Full text of "Third Lanark Athletic Club : investigation under section 165 (b) of the Companies Act 1948" See other formats Third Lanark Athletic Club Limited Report Appointments and terms of reference 1. On the 15th day of June 1966, I, John Moncrieff Turner, was appointed an inspector to examine the affairs of the above company in the following terms’. m THE MATTER OF THE COMPANIES ACT 1948 AND IN THE MATTER OF THE THIRD LANARK ATHLETIC CLUB LIMITED "The Board of Trade in pursuance of the powers conferred on them by Section 165(b) of the Companies Act 1948, hereby appoint Mr. John Moncrieff Turner, OBE, CA, of 90 MitcheE Street, Glasgow Cl, to act as inspector to investigate the affairs of the above-named company and to report thereon in such manner as the Board may direct. " 2. On the 10th day of January 1967, I, the Honourable Henry Shanks Keith, QC, of 33 Heriot Row, Edinburgh 3, was similarly appointed an an additional inspector. History 3. The Third Lanark Athletic Club Limited (hereafter referred to as '*the Company”) is a public company formed in 1903 and having among its principal objects that of pro- moting the practice and play of football. By interlocutor of the Court of Session dated 14th April 1967, an order was made for the compulsory winding-up of the Company. 4. The share capital originally issued appears to have been subscribed mainly by •members of the Third Lanark Rifle Volunteers Athletic Club, Glasgow, and members held either two or five shares. Despite subsequent share issues, there are still a large number of members each with a small shareholding. Certain members, however, built up substantial shareholdings . 5. For some years dissatisfaction with the general management of the Company has been prevalent amongst shareholders and frequent changes have occurred in the board of directors following differences of opinion between certain major shareholders. In particular, at the annual general meeting in 1962, there was what has been termed a "takeover" when a number of directors who had held office for five years resigned, and a former director rejoined the board. 6. Both prior to the above meeting, and subsequent to it, there was a considerable effort by certain persons to acquire shares and also to obtain support at the meetings by means of proxy votes. 7. Every resolution put to a Company meeting since 1962 has been the subject of a poll vote which reversed the decision of the numerical majority of shareholders. These resolutions ranged over a variety of subjects, including acceptance of the accounts and the removal of the playing venue of the club from Glasgow to East Kilbride . Preliminary investigation 8. Our preliminary investigation revealed a considerable number of irregularities in the management of the Company's affairs. These irregularities fell into three main fields’. l. Control of the Company n. Capital and share transactions m. Cash transactions Our report deals with each of these fields. 1 Printed image digitised by the University of Southampton Library Digitisation Unit I. Control of the Company (a) Directors and secretaries (i) Geneval 9 During the period since 1962, the board of directors has on a number of occasions acted contrary to Article 66, when there were fewer than the five members required by ^ticle 59 of the Company’s Articles of Association. In particular between May and December 1965 and from January 1967 until the order for winding up of the Comcanv there were four members only, 10, No register of directors and secretaries has been maintained and we have not been able in all cases to verify the information given to us, which indicates that the foUowing persons have held office during the periods stated- DirectoYS W. McLean R.T. Martin G. Foster R. Spence J. Murray W.C. Hiddleston and from S, Meadow J, MclCllan S. Basso J, Scanlon J. White J, Ross R. Hough J, Agnew T. C. McPhee J,M. Lough J.F. Reilly from A. Foreman from from 28th June 1956 to 13th December 1962 28th June 1956 to 13th December 1962 6th November 1956 to 21st November 1963 5th March 1957 to 16th June 1963 5th March 1957 to 13th December 1962 21st December 1954 to 26th February 1957 13th December 1962 27th December 1962 to 21st November 1963 27th December 1962 to 21st November 1963 16th June 1963 to 21st November 1963 21st November 1963 to 4th June 1964 21st November 1963 to 9th January 1967 21st November 1963 21st November 1963 to 4th June 1964 10th January 1964 to 20th May 1965 2nd July 1964 to 20th May 1965 20th May 1965 to 13th October 1966 16th December 1965 2nd December 1966 S&cretaYies: W.C. Hiddleston J. Murray J.M. Lough and and W, Steele R. Evans J. Ross from 8th November 1955 to 20th March 1956 20th March 1956 to 13th December 1962 13th December 1962 to 26th September 1963 29th January 1964 to 9th April 1964 15th April 1965 to 13th October 1966 26th September 1963 to 29th January 1964 9th April 1964 to 15th April 1965 January 1967 11. Among the above changes is the appointment of Mr, W.C. Hiddleston to the Hiddleston had previously been a director from December 1954 until February 1957, when his resignation was requested by the other directors on the grounds that he had allegedly carried out a number of unauthorised cash trans- actions. -^rmg the ensuing years Mr. Hiddleston made several efforts to rejoin the board md by December 1962 appears to have collected sufficient proxy votes and other support to out-vote.the existing board. At an annual general meeting held on 12th December 1962, ti^ee of the five directors resigned and Mr. Hiddleston was appointed. Within a year the cl^ge-over was complete, the two directors who had retained office having also resigned. ^ 12. Immediately after the above meeting, Mr. J.M. Lough, Certified Accountant. secretary. Mr, Lough has acted as personal accountant for Mr. Hiddleston sin^ 1957, and appears to have worked closely with Mr. Hiddleston in most aspects of the Company's management and administration, 13. From the time of the annual general meeting in December 1962, there have been many infringements of the statutory provisions for the regulation of a limited company. fii) Qualification of directors 14, No register ol directors' shareholdings has been kept but irom the records it IS apparent l^t certam directors held olflce and frdth the exception ol Mr. Foreman) acted without holctog the qualilicatlon shares required by Article 64 of the Company's ^mpmfies Act 19??°^’ month period permitted by section 182 of the 2 Printed image digitised by the University of Southampton Library Digitisation Unit J. White J. Ross J. Agnew A. Foreman Appointed to hoard 21st November 1963 21st November 1963 10th January 1964 2nd December 1966 Acquired qualifying holding 2nd July 1964 2nd July 1964 2nd July 1964 none acquired (Hi) Minutes and meetings 15. hi 1959 the existing bound minute book was discontinued and since that time a plain loose-leaf book has been used. We found that there were missing from this book the minutes of at least three board meetings at which the directors discussed the share transactions referred to in paragraphs 41 and 52 . 16. From July 1964, until December 1965, the minutes show only changes in directors holding office, and the amount of the bank overdraft. 17. We have been advised by Mr. Reilly that at no meeting between 16th December 1965, when he joined the board, and the end of 1966, did he see, or as chairman sign, a minute for a previous meeting, and we have been imable to trace the existence of any such minutes. 18. Various former directors have stated to us that no proper or regular meetings were held since 1964, and this was confirmed by Mr. Evans, a former secretary of the Company. 19. In view of the other matters disclosed in our report, it is of significance that many share transfers were given effect by the issue of share certificates without there being any record of formal approval of the transactions by the directors. Similarly there is no record of the board having duly sanctioned the signing of any cheques during the period covered by our investigation, and in this connection it is to be noted that Article 73(12) of the Company's Articles of Association provides inter alia \ "in case any Director shall sign any cheque without the sanction of a meeting of Directors, such Directors so signing shall be personally liable for and shall refund the amount of such cheque to the Company". (b) Statutory records not kept 20. The following statutory records have not been adequately kept-. Register of directors and secretaries Register of directors' shareholdings Minute books 21. We have been unable to obtain any record of financial transactions subsequent to April 1966, except as detailed in paragraph 63. (c) Company meetings (i) General 22. Annual general meetings have been held and audited accoimts submitted to the shareholders as follows-. 59th AGM 60th AGM 61st AGM (?immediately Accounts for year to 30th April 1962 23rd December 1964* 30th April 1963 23rd December 1964* 30th April 1964 adjourned and reconvened on 29th January 1965) Date of meeting 12th December 1962 23. In terms of Article 99 of the Company's Articles of Association, the share- holders are entitled to receive copies of accounts at an annual general meeting to be held within three months of the end of the period of such accoimt, but no accounts sub- sequent to those for the year to 30th April 1964 have been circulated and no annual general meeting has been held since January 1965. 24. The only reason given to us by the (Urectors for delay in presentation of the 1963 accounts was the alleged failure of the auditors to complete their audit. However, the auditors approved the accounts for the year to 30th April 1963 on 9th December 1963 and over a year elapsed thereafter before the accoxmts were made available to the shareholders. We feel it to be significant that during the intervening period the directors had considerably increased their shareholdings, partly by transactions stated to be in terms of Article 32 of the Company's Articles, quoted later in this report. 25. We were advised by the auditors, Messrs. Alexander Sloan & Co., Chartered Accountants, that such delays as did occur each year in the preparation of audited accounts arose through their inability to obtain necessary information from the officers of the Company. This is confirmed by correspondence which we have seen both in the files of the Company and in those of the auditors. 26. By letter dated 8th May 1966, Mr. Reilly stated to the Board of Trade that the accovmts for the year to 30th April 1965 had been completed by the auditors, that they were being printed, and that steps were being taken to call the 62nd annual general meeting. This meeting has never been called. 3 Printed image digitised by the University of Southampton Library Digitisation Unit ^i) Notice to shareholders 27. Correspondence in the Company's files shows that certain shareholders did not receive notice of an extraordinary general meeting held on 1st April 1966. 28. One shareholder, Dr. William Brown, wrote to the secretary of the Company on 23rd February, and again on 1st March 1966, requesting "an extract of the up-to-date Register of Shareholders”. On 14th March 1966, following a complaint to the Board of Trade that the shareholder had received no acknowledgement, the Board of Trade asked the Company for an e3q>lanation. On 26th March, Mr. Reilly, then a director and the Company's law agent, wrote to the Board of Trade stating that the word 'extract' had caused confusion but that a letter had been written to the shareholder requesting clarif- ication. In fact, the request for clarification was not dispatched by Mr. Reilly until 28th March, three days before the appointed day for the meeting. It appears that there was no prior effort to give the desired informaiion, which finally reached Dr. Brown on the day of the meeting, too late for him to contact the shareholders or take any other action with the information he received. 29. At the 61st annual general meeting, the Company secretary, Mr. Evans, stated that he did not sign the accounts for the year to 30th April 1964, nor the notice calling the meeting, although both documents circulated to shareholders bore his name. We have ascertained by examination of the principal accounts that they were not signed by Mr. Evans. (Hi) Minutes 30. Since the minute of the meeting held on 12th December 1962 no official record has been made of the proceedings at the Company's meetings, although typewritten draft minutes have been compiled. fiv) Request for Board of Trade enquiry 31. The draft minute of the 60th annual general meeting held on 29th January 1965 records that certain members called for a Board of Trade enquiry, and that the Company's solicitor, Mr. P. McGettigan agreed that this would be done. No steps were however, taken and ^following an enquiry about the matter made by the Board of Trade ’ on 17th May 1965 and an account of the proceedings at the meeting sent to the Board by the Company's secretary on 20th May 1965) Mr. McGettigan on 18th June 1965 wrote to the Board of Trade stating that in his view the request was made "in rixa". He has explained to us that he did not think that any action was required. 32. At a subsequent extraordinary general meeting convened on 1st April 1966 to con^der a formal resolution for a Board of Trade investigation imder section 165 (a) of the Companies Act 1948, the chairman, Mr. Reilly, is recorded in the draft minute as stating that he had had fxill conversation with members of the Board of Trade and that they were satisfied that the affairs of the Company were in order. During examination on lis on 8th March 1967, Mr. Reilly was asked for his explanation of this and stated mat he had spoken on the telephone to a young lady at the Board of Trade and told her that as far as he was concerned there was nothing wrong with the club. He further stated to us that his sole purpose at the meeting was to try and pour oil on troubled waters. The resolution was carried on a show of hands by 69 votes to 5, but defeated on a poU by 12, 500 to 6, 053. The present investigation was initiated by the Board of Trade itself. II. Capital and Share Transactions (a) Share capital 33. By 1957 the share records were in a state of considerable confusion. Over the past ten years the total of the list of shareholders submitted with the Company's annual return to the Registrar of Companies has never agreed with the issued share capital. (b) Share registers 34. Apart from an incomplete number of entries in 1961 and 1962, the original register has not been written up since 1960. From 1961, the only record has been a book showing an alphabetical list of members amended by deletion, erasure and alter- ation. This book records the name, address and number of shares held but does not show the following: (i) Amount paid tq) (ii) Distinctive share numbers (iii) Date of entry as a member and in many cases, (Iv) The date of ceasing to be a member ^ -?A 'oca number of errors have occurred and a list taken from it shows a total of 20,250 shares althou^ the authorised and issued capital is recorded as 20, 000 shares only. An excess of 126 ordinary and 124 preference shares has arisen through various errors, including the incorrect appUcation of Article 32, referred to later in our report. 4 Printed image digitised by the University of Southampton Library Digitisation Unit (c) Share numbers . . . , . ^ t. 36. The Directors have not authorised the elimination of distinguishing share numbers, but in the majority of cases in the past four years these have been omitted from share certificates, counterfoils and transfers, as well as from the share registers. (d) Approval of transfers by directors 37. In a number of cases since 1962 the approval of share transfers to.s not been recorded in the minutes of the directors' meetings. However, amongst those which were approved were a considerable number of transfers which were not stamped. (e) Unstamped share transfers 38 At the start of our investigation it became obvious that a very large number oi share* transfers were missing from the Company files. It was subsequently disclosed that 167 transfers in favour of Mr. Hiddleston had recently been passed to the Stamp Duty Office for late stamping. These were in due course returned to us bearing duty stamps dated 21st September 1966, although the transfer dates were very much earlier and the transfers had been registered contrary to Section 17 of the Stamp Act ^891. The extent of this irregularity is shown by the number of shares involved-. 6, 376 out of a total of 6, 607 acquired by Mr. Hiddleston since January 1963, for which transfers have been seen by us. , . j v 39 The majority of the above shares were entered m the share records by Mr. Lough who has stated to us that he was aware that the transfers were unstamped. We were informed by Mr. Hiddleston that in some cases, the relative entries are in his own handwriting, and in other cases in that of his daughter, Miss M.A. Hiddleston. Both Mr. Lough and Mr. Hiddleston have also stated to us that they knew it was illegal to register unstamped transfers. ff) Other irregular share transfers 40 hi examining the transfers in favour of Mr. Hiddleston, we noted a number of cases in which the signature of the transferor appeared to us to warrant further mvesti- gation in particular in cases where the cancelled certificate was not available or where the signature seemed to differ from earlier signatures by the same person. 41. Two transfers dated 24th April 1964, purporting to represent the tr^sfer of 172 ordinary and 78 preference shares from a Mr. W. H. Robison to Mr. Hiddleston, had been considerably altered. The number of ordinary shares had originally been shown as 153 (which was the number actually owned by Mr. Robison) and on each transfer form Mr. Hiddleston's name and signature were each superscribed on 1^. Lough's which had apparently been erased after attestation. None of the alterations has been initialled. ^ j j. j ocii. 42. Two directors' minutes dealing with the above transactions and dated 2oth September and 3rd October 1963 were missing from the minute book but we have received copies from the chairman at that time, Mr. G. Foster. It appears that Mr. Robison had earlier applied for repayment of a loan to the Company, but that this had been refused and Mr. Robison had offered his shares for sale on condition that the loan was repaid. Mr. Lough financed by Mr. Hiddleston) had purchased the shares and loan without advising the directors, other than Mr. Hiddleston, of his actions and, as a result, at the meeting of 3rd October 1963 his resignation as secretary was requested In. due course, the transfers appear to have been altered to Mr. Hiddleston's dated 20th April 1964, and the loan was repaid to Mr. Lough by the Company, although other applications for repayment of similar loans had been refused, and although re- payment was not formally approved by the directors. (g) Article 32 transfers (i) General 43. Amongst others, the undemoted directors appointed on the dates shown, con- tinued in office without qualifying shares beyond the period of two months statutorily allowed. J. White 21st November 1963 J. Ross 21st November 1963 J. Agnew 10th January 1964 44. In an effort to obtain the reqxiisite shares, recourse was had to clauses in the Company's Articles of Association which read as follows : Article 32-, ’’When two years shall elapse after the death of any member without any person claiming to represent him in respect of any share, the board may at any time thereafter sell such shares, accounting for the net proceeds as after expressed. '' Article 32a; "In the event of a sale in terms of Article 32, the necessary transfer shall, with the sanction of the board, be signed by any two of the directors and the secretary, and when so signed and delivered shall be valid and effectual, and the Utle of the transferee following thereon shaU not be open to question in regard to the procedure or formalities observed m terms of these Articles. '' 5 Printed image digitised by the University of Southampton Library Digitisation Unit 45. As is shown in Appendix A a small number of persons, mainly directors, acquired at least 1, 610 shares between 2nd July 1964 and 31st March 1966, and the transfers were recorded as being in terms of Article 32. In some other cases, where the share transfer document is missing, the same procedure may have been involved. 46. At the annual general meeting held on 29th January 1965 the transfers in terms Article were questioned and Mr. Hiddleston, as cl^rman, stated that this issue had been made after taking legal advice. The Company's solicitor at that time, Mr. P . McGettigan, stated to us that his advice had been that the Article could be invoked but that the actual procedures involved were irregular and that the shares should have been offered to all members of the Company. 47. ^ In addition, Mr. A.G. McBain, CA, a partner in the firm of Messrs . A.G. McBain & Co. , Chartered Accoimtants, who acted as Company treasurers from December 1962 until March 1965, had circulated to the directors two notes dated 19th and 22nd January 1965, in which he criticised the action which the directors had taken in purported exercise of Article 32, and he had also sent to each director a letter dated 27th January 1965, stating that he felt unable to attend the meeting in view of this matter to which he had "taken such strong exception”. At the meeting, the directors were asked for the reason for the treasurer's absence. In the draft minute of the meeting Mr. Hiddleston is recorded as having repUed that Mr. McBain had been asked by himself and the auditors to attend, but that Mr. McBain seemed to be of the opinion that there was no necessity for him to be present. (ii) Letter from Board of Trade 48. 5th July 1965, a letter was sent to Mr. McGettigan by the Board of Trade information relating to Article 32 transfers was requested. On 7th September 1965, Mr. McGettigan replied stating that no shares had been transferred in terms of Article 32 during 1964 and that 1, 209 shares had been so transferred in January 1965 records show that this is incorrect - 1, 358 shares having been transferred in 1 Qna QTiH n^n.5 4*, 1QAR 49. Mr. McGettigan's letter stated that the idea of proceeding under Article 32 arose because certain supporters of the club were anxious to become directors. la the case of Mr. Hiddleston and Mr. Ross, however, the numbers involved exceeded the ^rector's qualification of 100 shares. Mr. Hiddleston owned 6, 847 shares prior to ^nd July 1964, and the shares so acquired by Mr. Ross total 400. We are satisfied that the mam purpose of the majority of the Article 32 transfers was to maintain and in- crease the voting power of Mr. Hiddleston and his associates. (Hi) Evidence of death 50. It was stated to us that the evidence availaWe was partly the personal knowledge of the directors and partly the return through the Post Office of certain circular letters pe envelopes which were given to us as having been so returned to the Cornpany are in the majority of cases, marked 'gone away' or 'not known' and do not satisfy us that the various holdings may have been correctly dealt with under Article 32. 51. It tas indeed been found that certain of the shareholders allegedly dead are stUl ^ve, and the envelopes mentioned above include a number where the name and address have been typed on erasure and where the notation "deceased" does not appear to have been written by the postal authorities. (Sv; Transfers to Mr. J.M. Lough: 153 shares produced for the Company a list of shareholders which showed totals falling short of the authorised and issued capital by 91 ordinary and 62 preference shares, to December 1964 at a directors' meeting, for which the minute PPrMmates were made out in his favour and their issue approved at a further meetmg on 21st January 1965. A year later in December 1965, Mr. Lough made out transfers purporting to be under Article 32. and to support the issue of the above ^“r ^!;ougJ:^ o' « but no money (h) Proceeds of sale under Article 32 (i) General 53. Article 33 reads as foUows •. "In the several cases mentioned in Articles 31 and 32 the Board shall be bound to account to those having right for toe prices of the shares so sold, after deducting therefrom the charges incurred and any fsic . ) debts owing by the former proprietor to the Company. " (ii) Share price , bi ponsidering the steps to be taken the directors took as the value of the shares a fi^re of 20s. each this being the value reported by the secretary to persons requiring a figure for estate duty valuation and also being the price paid by Mr. Hiddleston to 20 ^ number of shares. On this basis, the Erectors considered tbe proper price for them to pay, although at this time the major transfers involving mdependent persons were at prices of 22s. 6d. and 30s. ^ Printed image digitised by the University of Southampton Library Digitisation Unit (iii) Deposit receipt 55. Following an enquiry by the Board of Trade in July 1965, a letter was sent to the Board by Mr. McGettigan on the instructions of Mr. Hiddleston and Mr. Lough. In this letter, dated 7th September 1965, it was stated that the proceeds of sale of Article 32 shares were £1, 209, and that these proceeds had been lodged on deposit receipt. The shares were transferred during 1964, but our investigation has shown that the deposit in question was not made until 3rd September 1965 and that on 24th September the deposit was uplifted and the cash returned to the Company's bank account whence it was originally drawn. Mr. Hiddleston and Mr. Lough were signatories to both money transactions . (iv) Amounts not paid 56. As a result, none of the proceeds of sale of shares under Article 32 is held available to meet possible claims in terms of Article 33. The directors maintain that this failure to hold the money in trust was a technical transgression only. However, the consideration for shares transferred up to that time was £1, 358, not £1, 209. In addition, we found that only £600 had been paid to the Company by the purchasers and the remaining £609 transferred to deposit receipt was the Company's own money. There was thereby concealed the deficit representing the following amounts impaid at 7th September 1965‘. £ J. Ross 200 J. M. Lough 153 W.C. Hiddleston 256 609 57. Mr. Ross paid £200 to the Company in June 1966. Mr. Lough and Mr. Hiddleston, who originated the statement to the Board of Trade that the proceeds of sale were held on deposit receipt, have still not paid the above sums. 58. Following further transactions, the proceeds of sale now xmaccounted for are*. £ 10th August 1964 Mr. W.C. Hiddleston 49 22nd December 1964 Mr. W.C. Hiddleston 356 28th March 1966 Mr. W.C. Hiddleston 36 £ 441 31st December 1964 Mr. J.M. Lough 153 15th March 1966 Mr. J. Massie 115 709 111. Cash Transactions (a) General 59. In the earlier sections of this report, we have made reference to a number of inadequacies and inaccuracies in the statutory records of the Company. Very much the same pattern has emerged from our examination of the financial records . 60. Audited accoxmts covering periods up to 30th April 1964 have been submitted to the members of the Company. In addition, we have seen accounts for the year to 30th April 1965, which have been signed by the auditors, Messrs. Alexander Sloan & Co. , CA, and by the directors. Since starting our investigation, we have received certain records showing the cash transactions during the year to 30th April 1966. These have been proved to be unreliable and despite constant requests few of the records for the period since April 1966 have been produced by the directors. 61. During the period from December 1962 until their resignation in March 1965, the firm of Messrs. A. G. McBain & Co. , CA, were employed by the Company as treasurers. This firm was responsible for the compilation of wages, for control of cheque payments and for the maintenance of the cash records. However, in January 1965 they intimated their resignation because of their dissatisfaction with the system of financial control by the directors. Mr. A. G. McBain also e3q)ressed his concern about the transactions relating to shareholdings of deceased shareholders, referred to in the earlier section of this report. 62. Since the resignation of Messrs. A.G. McBain & Co., the wages records have been maintained by the firm of Messrs. Lough, Higgins & Stuart, accountants (of which firm Mr. Lough was, and is, a partner) but the other financial records have been neglected. (b) bicomplete records 63. Having obtained only the bank and wages records we have repeatedly asked each officer of the Company for other books of account covering the period from 30th April 1966, but none of these has been produced to us and it is apparent that no such books have been kept. 7 Printed image digitised by the University of Southampton Library Digitisation Unit Each officer of the Company has advised us that he considered that he had no personal responsibility for the maintenance of the Company records, and in the event the financial transactions appear mainly to have rested in the hands of Mr. Hiddleston and, to a lesser extent, Mr. Lough. (c) Blank cheques 64. This concentration of control within the hands of two officials went so far that a number of the directors have been in the habit of signing cheques without either the name of the payee, or the amount having been entered on the cheque at the time of signature . (d) Income of the Company Car park receipts 65. The records show that the car park at Cathkin was used on the occasion of im- portant games at Hampden Park. The gateman states that cash received from this source between August 1964 and April 1966 totalling £317 I3s. 6d. was handed by him to Mr. Hiddleston and we have seen a number of the relevant receipts signed by the latter. Mr. Hiddleston stated that he had a record of disbursements which had been made from this money but the record has not yet been produced to us, neither has this income of the Company been recorded in any Company books. (ii) Gate receipts from Cathkin Park 66. Gate money of £453 14s. Id. from a match at Cathkin Park on 20th February 1965, had not been lodged in the bank by 30th April 1966, and we have been imable to trace the whereabouts of this money. 67. Until April 1966, the gateman employed by the Company maintained a record of cash drawn at home games and this record confirms the accuracy of the amounts shown by the Company as having been received. 68. However, on a number of occasions the cash received from this source was apparently lodged in the Company's bank account many days after receipt. Further enquiry disclosed that the cash taken at the turnstiles had not all been lodged in the bank and that various cheques in the Company's favour had been substituted to reconcile the sums banked with the amoimts taken at the gate. 69. The majority, if not the whole, of these cheques represented money in any case due to the Company from other sources, and our enquiries disclosed that the income of the Company, which they represented, had not been brou^t into account in any books of the Company. 70. Looking at one example, we find that on 1st January 1966, Mr. J.M. Lough signed a receipt for the sum of £206 17s. 6d. in cash received at a home game against Queen's Park FC. Subsequently there were made three bank lodgements which totalled £206 17s. 6d. and which purported to represent the above cash*. £ s. d. 14th January 1966 117 2 6 14th January 1966 50 0 0 25th January 1966 39 is o 206 17 6 71. An examination of records belonging to the bank showed that only a net ¦« reached the bank, and it therefore appears that, to the extent of £97 9s. 3d., cash was abstracted from the gate receipts. 72 . The fact that cash had been abstracted was conceded by the substitution in the bank lodgement of four cheques totalling the same sum, £97 9s. 3d. At least the first three of these cheques represented sums to which the Company was entitled, but which were not recorded as being received by it. They were; Refund from British European Airways Donation from supporters’ club Gate money from Clydebank FC Unknown cheque 73 . Hiddleston stated to us that the abstracted cash must have been paid out to meet debts due by the Company. 74. The bank lodgement of £39 16s. which finally completed and apparently squared tins transaction comprised the cheque for £44 7s. 3d. from Clydebank PC, less cash of £4 12s. 3d, uplifted. This lodgement was made by Mr. Lough, who has been unable to offer us any explanation for it. 75. On 7th October 1965 the Company received a cheque in the sum of £1, 600 from Clyde FC representing the transfer fee for player M. Murray. This cheque formed part of a bank lodgement as follows*. 8 £ s. d. 3 2 0 35 0 0 44 7 3 15 0 0 97 9 3 Printed image digitised by the University of Southampton Library Digitisation Unit Cheque from Clyde FC Untraced cheque Untraced money order Less: Taken in cash £ s. d. 1,600 0 0 12 0 0 8 0 0 1,620 0 0 18 0 1,619 2 0 £ s. d. 1,300 0 0 76 In the Company records this was represented as the lodgement of the following' £. s. d. n _ . Transfer fee from Clyde FC (cheque) Receipts from home match against Alloa Athletic FC on 25th September 1965 (cash) 126 8 0 Receipts from home match against Albion Rovers FC on 11th October 1965 (cash) 192 14 0 319 2 Q_ 1,619 2 0 77. There was thus a shortage of £320 of actual cash lodged in the bank, being the total cash receipts from the above home matches and the 18s. uplifted. This -was con- cealed by showing the transfer fee received as £1,300 Instead of £1, 600 and by failing to record the receipt of the cheque for £12 and the money order for £8. We have not received a satisfactory explanation for this shortage. 78. These and other similar transactions are detailed in Appendix B. (Hi) Cate receipts from "away" matches _ 79. On 22nd January 1966 the club played a friendly match against Clydebank FC and in due course the Company received a cheque in the sum of £44 7s. 3d. , represent- ing its share of gate receipts. The receipt of this money was not recorded in toe Company’s books and the cheque was later deposited in the bank as part of a lodgement purporting to represent cash received from the match against Queen's Park FC referred to in paragraph 72 above. . ^ x x. me.) 80. Gate money of £50 received from Celtic FC following a game in October 1964 was not recorded as received and the relative cheque was lodged in the bank account of a separate development fund (see paragraph 91 et sub.) (iv) Transfer fees received 81. On a number of occasions the contracts of club players were cancelled and the consideration received was not correctly recorded in the Company's books. We were advised by Mr. Hiddleston that of these sums £1, 300 had been received by him person- ally and utilised for the payment of tradesmen who had carried out building work at Cathkin Park, but who were prepared only to accept cash and were not prepared to give 82. We were also advised by Mr. Hiddleston that he had paid £300 in cash to player M. Murray on his lea'ving the Company. The payment is not shown in the Company records and receipt of it is denied by Mr. Murray. 83. Details of these transfer fees are sho-wn in .^pendix C. (v) Advertising revenue . , 84. During the period from April 1964 to December 1965, the Company received revenue totalling £265 11s. 8d. from firms advertising on display panels at Cathkin Park. Of this sum, £32 10s. only has been recorded as received. Cheques to the value of £100 11s. 8d. were lodged in a development fund run by the directors of the Company and the balance of £132 10s. was lodged in the Company's bank account in lieu of cash abstracted from gate receipts, for reasons which have not been adequately ejq)lained to us. (vi) Season tickets 85. In November 1965 there was lodged in the Company's bank account the sum ol £267 stated to be the proceeds of sale of season tickets. The lodgement comprised five cheques of which one for £247 10s. was drawn on the Company's own bank accoimt and charged to e 3 q>enses. This cheque was stated by Mr. Hiddleston to have been sub- stituted for cash tgkpn by him to cover outlays he had made but we have not seen adequate vouchers to verify this statement. In addition, the season ticket register has not been made available to us and we are unable to confirm that the total proceeds of sale of season tickets were £267. 86 . The sum received for season tickets in the previous year was £796 . (vii) International tickets 87. Each season the Company receives a substantial allocation of tickets for mter- national and other matches and between May 1963 and April 1966 the Company paid the sum of £1,787 for the purchase of such tickets. Printed image digitised by the University of Southampton Library Digitisation Unit unable to obtain sight of any record showing the basis of disposal 01 the tickets but the proceeds of re-sale are shown in the books to be £785 No satisfactory explanation for the shortfall has been given to us. ('vtiij Donations fvom supporters' association tu' J^uary 1966, the supporters' association sent a cheque lor £35 as a donation 1^ S'* ^ompany. Receipt of this donation is not recorded and the cheque was deposited as part of a lodgement purporting to represent cash received from the match against Queen s Park FC referred to in paragraph 72 above. supporters' association, Mr. WllUam Liddell, has stated rSLV? ® handed to Mr . HeiUy between November 1966 and March 1967. uredit lor this is not given in the cash account produced to us by Messrs. J P Reillv “ to our satisfaction, w Jn V Vi, * ? stated that on a number of occasions contributions were handed to “ ,‘i?™ bonfirm the total. He has further stated that the money was S to to supplement the gate drawings then being used to pay players wages, any surplus being banked subsequently. (ixj Development funds n years before 1963, there was a Third Lanark Development ^‘•"¦“totored by Persons independent of the Company. This club received taL oX Comply”""”*" in turn paid considerable sums to or of ITZ sati4acHnnS‘i'’®e ^'“toutes of directors' meetings record the board's dls- mmf cl a '"totoe liandlmg of "Thlrdspool" and the directors formed another develop ment club run initially m opposition to "Thirdspool" and finally superseding it ° amounts may have been drawn between September 1963 and M^9M“o"*3rd July maff dutTthl . , ^ £ s. d. Advertising revenue 100 11 8 Gate receipts 61 10 0 Insurance claims 108 17 3 Programme sales 51 10 10 Sundry income 14 19 9 337 9 6 Spe'ffstorS’sfi'toT '“T tor 22nd September 1964 £80 to Old Eagle hn Limited (Counterfoil marked "1st Prize 19th September 19fi4- TKie. nk McCrudden, a director of Old Eacle im Limited j the development fund draw, but tliat the cheque was cash^H^h Who stated that cash was r;qulred for of a ^ ^ 12th July 1964 13th June 1964 £10 to J. Massie £50 to David Hynds, endorsed to Oft TTT , J.M. Lough “51 record oF the proceeds cf tte tow perUaitb^“r?o-f^-/S%~ Printed image digitised by the University of Southampton Library Digitisation Unit of £129 6s. 7d. drawn on the development club account was preferred by Mr. Hiddleston in part settlement of this decree, but was not met due to the prior arrestment of the funds at credit of the account which amounted to £129 6s. 7d. precisely. (e) Expenditure by the Company (i) Wags^ 101. Since April 1965 the payroll records have been maintained by Messrs. Lough, Higgins & Stuart and shortly after their talcing them over Mr. Lough and Mr. Hiddleston arranged that the latter should receive a salary at the rate of £20 per week. This remuneration has been regularly paid since 17th June 1965, although it has not been authorised by the members of the Company in general meeting as required by Article 60 of the Company's Articles of Association, nor by the other directors. 102. Again without the Board's knowledge or authority, the sum of £5 per week has been paid since 15th April 1965 to Mr. Ifiddleston's daughter, Miss M.A. Hiddleston, a schoolgirl. Miss Hiddleston has been said by Mr. Hiddleston to have acted as a part- time typist for the Company, but despite the regular salary we were informed that Mss Hiddleston had worked only during school holidays. 103. During the same period since April 1965, substantial sums have been entered in the wages sheets against unidentified and other casual employees: Year to 5th 9 months to 6th April 1966 January 1967 £ £ "Groundsman" 189 171 "Casual groimdsman” 7 70 "Cleaner" 200 200 "Trialist" 35 65 "Angus" 17 0 "Tradesman (Bricklayer)” 0 10 "Casual Labour (Builders)" 442 0 “89(r ^I6" 104. During our meetings with directors and officials of the Company we have been unable to obtain any satisfactory explanation or receipts for the above payments, which are additional to the wages paid to named employees. Further, the under-noted expendi- ture in the year to 30th April 1966 is unexplained and no receipts are available: Payments from petty cash for casual labour £ s. d. £. s. d. "Groundsman'' 12 0 0 "Ash spreading" 12 0 0 "Weeding’' 8 5 0 "Casual labour" 21 0 0 53 5 0 Other cash payments "Builder" 230 0 0 "Painter" 5 10 0 288 15 0 (ii) Transfer fee paid 105. In 1956 Mr. Hiddleston entered into a contract on behalf of the Company for the transfer of player J. Herbert from Doncaster Rovers FC, as a result of which ^e Company was required to, and did, pay the sum of £500 to Doncaster Rovers. 106. On 10th April 1957, the board of directors informed Mr. Hiddleston that he was regarded by them as personally responsible for this liability on the basis that he had acted "without consultation with, or authority of, the Board" and on 3rd May 1957 the Company received a cheque for £500 from Messrs. Lough, Higgins & Co. , Certified Accountants "in settlement of Mr. Hiddleston's implied liability”. 107. Following Mr. Hiddleston's return to the board in 1962, the minute of a meeting held on 21st March 1963 shows that the board received a letter from Messrs. McGettigan & Co. , requesting "that a sum of £500 paid by Mr. Hiddleston personally to Doncaster Rovers in 1957 for player R. Herbert be now acknowledged although repayment was not being requested for this amount". The minutes further report the chairman, Mr. G. Foster, as stating "that as Club Lawyers, Messrs. McGettigan & Co. , had advised him on the telephone that the contents of the letter were in order and should be carried out". 108. The conclusion of this matter was that a sum of £1, 000 representing inter alia the repayment of this £500, was paid to Mr. Hiddleston through Messrs. McGettigan & Co. in November 1964. ^ii) Cash expenditure 109. Until 2nd April 1965, the petty cash book was maintained by M. Evans. From that date until 30th April 1966, when they cease, all entries have been made by Mr. Hiddleston. 11 Printed image digitised by the University of Southampton Library Digitisation Unit 110. We have seen vouchers covering e35)endlture in the year to 30th April 1965, although a considerable proportion of these comprise only slips signed by Mr. Hiddleston specifying outlays made by him, and are not supported by receipts . hi addition, however’ a number of the receipts which are available show distinct signs of alteration to the ’ dates and the amounts. In other cases, at least the receipt appears not to have been written by the person to whom payment is alleged to have been made . 111 . We have seen no vouchers to support petty cash expenditure of £ 1 , 328 13s. lid. m the year to 30th April 1966, and without doing so, we are unable to determine whether the petty cash book correctly records the outlays made on behalf of the Company. In particular, we are not satisfied that certain duplicated payments for substantial sums are in order. 112 . During the year to 30th April 1966 further sums of cash drawn from the bank with the wages cheques were recorded as ejqjenditure on ground upkeep. Among these were imvouched pajrments of £235 10s. to casual workers referred to in paragraph 104 and other items totalling £246 8s. 2d. , for which we have seen no explanation and no (iv) Sundry Outlays Whin chips 113 . In October 1965 the Company purchased and paid for a supply of red whin chips from Messrs. Scott & Rae Limited, 265 Pollokshaws Road, Glasgow. One of the invoices (Appendix p) representing a consignment priced at £6 15s. bears a notation "collected by contractors lorry" which has been written on erasure. Messrs. Scott & Rae advised us tot the notation had originaUy read 'D. D. , 108 Fernleigh Road, "and that the chips had been delivered to that address, which is the home of Mr. Hiddleston. ^<^<^eston stated that the notation was altered to conceal the fact that the chips had been delivered to him, but that the chips had been ^ exchange for cement, which he purchased for the Company. There is no record of the supply of this cement. Carpet fitting Febn^y 1965 a cheque in the sum ol £52 lOs. was drawn on the Company s account m favour of "Eric Albert or Bearer" and cashed by Mr. Hiddleston ^ , a ^ payment to Mr . Albert and is suppoid by a voucher ' m the form of a purported invoice from Mr. Albert on which the date and the amount flie “S’” y°helier also bears (in Mr. Hiddleston's handwriting) the notatim Brardroom New Club Premises Paid by Cheque 24.2.66". (Appendix I donlM' rw interviewed by us he stated that he had not at^y time done work for Third Lanark to the value of £52 10s. ; that he had done no work for the Company m February 1965; and that he had not received £52 10s. When e^mtoed by us Mr. Hiddleston was unable to explain this transaction to our satisfaction. ’ Mew carpets records show the acquisition on 3rd May 1965 of two identical carets and the eventual payment of both suppliers’ accounts. One invoice and receipt price b^tavTssiS^d^'Ld^ Manufacturers"^ purchasf pmce Demg £38 19s. 8d. , and the other m the name of Messrs. Shulman & Sons Llmltpd b?4"Sr3s.%d“- the purchase pr“f'‘’ ta j Messrs. Shulman have informed us that they did not supply the carpet that S “erre^tm^^ receipted invoice and that they did not at any time ^eceiv^ the Painting and decorating Company records show the following payments to Mr. John Baird, Painter and Decorator, formerly of 5 St. Mungo Street, Glasgow C4, and now of 14 Armadale SSd ”5' vouchers in the form of receipted invoices from Mr. (a) 21st August 1965 7 12 e" Appendix G fa) September 1965 14 18 5 AppenS G fc 120 1 . 49 0 0 Appendix G (c) r personaUy wrote out aU statements and receipts but timt on the voucher relating to (a) neither the form of receipt nor the amomt (which had been written on erasure) was in his handwriting felthoSgh the body fec^pSS “rmT ’ to (S) and (c) had not ieen prepared or to tofand^ci ifad torther stated that the work specified on the vouchers relating £49 ^ been done by him, and that of the amounts shown on the receipts £49 only had hew received. This, however, was in settlement of an account for the glintmg and wall-papering of Mr. Hiddleston's home and not for any work at Cathldn Park. As regards voucher (a), Mr. Baird said he had done soma“!^wrltSg 12 Printed image digitised by the University of Southampton Library Digitisation Unit park to the value of not more than £1, but that he had not been paid for it. Mr . Baird informed us that Mr. Hiddleston had asked Mm for some blank invoice forms on the grounds that he admired the layout, and that Mr . Baird had given Mm some. Jxuui-ug f 122. On 25th February 1965, a cheque on the Company’s account made payable to "A.I.D. Electrics or Bearer" in the sum of £60 11s. was cashed by Mr. Hiddleston. In the books tMs is recorded as being a payment to Messrs. AID Electrics (Glasgow) Limited for the purchase of a radiogram and wall-light brackets. The supporting voucher is an order form of Messrs. AID Electrics (Glasgow) Limited and bears a receipt "paid by cheque, 25th February, 1965, A.I.D. Electrics." (AppendixH). When examined by us, Mr. Hiddleston stated that he had received the sum of £60 11s. , but that tMs was to reimburse Mm for having previously paid the above account on oenau oi me i.^ompeuiy . \ x • -i. j 123. Mr. Andrew Docherty, a director of Messrs. AID Electrics (Glasgow) Limited, 54 Howard Street, Glasgow Cl, has stated to us that Ms company does not deal in radio- grams or Hght brackets, did not sell to the Company any of the items shown on the purported receipt, did not prepare the receipt or voucher and did not receive either the sum of £60 11s. or three other sums shown in the Company’s records as paid to them in cash, namely. £ s. d. (a) 21st March 1965 18 3 0 Appendix I (b) 25th October 1965 46 16 0 (c) 24th December 1965 46 16 0 124. We have seen a voucher only for (a) and Mr. Docherty stated that neither the voucher nor the receipt tliereon had been prepared or issued by Ms Company. He further stated that they had never supplied floodlight bulbs wMch were referred to in the petty cash book entry relating to (b) above . 125 The records show that the eiqienditure on liquor exceeded £300 m each ol the two years prior to 30th April 1965. TMs greatly exceeds the amount stated by the directors to have been consumed and we have been unable to verify that aH of the expend- iture recorded was made on behalf of the Company. . . . i a i 126. A number of the payments wMch are included in the records and wMch total £173 3s. 4d. are supported by vouchers in the form of receipts from the "Old Eagle Inn". These documents were shown to Mr. P.R. McCrudden, a director of Old EagM Inn Limited, and he stated that four, relating to a total of £53 4s. , had not been written or receipted by any representative of Ms company and that Old Eagle Inn Limited had not been paid the amounts shown. (Appendix J). 127. Mr. McCrudden also drew attention to certain vouchers bearing revenue stamps on which were superscribed the phrases "Paid by Cash. . . R. McCrudden" and ’’R^eived payment, with thanks, R. McC". These, Mr. McCrudden stated, were not authentic and had not been written by him or by any r^jresentative of Ms company. 128 The Company records show a payment of £45 17s. lOd. on 28th April 1965 to Messrs. Falks Limited, 254 Clyde Street, Glasgow Cl. TMs purported payment is supported by three invoices summarised on one bearing a form of receipt, part of wMch isillegible, viz. 28/4/65 FalksLtd.. ." (AppendixK). 129. Mr. E.J. McGeachy, an accountant employed by Falks, has stated to us that Ms company had not prepared the receipt and did not receive the sxun of £45 17s. lOd. , or three other sums shown in the TMrd Lanark records as paid to them in cash, namely. (a) 26th November 1965 (b) 4th January 1966 (c) 4th February 1966 £ s. d. Board room lights 42 9 9 Bulbs and electric fans 18 16 0 Club room lights 42 9 9 Summary and Conclusions . 130. Our investigation has disclosed that over recent years there has been an accelerating deterioration in the management of the Company’s business and the general conduct of its affairs, wMch may fairly be dated from the return of Mr . Hiddleston to the board of directors in December 1962, , , ^ a 131. Matters reached such a state that from April 1965, no proper books of account were being kept from day to day, TMs had the result that our investigation was ex- tremely difficult, and involved the esqjenditure of much time and effort in tracmg individual transactions. In many instances involving cheques, it was necessary to ascertain the bank on wMch the cheque was drawn and then to request from that bank the authority of the drawer for disclosure of Ms identity . 132 It seems clear that Mr. Hiddleston, for reasons wMch are obscure, made up Ms mind to secure practical control of the Company. In tMs he eventually succeeded, 13 Printed image digitised by the University of Southampton Library Digitisation Unit and thereafter the other directors of the Company consisted entirely of persons accept- able to him, who were not likely to and did not oppose him. In the end of the day, Mr. Hiddleston, with the acquiescence of the other directors, took the conduct of the Company's affairs and the management of its finances entirely into his own hands (with some assistance from Mr. Lough), lyh*. Hiddleston's determination was not matched by his ability or commercial probity. There followed an entirely justifiable lack of confidence in the Company's management on the part of the other shareholders and of persons dealing with the Company. Eventually the Company's affairs fell into a gross state of confusion and mismanagement. 133. While the primary responsibility for the decline and eventual collapse of the Company rests squarely on Mr. Hiddleston, the other directors during the material period must bear responsibility for failure even to attempt to exercise the functions of a board of directors. They exercised no control over Mr. Ifiddleston and no oversight over the Company's finances. As we have mentioned in paragraph 64, it became the regular practice for directors to sign blank cheques. We can find no excuse for the failure of other directors to observe and take action about the mismanagement of the Company's affairs by Mr. Hiddleston. In this respect we find it particularly difficult to understand the conduct of Mr. Reilly, a solicitor and chairman of the Company, who appears to have shut his eyes to the true state of affairs to the length of actively assist- ing Mr. Hiddleston to fight off the justified complaints of shareholders and their demands for a Board of Trade investigation. We regard his statement to the 60th annual general meeting in this connection paragraph 32) as unwarranted and calculated to mislead the shareholders. 134. The general picture is that the Company came to be run by Mr. Hiddleston, with the acqiiiescence of the other directors, as an inefficient and unscrupulous one-man business, without regard to the provisions of the Companies Act, the Articles of Associ- ation of the Company, or the interests of the shareholders. This is demonstrated by the failure to maintain statutory records (paragraph 20); to comply with the regulations regarding acts and appointment of directors (paragraphs 14 to 19 inclusive); to hold ^ual general meetings and present accounts (paragraphs 22 to 26 inclusive); the failure latterly to maintain proper books of account (paragraphs 62 and 63); and the manner in wWch the fin^cial transactions of the Company have been conducted fearagraphs 65 to 129 mclusive). 135. The share records of the Company were not in a satisfactory state in December 1962 (paragraphs 33 to 35 inclusive). The subsequent failure to maintain a proper register and the abandonment of distinctive share numbers 4>aragraphs 34 to 36 inclusive) have created a situation in which we doubt if it will ever be possible to ascertain with complete accuracy the present position with regard to the ownership of all the Company's shares. 136. The board of directors has shown considerable laxity in the approval of share transfers paragraph 37). Mr. Hiddleston and Mr. Lough have e 3 q)osed themselves to penalties by registering unstamped transfers paragraphs 38 and 39). transactions relating to the shares owned by Mr. Robison paragraphs 41 and 42) illustrates the devious and irregular methods pursued by Mr. Hiddleston (with the assistance, in this instance, of Mr. Lough) to increase his preponderance in the Company. 138. Mr. Ross claims credit for putting Article 32 into operation in order that directors might acquire for qualification purposes the shares of deceased members of the Company. There can be no doubt, however, that Mr. Hiddleston saw in this an admirable method of increasing his own preponderance in the Company, and he eventually acquired in this way 541 shares (Appendix A) for only 100 of which he has so far paid (Appendix A). In addition, the proceeds of the other sales mentioned in paragraph 58 have not been received by the Company, and the directors have thus failed in their duty to see that all shares transferred under Article 32 were duly paid for. In our view Article 32 has been applied in an unscrupulous manner with a view to increasing the shareholdings of Mr. Hiddleston and certain of his associates, and without proper or sufficient steps being taken by the board of directors to ascertain that all the members whose shares were purported to be acquired were in fact dead paragraphs 50 and 51). We are not satisfied that the board acted fairly in fixing the price of the shares trans- ferred under Article 32 at £1 each paragraph 54). The issue of 153 shares in favour of Mr. Lough paragraph 52) was plainly irregularly effected. 139. Such money as was received by the Company in consideration for shares trans- ferred under Article 32 was slumped together with the Company’s own money paragraph 56). We consider that it was the duty of the board of directors, owed to the representa- tives of such deceased members of the Company whose shares were validly transferred under Article 32, to see to it that the share proceeds were held in trust on separate account. This has not been done. We regard as highly discreditable the action of Mr. Hiddleston and Mr . Lough, after this matter had been questioned by the Board of Trade m arranging that a sum of money was placed temporarUy on deposit receipt with a view to a reassuring answer being given to the Board paragraph 55). Mr. Hiddleston's 14 Printed image digitised by the University of Southampton Library Digitisation Unit general handling of this matter, following the questions raised by shareholders at the annual general meeting on 29th January 1965 paragraph 46) was, in our view, repre- hensible. Clearly the shareholders were not given information to which they were entitled, and indeed information was actively concealed from them. The other directors at the time must also bear some responsibility for this, having regard to the communi- cations which they all received from Mr. A.G. McBain paragraph 47). 140. The directors' failure to see that proper books of account were maintained after April L965, or to exercise control over the Company's financial transactions, constitutes a serious dereliction of duty. In the result, we have no doubt that funds belonging to the Company have been misapplied. The directors' complete failure to produce any record of the Company's financial transactions after 30th April 1966 (with the exception of the items mentioned in paragraph 63, and an account made by Mr. Reilly of certain cash transactions carried out by him personally) has, however, made it impossible for us to assess the full extent of any current financial shortage. 141. The transactions of the development club formed by the directors in August 1963 (paragraph 92) have been treated by us as forming part of the Company's affairs, because the evidence available to us indicates that income due to the Company has been lodged in the club's bank account (paragraph 96), We have seen no books or records adequate to satisfy us that the monies from time to time in the hands of this club have been properly dealt with or accounted for (paragraphs 95 to 99 inclusive). 142. An examination of the records up to 30th April 1966 has disclosed three forms of transaction whereby funds appear to have been mishandled: (i) Sums due to the Company not received, or if received, not brought into account. (ii) Recorded outlays where we have seen insiifficient evidence to satisfy ourselves that the expenditure has been properly made. (iii) Recorded outlays where the supporting evidence appears not to be valid. After excluding items incorrectly classified only, and items which we have been unable to quantify, the amounts involved are*. Paragraph Amount Missing proceeds of £ s. d. Article 32 transfers 58 709 0 0 Car park receipts 65 306 3 6 Gate receipts from: Cathkin Park, 20th February 1965 66 453 14 1 Other matches Appendix B 808 14 2 Transfer fees Appendix C 1,200 0 0 Season tickets - unknown amount - - - International tickets 88 1,002 0 0 Development fund drawings 95 2,050 0 0 6,529 11 9 Casual wages 103 1,406 0 0 Petty cash expenditure - Year to 30th April 1966 111 1,328 13 11 Other casual employees 112 235 10 0 Une:q)lained items 112 246 8 2 3,216 12 1 Whin chips 113 6 15 0 Carpet fitting 115 52 10 0 Carpets 117 62 13 3 Painting and decorating 119 71 10 11 Radiogram, etc. 122 78 14 0 Refreshments 125 53 4 0 Other electrical equipment 128 45 17 10 371 5 0 10,117 8 10 143. hi addition, we are not satisfied that the under -noted ejqjenditure which has been incurred represents a correct charge against the Company. 15 Printed image digitised by the University of Southampton Library Digitisation Unit Transfer fee - repaid to Mr. Hiddleston Salary to Mr. Hiddleston up to January 1967 Salary to Rfiss M.A. Hiddleston up to 6th January 1967 Paragraph 105 Amomt £ s. d. 500 0 0 101 1,640 0 0 102 472 0 0 2.612 0 0 144, hi relation to the transactions described in paragraphs 65 to 85 inclusive (including Appendices B & C), 89, and 113 to 129 inclusive, we consider that the cir- cumstances merit police enquiry. In our opinion there are strong grounds for suspicion that in some, at least, of these instances money belonging to the Company has been dishonestly misappropriated by Mr. Hiddleston or misapplied for his benefit. In a large number of the transactions in question it is apparent that Mr. Hiddleston personally received money belonging to.the Company, or the benefit of goods or services paid for by the Company, hi regard to cash received at the gate, the pattern is that on the occasions mentioned in Appendix B, some or all of the cash has been abstracted and cheques representing other income of the Company have been lodged in the bank as representing the deficit. There has been a concomitant concealment of the other income concerned. These transactions occurred when Mr. Hiddleston was for all practical purposes in sole control of the Company’s finances, hideed Mr. Hiddleston has admitted the practice of abstracting cash from the gate money. He has maintained that the cash abstracted by him was utilised for payment of accounts due by the Company, but has not produced any receipts or books of account relating to his intromissions. The concealment of the income of the Company represented by the cheques paid into the bank in the guise of gate money strongly suggests to us a dishonesty of purpose. In the event, the true situation was only discovered with considerable trouble and difficulty. In certain of the instances relating to goods or services there is evidence that certain relative vouchers have been fabricated or altered, and it is difficult to resist the infer- ence that this was done by, or on the instructions of, Mr. Hiddleston for a dishonest purpose. Likewise Mr. Hiddleston has not been able to satisfy us that the transfer fees admittedly received by him, but not accounted for, paragraphs 81 to 83 inclusive and Appendix C), have been honestly dealt with by him. In this connection, we regard as significant the absence of any contemporary record of how the sums in question were disbursed. 145. We have found considerable difficulty in assessing the role played by Mr. Lough in connection with Mr. Hiddleston’s questionable transactions. It is to be noted that in one instance (paragraph 74), Mr. Lough personally made a bank lodgement, purporting to represent gate money, consisting not in cash but in a cheque representing other income of the Company. Mr. Lough has been imable to satisfy us as to how he came to be party to this transaction. We find it difficult to accept that he, a professional account- ant, was unaware of the composition of a sum which he lodged in the bank, or that he did not appreciate that the transaction was open to question. Although we’have no evidence that he received any personal benefit from any of the transactions in question, and acquit him of any dishonest intention, we consider that he deliberately ignored or closed his eyes to the irregular nature of Mr. Hiddleston’s intromissions and that his contoued association with Mr, Hiddleston in these intromissions was contrary to proper professional standards, and not in accordance with his duty as a director and as secretary of the Company at the material time. (Signed) J.M, TURNER H.S. KEITH 16th November 1967 16 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX A 5 ’^ w <3 o o ; o o o i* o o o O O O O O o o o o o o o I? m ca o CO CO to t- E— C“ t“ evj ca M M “^g 0} le s ^ ca ea ca H-J3 >M O « S' g § W -o ^3 T3 bC 3 3 -2 ^ O O 43 1 s . a . S n n a iS s a tH - s-^ < o’ S K O O" ^ ^ TJ . TS "§ S o Di o K h 3 “ 3® *~3 >-s •-5 & * 17 Printed image digitised by the University of Southampton Library Digitisation Unit oi appendix b o h CD Oh 1 U ^ S| O g 4) c5 S ¦o y "O t-i ii >> O c B sl & “ & -a &> *H •fa o ¦? g § t &i = a.h.2 u s o CO col o o o o o o o o o o o oa CO o o o O CO N 05 o o 03 CO S 42 00 12 8 o 03 « OJ CO o o t- CO ' CO CO T3 CO CD o -2 o o o o 3 tH 00 ecl & CO o o 03 iH tH a 03 w N CO o o 97 6 7 . W CO o CO - ¦ 14 13 15 1 o eo CO 03 esi •S -2 >>>> S S ^ Qj OJ CO SS 2 o y CO 2 3 Q y 03 g g Q Q ^ I 3 S 1 I H CQ ^ fS < H I I M ffl I s I 5 § a I s s s I y y 03 j Printed image digitised by the University of Southampton Library Digitisation Unit Clydebank FC - proceeds of match at Clydebank Proceeds of sale of international tickets do. do. 73 "V O CO O O O CO CO CO 05 CM O 19 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX C Transfer fee deficits 1965 Player Transferred Fee Received £ Transfer Fee recorded in hoohs £ Deficit £ - May J. McKay 750 750 Received by Mr . Hiddleston and stated by him to have been utilised for payment of tradesmen 8 August J. Geddes 300 300 Recorded as loan from Mr . Hiddleston and repaid to him on 13th August 1965* - October 1966 M, Murray 1,600 1,300 300 Stated by Mr. Hiddleston to have been paid to Mr. Murray. - February R. Black 100 " 100 Recorded as payment by Mr . Hiddleston for his purchase of shares under Article 32* - August M. Jackson 150 150 Received by Mr . Hiddleston and stated by him to have been utilised for payment of tradesmen . ®""^s to compensate for earner payments to tradesmen made by him personally on behalf of the club. 20 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX D Copy of invoice included with others in the Company records in support of a payment of £19 15s. 6d. to Messrs. Scott & Rae Limited on 5th March 1966. 21 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX E •liphon* : CtOftfoM 3773 ^0l 6 ARDENCRAIC ROAD Glasgow, M: £'^\ , /h)l. , ERMC^ ALBERT Your Rof. CARPET FlUEft TO THE TRADE Our Rof. /€> O Copy of voucher No.506 included in the Company records in support of a purported payment of £52 10s. Od. to Mr. Eric Albert on 24th February 1965. I I Copy of cheque relating to the above transaction. 22 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX F T^phoM • CENtrtI 4IU-37 T«ta|rm: “Srmln*'’ Glufow No. SHULMAN & SONS LTD. WKolesole Monufoctufing Furriers ST. ENOCH HOUSE, 163 ARGYLE STREET Corpet Dept. \64 HOWARD ST. GLASGOW, C2 .W .Ihixd . ,Lanar3s. . A r.C.,Xtii. . -r- / £46 7 0. V SAT 27' X 3/4 )SuIJBr Triciatit. } pA £ 2 14 0. 2^ P. 4 -i- I’/Ta7. JLL 9 _2 . aIIOO^L^ rap — — ¦ Departmente PUBS — PUR COATS — M.\NTLE8 — GOWNS — RUGS, Etc. Voucher taken from Company records where it was shown as supporting cash payment £62 13s. 3d. on 3rd May 1965. 23 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX G(a) APPENDIX G(b) Copy of vouchers taken from the Company records and purporting to represent payments to Mr. John Baird. 24 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX G(c) To JOHN Third Lanark r.C.Lt'’. Cathkin rark, ijlBiTOVI, 3.?. Copy of voucher taken from the Company records purporting to support a payment of £49 to John Baird on the 28th October 1965. Copy of cheque relating thereto. 25 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX H 'Rvons : DOUgU* 24S1 5 6 Q 1.6lh,^...Iiu£Labo.r, ..19.. {-.n A.I.D. ELECTRICS (Glasgow) LTD. AaiKTS rc» U.L MAX BS or slsctiucju. AmiANeis 211 HOPE STREET . . . GLASGOW, C.2. To Messrs. J. I't-''.* » .Cathkir .1 Cry: -jlu-L-o-. 4 only-." li- hi ;,r< ct. -'.i 0 anly-fiC j.. n-'r; Copy of voucher No. 508E included in the Company records in support of a purported payment of £60 11s. to Messrs. AID Electrics (Glasgow) Limited on 25th February 1965, and of the cheque relating to this payment. 26 Printed image digitised by the University of Southampton Library Digitisation Unit 925445 APPENDIX 1 knnch: 3i£ Sprinjburn Glwfow, N.1. Talspiiont: CiNtril A.I.D. ELECTRICS (Glasgow) LTD. Agents for all Makes of Washing Machines and Official Hoover Dealers APPOINTED HOOVER SERVICE CENTRE 20 «« FtEOISTERED OFFICE; 54 HOWARD STREET. ST. ENOCH SQUARE. GLASGOW, C.1 ;ird Lanark A.C.Ltd., 2Ist.March 1965. Cathkin Park, Crossbill , Glasgow. T .0 Goods, m I u . Copy of receipt taken from Company records and purporting to support cash payment £18 3s. 27 Printed image digitised by the University of Southampton Library Digitisation Unit ©lb Cagle 3nn 83 H»otoarb Street, ^lasgoto, C.l ^re. ^JizabEtl; ,^HiQln]bb(n Wine end Stiiril Dtaler Privite - CENTRAL 2391 ,, - LARGS 3353 jm 11 Copy of voucher, taken from the Company records, purporting to support a cash payment of £17 19s. 6d. to Old Eagle Inn Limited on 28th April 1963 but not accepted by Mr. McCrudden as being genuine. 28 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX K r FALKS 1S4-160 CLYDE STREET, GLASGOW, Cl INVOICE No. G2/39637 9TH JULY I96A. THE THIRD LANARK FOOTBALL CLUB, CATHKIN ROAD, GLASGOW. i, ,•«, -„ve VAN CuH:-T!r't O.No. PURCHASE TAX 09/6 EA. l/6i.EA. 32 17 IS - bi- 5 S - 9 3 6 33 15 6 K 5 12 10 LESS 2S% S 8 10 ^ 2 9^ £25 i S 5 10 1 5j^»UP f. r. fOe- /. 4. f. 1 f . f . fh'M. , 2 - li rnut. ! 3- 13 1.1 Copy of vouchers in the Company records supporting a cash payment of £45 17s. lOd. on 28th April 1965. Printed in England lor Her MRjeety'e SUUoner, Office b, Hobbs the Printers Ud. Southampton (1B82) Printed image digitised by the University of Southampton Library Digitisation Unit 143009 K4 10/88 BOARD OF TRADE Third Lanark Athletic Cluh Limited under Section 165 (b) of the Companies Act 1948 Report by Mr. John Moncrieff Turner, OBE, CA and The Hon . Henry Shanks Keith, QC (Inspectors appointed by the Board of Trade) LONDON her MAJESTY'S STATIONERY OFFICE 1968 Investigation Printed image digitised by the University of Southampton Library Digitisation Unit Mr. W. C. Hiddleston mentioned in the report died on the 16th November, 1967. The publication of this report was deferred pending the completion of criminal proceed- ings instituted on behalf of the Lord Advocate in March 1968 as a result of which Jack White, John Ross, James Francis Reilly and John McNicol Lou^ were each fined £100 for an offence under Section 331 of the Companies Act 1948, namely as officers of Third Lanark Athletic Club Limited being in default in that the Company failed to keep proper books of account throughout the period of two years immediately preceding the commence- ment of the winding-up of the Company; and were each admonished in respect of certain other contraventions of the Companies Act 1948. SEN 11 510100 4 ii Printed image digitised by the University of Southampton Library Digitisation Unit Contents page Appointments and terms of reference 1 History 1 Preliminary investigation 1 I Control of the Company A Directors and secretaries (i) General 2 (ii) Qualification of directors 2 (iii) Minutes and meetings 3 B Statutory records not kept 3 C Company meetings (i) General 3 (ii) Notice to shareholders 4 (iii) Minutes 4 (iv) Request for Board of Trade enquiry 4 n Capital and Share Transactions A Share capital 4 B Share registers 4 C Share numbers 5 D Approval of transfers by directors 5 E Unstamped share transfers 5 F Other irregular share transfers 5 G Article 32 transfers 5 (i) General 5 (ii) Letter from Board of Trade 6 (iii) Evidence of death 6 (iv) Transfers to Mr J M Lough'. 153 shares 6 H Proceeds of sale under Article 32 (i) General 6 (ii) Share price 6 (iii) Deposit receipt 7 (iv) Amounts not paid 7 m Cash Transactions A General . . 7 B Incomplete records 7 C Blank cheques 8 D Income of the company. (i) Car park receipts 8 (li) Gate receipts from C^thkin Park 8 (iii) Gate receipts from "away" matches 9 (iv) Transfer fees received 9 (v) Advertising revenue 9 (vi) Season tickets 9 (vii) hiternational tickets 9 (viii) Donations from supporters’ association 10 (ix) Development funds 10 E E:q)enditure by the company. (i) Wages 11 (ii) Transfer fee paid 11 (iii) Cash e^enditure 11 (iv) Sundry outlays 12 Summary and conclusions 13 iii Printed image digitised by the University of Southampton Library Digitisation Unit Appendices A Summary of share transactions recorded as being in terms of Article 32 17 B Gate receipts from Cathkin Park 18 C Transfer fee deficits 20 D Invoice of a pa 3 rment to Messrs. Scott & Rae Limited on 5th March 1966 21 E Voucher No. 506 and a cheque of a purported payment to Mr. Eric Albert on 24th February 1965 22 F Voucher supporting payment to Schulman & Sons Ltd. on 3rd May 1965 23 G Vouchers and cheques {ftirporting payment to Mr. John Baird .. 24 H Voucher No. 508E and cheque purporting payment to Messrs. AID Electrics (Glasgow) Limited on 25th February 1965 26 I Receipt purporting payment to AID Electrics (Glasgow) Ltd. on 21st March 1965 27 J Voucher purporting payment to Old Ea^e hm Limited on 28th April 1963 28 K Voucher supporting payment to Falks Ltd. on 28th April 1965 . . 29 iv Printed image digitised by the University of Southampton Library Digitisation Unit