David Conn: League unhappy over 'conflict of interest'

Respected consultancy firm faces legal action from irate clubs for representing troubled digital network

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The Football League has taken advice on mounting a legal challenge to the appointment of Deloitte & Touche as administrators of ITV Digital, Carlton and Granada's failed television venture which is seeking to renege on the £178m it owes the League.

In recent years Deloitte & Touche has become known as the predominant accountants and consultants in football, working here and abroad for dozens of clubs and governing bodies, including the Premier League, the Football Association and even the Football League itself.

David Burns, the League's chief executive, said yesterday that the League was "seriously contemplating" legal action: "We believe that Deloitte & Touche have a serious conflict in accepting the appointment as administrators, by virtue of their close and total involvement in all aspects of football."

In its legal challenge, the League might seek to argue that the information, much of it confidential, gathered by Deloitte & Touche in the course of its work in football puts it in a privileged position when considering how, as ITV Digital's administrators, to negotiate the League down.

But with the firm having also produced reports recently arguing for football's overall welfare – for the maintenance of the player transfer system and collective selling of TV rights – some are arguing there is a moral case for them to refuse to act as ITV Digital's administrators.

In Deloitte & Touche's most recent annual review of football club's accounts, in August last year, it bemoaned the continued financial losses of English football clubs and said: "Football League clubs must grasp the opportunity presented by their splendid new TV deal to repair their finances over the next few years."

On 27 February, the firm, which has an annual global turnover of $12.4bn (£8.6bn), was appointed as consultants by Carlton and Granada, the joint owners of ITV Digital, which shortly afterwards offered the League £50m over two years instead of the £178m contractually agreed. Then last week the firm was appointed administrators, and they are understood to have repeated the offer at a meeting with the League on Wednesday.

The League and its clubs have united in rejecting the offer and predicted financial meltdown if the TV commitment is not honoured. Splits within the League had been predicted, but, following a meeting of First Division clubs on Tuesday, the chairmen announced unanimous support for Burns and the League's chairman, Keith Harris.

Harris, while maintaining that the League is prepared to sue Carlton and Granada for the full amount owing, did offer to negotiate on the second year's money, as long as the first payment, of £89m, is met in full. The two giant TV companies have maintained they have no legal responsibility to meet their joint venture's debts, and sources at the companies have confirmed they have no intention of doing so.

John Dennis, Barnsley's chairman, said of Deloitte & Touche: "They are uniquely placed to realise the damage their clients are intending to do to football by not meeting their contractual obligations. You'd have thought they might have the morality and decency not to take up the appointment."

Whatever the merits of the proposed claim, the row cannot have gladdened the heart of Gerry Boon, head of Deloitte & Touche Sport, who has successfully cultivated a role as chief consultant to football over the last decade. A partner based in the Manchester office, Boon moved into football commercially in 1992, after the Premier League breakaway and the Premiership's first £305m deal with BSkyB.

I interviewed him in 1994, when he described himself as a "missionary" for football's new business age. He believed the TV money would transform the game from shambolic parochialism to a profitable industry, and that the flotations of clubs on the Stock Market would benefit the game. Boon began to produce the Annual Review of Football Finance 10 years ago. Essentially a collation and analysis of all 92 club's accounts, the core information is publicly available, but as the media does not habitually devote resources to work on this scale, Deloitte & Touche's reports have garnered massive publicity.

"Journalists are lazy," Boon told me. "If they can go to a source for information, they will do so rather than do their own research. We began the report as a marketing exercise, and with all the football clients we've picked up since then, I'd say it has paid for itself."

Deloitte & Touche Sport, Boon's department, has grown to become 12 strong and, according to the firm's website, works exclusively in sport, two thirds of it in the football "industry". Forty different football clients are listed, including Premier, Football and Scottish League clubs, the Premier League, FA and the Nationwide Conference.

It is difficult to know how much the firm has made out of the game, but consultants typically cost around £150 to £400 per hour. The firm is understood to have produced a report a few years ago on the future of Football in the Community.

In 2000, Deloitte & Touche was commissioned by the English football authorities to produce a report on the player transfer system, then under threat from the European Commission. The study argued that the system "ensures the survival of the smaller clubs. The football transfer system operates as the most effective wealth distribution system," it said.

Work has since been carried out for Uefa on the collective selling of TV rights. It argued, again, that they are vital for the redistribution of money around the European game. The European Commission is currently considering its response to the report.

Last year in the run-up to the row with the Professional Footballers' Association over the PFA's share of the football authorities' TV income, Deloitte & Touche was commissioned to audit the PFA's books. In 1997, Deloitte & Touche was asked to produce a major report for the Football League, which League sources said cost around £200,000.

There is no argument with the quality of Deloitte & Touche's work; the recommendations to the League were mostly implemented, including the formation of a dedicated commercial department, the appointment of a chief executive, Richard Scudamore, and an office move, in the event, to Preston.

Boon himself is approachable, and his annual reviews are useful documents regarded as sound common sense. This season one of his team, Paul Rawnsley, has been a central figure in the formation of the supporters trust to help save York City, who were threatened with extinction.

League staff are said to have a good working relationship with the firm but they are understood to be bitter about Deloitte & Touche's role in acting for ITV Digital, which could precipitate the worst financial crisis clubs have ever faced.

The League's argument is that Deloitte & Touche's involvement amounts to a conflict of interest given the number of clubs which the firm audits, its consultancy work, and the annual reviews, with which the League itself assists.

"We're a client of Deloitte & Touche's," Burns said. "It is unbelievable that they have accepted the appointment to act for Carlton and Granada and as administrators of ITV Digital."

Burns is adamant that, regardless of the precise legal documentation, ITV Digital, a wholly owned joint venture of the two companies, is effectively an internal subsidiary and cannot be separated. He said it was significant that Deloitte & Touche's appointment as consultants to ITV Digital in February was made by the parent companies, who also paid the firm.

Dennis, Barnsley's chairman, said: "I think Carlton and Granada have underestimated the League, our determination and, frankly, the damage they would do by reneging on the deal. I also think they underestimated the sense of decency the public has about companies meeting their obligations."

Nobody from Deloitte & Touche would discuss the firm's position yesterday, but it issued the following statement: "Deloitte & Touche are confident there are no conflicts of interest and would not be undertaking the work if there were."

davidconn@freeuk.com