Carson Yeung had previous conviction before Birmingham takeover

 Still allowed to take over club despite 'fit and proper' test 
• £2.8m of laundered money used to buy shares in 2007 
• Yeung serving six-year prison sentence for money-laundering 
• T he takeover that was a riddle wrapped in a mystery

 

 Carson Yeung was convicted of two other criminal offences in the past decade yet the Premier League still allowed him to take over Birmingham City in 2009. Photograph: Bloomberg/Bloomberg via Getty Images

Carson Yeung, now serving a six-year prison sentence in Hong Kong for money-laundering, was convicted of two other criminal offences in the past decade yet the Premier League still allowed him to take over Birmingham City in 2009 and remain chairman in 2010. Yeung's other convictions took place in 2004 and 2010 yet the Football League allowed Yeung to remain Birmingham's chairman until he stepped down last month.

Both leagues have "owners and directors" tests – previously the "fit and proper persons" test – which prohibit people from becoming directors of a football club, or owners of a substantial stake, if they have "unspent convictions for offences of dishonesty".

Delivering the verdict that convicted Yeung in Hong Kong last week, the presiding judge also found that £2.8m of laundered money was used to buy Birmingham City shares in 2007.

In 2004, Yeung pleaded guilty in a Hong Kong magistrates' court to 14 counts of failing to disclose shares he owned in a Stock Exchange-listed company, Cedar Base Electronic Group. Yeung was fined HK$43,000 (£3,300) and ordered to pay the investigation costs incurred by the Hong Kong Securities and Futures Commission, which prosecuted him. Breaches of the SFC's laws requiring people to disclose shareholdings of 10% or more are criminal offences in Hong Kong, prosecuted in the courts and punishable by a fine or possible prison sentence.

Three years later, Yeung spearheaded the £15m purchase of a 29.9% stake in Birmingham, just promoted to the Premier League, from the then major shareholders, David Sullivan and the brothers David and Ralph Gold. Yeung did not then become a director. Two years after that, in August 2009, Yeung led the full takeover by the Hong Kong-listed company of which he was the chairman and significant shareholder, Birmingham International Holdings (then called Grandtop), registered in the Cayman Islands tax haven.

Grandtop paid an £81.5m price for the club, more than three times the £24m value at which City had been trading during the preceding six-month period. Sullivan and David and Ralph Gold agreed to sell their combined 49% stake and shared £40m between them. Sullivan, Gold and their managing director at Birmingham City and now vice-chairman at West Ham, Karren Brady, all declined to comment on their sale of Birmingham City to Yeung but a source maintained that they acted properly at all times.

 Carson Yeung's parking place outside Birmingham City’s stadium. Photograph: Nigel French/PA

In July 2010, a year after the takeover, while Yeung was chairman of Birmingham City, he was convicted again of failing to disclose his ownership of shares in a Hong Kong-listed company. BIHL announced that Yeung had been fined HK$16,000 (£1,240) in an eastern magistrates' court. Yeung's company Great Luck Management was also fined for a similar offence.

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Yeung's takeover was financed with a HK$690m (now worth £53m) loan from Best China Ltd, a company owned by Pollyanna Chu. She was the controlling shareholder of a firm, Kingston Securities, which underwrote a subsequent sale of shares in Grandtop on the Hong Kong stock market which raised money to pay her loan back. Chu was at the time the chief executive of a casino, Golden Resorts, in Macau. It has not been suggested that she or Kingston Securities acted irregularly in financing the Birmingham takeover.

The Premier League had just three months earlier, in May 2009, announced the strengthening of its fit and proper persons test ; the league's chief executive, Richard Scudamore, said it would operate a more rigorous process to vet buyers of clubs and the new test barred people who had been convicted of a criminal offence involving dishonesty.

Birmingham City did in fact inform the Premier League of Yeung's 2004 conviction in Hong Kong but he was still allowed to take over and become the club's chairman. This was because the same offence, of failing to disclose a significant shareholding in a Stock Exchange-listed company, had been decriminalised in the UK by the Labour government in 2000. As it would not have been a crime here, the Premier League is understood to have taken the view it should not be considered a crime of dishonesty under its owners and directors test, and so Yeung could complete the takeover.

He famously promised £80m of investment for the club's then manager, Alex McLeish, and pledged that the Grandtop directors' "significant business experience and connections in Hong Kong and the People's Republic of China", would "significantly increase [the club's] global fan base, promote and enhance its brand and … provide … sustainable financing to help support the club in consistently competing at the highest levels in domestic and European football".

 Cameramen and photographers try to take pictures of Carson Yeung as he sits in a van outside a district court in Hong Kong. Photograph: Kin Cheung/AP

Douglas Yau, the Hong Kong district court judge who sentenced Yeung last week, found that in the period from 2001 to 2007, Yeung was laundering £55m that was the proceeds of crime, through multiple deposits of cheques and "folding cash" in five different bank accounts. Those paying money into Yeung's accounts, the court heard, included Cheung Chi-tai, a Macau casino boss suspected by the Hong Kong police of involvement with triad-organised crime.

Yau referred in his 84-page verdict to a newspaper report of a court case in March 2010, in which Cheung Chi-tai was identified as the leader of the Wo Hop To triad. Yeung told the court that he did not know Cheung Chi-tai was a suspected triad, only that Cheung was "a business associate".

The judge found that HK$36m (£2.8m) of the laundered money, including HK$18m (£1.4m) from Cheung Chi-tai, was transferred to Prince Evans, a London firm of solicitors, and used to buy the Birmingham City shares in 2007. The judge, who described Yeung as a habitual liar, did not believe his claim that the money was in fact used to buy a property in London.

Robert Jennings, a partner in Prince Evans, told the Guardian, however, that his firm "did not act in the purchase of shares in Birmingham City Football Club in 2007 or at any other time. We confirm that in 2007 we acted on behalf of Mr Yeung in the purchase of a residential property and we are content that we complied with all necessary [anti] money-laundering requirements at that time."

The Premier League in 2010 had again strengthened its rules to the current "owners and directors test". It bars people who have "unspent convictions for offences of dishonesty", and requires prospective club buyers to show they have sufficient money, and the source of it. The Premier League took the view then, too, that as Yeung's 2010 conviction would not have been a criminal offence here, he should not be barred.

The money-laundering trial revealed that a year before Yeung, a former hairdresser, took over Birmingham City in 2009, the Hong Kong police had already begun their investigation into the source of his wealth for suspected criminal wrongdoing. In 2011, after City under Alex McLeish won the League Cup, the club were relegated, Yeung was arrested, his assets were frozen, money for the club dried up and it fell into financial difficulties.

 Carson Yeung holds the trophy with manager Alex McLeish after Birmingham won the 2011 League Cup. Photograph: Glyn Kirk/AFP/Getty Images

Neither the Premier League nor the Football League believe their rules or governance have failed in relation to Yeung's takeover or chairmanship of Birmingham City. The Premier League said in a statement its rules go beyond the law for people investing in the UK, and "Premier League football is one of the most regulated and transparent sectors of UK sport or business".

Birmingham City's board now consists of Yeung's long-time Hong Kong-based associate Peter Pannu, and Yeung family members including his 20-year-old student son, Ryan. The league said after the verdict that it is satisfied its rules are being complied with.