Northampton Borough Council has launched its bid to possess a property belonging to former Cobblers chairman David Cardoza and his wife.
The council has commenced proceedings as part of a bid to recover parts of a £10.25million loan to Northampton Town Football Club, meant to fund a redevelopment of its Sixfields Stadium, which was then ‘misappropriated’. The East Stand at the ground remains uncompleted and a criminal investigation surrounding the loan money is ongoing.
A civil court trial in Birmingham earlier this year found David and Anthony Cardoza had ‘breached their fiduciary duties’ as directors of the club, with David and his wife Christina ordered to pay back the money they had used to rebuild their ‘Cheriton’ home in Church Brampton.
David’s father and former NTFC director Anthony Cardoza meanwhile has been ordered to pay back £2.1million, as he received money from a company named 1st Land Limited that was acting as the developer. He has since declared bankruptcy.
At its cabinet meeting next Wednesday (October 16), Northampton Borough Council will outline its updated strategy on recovering the money.
David and Christina’s former home has since been sold, with their new address being kept confidential for ‘security reasons’. The council has now initiated court proceedings for the sale of the Cardoza’s property, which is outside Northampton, in order to recover the £365,975 that it is owed, though this action is being defended by Christina Cardoza.
The authority is also currently in the process of agreeing transfers to it of residential properties from Artefact Investments Limited, a company linked to the Cardozas.
The council argues that the loan monies were used by Artefact to purchase two properties in Milton Keynes.
The court order granted the council permission to join Artefact to any claim. One of the two active directors for the company is David Cardoza’s sister Paula Etti, although both David and Anthony are former directors for the company with both resigning on April 1, 2015.
Papers say: “An informal valuation suggests that the two properties are worth in the region of £680k. Action is being taken to secure the maximum recoverable equity in the two properties.”
The cabinet papers also outline how an independent trustee has now been appointed to look into Anthony Cardoza’s assets, with the aim of distributing them to creditors such as NBC. The council still has the ability to issue bankruptcy proceedings against David Cardoza, but this is not something it is yet pursuing but says it ‘shall be kept under review’.
The majority of the loan money, a sum of about £7million, was passed from the football club to 1st Land Limited, which is currently in liquidation. Its sole director, Bushey based businessman Howard Grossman, has subsequently been banned from being a company director for ten years.
An investigation by the Insolvency Service has revealed that it is unable to determine where more than £5.6million of the loan money has gone, and whether £1.5million was used by Grossman’s family or treated as dividends.
Deloitte has since been appointed liquidator of the company, but it has no ‘discernible assets’ according the council papers. Because of this, the authority is being encouraged to provide funding for specialists to ‘pursue’ companies and individuals associated with money ‘dissipated’ from 1st Land.
It means that the specialist funders, Deloitte, and lawyers would receive early payment and a ‘success fee’, with the council and other creditors receiving any ‘surplus’ funds. This is known as a ‘payments waterfall’, and the council had previously agreed a deal behind closed doors during an exempt item at previous cabinet meetings in April and May, from which the public and press were excluded.
But the cabinet papers say: “Following a change of lawyers, Deloitte have changed their position and proposed a different payments waterfall which would disadvantage the council substantially. In order to find a compromise, the council has suggested a compromise position.”
The borough council believes it should only agree to fund the liquidation if the ‘benefits outweigh the costs’, and it believes the cases they are ready to proceed against amounts to circa £380k.
The cabinet meeting will also hear that £141k of the £200k maximum legal costs spend agreed by cabinet at its meeting in April have now been spent.
Councillors will be asked to approve the current enforcement strategy, with the report – which was written by borough secretary Francis Fernandes – stating: “The council’s external solicitors are in the process of arranging a meeting with Deloitte to discuss the proposed compromise waterfall and they have been asked to expedite this meeting.
“The plan is to bring a report to cabinet at the next available meeting seeking authority to enter into the funding agreement, the associated costs and any other ancillary matters.”