Leeds in a Â£2m bid to dress up Kewell transfer

14 April 2012

Leeds United's desperation to hide the true extent of their financial crisis led chairman John McKenzie to suggest a bizarre scheme that would artificially inflate the amount of money the club received from Harry Kewell's transfer to Liverpool.

Sportsmail can reveal today that Professor McKenzie was so keen to present the City with a rosy picture of the club's earnings from the sale of one of their most valuable assets that he tried to persuade Kewell's representatives to include their client's £2million signing- on bonus from Liverpool in the size of the transfer fee.

Kewell's agent, Bernie Mandic, already had a written contract from McKenzie stating that the price for Kewell was £5m, with the club receiving £3m of that and the rest going to Mandic. The proposal by McKenzie would have raised the published total for the deal to £7m, all of which would have been paid directly to Leeds.

In return for agreeing to the arrangement, which Mc Kenzie described as ' cosmetic ' , it was suggested to the Kewell camp that Leeds would then split the £ 7m equally - £3.5m of which they would have kept and £3.5m of which would have been sent to Mandic as his £2m fee and £ 1.5 m of Kewell's £2m signingon bonus.

In return for the extra £500,000 which the club would receive from the deal, the player would get his bonus up front with the potential of it being paid tax-free.

The Australia striker was due to be paid the £2m in five annual instalments over the course of the contract he signed at Anfield and so was due to pay 40 per cent income tax on it, meaning he would actually receive £1.2m net.

So, by receiving £1.5m tax free, he would have made an extra £300,000 on the deal as long as the money was placed offshore to prevent it from being scrutinised by the Inland Revenue.

McKenzie is understood to have offered to pay £3.5m direct to Mandic's Paris-based company, MaxSports, indicating that it would then be up to the agent how Kewell disposed of the money.

Liverpool were informed of the suggestion and are believed to have advised Kewell that such a move presented possible problems with taxation as well as the FA's compliance unit, who police all deals done in England. Kewell sought the advice of Mandic as well as his lawyer and financial advisor and quickly rejected the idea.

Mandic said to Sportsmail: 'This was one of the suggestions made by Professor McKenzie during the finalising of Harry Kewell's transfer to Liverpool as a way of making the deal look better for Leeds United to the City.

'We listened to all of the proposalsbut, given the potential consequences for Harry Kewell, we declined absolutely.'

The fact that it was even suggested, however, indicates the lengths to which McKenzie and the Leeds United plc board were prepared to go in order to make it appear that their financial health was better than it really was.

With debts of £78m and having reported record losses for the financial year of almost £50m, the sale of Kewell for effectively £3m seems even more of a disaster now than it did when the deal was done in July.

Even though the Kewell deal was not carried out in the manner that McKenzie suggested, it seems likely, in view of Mandic's confirmation of the proposals, that deals already done by the club as well as those agreed in the future will attract the interest of the FA, Inland Revenue and the Financial Services Authority, who regulate Stock Market-listed companies.

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