A high court judge has ruled that Owen Oyston and his son Karl, the owners of Blackpool football club, must pay £31m to the minority shareholder Valeri Belokon for his shares after operating an “illegitimate stripping” of the club following promotion to the Premier League in 2010.
Justice Marcus Smith found that the Oystons paid £26.77m out of the club to companies they owned, during and after the single lucrative season in the Premier League, in a manner which involved “fundamental breaches” of their duties as directors and unfairly prejudiced Belokon. The Oystons were ordered to pay £10m within 28 days and for all their assets to be frozen while they present to the court how they propose to pay the total, plus millions for legal costs.
More than 50 Blackpool supporters who had travelled to the Rolls building in London to attend the hearing applauded and congratulated Belokon after the judgment was delivered. Supporters have been bitterly protesting against the Oystons’ running of the club in recent years and thousands have heeded the Blackpool Supporters’ Trust’s call to boycott matches. Christine Seddon, chair of the trust, described the judgment as “a momentous day” for the club and football itself. The trust believes the financial pressure on the Oystons to meet the payment to Belokon makes it more likely they will have to sell the club.
The cash which Smith found had been illegitimately paid out of the club included £11m to a company owned by Owen Oyston, described in Blackpool’s 2010-11 accounts as a director’s salary.
Smith ruled that the £11m was not truly a salary, describing it as an “essentially gratuitous” payment to Owen Oyston, the club’s long-term owner. Smith also ruled that two professionals employed by the Oystons made “misrepresentations” to Her Majesty’s Revenue and Customs, which had mounted an investigation into the payment.
The court had heard that when Belokon’s adviser, Normunds Malnacs, first saw in February 2012 that the £11m was going to be paid to Owen Oyston’s company as a salary, he had sent an email protesting: “This is out of any acceptable corporate governance norms, even without mentioning the moral aspect of the transaction!”
Belokon, a Latvian banker who invested £4.5m for a 20% stake in Blackpool in 2006, told the Guardian he had hoped to come to an agreement with the Oystons before deciding he had no option but to bring the legal action for unfair prejudice in September 2015. Represented by the City law firm Clifford Chance, Belokon argued in his claim that he had been frozen out of crucial decisions and he challenged the legitimacy of the millions the Oystons paid out to their own companies.
Belokon’s barrister, Andrew Green QC, accused the Oystons of having run Blackpool as the family’s “personal cash machine”, following the club’s single season in the Premier League in 2010-11.
The Oystons strenuously contested the claim, arguing they had operated within their rights and in the best interests of the club.
The £31.27m award, forcing the Oystons to buy Belokon’s shares, was calculated by ruling that Belokon should have also been paid the £26.77m the Oystons saw fit to pay their own companies, and adding the £4.5m Belokon paid for his stake.
Blackpool’s promotion to the Premier League was hailed as a romantic return of a formerly grand football name to the top flight, and Karl Oyston’s frugal methods, keeping players’ wages low and refusing to pay agents, were briefly admired as a model. But relations with fans soured following relegation, the plummet into League Two and the millions going out of the club.
Supporters have boycotted matches in large numbers, including the play-off final last season when the club was promoted back to League One with banks of empty seats at Wembley. Fans have repeatedly called for the Oystons to sell but the family has been defiant and been prepared to sue some supporters for libel over comments made. In June 2015 Karl Oyston was fined £40,000 by the Football Association and banned from all football activities for six weeks for abusive text messages sent to a supporter as relations became increasingly bitter.
Belokon himself was disqualified by the Football League from being a Blackpool director in May after a conviction in Kyrgyzstan for alleged money laundering. His disqualification came under the EFL’s rule that directors must not have unspent criminal convictions involving dishonesty. Belokon argues the conviction is invalid because it was decided in his absence without due process, following a dispute with the Kyrgyzstan authorities over his bank.
In his judgment Smith agreed, stating that he found it “extraordinary” the EFL should disqualify Belokon for a conviction based on him having not attended the court in Kyrgyzstan, rather than “on the merits”.
In court after the judgment Belokon said he believed the way the Oystons ran the club was “wrong and unfair”. Asked what he hoped might happen to Blackpool, following a judgment which Smith himself said would “result in the [club’s] further impoverishment”, Belokon said he was still prepared to discuss a possible solution with the Oystons.
Karl Oyston was approached for comment but at the time of writing had not responded.
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