Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 300 - 319)



  300. In legal status what is the golden share? I have not heard of it done this way before.
  (Mr Jeffries) It is rather like a restrictive covenant in that WNSL is restricted from doing certain things without the approval of Sport England.

  301. Thank you for that. Lastly, how was the Government kept in the loop over the last four years over this? Did you send them regular monthly reports? Did they send a civil servant to attend all the meetings? How were they kept in the picture?
  (Mr Cunnah) The Government involvement has varied over that four year period as you describe. Initially the project was Government sponsored. Then of course it was transferred to the FA in the shape of WNSL, when the FA became the lead stakeholder. During that period up to December 2001 Sport England were the representatives of what are called government bodies on the board of WNSL and indeed they had an observer, so we worked closely with Sport England, particularly relating to the Lottery Funding Agreement. Since April last year when it became clear that the original financing proposals were not successful we have worked very closely with the Government on such an important project and therefore I would say that from then there has been a lot of co-operation and we have worked closely with DCMS.

  302. The question I asked was, has one person from DCMS, one Permanent Secretary or one Under Secretary, been attending meetings?
  (Mr Cunnah) Not attending board meetings, but we have worked closely with one particular team within DCMS.

Mr Flook

  303. At the weekend there was very heavy press speculation about West LB. Does it worry you that your preferred supplier of finance is retrenching?
  (Mr Cunnah) What is written in the press is not always absolutely accurate, of course. However, it did cause us to check that and the bank have assured us that they are not retrenching.

  304. What is the name of the principal investment banker that you have been dealing with?
  (Mr Cunnah) Do you mean our advisers?

  305. No, I mean the deal maker at West LB that you have been dealing with. Who is the bank's principal individual?
  (Mr Cunnah) Somebody called Robin Saunders.

  306. A female?
  (Mr Cunnah) She is.

  307. There is press speculation that if West LB go ahead with this retrenchment she might walk out.
  (Mr Cunnah) That is the article that we clarified with them and we were told that there was no substance to that position.

  308. By the banker herself?
  (Mr Cunnah) By her colleagues.

  309. Right. I am also worried about the third contractor. First of all, we had MPX as a preferred contractor, then it was Bovis/MPX, and then there was no Bovis, and the Tropus report says that was hasty. Would you like to comment?
  (Mr Cunnah) If I may correct you, Bovis/Multiplex was the preferred contractor and ultimately during the negotiations Bovis dropped out leaving Multiplex on their own. As I understand from the process at the time and being a board member at the time, that was a certain natural process in the negotiations. Bovis dropped out knowing that Multiplex would carry on and indeed that was amicable between the two companies.[4]

  310. Did Bovis give their reasons to you as to why?
  (Mr Cunnah) Not me personally.
  (Mr Jeffries) No. I think we could speculate by saying that of course in December 1999 Bovis was acquired from P&O by another Australian competitor of Multiplex and that may have had something to do with it.

Alan Keen

  311. It may be completely unimportant, but what you are saying is completely the opposite from the previous people. They said that the letter was written to Bovis telling them to go. You have just said the opposite.
  (Mr Jeffries) I did say I was speculating. That may be a cause.

  312. Mr Jeffries, is it not true that everything up till the recent negotiations has been really exciting and fascinating and a shambles, but that we all hope that the boring bit has started now where it is going to go through, it is going to go through smoothly and then only the football will be exciting? Is that really the situation? Just for clarification, it is very easy for people hearing all this interesting stuff to think that it is still a shambles now. Can you assure us that it is not?
  (Mr Jeffries) Since my arrival, which was a little over a month ago, I have ploughed through an enormous amount of paperwork and reports, particularly the Patrick Carter report and the David James report, and I cannot help but affirm my conclusions that the conclusions that they reached were ones I agree with. Those reports were presented in December 2001 and a huge amount of work has been done to try and regularise the position. There has been concern expressed this morning about the appointment of MPX. The irony for me is that the value for money report which was produced by Cyril Sweett I thought as a professional was a very thorough and competent piece of work and that came with the view that this position we find ourselves in today does represent value for money. The irony is that had we gone through a more normal procurement process we might have found ourselves more or less in the same position, albeit significantly earlier than with the deadline of the reversion of the seven acres of land hanging over our heads. I commend Mr James for his pragmatic conclusion in his covering letter to Sir Rodney Walker which says that had he been given a clean sheet of paper he would perhaps have recommended a re-tendering process but, given the constraints of the December 2002 reversion, that was simply not a feasible proposition. The value for money report that Cyril Sweett has done has vindicated that view and strengthened it. If I can refer back to the Chairman's question about confidence, from what I have seen so far in terms of what has been done and in terms of corporate governance, the management procedures in the project, the personnel that I have interviewed and talked to, and particularly the situation on the banking, I am confident that I can support the conclusions reached by the OGC that we do have a competent management team in place and the resources to deliver this project now going forward.

  313. I am obviously very happy with that response. I do not like looking backwards, but it is clear from answers given this morning, both from Tropus and from all of you, that it is hard to work out why so much money was paid for the stadium site and the business. I understand commercial accountancy very well and it is used in different ways. Frequently it is used just as a balancing figure between what the assets are valued at and what the purchaser has to pay. Sometimes it is just the business and that would be the figure in the books. Why did we pay—I say "we" because I am a member of the public who buy the Lottery tickets—so much for it? The Chairman asked are the FA and WNSL not paying for their own goodwill, because if they decided not to play the games then the business was not really worth very much.
  (Mr Jeffries) For me it is a very difficult question to answer. Clearly, assets have different values in different timescales. Even if one buys shares in the Stock Market they can vary in value subsequently. One normally buys a business or an asset in the expectation that one will do something with it, and sometimes the assets of a business are worth more to one organisation than they do to another, so clearly there was an awful lot of judgement taking place and also, I can only presume, it was an open market position in terms of other bidders for the site and the expertise that was brought in to value the business and the assets at the time.

  314. I have asked this question in many a way to try to find these things out but I have never been successful in getting the answer back that I wanted. Having listened very carefully to all the responses, it is clear to everybody that the site is not worth the money. My fear has always been that we got over-excited over the 2006 World Cup and that is really why so much money was being bid for Wembley at that time, because there was a real need for speed, and then we have tried to justify it afterwards for different reasons. Do you think there is any truth in that?
  (Mr Jeffries) It is very difficult for me to answer that.
  (Mr Cunnah) No, I do not believe that the 2006 World Cup bid had an impact. The price of any business is judgement and there is a point at which in the negotiations one company will say they will sell and another company wishes to purchase. At the time we believed that was a market price for the business. That was evidenced first by the valuation report; that was ascertained at the time, and also the fact that there were other potential purchasers in the market.

  315. Coincidentally, yesterday the Evening Standard said that the Government were going to get nowhere near the £125 million they hoped from a sale of the Dome site, and yet I think if any of us were property developers and we had the choice of buying the Wembley site or the Dome site where the football was involved in one or the other or neither, I think we would all choose the Dome site because we can sell desirable houses on the Thames to cover the costs quite easily when it is properties because the Wembley site is factory premises and that does not affect anyone here.
  (Mr Jeffries) As I have some specialist knowledge of the Dome site, I believe the environmental remedial standards would not render it suitable for housing without a substantial amount of money being added to the cost of the land.

  316. I have heard people trying to justify the price of the site on the basis that it was a business and there was going to be income from it. Can I ask what income there has been since the purchase of the site roughly?
  (Mr Maslin) The ongoing income stream was in the order of £12-14 million per annum. We basically ran the stadium from March 1999 to October 2000. In that period we made just under £20 million.

  317. When I asked the question on the income, was it income you were answering on, £14 million income, or profit?
  (Mr Maslin) Profit.

  318. Should Sport England not have drawn up an agreement that any profit made from that would go back to them or should it not go back now?
  (Mr Maslin) No. It is quite clear that all the funds that were realised by the stadium would be channelled into the project going forward; that was absolutely understood.

Chris Bryant

  319. Can I say to Mr Jeffries, thanks for your first answer to Alan Keen because, to be honest, that was the first time today that I started to have some confidence about the future. Some extraordinary things have been alleged about what has happened in the past which are of major concern to every member of this Committee; otherwise we would not be focusing so much time and energy to this. To be honest, that was the first time I have heard anybody in any sense be contrite about what has happened in the past. It is not so much that it was not transparent; it was not even pearlescent. I have just a niggling question at the back of my mind which is still about the difference between ENSDC and WNSL. Is there any technical difference or are those just different names for the same thing?
  (Mr Maslin) They are different names. Up until 19 March 1999 it was the English National Stadium Development Company Ltd. The name was then changed on 19 March 1999 to Wembley National Stadium Ltd.

4   Footnote by witness: (ie the Bovis/Multiplex joint venture) position as the preferred contractor was terminated by WNSL but WNSL indicated that "should either Bovis or MPX wish to recommence negotiations with us on an independent basis, we would of course be willing to treat with either party separately." MPX took up this opportunity but Bovis did not. Both were aware of the other's position. Back

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