfoyle said then: "This is the first time a Premier League football club has been investigated with the backing of the law. I will look at the conduct of current and past directors to see if they are fit to be directors" - an announcement said to have infuriated Leighton, because directors' conduct is investigated routinely as part of any administration, and was not unusual to Leeds.

Leighton has a big reputation to protect; formerly Asda's chief executive, he is a director of BSkyB, Selfridges, British Home Stores and Dyson. He was chairman of the Royal Mail when Adam Crozier was appointed to be the chief executive, shortly after Crozier had been forced to resign from the Football Association following a campaign against him by Premiership club chairmen on the FA's board, including Ridsdale.

Since the initial furore, the Leeds investigation has been shrouded in confidentiality; Guilfoyle interviewed both Leighton and Ridsdale over the summer. While all the plc shareholders lost their money, and Leeds fans were left fearing for the club's existence, leading a company into insolvency is not in itself grounds for action by the DTI against a director. That normally follows specific breaches of company or insolvency law, including trading while insolvent, or directors improperly enriching themselves while creditors are left high and dry. The DTI can, however, take action if the Inland Revenue has been left owed large debts or if the company has been seriously mismanaged.

Ridsdale, now looking to rehabilitate his reputation at Barnsley, told me that while he accepted Leeds' strategy was calamitous, the board followed procedures properly: "I am confident we behaved honestly and did not breach company rules."

It was thought Guilfoyle might concentrate on the alleged culture of excess at Leeds; the stories told by the chairman who succeeded Ridsdale, Professor John McKenzie, of a large fleet of company cars and well-fed boardroom goldfish, were particularly damaging. Ridsdale has always scorned those tales.

Guilfoyle said he would report to the DTI in six months, a date which was up last Sunday. He did not return my calls this week, and the DTI's Insolvency Service said such reports remain confidential. Others suggested the DTI would ultimately conclude that Leeds' collapse was down to a strategy which went horribly wrong, rather than misconduct by directors.

Krasner said he was "quite pleased" with Leeds' mid-table start in reduced circumstances under new manager Kevin Blackwell, but the club is not out of trouble. The debts have come down from £103m before administration to £40m, the wage bill from £57m at last year's height to £18m, but that is still twice the First Division average, and six times the £3m Sheffield United pay all their players. "We were paying one of our players more than Sheffield United were paying their whole squad," Krasner sighed. "And those high earners were the players who should have kept us up."

In the summer, Leeds sold Alan Smith, Mark Viduka, Paul Robinson and James Milner but need to trim more. The plan to raise £8-10m up front by selling 20-year season tickets was greeted with underwhelmed scepticism by fans, and just 250 bought. The £40m debts include £15m lent via the property developer Jack Petchey, whose company Trefick, have a mortgage on Elland Road and have to be repaid in the spring.

Krasner said the fans, had been "magnificent", citing the 32,000 who watched Leeds beat Huddersfield in the Carling Cup first round. However, he said: "The financial pressure is not off." Asked for his view of how the club came to this, Krasner said: "From the figures I've seen, we didn't live the dream. We lived the nightmare."