A guide to The Football League’s decision on Massimo Cellino
Published 29 January 2015 By: John Shea
Earlier this month, The Football League’s Professional Conduct Committee1 (“the Committee”) issued its decision 2 in the appeal made by Leeds United owner, Massimo Cellino, against his disqualification under The Football League’s owners’ and directors’ test set out in Appendix 3 of its Regulations and Rules (the “Regulations”).3
The case involved complex and technical arguments concerning the various elements under the test that need to be proven in order to lead to a disqualification. It is interesting to note from the decision how the Committee addressed these arguments with an eye on how future cases may be determined.
Massimo Cellino was convicted on 18 March 2014 by a court in Sardinia of an offence relating to non-payment of import tax in respect of a boat called the Nélie. Mr Cellino was fined €600,000 and the boat was confiscated. Mr Cellino claimed he honestly believed that he was entitled to a tax exemption however the Italian court rejected this and found that a shell company was deliberately setup in order to evade payment of tax.4
As a result of the decision, the Football League Board unanimously agreed5 that Mr Cellino was subject to a disqualifying condition under the owners' and directors' test as he had an unspent conviction for “an offence involving a dishonest act.”6 A dishonest act is defined in the Regulations as “any act which would reasonably be considered to be dishonest.”7 As a result, Massimo Cellino was prevented from buying a majority stake in Leeds United in accordance with Appendix 3 Rule 2.1.
Mr Cellino appealed that decision to the Professional Conduct Committee8 who upheld his appeal in April 2014 on the basis that whilst Mr Cellino did have a conviction, it was not a conviction for “an offence involving a dishonest act” since there was insufficient information regarding the offence to reasonably conclude that his offence was dishonest. Mr Cellino was then subsequently free to acquire a controlling interest in the club. However, Tim Kerr QC, who chaired the committee alone, confirmed in his initial decision that “if the reasoned ruling of the court in Cagliari discloses that the conduct of Mr Cellino was such that it would reasonably be considered to be dishonest, he would become subject to a Disqualifying Condition.”9
The Football League successfully applied for a copy of the Italian Court’s reasoned judgment in October 2014 and, after considering it, they once again concluded that Mr Cellino was subject to a disqualifying condition under its rules and disqualified him from acting as Director or exercising any control over the club.10 Massimo Cellino issued a further appeal, and the Committee heard this second appeal on 15 January 2015.
Grounds of Appeal
Mr Cellino’s grounds of appeal were that the Italian Court’s decision was not a conviction; alternatively that it was not a conviction involving a dishonest act; alternatively that there are compelling reasons why Mr Cellino should not be disqualified from holding office or being a Director of Leeds United. In the event that Mr Cellino’s appeal was dismissed, he made an application under Appendix 3 Rule 6.3 of Regulations to review the length of his disqualification. Mr Cellino urged the Committee to reduce the length of his disqualification to nil on the basis that it was disproportionate to the nature of his conviction.11
There were five issues that the Committee had to decide:
- Whether it was open for Mr Cellino to reopen the issue as to whether the Italian Court’s decision was a conviction under the Football League rules;
- Whether the Italian Court’s decision was a conviction under the Football League’s Regulations;
- If so, whether it was a conviction “for an offence involving a Dishonest Act”;
- If so, whether there are compelling reasons why Mr Cellino should not be disqualified from holding office or acting as the club’s director; and
- If not, whether Mr Cellino’s application to reduce the length of his disqualification should succeed.
1. Had the matter already been decided (doctrine of “res judicata”)?
The Football League submitted that it was not open for Mr Cellino to argue that the Italian Court’s decision was not a conviction under the Regulations because the Committee had already decided in April 2014 that it was. This decision was, therefore, binding on the parties in accordance with the doctrine of res judicata.
Lord Macdonald, on behalf of Mr Cellino, claimed it would be wrong to prevent Mr Cellino to challenge the decision on this issue as it was an appeal against a fresh decision and he was not expected to challenge the previous decision by the Committee as he won that appeal on another ground. Mr Cellino also argued that the present proceedings were not arbitration proceedings but internal disciplinary proceedings so the doctrine of res judicata should not apply and “to do so would be unfair and inconsistent with the right to a fresh appeal.”12
The Committee found no basis to reopen the conviction issue. Caselaw confirmed that the doctrine also applies to disciplinary proceedings and whilst the doctrine is sometimes not applied when there are a change of circumstances, there were no material changes in this case to “justify reopening the conviction issue.”13 The Committee, therefore, decided that the conviction issue could not be reopened but nevertheless went on to consider the issue again in case they were wrong on this point.14
According to Mr Cellino, the previous Committee was wrong to conclude in April 2014 that the Italian Court’s decision was a conviction under the Regulations.
As Mr Cellino appealed the decision, he previously argued that the Italian Court’s decision was not a conviction because in accordance with Article 27 of the Italian constitution, “a person found guilty by a first instance court is not considered to have been convicted”15 until disposal of that appeal. The previous Committee rejected this argument and found that the word conviction should be understood in the English law sense16 however Mr Cellino invited the new Committee to reconsider. In any event, Mr Cellino claimed that a conviction in England normally leads to “immediate certain punishment”17 however, under Italian Law, Mr Cellino’s fine would not be payable until his appeal was determined. Mr Cellino also highlighted how the Italian Football Association was forced to amend their rules, which provided for precautionary suspension of club officials who were subject to non-final judgments because in Italy “a Defendant shall be considered not guilty until a final sentence has passed.”18
In response, The Football League maintained that the legal dictionary definition of conviction does not include a requirement for immediate punishment and believed the apparent rule changes have little relevance because the Italian Football Association previously did have a provision in their rules for precautionary suspension as a result of a first instance finding of guilt. Even if this provision was unenforceable under Italian Law, this is not the case under English Law, by which the Regulations are governed.
The Committee saw no flaw in the previous Committee’s reasoning and did not find Mr Cellino’s point regarding a conviction requiring immediate punishment persuasive. They found this as another way of arguing that the word conviction should be interpreted in accordance with Italian Law, which was rejected by the previous Committee back in April 2014. As the Regulations were governed by English Law, the Committee focused on English legal culture and highlighted how a sentence is not part of the conviction but is a consequence of it. The Committee also found the evidence regarding the rule changes as inconclusive. Sport related sanctions were one of the consequences of a first instance finding of guilt and the extracts from the amended rules did not appear to cancel the previous imposed measures. The Committee, therefore, once again concluded that the Italian Court’s decision was a conviction within the meaning of the Regulations.
3. Dishonest Act
The Committee addressed this issue by looking at the Italian Judge’s written reasons. The key question that needed to be determined was whether the Judge’s comments about Mr Cellino’s mental intent formed a key part of her reasoning.
Mr Cellino claimed the Judge adopted a strict liability approach and so once she found that the tax exemption did not apply, he was guilty of the offence. There was, therefore, no need to explore the mental element and the Judge’s comments regarding Mr Cellino’s state of mind were only “moral condemnation, not legal reasoning”19so should be disregarded.
According to The Football League, the Judge’s comments “did not indicate a strict liability approach”20and it maintained that some form of intent was necessary in order to establish the offence. This was supported by the fact that lack of intent formed part of Mr Cellino’s defence and so the Judge had to explore the issue of intent and give detailed reasons when rejecting his defence. The Judge also referred to finding “all the elements constituting the offence”21 and so it cannot be true that the offence only required the physical act of the crime.
The Committee found that the prosecution needed to prove some form of intent in order to establish the offence, and it was clear that intent did form part of Mr Cellino’s defence as he believed in good faith that he was entitled to the tax exemption. The Judge’s comments regarding Mr Cellino’s state of mind was, therefore, “necessary to address the defence’s argument.”22
The Committee then had to decide whether the Judge’s factual findings and description of Mr Cellino’s mind was “conduct which would reasonably be considered to be dishonest.” The Judge described Mr Cellino’s conduct as “Macchiavellica Simulazione”23 which was translated to roughly mean that Mr Cellino adopted “a cunning plan to evade payment of the tax due”24 and this was “integral to her conclusion that he was guilty of the offence.”25 As a result of the Judge’s findings of fact and description of Mr Cellino’s state of mind, the Committee concluded that the offence was a conviction involving a dishonest act.
4. Compelling Reasons
Whilst the Committee found that Mr Cellino was convicted of an offence involving a dishonest act, Mr Cellino argued that there were compelling reasons why he should not be disqualified because (1) he is still presumed innocent under Italian Law, (2) his offence would not now lead to a disqualification or a precautionary suspension under the Italian Football Association’s amended rules and (3) his disqualification would have an adverse effect on the club as it would be necessary for him and his family members to divest themselves of their stakes in the club. Mr Cellino relied upon evidence from Mr Andrew Umbers, a current director of the club, who claimed that Mr Cellino’s disqualification could lead to severe adverse consequences for the club including “a significant risk of insolvency.”26
The Football League felt there was no good reason to treat a first instance conviction in Italy more favourably than in other countries where a conviction results in an immediate sentence and that Mr Cellino should not enjoy an advantage over those convicted in other countries. The Football League also played down the potential impact on the club by pointing out how Mr Cellino’s disqualification is only for 79 days. The Football League also took the view that Mr Umbers’ concerns were “exaggerated, speculative and unsupportive by any external evidence or, tellingly, by any evidence from Mr Cellino himself.” 27
The Committee were not persuaded to treat Mr Cellino’s conviction differently as the primary focus should be on the conduct of a person who has been convicted. Equally, the Committee were not persuaded that there would be an imminent demise of the club as there was no evidence to suggest that Mr Cellino will “walk away.”28 Accordingly, the Committee found no compelling reasons why Mr Cellino’s “conviction should not lead to disqualification.”29
5. Review Application
Finally, the Committee had to determine Mr Cellino’s application to reduce the length of his disqualification to nil.
The problem for Mr Cellino was that his arguments in support of his application covered the same issues that were addressed and rejected by the Committee in the Appeal and the disqualification period of 79 days was “short when measured against the conduct of which Mr Cellino was convicted.”30 Mr Cellino’s Review Application was, therefore, rejected.
Massimo Cellino is now disqualified from acting as a “Relevant Person” until 10 April 2015 in accordance with Appendix 3 Rule 2.1 of The Football League Regulations. This includes being prevented from acting as a Director or any other company officer and from exercising any “control over the affairs of the club.”31 Mr Cellino apparently has to take immediate steps to convince the Football League that he is no longer exerting influence on the club or acting as a relevant person.
Some believe the action taken by The Football League in this case has been unnecessary given the relatively short period of the disqualification and unfair given the money Mr Cellino has invested in the club in order to clear its debts. The Football League, however, have been keen to stress the importance of defending their ownership regulations in this case with no doubt an eye on future cases also:
"The Football League's sole objective throughout this process has been to ensure that our regulations, as democratically approved by our member clubs, are complied with. These regulations uphold principles relating to club ownership that are widely recognised to be in the interests of the game and have the support of the other football authorities, the Government and football supporters generally.”32
Leeds United confirmed in a statement that they were “continuing to take legal advice” 33 following the decision but it is unclear whether there will be a further challenge to the decision and Mr Cellino confirmed that he would “abide by the rules” and “come back” in April.34
This might not be the end of Mr Cellino’s issues with The Football League though as he and Leeds are facing a further misconduct charge for failing to supply the Italian Court judgment to The Football League when it first became available35 and, more significantly, Mr Cellino is subject to a second tax evasion trial for allegedly failing to pay import duty tax of around £75,000 on a second yacht called Lucky 23. This is likely to lead to a fresh disqualification for Mr Cellino if he is convicted.
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- Tags: Anti-Corruption | Criminal Law | England | Football Association Owners and Directors Test 2014-15 | Governance | Italy | Regulation | The Football League | The Football League Regulations
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