Carson Yeung and the takeover that was a riddle wrapped in a mystery | David Conn

Warning signs over former Hong Kong hairdresser should have been heeded before he acquired Birmingham City

The Premier League is satisfied it followed all its rules on "fit and proper people" when it welcomed a smiling Carson Yeung to take over Birmingham City for an £81.5m price in 2009, and no review has been prompted by the verdict of a Hong Kong judge that Yeung had by then laundered £55m, which was the proceeds of crime.

In his 84-page judgment, Judge Douglas Yau cast Yeung as a liar, "not a witness of truth", who exaggerated the earnings from his hairdressing salons and stock market trading; was an "avid gambler" in the VIP suites of Macau casinos whose staff and a boss, Cheung Chi Tai, a suspected triad, paid money including "folding cash" into Yeung's bank accounts.

Along with the glaring puzzle in 2009 of who Yeung was, and how he had made such money to buy a Premier League club, he had two criminal convictions in Hong Kong in 2004, then another in 2010, for failing to disclose shareholdings in listed companies.

Birmingham did tell the Premier League, which bars people with criminal convictions for dishonesty from taking over its clubs, but the league deemed Yeung still "fit and proper" because such an offence would not be considered criminal under UK law.

So Yeung was allowed in, and £40m was paid to City's owners David Sullivan and David and Ralph Gold, who with their managing director, Karren Brady, had turned the club around over 16 years, restoring it to top-flight status, rebuilding at St Andrew's and passing it on in financial health.

The club, formed in 1875 by members of the Trinity church, Bordesley, was assured by Yeung of a "global brand" and a mass following in China if they hitched their history to his "connections and expertise".

Promised the world, the club is in crisis, going nowhere. It is reliant on the manful efforts of the manager, Lee Clark, his decimated squad and loyal staff and supporters at St Andrews, determined to preserve some dignity. Peter Pannu, Yeung's long-time associate, now the acting chairman, is still in control, mostly from Hong Kong. After Yeung's six-year prison sentence, they wait to see if the Hong Kong justice authorities will seek to seize Yeung's stake in the club's Cayman Islands-registered holding company, Birmingham International Holdings, £15m he loaned the club. Pannu says the holding company, which he has sought to refinance with loans or investment from sources in China, does want to sell, but the club, whose once big-time boss has just gone to jail, is not now the most attractive prospect in football, unlikely to reach a price Pannu would deem handsome.

For the Premier League to argue that the rules were all followed when Yeung took over rather evades the point that the leagues themselves, which means the clubs, have made the rules.

This catastrophe should prompt a review, not least because the warning signs were there. Besides his 2004 conviction, the fine legal detail of which made a seismic difference to Blues' fate – such offences had been decriminalised here, so he was clear – there was a large question mark where Yeung's track record was supposed to be.

We wrote at the time of Yeung's takeover that with no clear story of how he had made so much money having until quite recently been working as a hairdresser, "still it can feel like a riddle wrapped in a mystery". Yet rather than football being determined to protect its treasured clubs from people and plans where alarm bells are ringing, the leagues have a test based on strict legal criteria, for fear somebody barred will take them to court.

More broadly, the Premier League has an attitude of welcoming buyers from overseas, believing it brings money in and expands English football's profile and commercial reach.

A spokesman for Supporters Direct, which campaigns for better governance and supporter involvement in clubs, called after the Yeung guilty verdict for a complete overhaul of the ownership system, not merely a tweak of the current process, saying: "We have owners who are not fit and proper, passing tests that are not fit for purpose."

Yeung swaggered into Birmingham, and the £40m, funded by Kingston Securities in Hong Kong, a firm owned by the chief executive of a Macau casino, was paid to Sullivan and the Golds. It has not been suggested that Kingston Securities acted irregularly in financing the Birmingham takeover. Sullivan, the Golds and Brady all declined to comment on their sale of Birmingham City to Yeung but a source maintained that they acted properly at all times.

Since Yeung was sentenced, David Gold has pointed out to any critics the strong position in which he and Sullivan left Birmingham, and reminded supporters that many had grown tired of his and Sullivan's ownership and wanted a change. The Golds and Sullivan made a great profit on the sale owing partly to their and Brady's clarity and shrewdness reconstructing at St Andrews, but also because they invested in football at the right time.

Birmingham's board now consists of Pannu, Yeung's son Ryan, Yeung's brother-in-law and future brother-in-law; Pannu has reassured Birmingham's supporters that Yeung will not run their club "by proxy from prison".

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