Tnewton_1988
Jack Armstrong
[ Soccer icon Brian Clough - who reigned over a "culture of corruption" at Nottingham Forest - has been forced to cough up pounds 600,000 to the taxman.
Clough, recently slammed by the Premier League's bung enquiry for alleged involvement in "fraudulent" transfer deals, was forced to pay back the cash to the Inland Revenue after reaching a top secret settlement with tax inspectors from a crack hit squad.
The SUNDAY MIRROR has learned that the four-year probe examined Clough's involvement in at least 58 transfer deals, brokered during the period 6 April 1987 to 5 April 1993. The deals that were investigated are worth more than pounds l9.5 million.
A Revenue insider told me: "Our enquiries uncovered serious problems at Forest and with the affairs of certain high profile individuals associated with the club. Significant sums have been recouped, with the club's former manager reaching a sizeable six- figure settlement."
And a close associate of Clough's confirmed last night: "Brian recently told me that the revenue forced him to pay back pounds 600,000. He just came out with it one day, in a very matter of fact fashion. He even joked about it - but deep down I could see that he was glad that all the probing and digging was over. It's taken a terrible toll on him."
Clough's old club Forest, since taken over by a consortium which had no role in any misdemeanours, have also been hit by the same probe - as has his former assistant, Ronnie Fenton, who has been accused by the Premier League of accepting at least pounds 140,000 through a series of irregular deals.
Key reports prepared by Forest's former auditors, Price Waterhouse, disclose that the Midland giants were forced to hand back pounds 475,000 in undeclared tax after a catalogue of cash scams at the City Ground were exposed. These include:
Senior members of staff laundering at least pounds 75,000 through the club's Football in the Community scheme so that some players could receive 'win bonuses' in cash. The scheme is a registered UK charity
Some players receiving "disguised" signing-on payments through Guernsey- based bank accounts. The cash payments originated from transfer fees.
Club finances being used as a private bank by some Forest staff. An example of this was Forest's Jubilee Room catering facility which flouted the rules and was used as a slush fund to pay certain players. It was hit with tax and VAT bills amounting to pounds 400,000.
A cash racket that cost the club over pounds 100,000 in bungs being exposed in the Forest scouting operation.
Despite the level of corruption at the club by certain officials - and it must be said this took place under the previous regime BEFORE the 1996 consortium took control - those in charge at the time were delighted that the club escaped so lightly.
When the investigation into Clough and the club started in July 1993, Forest were told they may have to set aside at least pounds 600,000 "for starters". City Ground sources said at the time that they felt the revenue could claim more than pounds 1.2m.
A memo sent by financial controller Lance Darlaston to the Forest board explains how the Revenue's enquiries became frustrated. Darlaston wrote: "Many of the investigated items are subject to speculation as the principles have left the scene."
What the taxman
uncovered
THE tax squad's investigation started just seven weeks after Alan Sugar told the High Court in May 1993 that Clough "likes a bung".
By then Clough and his No 2, Ronnie Fenton, had quit the City Ground and Forest had been relegated from the Premier. But that didn't stop investigators scrutinising every transfer that was brokered during the period 6 April 1987 to 5 April 1993 - some 58 deals worth in excess of pounds 19.5m!
Their routine enquiry into a specific allegation of an alleged backdoor payment of pounds 50,000 to Clough and others suddenly became a massive operation which looked into every facet of Forest's financial operation.
"Sugar's claims about Clough liking a bung acted as a catalyst for us, It enabled us to get out teeth into the game" explained a member of the Revenue team which has probed British football for the past four years.
Internal club documents, produced by club auditors Price Waterhouse throughout the tax investigation, question financial control among the City Ground's senior management which allowed a "culture of corruption" to take hold - practised by certain key figures at the club. The Revenue investigated allegations that:
Forest had not disclosed cash payments amounting to tens of thousands of pounds which had been paid to the club for undertaking several overseas tours.
Transfer fees for players were split between selling clubs and the players. The auditors noted that the dispute centred on "some cash payments...made into numbered bank accounts in Guernsey, which were probably disguised signing-on fees".
Tax free ex-gratia payments were made to some players when they were transferred to other clubs
Thousands of 'complimentary' tickets for home games were freely distributed by the club to players. In just one year 1989, over 20,000 tickets worth pounds 170,000 - were handed over to Forest staff.
Routine PAYE and national insurance payments - such as removal expenses, holidays, mortgage payments - had not been properly declared by the club.
Despite these grave allegations of breaches of FA and tax laws, Forest have to-date been able to emerge relatively unscathed from the affair.
"The club have adopted the hush-hush approach," said a senior club insider. "When people tried to get to the bottom of a number of things they were told to shut up by other members of the Board.
"If anyone ever criticised Clough, or questioned any of his deals, they were 'sent to Coventry' for months on end. It didn't pay to ask too many questions."
Two such directors were George Waterhouse and Chris Wooton who raised their concerns in 1994. Waterhouse - no relation to the auditors - demanded to be kept informed of financial matters and asked for answers to a number of questions. He got no adequate response.
The Revenue wound-up its probe in May 1996 by demanding a payment of pounds 475,000 for undeclared tax. The bill was split: pounds 265,000 related to irregular payments to players and the other pounds 200,000 concerned back taxes on the club's Jubilee Room catering facility which had traded 'independently' for a number of years. There was also pounds 10,000 provision to cover a tax liability on one employee's car.
Forest, who had originally set aside much more, were justifiably delighted with the result. And no wonder. Only 12 months earlier a Board Report, prepared by Price Waterhouse on 31 May 1995, stated that the Revenue could throw the book at the club.
The report said: "The quantifiable exposure is some pounds 375,000 although it is stressed that this is not a maximum.
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