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Guilty pleas close grim chapter in Grecian history

This article is more than 16 years old
Former directors face jail threat after admitting fraud as Exeter were pushed to the edge of extinction

The pleas of guilty to fraudulent trading by John Russell and Mike Lewis, who took over Exeter City in May 2002 and left a year later with the club on the brink of ruin, seemed last week to provide appropriate final words on a grimy period.

Following the collapse of ITV Digital, Football League clubs were tumbling over each other into administration, revealing astounding mismanagement and, in some cases, worse. Russell had a criminal conviction when he arrived at St James Park, having in March 1999 received a 15-month prison sentence, suspended for two years, after pleading guilty at Leeds Crown Court to two counts of obtaining services by deception in a £180,000 hire-purchase fraud.

Both men had football form, too. Russell had been the owner and chairman of Scarborough from March 1994 to 2000; he resigned following relegation to the Conference and left the club insolvent, owing creditors £1.25m. Lewis, after a career in clubs' commercial departments, had latterly been at Swansea City, where a brief tenure as managing director ended in what he described as "complete disaster". Swansea's owners handed Lewis the loss-making club, he sold the shares for £1 to Tony Petty, an English ex-pat based in Australia, and the club ended up insolvent with debts of £1.7m. Swansea fans were so incensed that for a time Lewis feared for his safety.

Soon after, Lewis teamed up with Russell to find another club. They approached Lincoln City first, but were rejected by the supporters trust, which had taken over, so they went to Exeter, another club in trouble. The Grecians were losing money, piling up debts; the majority owner and chairman, local jeweller Ivor Doble, was 77 and had loaned the club £483,000. Desperate for a solution, he did a deal to give Russell and Lewis control.

Last week at Bristol Crown Court, Russell pleaded guilty to a further criminal offence, obtaining a pecuniary advantage by deception, the charge that when he took over he "Dishonestly obtained for himself . . . membership of the board of directors of Exeter City AFC by deception, namely by falsely representing that he had substantial funds to introduce to the club."

The pair had no substantial funds to invest. Their first major move was to appoint as Russell's co-chairman Uri Geller, the celebrity spoonbender whose son, Daniel, had chosen Exeter as his club to support. Geller recruited the singer Michael Jackson as "honorary director" and, with the illusionist David Blaine, they performed a concert in June 2002 to raise money for the club and two charities.

The extravaganza did not boogie the club's troubles away. There were delays paying the charities and bills went unpaid, including from the company which produced the concert programmes, who instructed bailiffs. The builders, Mowlem, grew restive about £700,000 owed for two stands opened in 2001. When Russell and Lewis arrived, they said they would take no salaries, but after a while they admitted the club was paying their "accommodation and general expenses".

One of their economies was to stop employing NatWest Bank employees to count the gate money at matches and to dispense with the services of Securicor to take it away. After that, they would either take the cash away in their cars or leave it in the club's safe over the weekend, then bank it themselves later.

In April 2003, the FA's financial advisory unit produced a report which concluded that the club was failing to meet its debts and should seek advice from an insolvency practitioner. The FAU strongly recommended that a security firm be employed to bank gate money, and criticised the failure to hold regular board meetings. The six directors other than Russell and Lewis described the report as "deeply disturbing" and resigned.

Russell and Lewis said they were working "24/7" and would "battle on", but on May 14 2003, with City relegated to the Conference, Devon & Cornwall Police raided St James Park and arrested Russell, his wife Gillian and Lewis. Their homes were also searched. Last week the police revealed that "a number of complaints" had been made and "it was alleged that Russell and Lewis had committed a number of offences" during their time in charge. Uri Geller told me he was one of the people who reported his concerns to the police.

"I cannot add any more on legal advice," he said, "but it was a very unfortunate situation."

The Grecians, £3.2m in debt by then, came perilously close to collapse. Russell and Lewis's year in control left a trail of creditors grimly familiar at other clubs: local and national businesses, the ambulance service, electricity, water and phone companies. Almost £450,000 was owed in tax and VAT; £66,066 was owed to the local university. The £13,414.59 outstanding to Devon & Cornwall Police for match duties cannot have generated much sympathy at HQ.

A supporters trust - formed, like many, in the teeth of crisis - agreed to buy Doble's majority shareholding for £20,000 and immediately put the club into administration. The creditors were eventually paid just 7.12p in the pound.

The trust struck lucky in January 2005, when City drew Manchester United in the FA Cup third round. The live, televised 0-0 draw at Old Trafford and a replay, which United won, earned more than £1m and placed the club on the road to health.

The police investigation continued, hampered, the officer in charge, Detective Mark Sandford, said last week, by a lack of "the most basic financial records". Police had been unable even to determine how much money had gone through. Finally, Russell and Lewis were charged with four offences and Gillian Russell with two, and last week, at the beginning of the trial, Russell and Lewis pleaded guilty to the charge that they were "Knowingly party to the carrying on of the business of Exeter City with intent to defraud its creditors".

Russell pleaded guilty to the further charge of obtaining a pecuniary advantage by deception. Other charges, of conspiracy to defraud, were left to lie on the file. The prosecution accepted not guilty pleas from Gillian Russell to theft and false accounting.

David Treharne, the fan who became the club's chairman when the supporters trust took over, said: "Exeter City fans had been used to thin times but this was the worst. Many people still do not realise how close the club came to folding. Russell and Lewis went shopping for a football club and landed on us, but now we have our club back, our passion back, and we're proving that fans can run a football club properly."

Russell and Lewis are due to be sentenced in six weeks' time, following psychiatric reports on Russell. The judge, David Ticehurst, told the pair last week that he is not ruling out custodial sentences. At Exeter, fifth in the Conference, the fans of a resurgent club are lifting their eyes to the play-offs.

Rules and regulations

When John Russell and Mike Lewis took over Exeter City, the Football and Premier Leagues and the Football Association did not have a "fit and proper person test" to vet the many "businessmen" buying into crumbling clubs. In 2003, the Football League introduced a basic rule which bars recently convicted criminals and those who have taken two football clubs into insolvency from taking over. The FA and Premier League followed with similar rules.

Russell, with his 1999 conviction for fraud, would have been prev-ented from becoming involved at Exeter had the rule applied at the time. Campaigning groups like Supporters Direct argue Russell's case shows the need for wider protection for clubs from incompetent or ill-intentioned new owners.

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