Almost 9 years ago (October 2004) an article appeared in the Sunday Times with the headline,
“Former BoS director in row over loan for soccer shares”
This is the first of three posts based around this article. The other two touch on ‘Charlotte 18’ and the third speculates on the identity of the associate.
The full article is behind a paywall but the link, should you need it, is here. I append an abridged copy at the foot of this post but the article’s first paragraph is a good summary:
“ONE of the Bank of Scotland’s most senior directors arranged a loan from the bank for an associate to buy a stake in a Scottish football club of which the banker was also a director. The shares were later acquired by a company controlled by the banker.”
Unsurprisingly Gavin Masterton is that ‘most senior director”. I don’t know if there is anything illegal Masterton’s handling of this but it does seem strange.
Strange too is that, despite the headline, the article does not go into any detail about the rights or wrongs of the process but simply describes the steps involved. Normally we would expect the article to go into why there was a row and what were the issues. We get a few quotes from Masterton but the “row” is never explored nor explained.
At the head of the article in the ST is a short note,
“[This article is subject to a legal complaint]”
We do not know who raised the legal complaint. The obvious conclusion is that Masterton was the complainant but there is no clarity. Might the associate, who wanted to remain anonymous, have complained if he thought his identity might be revealed?
The article continues,
“After a discussion with the associate about buying a stake in Dunfermline, Masterton sent a letter to him, on headed notepaper from “Gavin Masterton CBE, treasurer and managing director, Bank of Scotland, The Mound, Edinburgh,” which said: “I appreciate your willingness to enter into this transaction and,I am sure that we will have a purchaser for the shares in place before the next settlement date. You have my guarantee in this regard.”
The associate then received what he claims was an unsolicited loan application in June 2000 from Bank of Scotland Corporate Banking, offering £69,250 at 1½% above base rate, with no security, no arrangement fees and with interest payments deferred until the end of the three-year loan period. The application form made it clear the facility was offered “only for an investment in DAFC”. Two years later, the final part of the arrangement was effected. A letter to the associate from solicitors for Wood Investments, a company which included Masterton as a director, said: “We will arrange with Bank of Scotland to have the loan account relating to the DAFC shares cleared using funds from Stadia.” At no point, the associate says, did he have to put up his own cash. He bought 11,273 shares, which were held in a nominee account on his behalf by Wood Investments for two years.”
Clearly, the associate was never meant to own the shares long-term and, so, after two years the loan was repaid and Masterton’s company, Stadia, owned the 11,273 shares. interestingly, Stadia collapsed in 2004 – before the ST article was published – with debts reported to be of £25M
Would it not have been simpler for Masterton, or his company, to buy the shares without involving an associate?
Why would Masterton, as he is quoted later in the article, say,
“We wanted to do it in that particular way. It was a very small amount of shares.”
Why did he want to do it that way for a ‘very small number of shares’? There must have been a benefit to Masterton? But what was that benefit?
Did this method allow him to get ownership of shares which would not have been possible had Masterton operated directly with the shares’ owner?
Was there a reason Masterton wanted to involve the particular associate he used?
Was there another reason? Will we ever know?
Why?
This simple question always seems to be around Masterton’s actions.
Why, Gavin?
Why handle this share acquisition in this way?
What was in it for you?
Why, Gavin, is there rarely clarity when you are involved?
____________________________________
The Sunday Times October 17, 2004
Scotland: Former BoS director in row over loan for soccer shares
http://www.thesundaytimes.co.uk/sto/business/article242074.ece
robert ballantyne, business editor scotland
[This article is subject to a legal complaint]
ONE of the Bank of Scotland’s most senior directors arranged a loan from the bank for an associate to buy a stake in a Scottish football club of which the banker was also a director. The shares were later acquired by a company controlled by the banker.
Documents given to the Sunday Times show that Gavin Masterton, at the time treasurer and managing director of Bank of Scotland, arranged between 1999 and 2000 for the associate to buy shares in Dunfermline Athletic with the loan. He also gave the associate a guarantee that the shares would be bought off him before the loan had to be repaid. Two years later — after Masterton had retired from the bank — the shares were sold to his company Stadia.
Masterton retired as treasurer and managing director of the Bank of Scotland in 2001. Banknotes which bear his signature remain in circulation today.
Stadia, which developed property at both Dunfermline and Livingston football clubs, collapsed earlier this year with debts reported to total £25m.
…….
The documents handed to The Sunday Times, on the condition that the name of Masterton’s associate remain anonymous, explain in detail how the Dunfermline deal was done.
After a discussion with the associate about buying a stake in Dunfermline, Masterton sent a letter to him, on headed notepaper from “Gavin Masterton CBE, treasurer and managing director, Bank of Scotland, The Mound, Edinburgh,” which said: “I appreciate your willingness to enter into this transaction and,I am sure that we will have a purchaser for the shares in place before the next settlement date. You have my guarantee in this regard.”
The associate then received what he claims was an unsolicited loan application in June 2000 from Bank of Scotland Corporate Banking, offering £69,250 at 1½% above base rate, with no security, no arrangement fees and with interest payments deferred until the end of the three-year loan period. The application form made it clear the facility was offered “only for an investment in DAFC”. Two years later, the final part of the arrangement was effected. A letter to the associate from solicitors for Wood Investments, a company which included Masterton as a director, said: “We will arrange with Bank of Scotland to have the loan account relating to the DAFC shares cleared using funds from Stadia.” At no point, the associate says, did he have to put up his own cash. He bought 11,273 shares, which were held in a nominee account on his behalf by Wood Investments for two years.
The loan was then cleared using funds from Stadia, which ultimately took control of the football club.
Masterton this weekend said the bank had been at all times aware of his actions. “Oh dear, there’s no end to this,” he said. “Yes, there were loan arrangements to individuals, but they weren’t preferential. I’m not going into all of this. It was all perfectly legitimate. We wanted to do it in that particular way. It was a very small amount of shares.”
…….”
