Hearts in administration: Ex-director speaks out

Liutauras Varanavicius with Vladimir Romanov. Picture: PA
Liutauras Varanavicius with Vladimir Romanov. Picture: PA
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VLADIMIR ROMANOV was eyeballed by a Lithuanian director of Hearts eight years ago and told his financial plans were disastrous. Yet he carried on regardless.

Liutauras Varanavicius today revealed his row with Romanov which led to him quitting the Tynecastle board and said the owner was warned in 2005 that the level of borrowing at Hearts was unsustainable.

Varanavicius voiced concerns along with then-chairman George Foulkes and chief executive Phil Anderton, but their pleas were ignored. Varanavicius stepped down from the Hearts board because he could no longer work with Romanov’s flawed business plan, which centred around borrowing money rather than sourcing investment. Foulkes also resigned over the sacking of former manager George Burley, whilst Anderton was sacked.

Administration is now upon the Edinburgh club as a result of years of financial mismanagement. Debt of £25million is compounded by a cash shortfall which leaves a five-figure sum of PAYE tax and players’ wages for June unpaid. Varanavicius explained how he tried to prevent the senseless overspending in 2005, when many players joined Hearts on wages of £10,000 a week or more. His stance prompted an argument with Romanov in which he was effectively told to mind his own business.

“It was a major disagreement with the owner about how the club should be run. That’s why I decided to quit,” he told the Evening News. “It was not only to do with funding. I only understand business practice when you have a break-even. If you want to invest, you should find investment money and that was my firm stand. It was not welcomed. Mr Romanov told me: ‘You shouldn’t count my money.’ He wanted me to leave him to it.

“I left the group after that so it was one of the arguments we had. You see where Hearts are now and I was trying to prevent that. I was not alone asking the questions but I was almost alone. Others on the board, like the locals, were asking the same questions. However, this miracle of money pouring from heaven was very attractive for most of the people.”

Varanavicius and his fellow directors agreed to aim to break even during their first year in charge at Hearts following Romanov’s takeover. However, it quickly became apparent the landscape surrounding the club was changing dramatically. “I was on the board for the first year under Romanov and the only target in the beginning was to break even,” continued the Lithuanian.

“We worked towards that goal and we were very near to reaching that. It was a target set by the board. Then people changed on the board and the chief executive was also changed. That’s when the target changed. When I was on the board, our only target was to break even.

“I don’t know what the main problem was. I think the club had very good prospects. All the money should have come from investment, not from borrowing money. I think that is clear. The money was not coming as investment, the money was coming as loans.”

Varanavicius went on to become president of the Lithuanian Football Federation, a role he held until last year, where he had another altercation with Romanov over FBK Kaunas and their demotion to a lower league. He continued to keep abreast of developments in Gorgie as finances tightened and Ukio Bankas went bust while parent company Ukio Bankas Investment Group has asked to be declared insolvent.

Hearts petitioned Edinburgh’s Court of Session on Monday to appoint KPMG as administrators after funds completely dried up, but main creditor Ukio Bankas want their own people to oversee the administration process.

“I have seen several articles written about Hearts here in Lithuania,” said Varanavicius.

“I’m not involved in the process but I think the debt will need to be written off and the club can start from scratch. I think that’s the only way.”

Having worked closely with Hearts and seen the depth of feeling for the club, 
Varanavicius – a former chairman of Ukio Bankas – is certain the club will survive in some shape or form, although he stressed there is no guarantee of emerging from administration safely and cited the Rangers case last year as an example of what can potentially go wrong. “Sure, I have sympathy with the Hearts supporters and I understand them very well. The example of Rangers shows what can happen when a club has financial problems.

“We can say ‘sh*t happens’ but in reality everybody should go through some kind of procedure to reach level ground and then you can start doing business again. I don’t know what will happen now but the club will need to try and recover their position.

“Hearts definitely have the potential to recover with all the love the supporters have for the club. The fans will have an opportunity to become part of the new make-up of their club. I hope that will be a good thing and I hope Hearts never in the future will have to go through this again.”