I stumbled across an interesting article by Tom Duncan in this week's Newham Recorder. I didn't see it anywhere online so I thought I would put it up here...
Egged on as crisis loomed (7 February 2008)
By Tom Duncan
The financial facts behind Eggert Magnusson's reign as chairman, which led to his sudden departure, are revealed in West Ham United's annual report.
At the time of the club's takeover in December 2006 the Hammers were nosediving towards relegation and the dressing room was in disarray. Less than two weeks later Alan Curbishley replaced Alan Pardew as manager, but a surprise victory over Manchester United in his first game was quickly followed by a 6-0 drubbing at Reading when the players were chided with chants of 'You're not fit to wear the shirt'. It coincided with the opening of the January transfer window when, some would argue, a desperate situation demanded desperate action. In the following four weeks £23.1 million was spent on recruiting players it was hoped would stave off what, by then, the fans angrily regarded as inevitable. It brought expenditure for the year under review up to £33 million and, although there was no immediate improvement in the club's prospects, another victory over Manchester United on the final day of the season completed a remarkable escape.
A massive increase in television earnings, as well as all the other benefits that go with Premiership status, encouraged the club to go on a further spending spree in the summer. Another £17.4 million went out, bringing the total amount spent on recruiting players up to more than £40 million in eight months following the takeover. A sizeable amount of that was recouped through outgoing transfers - mainly Yossi Benayoun, Nigel Reo-Coker and Marlon Harewood. As the main objective had been survival, Magnusson's gamble seemed to have been justified...but the devil was in the detail.
Questions were asked about the amounts paid for some of those recruited, but the fiercest criticism was reserved for the ongoing effect they would have on the club's wages structure. In the year covered by the report the number of people employed on the playing side of the business (players, team management and training staff) increased by 17 to 94 - including, of course, junior players. The overall staff costs went up by £11.1 million, due mainly to increased player wages - and it has to be remembered the report covers only six months under the new ownership with even less of that time affected by the incoming transfers. If those figures were extrapolated over the entire period the increase would obviously be significantly higher - and that will come home to roost in the current year and for as long as some of those overblown contracts continue.
Magnusson's share of the £85 million takeover of West Ham was five per cent and the remainder was financed by fellow Icelander Bjorgolfur Gudmundsson - a billionaire banker known more familiarly as BG. He acquired Eggert Magnusson's shares, replacing him as chairman in December, and now has total ownership of the club. BG has put in a further £20 million of his own money to cover a similar loss incurred during the year, even though turnover was down by only £2.6 million compared with the previous 12 months when the Hammers reached the FA Cup Final and held a much higher position in the league.
Eggert Magnusson's time in charge lasted for only a year and ten days, but it was a highly contentious period in the club's history. He inherited the controversy surrounding the signings of Carlos Tevez and Javier Mascherano on the final day of the transfer window in the summer of 2006. Again, there is disagreement on the manner in which he dealt with an inquiry launched by the Premier League into the legitimacy of Tevez's position at Upton Park. At first the club said it would vigorously defend the action, but when the moment arrived Magnusson pleaded guilty to two of the claims levelled against West Ham and a record fine of almost £6 million was imposed. It appeared that, by claiming the new owners could not be held accountable for actions taken by a previous administration, the Hammers avoided a deduction of points which would most certainly have consigned the club to relegation. What was not so obvious at the time was how taking that course of action also got the Premier League off a difficult hook. If points had been deducted, the Premiership would have been left facing legal actions which could have jeopardised arrangements for the following season.
There were other reasons, too, why Magnusson's actions can be seriously challenged. What was so different about the position of Javier Mascherano, who is still on loan at Liverpool - or any other loan arrangement come to that - which justified such punitive action being taken against West Ham over Carlos Tevez? Magnusson's case centred mainly on blaming the former chairman, Terence Brown, and managing director Paul Aldridge - but neither was called to address the Commission, despite expressing a willingness to do so. It was hardly what one could call natural justice. Paul Aldridge had already stood down at the time of the takeover and received £521,000 compensation for loss of office, while Terence Brown, a lifelong Hammers fan, was perfunctorily expelled from Upton Park by Magnusson when the inquiry was announced. This controversy is rumbling on with Sheffield United, who were among those relegated at the end of last season, still pursuing what has always seemed a forlorn cause.
The unanswered questions are:
Why did Magnusson plead guilty when he had previously stated the case against West Ham would be contested vigorously and there were sound reasons for believing the club would be successful in doing so?
Why sacrifice the best part of £6m, unless it was intended only to mollify the Premiership and get both West Ham and the league out of a hole?
And on what possible grounds were those maligned at the hearing denied an opportunity to defend themselves?
Bjorgolfur Gudmundsson can do nothing now about the resultant effects of the first two questions, but he can do something to correct the apparent injustice meted out to those found guilty in their enforced absence. He has already created a good impression at West Ham and his expertise, honed in a hard world of business at the highest level, marks him out as someone capable of taking the club forward. The future revolves around moving to a new ground, where there is every reason to believe the fan base could sustain a stadium capable of holding 60,000 spectators. The club is also in the strong position of holding the freehold of all its current properties, including the Boleyn site currently valued at £74.8 million. It's anyone's guess at the moment how much that would really be worth if major redevelopment took place in conjunction with properties owned by Newham Council in Barking Road.
To the average fans, of course, none of this really matters. All they are interested in is what happens on the pitch, but that has to be secured by sound judgements made in the boardroom as well as on the training ground. For a few years the club must live with the excesses of the recent past and the problems they have created. The main problem is that some players - although fairly paid themselves - can resent others getting more if they think it is not justified and there is already evidence of that happening. This dilemma is just part of the reason why Eggert Magnusson had to be replaced - even though the debate will continue on how irrational or justified his actions were.
Egged on as crisis loomed (7 February 2008)
By Tom Duncan
The financial facts behind Eggert Magnusson's reign as chairman, which led to his sudden departure, are revealed in West Ham United's annual report.
At the time of the club's takeover in December 2006 the Hammers were nosediving towards relegation and the dressing room was in disarray. Less than two weeks later Alan Curbishley replaced Alan Pardew as manager, but a surprise victory over Manchester United in his first game was quickly followed by a 6-0 drubbing at Reading when the players were chided with chants of 'You're not fit to wear the shirt'. It coincided with the opening of the January transfer window when, some would argue, a desperate situation demanded desperate action. In the following four weeks £23.1 million was spent on recruiting players it was hoped would stave off what, by then, the fans angrily regarded as inevitable. It brought expenditure for the year under review up to £33 million and, although there was no immediate improvement in the club's prospects, another victory over Manchester United on the final day of the season completed a remarkable escape.
A massive increase in television earnings, as well as all the other benefits that go with Premiership status, encouraged the club to go on a further spending spree in the summer. Another £17.4 million went out, bringing the total amount spent on recruiting players up to more than £40 million in eight months following the takeover. A sizeable amount of that was recouped through outgoing transfers - mainly Yossi Benayoun, Nigel Reo-Coker and Marlon Harewood. As the main objective had been survival, Magnusson's gamble seemed to have been justified...but the devil was in the detail.
Questions were asked about the amounts paid for some of those recruited, but the fiercest criticism was reserved for the ongoing effect they would have on the club's wages structure. In the year covered by the report the number of people employed on the playing side of the business (players, team management and training staff) increased by 17 to 94 - including, of course, junior players. The overall staff costs went up by £11.1 million, due mainly to increased player wages - and it has to be remembered the report covers only six months under the new ownership with even less of that time affected by the incoming transfers. If those figures were extrapolated over the entire period the increase would obviously be significantly higher - and that will come home to roost in the current year and for as long as some of those overblown contracts continue.
Magnusson's share of the £85 million takeover of West Ham was five per cent and the remainder was financed by fellow Icelander Bjorgolfur Gudmundsson - a billionaire banker known more familiarly as BG. He acquired Eggert Magnusson's shares, replacing him as chairman in December, and now has total ownership of the club. BG has put in a further £20 million of his own money to cover a similar loss incurred during the year, even though turnover was down by only £2.6 million compared with the previous 12 months when the Hammers reached the FA Cup Final and held a much higher position in the league.
Eggert Magnusson's time in charge lasted for only a year and ten days, but it was a highly contentious period in the club's history. He inherited the controversy surrounding the signings of Carlos Tevez and Javier Mascherano on the final day of the transfer window in the summer of 2006. Again, there is disagreement on the manner in which he dealt with an inquiry launched by the Premier League into the legitimacy of Tevez's position at Upton Park. At first the club said it would vigorously defend the action, but when the moment arrived Magnusson pleaded guilty to two of the claims levelled against West Ham and a record fine of almost £6 million was imposed. It appeared that, by claiming the new owners could not be held accountable for actions taken by a previous administration, the Hammers avoided a deduction of points which would most certainly have consigned the club to relegation. What was not so obvious at the time was how taking that course of action also got the Premier League off a difficult hook. If points had been deducted, the Premiership would have been left facing legal actions which could have jeopardised arrangements for the following season.
There were other reasons, too, why Magnusson's actions can be seriously challenged. What was so different about the position of Javier Mascherano, who is still on loan at Liverpool - or any other loan arrangement come to that - which justified such punitive action being taken against West Ham over Carlos Tevez? Magnusson's case centred mainly on blaming the former chairman, Terence Brown, and managing director Paul Aldridge - but neither was called to address the Commission, despite expressing a willingness to do so. It was hardly what one could call natural justice. Paul Aldridge had already stood down at the time of the takeover and received £521,000 compensation for loss of office, while Terence Brown, a lifelong Hammers fan, was perfunctorily expelled from Upton Park by Magnusson when the inquiry was announced. This controversy is rumbling on with Sheffield United, who were among those relegated at the end of last season, still pursuing what has always seemed a forlorn cause.
The unanswered questions are:
Why did Magnusson plead guilty when he had previously stated the case against West Ham would be contested vigorously and there were sound reasons for believing the club would be successful in doing so?
Why sacrifice the best part of £6m, unless it was intended only to mollify the Premiership and get both West Ham and the league out of a hole?
And on what possible grounds were those maligned at the hearing denied an opportunity to defend themselves?
Bjorgolfur Gudmundsson can do nothing now about the resultant effects of the first two questions, but he can do something to correct the apparent injustice meted out to those found guilty in their enforced absence. He has already created a good impression at West Ham and his expertise, honed in a hard world of business at the highest level, marks him out as someone capable of taking the club forward. The future revolves around moving to a new ground, where there is every reason to believe the fan base could sustain a stadium capable of holding 60,000 spectators. The club is also in the strong position of holding the freehold of all its current properties, including the Boleyn site currently valued at £74.8 million. It's anyone's guess at the moment how much that would really be worth if major redevelopment took place in conjunction with properties owned by Newham Council in Barking Road.
To the average fans, of course, none of this really matters. All they are interested in is what happens on the pitch, but that has to be secured by sound judgements made in the boardroom as well as on the training ground. For a few years the club must live with the excesses of the recent past and the problems they have created. The main problem is that some players - although fairly paid themselves - can resent others getting more if they think it is not justified and there is already evidence of that happening. This dilemma is just part of the reason why Eggert Magnusson had to be replaced - even though the debate will continue on how irrational or justified his actions were.
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