PRESSURE is mounting on Coventry City Council and its leader Ann Lucas as she claimed she had believed information from senior officers when misleading the public with false claims about the Ricoh Arena amid its sale to London rugby club Wasps.
The Observer can also exclusively reveal evidence to show Coun Lucas last week made further false claims, wrongly alleging the Sky Blues had only been interested in buying back the stadium, built by and for the football club, on a FREEHOLD basis.
The evidence, revealed for the first time, comes from a letter written by Joy Seppala, head of Sky Blues’ parent company Sisu, to Coun Lucas in November 2013, days after they met to discuss a possible stadium deal.
Critics have today called for an inquiry, and said the revelations cast major doubts over the entire Wasps deal and use of taxpayers’ money.
Coun Lucas made the further false claims in a BBC interview on Friday following a Coventry Observer story which referred to her previous misleading claims that the Arena Coventry Limited firm was profitable before the Wasps deal, when newly published accounts revealed it was not.
The revelations raise questions over whether councillors had acted on false information from senior council executives last October when they voted in private to sell the council’s Ricoh Arena shares to the then High Wycombe-based rugby club on a long leasehold – which the Sky Blues HAD also sought.
Coun Lucas told BBC Coventry and Warwickshire she had taken advice on face value from the council’s “advisers and ACL shareholders” – which included council executives – when she claimed ACL had been “very profitable” without the football club in 2013/14. The accounts revealed losses of nearly £400,000.
She also accepted she had taken information to be correct, without any request for further evidence, when asked why she had stated the day after the council’s Wasps deal that ACL was “washing its face” – making a small profit.
Last Thursday, in an article on the Coventry Observer website, the council leader admitted the Ricoh firm had not been “washing its face”. She said on Friday that all councillors had acted on the same information, prompting further questions about how much they knew about the finances behind the Wasps deal.
The deal with Wasps firm London Wasps Holdings Limited meant £14million of city taxpayers’ money remained tied up in a loss making company, amid unprecedented cuts to council jobs and services.
Coventry council’s Labour leaders have repeatedly stated they would only loan to viable and sustainable companies. Wasps, now 100 per cent owners of the Ricoh firm ACL, were also reported to be a loss making company.
London Wasps Holdings Limited reported losses of £3.2million the previous year in the last available accounts. In a statement to its fans about moving to the Ricoh in a bid to save the business, Wasps admitted: “We run a high risk of going bust”.
The council acccepted to the Coventry Observer last week that the Wasps’ business plan is based on the Sky Blues remaining as tenants for at least four years. But the loss-making football club continues to insist it too needs commerical revenue from owning a stadium. It claims to still be seeking land just outside Coventry’s boundary to build a new stadium.
The Coventry Observer last Wednesday raised questions with Coun Lucas over whether she had misled Coventry voters, taxpayers and Coventry City fans after the newly published ACL’s accounts for the year up to May last year revealed the net losses of nearly £400,000.
Our story was referred to, and put to, Coun Lucas in the BBC Coventry and Warwickshire interview. Asked by breakfast show presenter Shane O’Connor why she had claimed ACL had been “very profitable” and “washing their face”, she said: “Because that is actually what I believed and I would never, ever mislead anyone.
“Once I’d been told what I was told by the shareholders and our advisors, I take it to be correct. This was an incredibly challenging full year for them. They were £1.3million down because they hadn’t got the football club and they faced extremely high litigation costs.”
Asked if she had knowingly misled the public or was “sombody who doesn’t know what they’re doing”, she said the council had done the best thing for taxpayers.
She said the council had already received around £1million in interest from ACL from the £14million loan. Only £112,000 of the £14million loan was paid off in 2013/4. The money for the loan had come from council “cash balances” amid dire council cuts.
Asked if her credibility was damaged, she said: “Well, I hope not. I would never intentionally mislead anyone… if people feel misled, then I’m sorry about that.”
Throughout the saga, councillors were advised by senior council executives, particularly Martin Reeves and Chris West, who had also been board members of Arena Coventry Limited.
The council leader denied she had “bigged up without checking” ACL’s profitability to push the deal through. She said the Ricoh firm was facing possible liquidation without the Wasps deal, and claimed the Sky Blues had only been interested in buying the Ricoh Arena on a freehold basis.
But the Observer can today reveal evidence to show this claim, repeatedly made by the council leader and others throughout 2013/4, was also false. Ms Seppals’s letter to council leader Lucas clearly states the club would be interested in buying the Ricoh Arena on a freehold or a long leasehold basis.
The letter states: “In any scenario we need a freehold or clean restriction-free long lease.”
Sky Blues then chief executive Tim Fisher had also stated in a public shareholders’ meeting of Coventry City FC Holdings Limited in December 2013, as reported in the press, that the club would be interested in acquiring ACL on a long lease, which would extend the previous “worthless” 40-year ACL lease from the council as the Ricoh’s freehold owners.
Depite Coun Lucas’s claims to the BBC of ACL’s exceptionally high legal costs in 2013/4, when the football club had moved home games to Northampton, there is no clear reference to this in ACL’s accounts, or of it being a significant factor in the losses.
ACL had instigated High Court proceedings against the football club in 2012 and again in early 2013, before the 2013/4 accounts period, after the club’s non-payment of rent which many observers accepted was extortionate.
Sisu had brought a judicial review, heard after the accounts period 2013/4, against Coventry City Council, not ACL.
ACL had instructed law firm Walker Morris and tried to sue Northampton Town F.C in a strongly contested and failed attempt to claim Northampton Town had unlawfully attracted the Sky Blues away from the Ricoh. ACL’s then joint owners, the Alan Edward Higgs Charity, had also taken legal proceedings against Sisu.
The Coventry Observer has today asked Coun Lucas and the council for evidence for her claims that ACL had incurred high legal costs in 2013/4 as a significant factor in the losses.
Sisu has lodged an appeal after losing a judicial review into its claims that the council’s loan to ACL, originally taken out by councillors in private in January 2013, was an unlawful use of taxpayers’ money.
Sisu has also insitigated related court proceedings concerning the terms of the council’s loan to ACL under the Wasps deal.
The council leader last week also stated the council had “always hoped it would be the Sky Blues” buying into the Ricoh Arena and “her door was always open” to them.
Yet courts heard claims she had said “hell would freeze over” before a deal was done with Sisu, a phrase also attributed to council finance officer Chris West in a meeting with club directors. He had also made handwritten notes in 2012, disclosed to the court, which attributed those words to Coun Lucas in a council meeting.
ACL’s losses would have been £1.4million in 2013/4 but for £1million received from the former owners of the casino at the Ricoh, Isle of Capri, for quitting and scrapping its contract in 2009.
The lump sum ACL received was broken up – or amortised – to enable it to include around £1million in its accounts each year over seven years. ACL will no longer be able to include that money in its accounts from next year.
ACL was sold to Wasps for a reported £5.5million with Wasps taking on the council’s loan. The figure was similar to amounts discussed in collapsed talks with Sisu in 2012, when courts heard Sisu had offered to write off the loan.
Andrew Russell, professor in politics at Manchester University, said: “As a Coventry City fan I have become accustomed to disappointment with the way in which my club is run but I think the latest developments concerning the false claims made about the profitability of ACL should be alarming for all citizens with a connection to the city.”
He said the council had developed a “largely unnecessary habit of secrecy” in their Ricoh dealings and had “repeatedly told the public to trust them” in not disclosing for legal and commercial reasons the economic case for the Wasps deal.
He added:. “The council appear to have been remarkably incurious about the feasibility of the profitability of ACL. The apology for misleading the public is no doubt sincere but it is not good enough.
“The Coventry public deserve better than to be routinely kept in the dark about council and community assets, and made to feel grateful that elected representatives have been assured that everything is okay.
“When it turns out that everything was far from okay, it’s time for the council to do more than apologise but start to explain their lack of diligence here.
“Until we get a proper explanation for why the council misled the public on ACL’s profitability, and a realistic assurance that they are no longer at the mercy of Pollyanna promises from ‘experts’ and interested parties, how can anyone trust the new claims about the significant financial boost to the local economy caused by the arrival of the rugby franchise?”
Former city MP and ex-Socialist city councillor Dave Nellist, of the Trade Union and Socialist Coalition, said: “It’s difficult to understand how leading councillors could not have been aware of the true financial position.
“Council officers at a most senior level oversaw the running of ACL and would have reported back regularly to council leaders, daily if necessary, on developments. Businesses don’t look at cash flow projections of profit/loss only once a year, it’s under continual scrutiny.
“The loan of £14 million to ACL was apparently from cash balances which, if still in the council’s direct ownership, could be being used today to stop £15 million worth of cuts hitting every family in the city, through the closure of virtually every library, children and family centre in Coventry.
“If when that loan was made there were two versions of ACL’s viability, publicly profitable but privately not, then the whole decision-making process leading up to that loan needs to be brought out in the open.”
Council leader Ann Lucas on the steps of Council House.21.013.005.cov.nc1