The men and women involved in the £1 billion London Stadium financial fiasco
This week London Stadium owners London Legacy Development Corporation (LLDC) revealed that liabilities for what they now call ‘Onerous’ loss making contracts with West Ham and UK Athletics will cost them an estimated £200m in future losses which will be ultimately be paid by the taxpayer.
Draft financial accounts for E20 Stadium LLP and LLDC reveal is that revenue for the London Stadium for the year up to 31 March 2017 is recorded as £6.588m against the cost of sales of £10.614m The operating loss is listed at an incredible £205.206m with a total comprehensive loss recorded as an eye-watering £268.245m.
They explain that £200m of the losses relate to liabilities for onerous contract provisions that have with West Ham United and UK Athletics with a further provision of a £62.3m loss relating to impairment which is the reducing value of an asset you own, namely the Stadium with the valuation of Nil.
Newham Legacy Investments (NLI) which owns the remaining forty percent of the London Stadium also published their draft financial accounts this month. They reveal they lost another £2.5m in the financial year up to April 2017 on the Stadium. The latest loss for Newham is on top of a reported £41.6m loss recorded last year for the company setup by Newham Council. NLI now have net liabilities totalling £44.4m primarily due to the £40m loan from Newham Council of which no repayments have been made to date. Many doubt whether Newham Council will ever see any repayments of this loan.
These losses come on top of the total cost of building and rebuilding the former Olympic stadium which already stands at £753m.
The current London Mayor ordered an investigation into the decisions which led to the financial disaster and its future financial sustainability which will be published later this year by Moore Stephens.
In this article, I delve into the men and women involved in those decisions or challenges which inevitably led to the financial mess we are in today. I place no personal accusations or blame of their involvement but collectively they got us to where we are today and each must take some responsibility for their involvement in my personal view.
London Mayor Ken Livingstone, Sports Minister Tessa Jowell Lord Sebastian Coe & Lord Moynihan
Former sports minister Richard Caborn claims he was voted down by then London 2012 chairman, Lord Coe, the then Olympics minister, Tessa Jowell, the then mayor of London, Ken Livingstone, and the British Olympic Association’s chairman, Lord Moynihan over his proposal in February 2007 for an Olympics stadium designed and built for Athletics and football from the start.
In 2007 after the Icelandic takeover Eggert Magnusson criticised the Government openly saying: “I don’t understand why we are not able to go to the Olympic Stadium. We offered money, we sent letters and we described how we saw things happening. We had a meeting at the House of Commons with [Olympics minister] Tessa Jowell and [Mayor of London] Ken Livingstone and it was not possible. As a businessman it makes no sense to me [to] build a new stadium and then take it down to 25,000.”
Magnusson later admitted he had offered the Olympic Delivery Authority £100m to take over the Olympic Stadium in Stratford, but says their proposal was eventually turned down. I spoke to Magnusson earlier this year and he says he stands by the quotes at the time and says the articles were an accurate reflection of what happened.
Current LLDC CEO, David Goldstone recently defended his predecessor’s decisions not to build a stadium suitable for football in 2007 claiming no football club was willing to commit at that time to his knowledge. Giving evidence to the London Assembly Budget Monitoring Sub Committee in December last year Goldstone said: “With hindsight would you have made that decision in 2007 to build a multi use stadium rather than the one that was built for the games which was demountable to a 25,000 seater bowl. I would say the information available I believe at the time was there wasn’t a football club who would commit then so it would have been slightly speculative, it would have risked it being a white elephant."
London 2012 Forum Chair Richard Sumray admitted in written evidence that West Ham had in fact been interested in taking over the Stadium when he discussed it with the club himself in 2001. He later said he regretted the countered proposals which aimed to put athletics “in the mix” which in his view “made the whole process of finalising the ownership and uses of the stadium much more difficult. Early on a decision should have been made to use the main stadium for football, converting the warm up track to an athletics stadium. This would have been a more sustainable and appropriate use of that part of the park.” he stated.
Former London Mayor Boris Johnson was not only the London Mayor also took over the Chair of the London Legacy Development Corporation for a period of time. London Assembly member Andrew Dismore, once told Johnson “You wanted to cover up the fact West Ham had put one over on you and taken you to the cleaners.”
While still Mayor, Boris said that the LLDC was left with no choice but to undertake the expensive conversion scheme in an attempt to clean up the “mess” left by the previous Labour government. He also laid the blame squarely at Ken Livingstone, Tessa Jowell and Lord Coe doorsteps. However, his insistence on hosting the 2015 Rugby World Cup at the London Stadium and what impact that had on the stadium transition programme and in particular retractable seating is expected to come under scrunity and criticism in the Mayor’s £140,000 investigation report due out later this year.
Dennis Hone served as the Chief Executive of Olympic Delivery Authority and London Legacy Development Corporation from February 2011 until 2014. From 2006 to 2011 he was director of Finance and corporate services for the ODA. Mr Hone was appointed as chief executive of the authority in February 2011, replacing Sir David Higgins, who joined Network Rail. Hone was paid £233,000 in salary, a bonus of £153,000 and received £36,000 in pension contributions. He also spent two days a week as interim chief executive of the London Legacy Development Corporation, the body overseeing the legacy of the Olympic Park. He was paid £90,000 for this. The two jobs brought his total pay package to £512,000 per year. In addition, he was given an £80,000 exit package, including a “terminal bonus” and redundancy pay. The authority also paid an extra £373,000 into his pension pot. This meant that in total, he was paid £965,000 in one year. He was entitled to the pay-off because Jeremy Hunt, the former culture secretary put him on a permanent contract when he appointed him. Mr Hone was later appointed the full-time chief executive of the London Legacy Development Corporation, where his basic pay is £195,000 a year. On leaving the LLDC in 2014 he joined one of the Stadium’s prime construction contractors Mace as their Group Finance Director.
LLDC Deputy Chairman Philip Lewis is still a board member of the London Legacy Development Corporation for the past three years and a chartered surveyor with 40 years experience in the property market. He is currently Chief Executive of the property division of the Kirsh Group. He is a former Chairman of Sport England, London and past President of the British Council of Shopping Centres. Lewis was part of a three man sub committee convened by Baroness Ford in 2011 to review bids for the London Stadium occupancy.
Keith Edelman was formerly the Managing Director of Arsenal Holdings plc and was instrumental in the development of the Emirates Stadium and the attendant regeneration of the surrounding area including the development of Highbury Square. He is still an LLDC board member. Edelmen was part of a three man sub committee convened by Baroness Ford in 2011 to review bids for the London Stadium occupancy.
Baroness Margaret Ford was the former Chair of the Olympic Park Legacy Company On 7 April 2009 Communities Secretary Hazel Blears, Mayor of London Boris Johnson, and Olympics Minister Tessa Jowell announced Ford’s appointment to chair the newly created London Legacy Development Corporation, known officially as the Olympic Park Legacy Company (OPLC). In 2011 she formed a sub-committee to consider bids for the former Olympic Stadium. She was replaced in 2012 by Daniel Moylan.
Daniel Moylan was the Chairman of the LLDC for just three months in 2012 before he was replaced by Boris Johnson who had appointed him.
At the time of the appointment, Mayor Johnson said: “I am sure there is no better man than Daniel Moylan to ensure every possible ounce of benefit for Londoners is squeezed out of our Olympic legacy.”
At the time London Assembly Members had criticised the Mayor for ignoring the recommendation of a London Assembly confirmation hearing which said Mayor should not appoint Mr Moylan to the LLDC because he “did not consider that he had demonstrated sufficient knowledge and experience in the area of regeneration which was crucial to this role”.
Andrew Altman is the former CEO of the Olympic Park Legacy Company and London Legacy Development Corporation from 2009 until 2012 when the American stepped down unexpectedly. He was also a member of Baroness Ford’s sub committee which approved of West Ham’s initial bid for the Stadium in 2011.
Secretary of State for Communities and Local Government (2009) Eric Pickles
The Olympic Park Legacy Company (OPLC) was established in May 2009 by the Mayor of London and Government as the company responsible for the long-term planning, development, management and maintenance of the Queen Elizabeth Olympic Park .The OPLC was a public sector, not-for-profit company limited by guarantee with three founder members: the Mayor of London, Secretary of State for Communities and Local Government, and the Secretary of State for the Department for Culture media and Sport.
All the Secretary of States named above were involved in decisions relating to the former Olympic Stadium during the time the OPLC was in existence.
Former LLDC Chairman David Edmonds resigned in November last year shortly after a further over spend of £51m was revealed for the London Stadium transition. Edmonds, who has been an LLDC board member since its 2012 inception was appointed chairman in September 2015. He has been involved in the post-Olympic planning since 2009 when he became a director of the Olympic Legacy Committee. He will soon be replaced by Sir Peter Hendy who is also the Chairman of Network Rail since 2015.
Sir Robin Wales Current Mayor of Newham council was involved in both West Ham bids and a board member of the LLDC. Also, a self-confessed West Ham fan.
David Goldstone is the current CEO of the LLDC having joined from Transport for London in 2014 where he was Chief Finance Officer.
He was the Government’s finance director for London 2012 between 2007 and 2012, helping ensure that the Games were delivered within the £9.3 billion budget. In that capacity, he worked closely with the Olympic Delivery Authority on the design and delivery of the Olympic Park including the Stadium and on the planning for the future of the Park including the regeneration of east London. Goldstone is also a board member of Sport England.
Spurs Chairman Daniel Levy raised two Judicial review legal challenges in 2011 and 2013 to West Ham’s occupancy of the former Olympic Stadium. The first one was rejected by the high court and a second challenge was later withdrawn after agreeing to rebuild White Hart Lane with some help from the London Mayor. In December 2013: Three investigators found guilty of illegally obtaining Karren Brady’s phone records during the initial battle for the stadium. The lead investigator worked for accountants PKF, who were engaged by Spurs. The company and Spurs both denied any knowledge of illegal activities.
Leyton Orient Chairman Barry Hearn raised a Judicial review in 2013 over ground sharing at the former Olympic Stadium claiming he wanted Leyton Orient with West Ham and the LLDC hasn’t considered this. He also wrote to the Premier League asking them to ban West Ham’s move because of the distance from Leyton’s Orient’s stadium. His judicial review was rejected by the courts. He originally vowed to give up his legal fight if he lost the judicial review but instead said he would take his case to European Court of Justice. He later sold the club for £4m in 2014 and dropped his fight. This year he claimed he bitterly regretted the sale after Orient were served with a winding up order from HMRC.
The club was finally taken over by fan led consortium last month.
Architect Steve Lawrence is probably the least public figure involved in this sorry tale but possibly had the biggest impact when he challenged the LLDC by filing an anonymous complaint to the European Commission over illegal state aid. The public body cancelled West Ham’s winning bid as a result of this complaint and Boris Johnson ordered a new tender process in which the former Olympic Stadium would only be rented on a 99-year agreement.
When Lawrence’s anonymous complaint to the EU came to light at the High Court, the Olympic Park Legacy Company agreed to scrap the West Ham takeover of the stadium.
“If it had been shown subsequently to be illegal, and I am not saying that it was necessarily, then in those circumstances then West Ham would have had to repay the subsidy,” Lawrence told Sky Sports News at the time.
“If that had happened after they had moved out of Upton Park and that ground had been redeveloped then they would then have been in a position where they would have had to return the stadium to the authorities and they would have been homeless. So we would have lost one of our precious English football clubs.
“The EU would have required the UK authorities to recover the illegal state aid, which would have meant either West Ham would have had to pay the full price for it or a full rental for it – and we are talking about an asset worth £500?million – and they would not have been able to afford that. The only option would have been for West Ham to go somewhere else.”
Going forward there is no simple solution, West Ham is unlikely to take over the London Stadium in the short term even if it was offered to them for free of charge, the government would need to pay the Hammers to take it off their hands. As they have forecast £200m of operating losses an up front fee of £100m might do the trick. Of course, there would be a political outcry and various complaints from jealous third parties to not make that feasible. In reality, the tax payer will need to fund the stadium for now and E20 Stadium LLP will need to honour their legal and proper contract with West Ham.
I understand that the Stadium is more likely to change hands into Newham Council ownership long term but only when the operating losses can be stemmed.