Often Partisan

Pannu’s Consultancy Deal: Why it’s a Big Deal

The Birmingham Mail today led with a story with respect to an investigation into the consultancy agreement between Birmingham International Holdings and Asia Rays (Peter Pannu). It marked the culmination of a lot of hard work between themselves, the Blues Trust and this website.

So What’s New? Wasn’t This Reported by the Guardian?

The story written by David Conn went into detail about the announcement made to the Stock Exchange on Wednesday with respect to the consultancy agreement that was in place between BIH and Peter Pannu’s firm Asia Rays. However, the Guardian article was based only on what was in the public domain and doesn’t contain two key bits of information that was discovered in the joint BPM/BT/OP investigation.

These were namely:

  1. That the agreement made between BIH and Asia Rays was only agreed between Peter Pannu and Carson Yeung  – none of the other directors were aware of the agreement for over 2 years after it was made, and more importantly
  2. That since July 2011 the consultancy agreement was being paid by Birmingham City Football Club.

Furthermore, evidence has come to light in our investigation that one of the chief causes of the delay in release of the accounts – with the subsequent sanctions that caused to the club such as the transfer embargo – was the consultancy agreement and the questions surrounding it.

Hold On? Wasn’t Blues Already Paying Pannu a Massive Salary?

According to the year ending 2012 accounts, Peter Pannu picked up a salary of £687,611 from the club. This payment was on top of that – it was a consultancy agreement between BIH and ARL, and was his payment from them. However, as BIH didn’t have the money to pay for it BCFC paid the money and deducted it from what they owed BIH. From a profit/loss point of view, the club didn’t lose any money – everything they paid out was taken off the loan so it meant that in effect they were just losing debt.

However… debt has never been the issue at St Andrews – it’s always been about cashflow. It’s been widely reported since Carson’s arrest at the end of June 2011 that the club was suffering cashflow problems – some of it stemming from Carson’s asset freeze whilst other factors like the removal of the overdraft came into play. Had the consultancy agreement not been in place the likelihood would have been that BCFC wouldn’t have paid a penny back to BIH so in effect there was £65,000 a month going out the door for six months (nearly £400,000) that didn’t need to be – and even when it was reduced down to £33,000 per month, it means over £500,000 of cash extra has had to be paid out since January 2012. Think of the struggles the club has had in bringing in players this year – would nearly £1mil extra have made a difference?

We Knew Pannu Was Earning Lots of Money Though – So Why Does It Matter?

As I intimated in my piece yesterday, it’s not so much about the money. Chief executives at the top of businesses earn lots of cash – it’s the way things are. However, what is worrying is the way that BIH is being run – and by extension, how it affects BCFC. The information I have seen doesn’t point to a well-run business at all; if I was in the position of being an executive director of a publicly listed company I’d be worried about agreements such as this one being signed off without any notice to the board of directors because there are all kinds of potential implications – from a legal and accouting perspective.

Furthermore, despite Mr Pannu’s protestations that he is trying to fix the mess at BIH it appears one of the chief issues that the auditors have had both here and in HK which delayed the accounts was this consultancy agreement and the implications it caused – which leads me to wonder if Mr Pannu is the solution at BIH or if he is the problem. Documentation I have seen from Hong Kong confirms that the auditors over there had lots of questions about the consultancy agreement which couldn’t be answered in a satisfactory manner and eventually led to them resigning their position.

What Implications Does This Have For Blues?

Well – this is the big question. I’m concerned that various regulatory bodies will also want to see this information and might have further questions for the club and for BIH. There is also the possibility that the shareholders in BIH will be concerned as to the management of the company and may turn that concern into action at the upcoming AGM where they could possibly deny re-election to the board of any of the directors – which of course would have implications on changing the way the company is run.

One of the key points I should make though is that this story isn’t really about Blues – it’s about the holding company in HK. There has been nothing to suggest that BCFC staff have acted in any improper manner or have done anything that they shouldn’t – the blame lies solely within the offices of Birmingham International Holdings. From all the evidence I’ve seen, there are a lot of issues to be resolved there internally – even if they are as they claim close to getting the shares relisted.

What is plain to me from all this is that there have been issues in the way that BIH has been run in the past and I hope those issues don’t come back to haunt the club.  There is a lot going on out in Hong Kong that we aren’t aware of and it’s my belief someone needs to go out there from here to find out about it.

Due to the nature of this story and the potential for libel it may cause comments have been turned off. Please do not comment about it elsewhere on this site as comments will be summarily deleted.

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