FORMER Chinese billionaire and Newcastle Jets owner Martin Lee "lost interest" in the club and refused to transfer any money for more than a year as the COVID-19 pandemic provided the final nail in the coffin for the struggling A-League team.
A liquidator's report filed with the Australian Securities and Investments Commission (ASIC) this week revealed that former director Lawrie McKinna injected $365,000 of his own money into the club in February last year in an effort to keep it afloat.
Mr McKinna, who resigned as director this year after the club was placed in the hands of liquidator Jeff Shute, of Shaw Gidley Insolvency Reconstruction, will not be repaid the loan.
Mr Lee is the major creditor, with $8.598 million outstanding, while the Australian Tax Office is owed $2 million.
Mr Shute said he expected to recover just $288,899 that would be used to pay staff about 69 cents in the dollar for wages and superannuation, excluding assistance from the federal government's Fair Entitlements Guarantee (FEG), which picks up the tab for workers' entitlements when their employer collapses without enough money to cover them.
According to Mr McKinna, problems outside the Jets' control, including tariffs between the USA and China and the pandemic, collided to seal the club's fate.
But Mr Shute said a host of internal issues meant it was constantly in need of external funds to prop up its precarious financial position.
"My investigations also revealed that the company had difficulty attracting sufficient sponsorship, membership and match-day sales to cover its expenses resulting in carried forward trading losses of at least $11 million as at the date of my appointment," he said.
"These historical trading losses demonstrate an inability to meet the costs and expenses associated with running the company for the revenues available to the company."
According to the report, Mr McKinna provided information to the liquidator as required about the club's demise, but Mr Lee did not and this would be reported to ASIC.
Mr Lee, who bought the Jets in 2016 for $5.5 million, also folded his Chinese club Shenzen Ledman which played in China's third division, due to financial difficulties.
Trade tariffs between the USA and China had a major impact on Mr Lee's fortunes in 2018-19 with his LED lighting company Ledman Group suffering a severe downturn.
The Chinese LED lighting industry was slapped with a 25 per cent US tariff in an effort to reduce the trade imbalance between the USA and China. As a consequence, Mr Lee's LED lighting fortune was cut in half in only five months.
According to Mr McKinna, this combined with the impact of the pandemic on Mr Lee's businesses and the A-League competition, as well as a "lack of confidence" in Football Australia (FA) after Fox Sports slashed its television funding commitment, meant Mr Lee "lost interest" and refused to inject funds from October, 2019.
The club had $56,000 in the bank when it collapsed and held about $312,000 in Bartercard dollars that is not convertible to cash.
Mr Shute has employed a lawyer to investigate the possibility of recovering $97,495 held in a Ticketmaster account used for membership and ticketing.
It's understood the new entity in control of the Newcastle Jets has made a claim on the funds held by Ticketmaster.
"In an attempt to avoid incurring additional costs associated with legal action for recovery of the Ticketmaster funds, I entered into negotiations with Ticketmaster and Newco [Newcastle Jets Football Club] to settle the claim on a commercial basis," Mr Shute said.
"These negotiations have been unsuccessful to date and it is my intention to now commence formal legal recovery action for the funds."
Mr Shute said the company was "entitled" to receive merchandise royalties and grants totalling $221,066 as part of its club participation agreement with FA for November and December last year, plus an additional $51,535 grant for the W-League.
"FA advised that they are still in the process of determining the royalty amount but expect that it will be less than $2000," he said.
"FA denied any obligation to pay the grants amounts to the company arguing that the company was in breach of the agreement by failing to maintain sufficient working capital and was unable to pay its debts from at least 1 July 2020."
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