In trying to explain just how bad 777’s latest legal scrape is for the Miami-based investment firm, it is difficult to know where to start.
The complainant this time is London-based investment firm Leadenhall and the civil suit it has filed against 777 Partners, some of its portfolio companies, its co-owners Steven Pasko and Josh Wander, its close partner A-Cap and its boss Kenneth King runs to 82 pages. And there is a wounding zinger on each page.
Advertisement
But perhaps the easiest place to start is simply to say this must surely be the end of 777’s almost eight-month attempt to complete its purchase of Everton, and very possibly the end of 777, too.
The allegations are staggering, although to many they will not really come as a huge surprise.
After all, Leadenhall’s complaint, which was filed in a U.S. district court in New York on Friday, notes that 777 and its associated companies are already the subject of 16 different lawsuits over unpaid debts totalling more than $130million ($104m). Leadenhall, for what it is worth, says it is owed more than $600m by the group.
Wow, right? But Leadenhall says 777 and its affiliates owe A-Cap more than $2billion, not that it thinks A-Cap itself deserves any sympathy, as Leadenhall believes A-Cap is in on the scam.
The central allegation is that 777 and its associated companies set up a credit facility with Leadenhall in 2021 that was secured against assets that had to be “free and clear” of all other potential claims. And the unencumbered status of these assets had to be confirmed to Leadenhall by the group every month. This enabled the 777 group to borrow lots of money from Leadenhall, at a relatively low interest rate.
However, a combination of anonymous tip-offs, forensic accounting, conversations with other lenders and, even, admissions from 777’s main man Wander himself led Leadenhall to the conclusion that what was going on here was “a giant shell game, at best, and an outright Ponzi scheme, at worst”.
Instead of “free and clear”, most of 777’s collateral either did not exist or it was “double-pledged”. Oh, and the borrowers forged documents and faked records to hide its deception, Leadenhall claims.
The plan, as far as Leadenhall can fathom, was to funnel money, usually borrowed money, into “speculative bets” on airlines, payday lenders and football clubs, with Everton being the biggest and most important bet of all.
Advertisement
“Everton is the latest shiny object of Wander’s fraudulent scheme, solvency aside,” the complaint says.
“Despite the fact that 777 Partners and many of the operating businesses and professional football teams that Wander owns are deep in debt, behind on their obligations, and on thin ice with regulators, Wander’s strategy has been continued expansion — using debt to acquire new assets that he can then use as collateral for more debt, which he then fails to timely pay off, in a seemingly never-ending cycle of ‘robbing Peter to pay Paul’.”
This “house of cards” was propped up, in “Whac-A-Mole fashion” by King’s A-Cap, which, contrary to 777’s agreement with Leadenhall, had overarching security over all of 777’s assets.
But, according to Leadenhall, King’s control over 777 goes even further than that. He is the “puppeteer to Wander’s marionette” and the “Wizard of Oz behind the 777 curtain”. It is A-Cap’s money which has bankrolled 777’s purchase of airlines and football clubs. It is A-Cap’s money that has been paying Everton’s bills.
And when we say A-Cap’s money, what we really mean is it is the insurance premiums of millions of regular Americans, everyday folk who have invested in healthcare and pension schemes, people who thought their money was going into gold-plated, copper-bottomed investments that would definitely be there for them if and when required.
Evertonians, do you agree with current owner Farhad Moshiri that this lot are the “best partners to take (your) great club forward”?
Obviously, this is just a civil suit. We are not yet at the criminal stage, and we may never get there. Wander and 777 have declined to comment but their usual line is they never comment on ongoing litigation.
A-Cap has not yet responded to a request for comment from The Athletic but in a statement to The New York Times it said the accusations are “sensational and unfounded”. “A-Cap, similar to Leadenhall Capital, serves as a lender to 777 — there are no ownership ties,” it said. “The key distinction lies in the fact that A-Cap holds senior rights to collateral associated with 777.”
Advertisement
But A-Cap has already been forced to try to untangle itself from 777, under pressure from its rating agency and state insurance regulators.
Good luck with that. Hope it goes well — if not for you but certainly for your customers, who did not sign up for this.
But can you conduct your experiments in financial engineering away from our football clubs, please? They are not moles to be whacked, Peters to be robbed or shells to play with.
It’s hard to see what 777 could say to answer these claims. But whatever happens, for Everton, the FA and the Premier League, surely this is now too much.
It has to be over. This must be the end.
(Top photo: Peter Byrne/PA Images via Getty Images)
