Former Chelsea director flees US fraud charges

Need for tighter club ownership regulations is highlighted as hunt goes on across the Atlantic for fugitive Tollman

The Football Association is to introduce a "test" of major shareholders and directors of clubs to ensure they are "fit and proper" to occupy such privileged positions, but the indictment served in the United States on a former Chelsea director, Stanley Tollman, for conspiracy, multi-million dollar bank fraud, tax fraud conspiracy and tax evasion shows how difficult any such test will be to construct.

Tollman, an American businessman and a friend and former business associate of the current Chelsea chairman, Ken Bates, was a director of the club from 1982, shortly after Bates took over, to 1992, when Tollman resigned.

There has long been speculation, mentioned by BBC Radio 5 Live's On the Line programme this week, that Tollman also owned a large stake in Chelsea Village plc, Chelsea's holding company, which floated in 1996. But as the shares were held by companies registered first in Hong Kong, then Guernsey, the tax haven where shareholders can remain anonymous, it has been impossible to ascertain who owned this large portion of Chelsea.

Bates has never disclosed who his backers were – they owned 66.61 per cent, over two-thirds of the shares, when Chelsea floated – but in programme notes for the Champions' League match against Marseilles in March 2000, Bates said they were: "The same people who backed my appointment in 1982 when I completed the purchase of Chelsea FC and became chairman. If they are now sitting on a nice profit on their 18-year-old investment, good luck to them."

Any profit was swollen in June when Swan Management, the Guernsey company which formally held the shares, then 26.3 per cent of Chelsea Village, sold them all. Bates himself bought nearly half, for £3.6m, bringing his stake up to 29.5 per cent, held through his company, Mayflower Securities, registered in the off-shore tax haven of the British Virgin Islands. It is as yet unknown who bought the rest.

It is mere speculation that Swan Management held the shares on behalf of Tollman and sold suddenly because he had been indicted, but the indictment itself provides some evidence of a connection between him and the Chelsea shares. Both the shares and offshore bank accounts held by Tollman were managed by the same Guernsey accountancy firm: Saffery Champness Management International.

One of Saffery Champness' directors at the time, Patrick Murrin, was also a director of Swan Management. He was responsible for administering the Chelsea shares and was, and still is, a director of Chelsea Village itself.

The 82-page indictment served in New York's Southern District Court against Tollman and his co-defendants charges them, along with other alleged offences, with having conspired to defraud five American banks of a total of $44.63m (£29m) between 1992 and 1996. They did so, the indictment alleges, by setting up "straw entities", companies which they claimed were independent, but were in fact "controlled by" Stanley Tollman and his partner Monty Hundley, who has also been charged.

The largest single alleged fraud, of $19.53m, was, the indictment charges, carried out on Chemical Bank using a company registered in the US state of Delaware: Chelsea Acquisitions Inc. In early 1994, the indictment says, Tollman and Hundley owed Chemical Bank $21.7m. The charge is that Tollman, Hundley and another defendant, Sanford Freedman, convinced the bank that a "Euro-investor group", totally independent of them, wanted to buy the debt for a tenth of its value, approximately $2.17m. This, the indictment says, was false; Hundley and Tollman provided the money.

Chelsea Acquisitions was, it is alleged, formed "to convey further the false appearance that a 'Euro-investor group' was buying" the debt. The indictment mentions the involvement of "a foreign business associate of Stanley Tollman" in three places. First, that a "foreign business associate of Stanley Tollman" had been enlisted to serve as Chelsea Acquisition's president. Second, that a foreign business associate had been "caused" to serve as a shareholder. Third, that a "foreign business associate of Stanley Tollman" had been "caused" to falsely certify to Chemical Bank that Chelsea Acquisitions was independent of Tollman and Hundley. This, the indictment alleges, was false; the pair were behind Chelsea Acquisitions and used it to reduce their own debt by £19.53m, thereby defrauding Chemical Bank of that amount.

The name of the "foreign business associate" registered as a shareholder appears to be Kenneth Bates. Bates' solicitor, Alasdair Pepper of Peter Carter-Ruck and Partners, has been quoted in the UK national media confirming that Bates understood that he appeared as a shareholder in Chelsea Acquisitions, but knew nothing about it:

"He understands," Pepper told the Daily Telegraph, "that there is a share certificate issued in the name of Kenneth Bates but he has no knowledge why."

Pepper was on holiday this week and no other Carter-Ruck partner was in a position to answer questions on the matter. Ken Bates declined to respond to a list of questions.

The State of Delaware confirmed that a company was formed in 1994 called Chelsea Acquisitions Inc, but Delaware, like Guernsey, is a low tax environment which allows shareholders to remain anonymous. There is no public way, therefore, of finding out who shareholders are, or seeing the Bates name on a share certificate.

However, the state does provide names of a company's directors and president, and disclosed that the "foreign business associate" who was registered as Chelsea Acquisition's president was a UK resident, Michael Ness. Ness served as a director in three UK Tollman companies, including Trafalgar Tours, the travel outfit, until he resigned from them all on the same day, 4 December 1991. I was unable to contact Mr Ness and it is as yet not known how he came to be named as Chelsea Acquisition's president.

Saffery Champness is named on the indictment in relation to an alleged £7.7m fraud on the Bank of America by Tollman and his co-defendants. "On or about November 8 1996", a representative of Saffery Champness was, it alleges, requested by one of Tollman's relatives to "disguise" the transfer of $1.28m from a Guernsey bank to New York, "to make it appear as a loan from Saffery Champness" when in fact it came from a series of accounts controlled by Tollman and family members.

Saffery Champness issued a statement saying it: "Always behaves with complete integrity, discretion and respect for the law." They added it was not their policy to comment on clients' business or "matters which may be subject to investigation by the proper authorities."

The indictment was issued by the US Grand Jury on 17 April and the defendants were arraigned, required to appear before a court to answer them, a week later, 24 April. Tollman did not appear and a warrant has been issued for his arrest. Inquiries of the US Attorney's office in New York are met with a blanket statement: "Stanley Tollman is a fugitive." His Washington DC-based solicitor, Chris Todd, was overseas and did not return my call.

The alleged identities of Stanley Tollman's "foreign business associates" and of the representative of Saffery Champness mentioned in the indictment, will be revealed in the course of the case. The prosecutors are currently serving on the defendants all the documents they have which support their case, and the names will be provided in the course of this "discovery" process.

Where all this leaves Chelsea – the football club, that is – kicking off their Premiership season today with a squad full of expensive foreign stars and a manager, Claudio Ranieri, complaining he has no money to spend, is unclear. Chelsea Village is saddled with debts, according to the latest accounts, of £170m, and have made substantial losses for two years running.

The Chelsea Action Group, a supporters group which has tirelessly campaigned for openness at Chelsea and against Bates' regime and policy of building up the "Chelsea Village" complex of hotels, bars and restaurants around Stamford Bridge, said the indictment re-emphasised the need for openness.

"Obviously we can't prove for certain whether a large chunk of our club was owned by Tollman all those years, but it's fact that he was a director for a decade. The FA has to realise how vital and basic it is for all fans to know who owns their club and to be sure they are decent people with integrity and the interests of the club at heart."

Senior FA sources said they will shortly announce a review and overhaul of all rules and regulations relating to finance and the constitution of clubs, and as part of that the FA is committed to introducing some kind of "fit and proper person test". The unfolding of the case against Stanley Tollman, for 10 years a director of Chelsea, and possibly a controlling shareholder, should give them plenty to ponder as they wrestle with their commitment to firmer regulation of the national game.