Henry Gabay lent £81m to Derby owner Mel Morris
By Ryan Conway and Matt Slater Jul 9, 2020 83
Derby County’s owner Mel Morris has received loans from a company linked to Henry Gabay, the businessman who was detained in France last week and faces German extradition charges in connection to an unrelated tax scandal, The Athletic can reveal.
Up until now, it was believed Gabay had only held talks with Morris about investing in Derby but The Athletic has uncovered that his involvement goes far beyond talks with the Derby owner. The Swiss-Turkish financier has already lent Morris the £81.1 million he used to buy the club’s stadium in 2018.
That purchase is already controversial as it has resulted in an English Football League disciplinary charge related to Derby allegedly overstating the value of Pride Park in an attempt to avoid a breach of the league’s profitability and sustainability rules.
Derby were the first side to spot the loophole in the rules that allowed clubs to sell their stadiums to their owners and then lease it back, thereby recording a one-off profit. The EFL believes Pride Park is worth about £50 million, which would turn their 2017-18 profit of £14.6 million into a £16.5 million loss, a sum that would tip them over the £39 million limit that clubs are allowed to lose over a three-year period.
The case is set to be ruled on by an independent disciplinary commission and if it finds Derby guilty of overstating Pride Park’s value, the club could face a significant points deduction. The club deny any wrongdoing.
The EFL charged Derby on January 16, only a month after Gabay’s interest in buying the club was widely reported, with Morris suggesting a takeover was imminent. But, six months on, there has been no movement whatsoever on that front.
Most observers had assumed that was because of the uncertainty related to the EFL charge and the COVID-19 pandemic but it now seems Gabay has more pressing concerns and Morris’ chance of bringing in investment through him look bleak.
Most Derby fans will wonder what this has to do with them but The Athletichas discovered that Gabay has already indirectly invested in their club by providing Morris with the cash he needed to buy the stadium.
According to documents on Companies House, Morris’ Gellaw Newco companies have borrowed £81.1 million in two separate payments from Rams Investment, a company set up by Duet Group owner Gabay.
The loans from Rams Investment Limited were signed off in November 2019 by Amit Haria, Gabay’s chief financial officer who is listed as the director of Rams Investment. The company, along with Rams Sports Management Limited, is listed at Gabay’s London address. The Swiss-Turkish businessman is also listed as a person with “significant control” with both companies.
Of the loan, £7.7 million went to Gellaw Newco 202 Limited (the company that owns Pride Park) while the remaining £73.4 million was lent to Gellaw Newco 204 Limited. According to Land Registry records, Morris bought Derby’s stadium, Pride Park, via Gellaw Newco 202 Limited for £81.1m on June 28, 2018, two days before the June 30 year-end for the club’s 2017-18 financial accounts.
According to its accounts, Gellaw Newco 202 has fixed assets of £81.1 million but no cash and debt of £81.1 million.
While Gabay has been detained, he has not been charged with a crime. He was the first person apprehended in connection to the CumEx scandal — a controversial stock trading practice under investigation in several European jurisdictions— and posted bail of $113,000 (£89,313). The businessman insisted he would have cooperated with German authorities if he was notified but claims no contact was ever made with him. According to his lawyer Jean-Marc Fedida, he was left “stunned in front of his wife and children” and insisted his client was “not on the run”. If found guilty he could face up to 15 years in prison. He insists he is innocent.
The Athletic revealed in April that Gabay’s Duet Asset Management had survived its fourth winding-up order from HMRC in three years. His company appearing on the list of companies to wind up is believed to be part of the reason the Derby deal stuttered. It’s believed it was incredibly close at one stage and was expected to be concluded before January 2020. As of April, it was believed Gabay was still interested in the club but faced fresh competition from MSD Partners, fronted by technology giant Dell’s founder Michael Dell.
Investment is even harder with possible EFL charge hanging over the club, though Morris is insistent he did nothing wrong.
“The situation is, if you are going to tie profitability and sustainability to accounting, and the regulations say you can effectively add back in profit on the sale of fixed assets, then the fact I sold my biggest asset doesn’t change the fact the rules say you can do this,” Morris told talkSPORT in June 2019.
Derby are confident that they will not be punished by the EFL but are under considerable financial pressure.
In recent weeks, they have let Tom Huddlestone become a free agent after the two parties could not work out a contract extension and Chris Martin is yet to secure a long-term deal, although he has agreed to stay on until the end of the season. Both players command high salaries.
Part of the financial burden was eased due to their deal with 32Red, which allowed for a “star player” clause. They activated the clause when appointing Frank Lampard last season and when signing Wayne Rooney this term. The clause allows for an extra £1.5 million in funding from the betting company to which Derby can use as they please.
At head coach Phillip Cocu’s unveiling in August, Morris told the press that the club had never been aggressive in finding investment but it would be welcomed.
“We said we’re open to offers but that’s a tough decision. We’re building something here and you have to have someone who wants to support that or somebody who, if they’re going to take me out of that, is going to continue what we’re building. We’ve got to be mindful of that and that makes it harder.
“You have lots of enquiries. Some you think wouldn’t fit at all, others you have slow conversations with. If somebody’s interest is still around after three months of talking, then that’s a better one to have than somebody who wants to come in within a week and then you find it all falls apart. We have to be careful, but we continue to be open to discussions.”
The lack of clarity at Pride Park is not helped by the fact that Morris is late in filing last season’s accounts for the club or any of the companies he has set up to buy and run the stadium. They were due at the end of June and he can expect to receive late-filing fines of £150 for each company. These will increase in time.
It’s believed the pending EFL charge for breaching profitability and sustainability regulations has no part to play in those accounts being delayed. Derby’s standard practice has been to submit their accounts late as far back as 2014.