12. Mark Goldberg – Paying the Penalty

In June 1998, multi-millionaire IT recruitment entrepreneur Mark Goldberg fulfilled his boyhood dream and became owner of south-London-based Crystal Palace Football Club. He had big dreams for the club to compete at the very top of European football, alongside the likes of Arsenal and Manchester United.

From the start, he meant business. He hired a former England football manager, Terry Venables, to run the club, and was soon splashing the cash on exotic international players. Goldberg also invested in the club’s training facilities, spending thousands on furniture and equipment, hiring a full-time club doctor and installing a new level of management in the club to cover IT functions, human resources and public relations. He even hired an internet specialist to help promote the club in China.

Unfortunately for Goldberg and Palace, in between his registering an interest and actually taking the reins at the club, it was relegated to the second tier of British football – a devastating financial blow. Unperturbed, Goldberg continued to talk up the potential of the club, and even floated the idea of buying British football legend Paul Gascoigne to join this south London revolution.

It was not to be. Gascoigne never came, Venables soon left in acrimonious circumstances, and within a year the club was put into administration with debts of £30 million. Goldberg was soon declared bankrupt.

The most astonishing aspect of the case is the speed with which it unravelled. It is quite extraordinary the way he managed to fritter enough money to last several lifetimes. From sitting on a £40 million fortune, Goldberg managed to lose the lot in less than 18 months.

Goldberg was entrepreneurial from a young age. The son of a south London dentist, he used to buy fruit from wholesalers and sell it on at markets. He bought and sold a range of goods, even cars, although the experience would prove a bad omen. ‘I bought [the cars] because I liked them,’ he says, ‘rather than because they were good cars. I remember buying a BMW 2002, the old model, with the little round back lights – I think I spent £400 and ended up needing a completely new reconditioned engine, which cost another £600. I think in the end I had to give it away.’ Goldberg is plainly different: a serial entrepreneur who does not learn from his mistakes.

Away from business, Goldberg also showed a passion for football. When he was 18, he won a soccer scholarship to the College of William and Mary in Williamsburg, Virginia, but dropped out because of a recurring hamstring injury. It was a passion that stayed with him, though, becoming something of an unhealthy obsession.

When Goldberg returned from America, he worked in a recruitment business in London. A quick learner, he soon realized there was a growing demand for IT specialists. He also realized that companies were prepared to pay agencies hefty finders’ fees. This ability to learn quickly and work out ways of generating revenue is vital for successful entrepreneurs. Goldberg wasted no time at all, and his firm, MSB International, started cashing in.

MSB would find qualified IT specialists and put them together with the people who needed them. It would pay the IT people £1,000 a week and charge the client £1,200. Each contractor Goldberg could place made him £200 a week. And by 1986, when Goldberg was 23, he had 25 contractors, making him £20,000 a month. He soon realized that if could train up people to do his job, the money would start flooding in. And it did. Fifteen years after starting the business it employed 150 sales people and handled 2,500 IT contractors.

Goldberg floated the business in 1996, but the company really started doing well as Y2K computer fears heightened. Towards the end of the decade, the business world was rife with fears that come midnight on the evening of 31 December 1999, computer systems around the globe would collapse, bringing the world to its knees. Companies such as MSB made the most of those fears. Revenues rose from £18 million to £129 million in the three years to 1998. The share price followed suit, quadrupling from the float price to more than 1,000p in the same year. Goldberg made something like £40 million. But he was about to lose the lot.

As Goldberg’s wealth grew, he invested some of it in his favourite football club, Crystal Palace. By December 1997 he had £3 million worth of shares, a seat on the board, and was ‘an active, enthusiastic director’ of the club. He also believed that he could use his business acumen to make Palace, as it is known to its supporters, one of the most successful football clubs in the land. It was a classic error of judgement: applying sound principles from one business or sector to a completely different industry. It shows an incredibly blinkered vision, and one doomed to failure.

Goldberg was instrumental in the purchase of footballers Attilio Lombardo and Michele Padovano from the Italian football giant Juventus. He also let it be known to the incumbent chairman, Ron Noades, that he would be prepared to buy the club if it was up for sale. Noades the butcher spotted Goldberg the lamb. What was to follow was pure slaughter.

Noades made Goldberg a ridiculous offer: to sell him the club and its Selhurst Park stadium for £30 million. For a club on the verge of relegation it was an extortionate amount, but Goldberg agreed. He went off to find potential investors, but returned to Noades saying he could only raise around £22.8 million.

Noades then suggested that Goldberg could purchase just the club but not the stadium (Noades agreed to lease the stadium to Goldberg). Again, incredibly, Goldberg agreed to these terms. However, it soon came to light that Goldberg had only managed to raise £18 million – so Noades himself ended up loaning Goldberg the outstanding £5 million! And actually, the potential investors had also got cold feet, leading Goldberg to sell most of his stake in MSB and use his own money to buy the club. Noades agreed to let Goldberg pay him in instalments over five years.

In reality, without the freehold of the ground, the deal left Goldberg with negligible assets. Noades later stated that Goldberg had been ‘stupid’ to buy the club – adding, ‘He wet his knickers about buying the place.’ Not the strongest bargaining position, then.

But bargaining and negotiating are what recruitment consultants are supposedly good at. What on earth was Goldberg doing, and how could he have been so blinded by his love of football and this football club? The naivety of youth can be the only reason. Here was Goldberg, who had just made a fortune. What could possibly go wrong?

It is a good question who, if anyone, was advising Goldberg on his football folly. Regardless, the deal went through and Goldberg was installed as chairman. It was a dream come true that was about to turn into a nightmare. After the deal was done, Noades famously gave Goldberg a gift: a Porsche. Goldberg later commented, ‘I worked it out later that the Porsche cost me about £37 million and was the most expensive car ever sold on the planet.’

Goldberg’s first act was to move long-serving manager Steve Coppell to director of football. He then installed Italian Attilio Lombardo and the soon-to-retire Tomas Brolin as player-managers, something football observers referred to with some understatement as ‘strange’. Not only was Lombardo one of the club’s key players, he didn’t even speak English. The arrangement did not last, but in an even more eccentric move, Goldberg appointed former owner Ron Noades, alongside coach Ray Lewington, as caretaker manager.

The club was relegated from the Premier League, finishing bottom of the table. But Goldberg had not even started. In his bid to make Crystal Palace one of the nation’s leading teams, he installed former England head coach Terry Venables as manager.

While Venables, or El Tel as he is known to the British tabloids, was and to some extent remains a favourite with the fans, he also courted controversy. In January 1998, the High Court in London banned him from being a company director for seven years. In their case against Venables, the Department of Trade and Industry outlined instances of bribery, lying, deception, manipulation of accounts and taking money that should have been given to creditors. Although the case was set to take three weeks, the fact that he decided to admit or not contest 19 specific allegations made against him meant it was over in five minutes.

Much later the details of his audacious appointment as Palace manager came to light. Again, you have to wonder where Goldberg was getting advice. First of all it was claimed that Goldberg paid Venables £135,000 just to talk about becoming the Crystal Palace coach! He went on to agree a deal with Venables that saw him pocket £750,000 salary per year after tax, to be paid annually – in advance. Venables also got an unsecured £500,000 interest-free loan, a £650,000 house, a Mercedes car, a 10 per cent pension contribution and £20,000 in relocation expenses (he was then the head coach of Australia).

Goldberg also allegedly promised Venables millions in the way of money that could be used on player signings, and a 5 per cent bonus on amounts not spent on transfers. He also agreed that Venables could remain as a consultant to the Australian Football Association, and that El Tel was entitled to a 6 per cent royalty on the use of his image.

‘To my mind, [Venables] is the only man who can give the team the confidence they need,’ Goldberg said at the time. Jim McAvoy, the club’s former chief executive, later added, ‘Mark made the astonishing statement that he didn’t want anyone to think that he couldn’t afford Terry Venables.’

It wasn’t one of salesman Goldberg’s best deals. Although come the following season the team, under Venables, started to improve, the transfer policy under Goldberg was chaotic. Players were offered crazy (for the time) signing-on fees and silly wages. Players were offered three- or four-year deals, and there were even loyalty bonuses for those who stayed at the club. The signing of Yugoslav international defender Gordan Petric summed up the confused approach at the time. While a good player, he cost £300,000 and was on a £5,000 per week deal. The thing was, the club had at least nine other senior players who could play in central defence, so his skills really were not needed.

For the club’s hierarchy, though, according to former chief executive Jim McAvoy, it was the fees paid to the players’ agents that were most galling. He claimed agents were paid more than £1 million during Goldberg’s reign. ‘Negotiations with agents and the manner by which players were being identified, brought to the club on trial, was completely unprofessional,’ McAvoy said later in a leaked letter to his fellow directors. ‘I have no doubt we were seen as an easy touch. All of this undermined the credibility of the club.’

McAvoy was specific about three Argentineans signed by the club, Pablo Rodrigues, Christian Ledesma and Walter Del Rio. ‘The Argentinean escapade cost £448,769 in agent fees and £187,000 in transfer fees,’ McAvoy said. Del Rio’s contract was terminated in March after one first-team start and one substitute appearance, while Rodrigues and Ledesma were never signed.

Goldberg blamed Venables, and Venables, who had been around football long enough to see the impending train crash coming, decided to pack his bags and left. In total he lasted little more than seven months at the club – a deal that ended up costing Goldberg something like £1 million for each month.

Spending was no less prolific off the pitch. When Goldberg took over, he made a series of appointments at the Selhurst Park-based club. He appointed a broadcasting manager, an IT manager, a human resources manager, an ‘internet specialist’ and a variety of other public relations executives, on annual salaries estimated between £30,000 and £50,000. Goldberg also spent ‘hundreds of thousands of pounds’ on furniture, computers and training equipment, but the biggest expense was staff, including a full-time doctor (estimated salary £100,000), a fitness expert and team of personal trainers, a nutritionist (another £100,000), various physiotherapists, a masseur – and even a cook.

One of the most poignant comments about Goldberg’s spending came from former manager, the softly spoken Steve Coppell. ‘He bought hundreds of gallons of bottled water. Under Ron Noades, we just filled bottles from the tap.’

Goldberg was spending money like water, and it could not – and would not – continue. The club’s relegation cost it dear – around £3.5 million from Sky TV, £280,000 from Carling sponsorship, £182,000 in overseas broadcasting rights, £33,000 of radio revenue, and more than £24,000 for every Match of the Day show. And with falling gate receipts and less of an appeal for the club merchandise, circumstances combined to add more woe.

Goldberg was soon paying the players’ wages (£500,000 each month!) from his own pocket, and financial armageddon loomed. Goldberg defaulted on his £67,000-a-month loan repayment to Ron Noades (who promptly sued). The club finally went into administration in March 1999 with debts of £30 million. Goldberg was declared bankrupt nine months later.

It is hard not to sympathize with Goldberg, regardless of this ludicrous football foray. He was not setting out to rob or defraud, after all. All he wanted was to make Crystal Palace one of the best clubs in the land – and do so with his own money. It is clear he was unprepared for the massive and constant drain on his resources.

It all meant that Goldberg was barred from being a company director for at least two years. He lost his villa in Marbella, his assets, shares, cash, reputation and it even caused his marriage to fail. He literally blew it all.

The Crystal Palace affair was not his only legal wrangle. A dispute with former business partner Peter Browne over a property deal also ended up in the courts. Again Goldberg was found wanting. The high court judge Justice Jacobs branded Goldberg ‘dishonest’ and a ‘liar’. At one stage he said, ‘I have already stated that Mr Goldberg is not to be trusted.’

Throughout all his difficulties, though, Goldberg has remained remarkably upbeat. Although bankrupted, he was soon embarking on a new recruitment-based venture, called TV Jobshop, although he was at pains to point out (especially to his creditors) that he was merely the sales and marketing manager. ‘I don’t direct the business,’ he said in one newspaper interview, ‘I drive the business’ – whatever that means. More recently Goldberg has been talking up a new property-related business venture. ‘I’m hoping to build a couple of sports villages in the UK before the 2012 Olympic Games,’ he has said.

Day to day, Goldberg has returned to football by becoming manager of Bromley Football Club, a Kent-based outfit operating in the Conference South league. While he got the job on the back of his brother-in-law being chairman, Goldberg’s football record is good. ‘I’m much happier in the dugout than in the boardroom and maybe that’s what I always wanted,’ he says. ‘But it was never going to happen at Palace. The next best thing was to own the club and to have some sort of control over the football but it’s the football I love, not the chairmanship.’

In terms of how and where it all went wrong for him, Goldberg is refreshingly frank. ‘I had a number of investors with me who had promised to put money in,’ he says. ‘Foolishly, I put my money up first on the basis that they were going to follow.’ He also admits that he did not expect the salaries to spiral out of control the way they did, and third, he says he thought he could handle the club’s hefty debt when he couldn’t.

‘I wasn’t unlucky,’ he says.

I was too eager to do the deal. I wanted it too badly. In a way, I deserved what I got because I let my heart rule my head. I would do things a lot differently if I was in that position again but I don’t regret what I did. I did fulfil a lifetime ambition of owning the football club I supported as a boy. But I really did lose £40 million of my own money, and I really did do it with the right intentions.

He admits he was naïve in terms of the Venables situation, but again puts it down to youthful enthusiasm.

But losing £40 million wasn’t good, he says. He:

had to sell a number of lovely houses. It was stressful for the family. I remember people sitting in my kitchen with their heads in their hands waiting for me to walk through the door. I said: ‘Look, no one’s died. Look at my dad, he’s been through two triple bypass operations and he’s still with us. This is nothing to cry over.

While Goldberg remains sanguine about losing the money (‘there is only a certain amount of money that you actually need’), it has not stopped him dusting himself down and looking towards the future. ‘I lost my entire wealth but I didn’t lose the ability to work hard,’ he says. ‘All of your materialistic possessions can vanish but you always have the knowledge of how you built every brick of the business that generated those materialistic things in the first place.’

Throughout it all, Goldberg says he has learned valuable lessons in business and life. ‘I’ve sought great success,’ he says.

I’ve experienced great success. I’ve also experienced taking very large risks, and I’ve experienced the occasions when the risks turned into a success. Large risks can often result in a greater fall. I have seen extremes. I have built a business from scratch from a desk with a phone into a £200-million company.

Finally, he adds:

When I was chairman I was a little bit in awe of what was going on. I’ve been an example of how you can take knocks in life and bounce back. If anything I would like my kids to be proud of me and I would never want the Crystal Palace story to be the last chapter.

Fair play to him: the man has heart.

SOURCES

BBC, 11 October 2000

BBC, 12 May 2008

Daily Telegraph, 8 October 2000

Daily Telegraph, 12 January 2001

Guardian, 13 October 1999

Guardian, 11 November 2006

http://networkersmsb.com

Independent, 28 April 1999

Independent, 31 July 1999

Independent, 25 June 2000

Independent, 2 April 2005

Recruiter magazine, 9 December 2003

Sunday Times, 28 December 2003

The Times, 31 July 2006