39: Football philanthropy and the stewardship of Chelsea FC
Roman Abramovich’s weekend announcement that he is giving the trustees of the charity, Chelsea FC Foundation, ‘the stewardship and care of Chelsea FC’ surprised the sporting world. Mr Abramovich, who has a net worth of more than $9.6 billion according to the Forbes rich list, has been the owner of Chelsea since 2003. The timing of the gift has left many wondering if this is altruism or enlightened self-interest.
At the time of writing reports indicate that this gift is far from a done deal and it will require the Foundation trustees to weigh up a number of difficult charity governance issues. Charity assets are essentially held for a charitable purpose to benefit the public; the Foundation has a number of charitable purposes including promoting sports recreation and advancing education of young people. It is self-evident that operating a commercial Premier League football club is incapable of advancing a charitable purpose. That being so, the only basis on which the Foundation could potentially receive the Club is if it equated to an investment asset which generated income to support its charitable activities. There is a long history of charities receiving commercial undertakings from donors or founders for this purpose; indeed the Wellcome Trust was established by Henry Wellcome donating his pharmaceutical company to the Trust which used the profits to fund charitable activities supporting research related to health.
When offered a valuable asset it can be tempting for charity trustees not to look a gift horse in the mouth. However, the position with Chelsea FC is a good deal more complicated. Annual accounts for Fordstam Ltd, Chelsea’s parent company, show that total related-party loans from Abramovich equated to £1.514 billion. Indeed last year Abramovich loaned the club £19.9 million. This begs the question as to whether the Club is capable of operating on a sustainable basis without the largesse of Abramovich. If the totality of Club revenue must be-reinvested in the Club and it can only operate via loans this renders it somewhat challenging to regard the Club as a legitimate investment asset. Of course valuable investment assets can also be sold for a profit and the Wellcome Trust ultimately disposed of its pharmaceutical company to GlaxoSmithKline securing its significant financial independence – given the financial entanglement with Abramovich it is difficult to believe that the Foundation would have such a free hand to dispose of the Club in order to realise value.
There will also be wider fiduciary considerations for the Foundation’s trustees who are required to act in the bests interests of their charity. Whilst there is no reference to it in any public statement made by Abramovich or the Club the timing of this announcement coincides with growing demands from Parliamentarians that the assets of Russian oligarchs should be seized as part of a package of UK sanctions targeting Russia in the wake of the invasion of Ukraine. Placing the Club in the hands of a charity might remove it from the scope of such sanctions. The Foundation trustees will therefore be anxious to avoid any perception that the Foundation is being used for a purpose not connected with its activities, essentially to shield private assets that may otherwise be placed at risk. We do not know the details of what is envisaged in this transaction but any suggestion that Abramovich’s gift of the Club’s ‘stewardship’ might be temporary, with the Foundation essentially warehousing ownership of the Club until geopolitical stability is restored at some future point in time, would be highly problematic.
Fundamental to charity status is independence. The Club is encumbered by the eyewatering debt owed to Abramovich, essentially placing its ongoing operations and future survival exclusively in his hands. Any lender of this scale would have very meaningful levers of control and therefore the Foundation’s trustees would need to grapple with how they would be able to operate on an appropriately independent basis in these circumstances. The Charity Commission would always be concerned about financial arrangements entered into by a charity which are so onerous that the charity is effectively reduced to carrying out the instructions of a third party.
The Foundation’s trustees might also be viewing this proposal through the prism of the Foundation’s reputation. Over the years various newspapers and members of Parliament have taken a keen interest regarding how Abramovich amassed his fortune and any connection he might have to Vladimir Putin; Labour MP Chris Bryant recently quoted a leaked Home Office document from 2019, which stated that ‘Abramovich remains of interest to HMG due to his links to the Russian state and his public association with corrupt activity and practices’. In recent times we have seen charities loudly condemned by supporters and the media for accepting gifts from or being associated with donors whose wealth was in some way tainted or perceived to be tainted.
In light of the many and varied issues affecting this proposal, not to mention the public and regulatory scrutiny to which it will undoubtedly be subject, we will have to wait and see if this gift is capable of hitting the back of the net.