Madoff Scandal Wiped Out Newcastle’s Two Potential Buyers


Keith Harris, who was hired by Newcastle in October to sell the club, after his success in selling Manchester City has said today he was unable to find a suitable buyer for Newcastle.

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Keith Harris – two potential Newcastle buyers submarined by Madoff

But the real news is that Keith says that the two American buyers in for Newcastle at the end, eventually pulled out after they lost $300M (£197M) in the Bernie Madoff Ponzi scandal.

Harris has claimed that negotiations with the two interested parties in the US, worth several hundreds of millions of pounds broke down after the collapse of the hedge fund run by Bernie Madoff, who is currently being prosecuted in the US for the largest investment fraud in world history, though to be around $50B – well that buy a few decent footballers, for sure..

A Ponzi scheme, explained at the end of this article, is when you take in money from investors, don’t invest it anywhere, and use other investments to pay back unreal returns to ther clients.

Since Madoff’s been in the business for over 40 years, heaven only knows how long he’s been doing this stuff for, and only yesterday the FBI found checks in his NY mansion, where he is under house arrest, written out to his relatives for way over $150M, which he was obviously going to try to keep in the family. A judge will today hear prosecution claims that he should be in jail.

Yes, this guy who has lost $50B of client money through fraud and greed is still not in jail – only in America.

Mike Harris talked about the Newcastle deal today:

“Mike Ashley hasn’t said I’m back in charge, what he has said is that we’ve tried but the economic climate beat us, which it clearly did,”

“A few weeks ago there was a decent degree of positive thought and optimism that there would be a buyer and then, amongst others, Mr Madoff came along.”

“There were two people that were looking at Newcastle with us who lost, let’s say, over $300m to Madoff.”

“Let’s face it, it (the Madoff scandal) holed everything beneath the water line. The people who were investing with him followed their peers and they should have done their due diligence and all those things and they didn’t.

“That came at the end of a two or three-month period of absolute decline in all the stock markets, financial markets and banking markets.”

Harris has also repeated Joe Kinnear’s recent claims that Mike Ashley has cleared the club’s debts, which puts the owner in a more positive light. That’very good to hear, but wouldn’t you think we could borrow say £15M just to get two or three decent players into the club in January, to ensure we don’t get relegated. But maybe that’s going back to our old ways and we like the fact that Mike has paid off all debts – but why didn’t he tell us that?

However, Keith Harris suggests that this zero debt will no doubt be a positive selling point when the economy improves – some time in the future – and maybe even in the summer.

“You don’t need to have a minimum of £5 billion to run a football club. It depends very much on the nature of the club you are taking over,”

“In the case of Newcastle, one of the things that I thought was very attractive was that Mike Ashley put his hand in his own pocket and paid off all the debt.”

“So in the case of Newcastle what you were acquiring would have meant not looking at having to worry about what do I do when the banks we want their money back.”

Mike Ashley has said he will not sell the club, and while that may be OK with most Newcastle fans, that’s only if  he is willing to invest in the club and truly tires rebuild.

That doesn’t look like what’s happening right now, but to be fair to Mike and the club, we just don’t really know what’s going on right now, and if we do end up with 4-5 good players by the end of the transfer window we should be in decent shape.

We feel sure also that some bigger deals will be done in the summer, when a lot more players will be available.

Comments welcome.

Note: Charles Ponzi (March 3, 1882 – January 18, 1949) was one of the greatest swindlers in American history.

A “Ponzi scheme” is a widely known description of any scam that relies on a “pyramid” of “investors” who contribute money to a fraudulent investment program. The fund promises clients very high profits like 50% profit within 45 days, or 100% profit within 90 days, by bascially redistributing the investments from other investors to give out the dividend payments. The program continually skims off money from the pool of investment. These schemes don’t usually last too long so everybody is wondering how Bernie Madoff kept one going for so long.

Ponzi was probably inspired by the scheme of William Miller, a Brooklyn bookkeeper who in 1899 used the same pyramid scheme to take in $1 million, and is the first known person to sue this scheme to defraud investors.



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147 comments so far

  • Micky Toon

    Jan 9, 2009 at 11:21 AM

    Comment #1

    So basically Ashley did the right thing and tried everything he could to sell the club.

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  • Stardust

    Jan 9, 2009 at 11:28 AM

    Comment #2

    and has cleared off the debt, no doubt many will now want him to remortgage everything to satiate the need for wow signings. I hope he maintains his prudent line of investing in youth and the right players at the right price

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  • lesh

    Jan 9, 2009 at 11:32 AM

    Comment #3

    But what is the situation with the debt clearance?

    Remember MA saying that all debts had been cleared and it emerging during the due diligence activities, that there was some debt?

    Not that it makes a deal of difference to the club’s finances and lack of transfer activity just now, but it does place into context MA’s expressed intent that the club would be managed responsibly, at all levels – ie keep the level of debt at zero or low. It helps me understand his enthusiasm for self-financed transfer dealings. I suspect though, that MA will spend when he’s assured of income from sales -he’s well aware of the risk of fan/ media backlash….. I hope.

    What I cannot come to terms with is the lack of meaningful communication from the club. We sorely need a good PR person/ outfit in there to give the fans quality information – not spin or bull – the club appears to be very amateurishly managed but I’m sure that’s not the case!

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  • Stuart

    Jan 9, 2009 at 11:34 AM

    Comment #4

    We are the unluckiest club in the world! Destined never to win anything ever again!

    Stardust – What you on about? Can you tell me which club have ever been successful being prudent?

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  • ash1001

    Jan 9, 2009 at 11:34 AM

    Comment #5

    So now because he cannot sell the club, he is assest stripping or so it appears – latest fiasco if the papers are to be believed ‘Wise trying to do a deal to swap Smith for Mido without telling Smith’ – brilliant man management that, but there again why should we be suprised – been there, done that, got the tee shirt, comes readily to mind, a chairman that in his spare time when is not digging a bigger hole for the TOON to fall into is chairman of the National Deaf and Dumb school, least thats the way is seems.

    footnote- I was prepared to give MA a chance when he took the club off the market but he has done nothing to warrant any faith in him, I am sorry to say.

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  • nuf-C you in the Championship

    Jan 9, 2009 at 11:34 AM

    Comment #6

    Keith Harris was interviewed on Talk Sport yesterday which is where the quotes come from.

    You know if Ashley is doing stuff behind the scenes that will dramatically improve the club such as 4/5 strong signings, getting rid of Dennis the pr*ck & Lamb (what ever his name is) & brining back Mort, then our season may not be over just yet & we may begin February with renewed positivity about the future or our beloved club.

    But no matter how much I try and convince myself – I DOUBT IT..!!!

    Everyone seen the new 5hit coming out of Charles’ mouth this morning?

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  • Micky Toon

    Jan 9, 2009 at 11:38 AM

    Comment #7

    There’s that term again. Asset stripping. Would you rather players like Owen went for nowt in the summer? It’s hardly asset stripping when we are looking to do a like for like swap with smith and mido is it?
    It’s a lose/lose situation for Ashley at the moment. If he sells Owen he is accused of asset stripping and getting all he can for him. If he doesn’t sell Owen, Owen will walk for nowt in the summer and Ashley will be slagged for not selling him when he had the chance.

    I still think Ashley isn’t the right man for us. He has just shown that he hasn’t a clue how to run a club, just like the Shepheard. Except shepheard kept the bedsheets on the beds by buying stupid wow signings.

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  • LJ

    Jan 9, 2009 at 11:39 AM

    Comment #8

    Stuart –

    Man utd, they never had debt till galzers came along.

    They won the trebble with no debt. There are plenty of clubs wihtout debt

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  • bowburnmag

    Jan 9, 2009 at 11:41 AM

    Comment #9

    I like the contradictory message most.
    Only days ago it was announced that by making a virtue out of necessity, 2009 would be the year we’d drive the club forward together. Now it’s – “Mike Ashley hasn’t said I’m back in charge, what he has said is that we’ve tried but the economic climate beat us, which it clearly did,”. The first ringing with good intentions (empty?) and objectives despite the cause. The second more of resignation and defeat and implying we’re rudderless. To be honest, just to know one way or the other would be nice.

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  • nuf-C you in the Championship

    Jan 9, 2009 at 11:43 AM

    Comment #10

    Stuart – I’m with you…

    “Stardust – What you on about? Can you tell me which club have ever been successful being prudent?”

    If keeping your Profit & Loss (finances) at zero is the objective of the club we might as well all go and sit in the NATWEST on a Saturday afternoon at 3pm for an hour and a half than go and watch the bull5hit currently being seved up at SJP.

    Man Utd are hundreds of millions of pounds in debt, but I bet their bogs don’t consist of fans being worried about off field affairs, that’s the Chairman / Owners worries. Our worries are about excellent players coming in and keeping our best then gatting 3 points at the week-end..

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  • Stuart

    Jan 9, 2009 at 11:44 AM

    Comment #11

    LJ –

    Think you’ll find that Man Utd were a plc before the Glazers arrived.

    They had a degree of debt because they had dividends to pay ect… So they couldn’t afford to subsidise the transfer dealings.

    Therefore they borrowed money against income as all PLC’s do.

    Spurs do the same thing as they to are a plc.

    Look at every plc company. They use debt to invest and use profit that comes from that investment to pay off that debt.

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  • Mal

    Jan 9, 2009 at 11:44 AM

    Comment #12

    This talk from keith harris is absolute rubbish – all he is doing is making excuses for his failure to sell the club.
    Meanwhile we appear to be approaching our transfer dealings in the normal shambolic way. I see that Arshavin may be going to arsenal but his club aren’t worried as they have already signed his replacement – now there’s a novel way of doing things.

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  • Izzy

    Jan 9, 2009 at 11:45 AM

    Comment #13

    Agree that we need a good PR to tell the fans what is really going on, I dont believe the Mido story for one minute by the way.

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  • Newby

    Jan 9, 2009 at 11:45 AM

    Comment #14

    Stuart – I’d say that Arsenal have been pretty prudent and are very successful. They made sure they had an amazing scouting system and youth team to fall back on.
    I’d like to say that’s what Mike is trying to do with us, however, if he’s going to sell his best stars when they’re at their prime, then it simply wont work.
    Its also obvious that Arsene Wenger would have had any amount he needed if he had have went to his director and said that the team was threadbare….something which obviously isnt going to happen at Newcastle.

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  • asprilla11

    Jan 9, 2009 at 11:46 AM

    Comment #15

    has anyone heard anything about sissoko and the other young guy from caen we were supposedly interested in?? It infuriates me that all the talk about if given is sold then we are looking to buy other keepers for 6 million?, we do not need to strengthen in that department with harper, krul and forrster as more than adequite back-ups!!

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  • nuf-C you in the Championship

    Jan 9, 2009 at 11:47 AM

    Comment #16

    *blogs

    Actually leave it as bogs is sounds better..!

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  • Micky Toon

    Jan 9, 2009 at 11:50 AM

    Comment #17

    nuf-c erm, I think you’ll find that they are very much pee’d off at their current ownership. When the glazers took over there were fans protests, talk of setting up a splinter club for the real fans, ala Wimbledon and calls that the new owners had plunged the club into millions of pounds worth of debt. They were lucky enough to have a brilliant team that consitantly wins trophies to take their minds off it. If we were always winning titles and had a team as good as theirs then we wouldn’t have page after page of moaning about our owner.

    Stuart – It is those clubs that are the ones that all the financial analysts are currently predicting will be the ones most effected by the current economic downturn.

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  • Stuart

    Jan 9, 2009 at 11:50 AM

    Comment #18

    Newby –

    Since Arsenal decided to be prudent and look at buying young players they haven’t won anything.

    This will be there 5th consectutive year without winning anything.

    When they were winning, they bought players like, Viera, Petit, Overmars, Pires ect… Quite a bit of money then.

    It just doesn’t happen! You need to invest to get any return. Like any business, football is the same!

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  • nuf-C you in the Championship

    Jan 9, 2009 at 11:50 AM

    Comment #19

    Ha ha ha Bolton have bid £2m for Barton !!!

    He might be a bad lad but £2m barely gets you Dean Windass these days!

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  • Stuart

    Jan 9, 2009 at 11:54 AM

    Comment #20

    Micky Toon – Liverpool are in debt due to the owners borrowing to buy the club as is the same for Man Utd. They are not worried about the debt due to buying players to be successful

    Borrowing to invest in players is absolutley normal practice if you want to be successful.

    The finance that the success brings would easily be enough to service that debt.

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  • HAMMY14

    Jan 9, 2009 at 11:54 AM

    Comment #21

    I still hope we still get sold as MA doing what he said again! But i hope he proves me and the rest of us wrong

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  • nuf-C you in the Championship

    Jan 9, 2009 at 11:56 AM

    Comment #22

    Micky Toon, thanks for agreeing with me:

    nuf-c erm, I think you’ll find that they are very much pee’d off at their current ownership. When the glazers took over there were fans protests, talk of setting up a splinter club for the real fans, ala Wimbledon and calls that the new owners had plunged the club into millions of pounds worth of debt. They were lucky enough to have a brilliant team that consitantly wins trophies to take their minds off it. If we were always winning titles and had a team as good as theirs then we wouldn’t have page after page of moaning about our owner.

    PS – the majority of the Man U fans have loads of splinter clubs anyway! Any club in London!! Much closer to home too..!

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  • Stardust

    Jan 9, 2009 at 11:56 AM

    Comment #23

    Stardust – What you on about? Can you tell me which club have ever been successful being prudent?

    Arsenal

    Stuart “Can you tell me any company, which is what we are, anywhere in the world that can outperform markets by not being prudent?”

    Your ignorance of the fundamentals is astounding.

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  • nuf-C you in the Championship

    Jan 9, 2009 at 12:01 PM

    Comment #24

    Stardust, if finances are the main drivers /objectives of football clubs these days then they will lose one of their biggest incomes – the fans…!

    Your comment is like saying ASDA is going to stop selling Milk & bread as their margins are too small. Wake up, this is football not business, like many like to think it is these days…

    Agreed – Leeds is an example of it going t*ts up but live a little, let your hair down, have a beer or two, loosen up, get excited on a Saturday rather than worrying about money!

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  • Stuart

    Jan 9, 2009 at 12:03 PM

    Comment #25

    Stardust – See comment 18 re ridiclulous Arsenal comparison.

    No club or business will EVER be up there with the best if they just don’t invest! FACT!

    Ask Mike Ashley what Sports Direct will be doing this year.

    Their not worried about their 450m debt. Mike himself has said instead of paying that debt off they need to invest in new stores and get their market presence stronger!

    Funny that! I think every normal NUFC fan i asking him to do the same here!

    For buying new stores read buying new players!!!

    Exactly the same princable!

    You need a lesson on economics

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  • Newby

    Jan 9, 2009 at 12:04 PM

    Comment #26

    Stuart, the players mentioned were bought for somewhere in the region of Viera – £3-4 m, Petit not sure, but he was only 18 when he signed, Overmars £5m, Pires £6m – even at the dates of signing for Arsenal, their fees weren’t at “trophy signing” levels.

    They may not have won anything recently, but how good were they in the days when they had those players. Arsenal are not by any means a bad squad, and it we could build our model on them and be challenging for Champs League every year, then I’d jump at that.

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  • neeraj

    Jan 9, 2009 at 12:06 PM

    Comment #27

    stuart

    successful teams without debt

    ARSENAL

    the only debt they have is stadium debt…..

    do you expect glazers, the hicks to be there all the time…..

    i am happy that man city is going chelsea way…
    coz there is going to be a big fallout among big 4..

    with aston villa and everton always knocking on the doors of champions league…..

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  • Newby

    Jan 9, 2009 at 12:06 PM

    Comment #28

    By the way Stuart, I dont disagree with you – I’m just pointing out the Arsenal case. I totally think we need investment, and probably major investment at the minute, because if we lose ANY players (probably save for the goalkeepers) then we really are in the sh!t. Before we even think about selling anyone, we need at least 3 players in. After that, it would be a case of 1-in and then 1-out.

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  • Stuart

    Jan 9, 2009 at 12:09 PM

    Comment #29

    Newby – Overmars cost 10m, Petit about 8m and someone like Willtord at 11m! They spent more than 20m. 10 years ago that was alot of money!

    Aston Villa are starting to overtake them as they have invested and Arsenal haven’t.

    Then there’s going to be Man City.

    Were getting so left behind it’s fuc*in frightening!

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  • bowburnmag

    Jan 9, 2009 at 12:12 PM

    Comment #30

    We need a middle ground between the big spenders and those relying on youth. That’s the holy grail. Man Utd somewhat fluked winning things with ‘youth’ by having a staggering influx of quality in a short space of time. Prudence might be necessary at times but we still need to invest. Arsenal definitely bought their way back up the table no matter how you look at it. £4m and £6m were not to be sniffed at back in the day. Prices became inflated just after that. I’d love a school of youngsters fresh off the production line which could fill the squad and see the club investing in the fans rather than the players but at the moment it’s not possible.

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  • Stuart

    Jan 9, 2009 at 12:13 PM

    Comment #31

    Also lets not forget we are the only club in the top 15 rich list of clubs that don’t have Champions League football money coming in every season.

    We have a massive fan base, with a big stadium. We, more than most would be better suited to servicing a certain level of debt.

    What I’m saying is, we have avery,very rich owner who could quite easily lend us the money. He is worth a lot more than Randy Lerner and he’s spent nearly 100m on players since he’s been at Villa.

    Look what their doing now!

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  • neeraj

    Jan 9, 2009 at 12:14 PM

    Comment #32

    anelka= henry + viera + henry
    sol campbell = free
    flamini = almost free
    hleb
    many more

    his biggest signing has been
    nasri- 12 mill
    look where they are now……

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  • Stuart

    Jan 9, 2009 at 12:16 PM

    Comment #33

    bowburn – That would be great, however if we ever produced another Alan Shearer he would be sold to the highest bidder!

    That is Ashleys blueprint. Players with a ‘sell on” value!

    All told he needs to go cos he ain’t the man we thought he was!

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  • Macas

    Jan 9, 2009 at 12:17 PM

    Comment #34

    Stuart – Good points as regarding Arsenal, I had the same argument on here a few months back with someone. The fact that they can afford to bring in cheaper less well known players is because they actually had a top class first team squad in the first place, and spent quite a lot on transfers. Arsenal weren’t successful being prudent, they built up an expensive squad first then made careful additions to it, there is a big difference. No club can expect to make signings like Bassong all the time, you need to splash the cash to some degree to bring in established quality players as well as few cheaper gambles.

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  • Stuart

    Jan 9, 2009 at 12:17 PM

    Comment #35

    neeraj – What’s ya point?

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  • Newby

    Jan 9, 2009 at 12:24 PM

    Comment #36

    Stuart, I checked the prices on the official Arsenal page for the players, so I think you might just be thinking that they cost more than they did. Also, Arsenal tended to buy their “bigger” players over several seasons as they were building. Remember, they didnt buy Vieira, Overmars, Petit, Wiltord, Pires, Henry et al, all in one season.

    I do agree though, if we ended up getting any decent players on the cheap, as soon as they come good we end up selling! Milner and N’Zogbia appear to be the first two of the raft of players heading outward under Ashley.

    I think if he was to give Kinnear £20m – without the need to sell any of our current squad – then everyone would be over the moon. I just dont get why the man comes out with the statement early in the year saying that he is now right behind the NUFC cause again (and we hear from Kinnear himself saying that the owner will invest) and then decide that we must sell to buy. It’s ridiculous! If we were in a very steady position, and we didnt have injuries, then I would probably be sympathetic, but we are in dire straits now and we DESPERATELY need more players for the squad.

    I honestly dont care if we are trying to get old rope (i.e. Ferguson, Mido etc) – we just need the numbers at the minute. We can get rid of the wheat and chaff in the summer, when there will be more players available, but now….we must not sell….and we MUST BUY!!

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  • Newby

    Jan 9, 2009 at 12:26 PM

    Comment #37

    P.S. Does anyone know if the usual Friday press conference is going ahead today? I havent heard much confirmation/denial of the recent stories, and it would be very interesting to hear Kinnear’s latest yarns and tales on the current rumours about players coming and going…

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  • nuf-C you in the Championship

    Jan 9, 2009 at 12:26 PM

    Comment #38

    Bottom line is our club used to have:

    Regular European Football
    Willing to pay good wages
    Excellent Fans/Support
    Excellent Players that others wanted to play with
    Ambition

    All of these things made the ‘World Class’ players want to sign. In turn the Satdia remained full, Europe was a given, money was available for high wages and the circle was self sufficient…

    Now all we have is the fans,

    The best players want to leave
    The best players are being asked to take a pay cut
    We have no European footy to offer
    We don’t pay top dollar
    We have no ambition.

    The only way to reignite the club is a massive cash injection – FACT!

    Players are greedy and will go where the money is which then in-turn provides Euro Footy, Better player, happy fans & ambition…

    Could you have seen Robhino, Bridge & Given joining Man City 5 years ago?

    Or Drgoba, Shevchenko and Robben joining Chelsea for the love of the club!

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  • Macas

    Jan 9, 2009 at 12:26 PM

    Comment #39

    neeraj – Hleb cost £10 million. Jeffers and Van Bronkhorst were £8 million each, to add to the players Stuart mentioned above. They only brought in cheaper players once they had a successful side.

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  • Sav

    Jan 9, 2009 at 12:27 PM

    Comment #40

    I agree with Mal – Harris’ job is selling clubs and here’s one he failed to shift, so naturally he’s talking up the diffuiculties.
    The Madoff scandal didn’t break until the 11th December, so some of Harris’ customers may have been hit, but they had already decided they didn’t want to know about the Toon. There is nothing gracious, conciliatory, promising or enthgusisatic about MA’s decision to stick around. We are the albatross around his neck. he’s lost millions and isn’t a billionaire any more? My heart is bleeding.
    Its time he took some grown-up decisions about the running of the club. He’s supposed to be an inspired businessman. Lets see it. mostly he seems to ‘pull off strokes’. Lets see if he has the intelligence and determination to turn this business around.
    Until he does, we are stuck with each other but we will be worth a lot less without some sensible handling and the balls to invest when money is scarce. Lets face it, apart from ManCity, there should be some relative bargains to be had for anyone with the courage to stick his hand in his pocket.

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