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Sham, secrecy & shredders - Russo brothers' cash backing of Bassini's Watford FC reign kept out of public eye, court hears
Mr Justice MacKay made a summary judgement on £959,500 paid in February 2012, which the Stanmore businessman denied was a loan but part of a secret arrangement between the them to covertly own the club.
Mr Bassini argued the money, which was meant as a bridging loan to help the Watford FC’s cash flow problems, was paid by Russos' to the club and not him.
The court heard negotiations between the two parties and their advisors for the cash were “totally covert” and that Mr Bassini’s solicitor had been urged to shred documents relating to it.
However Mr Justice MacKay said a letter regarding the money named Mr Bassini twice as the recipient and found with Russos’ claim.
Jimmy and Vince Russo.
The judge did not rule on two earlier payments of £3.5 million and £135,000 made from Valley Grown Salads (VGS) - the company owned the Russo brothers – to Mr Bassini in early 2011, just before and after his takeover of the club.
Those two claims are due to be settled in a trial at a later date.
The Russos took Mr Bassini to court for last year for a total of £4,594,000, given to him in the period just before and during his tenure at Watford FC.
At yesterday’s hearing Mr Justice MacKay said the Russos’ case was that the money had been straightforward interest-free loans paid to Mr Bassini and they had produced a loan agreement to that effect.
However Mr Bassini’s case was that the loan arrangements were “a sham” and the payments were part of a secret scheme for him and the Russos to take joint ownership of the club.
Mr Justice MacKay said: “The defendant admits receipt of the money and says they were not loans at all. The first tranche was paid by the claimant to acquire a half share in the company that controls and owns Watford FC.
"The second tranche is the return of the money paid by the defendant to acquire the claimant’s shares in the holding company of Watford FC, which was Watford Leisure PLC.
"The third was described as bridging loan to Watford AFC and not a payment to the defendant.
“The defendant describes them as in effect the price of investment by the claimant in a joint venture in the forming of a new company (Watford FC Ltd) to acquire control of Watford FC.”
The court heard Mr Bassini, who has been bankrupted before, is a businessman with interests in property development and was keen to buy into a football club.
Mr Bassini started attending Watford FC matches in late 2010 and set up Watford FC Limited on January 12 2011, initially with orthopaedic surgeon Panos Thomas as the only individual named on the company’s reports submitted to Companies House.
Laurence Bassini and Panos Thomas.
The court heard that in the early part of 2011 Mr Bassini had a series of meetings with Jimmy Russo.
Mr Justice MacKay added: “The defendant says the loans were agreed as effectively a sham. It was built to mislead as to what the true nature of what was going on.
“What was going on, says the defendant, were negotiations and in the end an agreement to set up an arrangement. The set-up would be that the claimant and defendant would come together to acquire two shares in the leisure company and in the process own it 50-50.”
The court heard that there was a need for secrecy due to Mr Russo’s “unhappy” time as a minority share holder in the club’s former parent company, Watford Leisure PLC.
Mr Justice MacKay said: “The circumstances were unfavourable and views were formed and it would have been bad politics to advertise their return to control.”
Summing up Mr Bassini’s version of what this deal meant, he said: “The effect of this, to put it in plain English, would have been to put the claimant and the defendant effectively in equal control and ownership of Watford FC Ltd.”
The court heard that after the deal was done there was a declaration of trust executed that said Mr Bassini would hold Mr Russo’s 50 per cent share in trust for him.
Mr Bassini claimed there was a deal to write off the balance of the loan once the shares had been acquired.
Mr Justice MacKay referred to notes kept by Mr Bassini’s solicitor, Angelo Barrea, that stated the £3.5 million "was the price the claimant was willing to pay for joint ownership in Watford FC Ltd”.
He said: "I don't intend to read all the documents out, but they included a note from the claimant’s advisor, undated, which stresses the need for secrecy and confidentiality and that the negotiations should remain totally covert.
“To the extent he recommended that he shred that document".
The first £3.5 million payment was made to Bassini on February 2, 2011. The second for £135,000 was made on May 20, 2011.
Mr Bassini’s case was that the second tranche of cash related to Mr Russo’s minority share holding in Watford Leisure PLC, of 29.9 per cent, which at the time was thought to be worth in the region of £135,000.
Mr Justice MacKay said it was decided that if they succeeded in setting up the ownership company on a 50-50 basis it would be wrong for Bassini to return the proceeds from the minority shareholding in Watford Leisure PLC to VGS.
The third sum in the case related to a payment to Mr Bassini on February 24, 2012 of £959,500, which was described as a bridging loan needed because of the club’s cash problems.
Mr Justice MacKay said: “The claimant’s case is that Mr Barrea approached Mr Russo for a loan and the security officered for it was a forthcoming player transfer, the funds from which would be used when they materialised for the repayment of this loan.
“Initially Mr Russo was being asked by the defendant to make this payment to the football club which had its usual cash flow problems.”
Mr Justice MacKay added that letters had been produced that named Mr Bassini as the recipient of the money.
He added: “It is plainer in that second letter that the loan is to the defendant who is twice named in it. The loan is to him and the repayment is to be by him.
“The defendant's case is that it is for presentational purposes or in other words a sham. Like the loan agreed the year before it is part and parcel of the agreement between the original parties.”
As a result Mr Justice MacKay made a summary judgement that Mr Bassini should repay the £959,500 as well as a portion of the Russos’ legal costs.
Following the judgement at the Queen's Bench Division of the High Court of Justice yesterday Mr Justice Mackay also continued a freezing injunction on Mr Bassini’s assets, with a limit of £1 million.
Mr Bassini’s barrister, Ian Mayes QC, said his client’s home was worth more than £1 million and he had no intention of selling it in the immediate future.