By Will Kennett, LLM, University of Limerick, Republic of Ireland
The Todd Boehly chairmanship of Chelsea FC has ended, with Clearlake, a leading global private investment firm, consolidating their ownership of the club by buying him out.
Boehly’s business partner Mark Walter’s shares have also been acquired by Clearlake. Both men’s shares – about 12.8% each - reportedly cost Clearlake close to £1 billion (around €1.16 billion), which values the club at approximately £5 billion (around €5.83 billion). Swiss billionaire Hans Wyss also held a 12.8% share but remains “an important stakeholder and partner in the ownership group”, according to the club’s statement.
Clearlake were already Chelsea’s majority owners and running the club day-to-day, so it remains to be seen if these transactions will face scrutiny by the UK Independent Football Regulator (IFR).
Should the club name a new chairman or add persons of interest to the club’s board who are not already involved, that would require approval from the IFR. The IFR can act against incumbent owners if it deems it necessary, a possibility at Sheffield United FC, for example. See my earlier Post on the SLT website.
A potential avenue of exploration, however, may open relating to Walter.
Class Action
Walter, who also agreed to sell the Los Angeles Lakers this summer, just a year after buying the franchise, is facing a class action lawsuit relating to his insurance companies’ annuities schemes. They have allegedly invested significantly in his other businesses, enabling his purchases of various sports teams and increasing his wealth, along with companies hiding evidence of US Federal investigations until after a cooling off period expired.
This is not the first time Walter, and his insurance businesses have faced action of this kind. A 2014 class action suit, in which Boehly was also named, was dropped a day later, and a Kansas court threw out a 2019 case based on similar claims.
In addition, the insurance companies are under investigation by US Federal prosecutors and the Securities and Exchange Commission (SEC) for self-dealing concerns. By law, regulators must be notified about affiliate investments by insurers. ‘The Athletic’ magazine reported that whilst some money invested by the insurers in affiliated companies was accounted for – 3% - the true figure was closer to 42%. This was described as an internal labelling error, to the tune of approximately US$17 billion (around €14.81 billion).
Questions could arise if these mislabelled funds were used to finance Walter’s purchase of Chelsea FC. Adam Silver, NBA commissioner, "found no red flags”, when Walter purchased the Lakers last year for US$10 billion (around €8.71 billion), with the US$12.5 billion (around €10,89 billion) sale currently awaiting Board of Governors’ approval. He has owned the Los Angeles Dodgers since 2012, in a consortium with Boehly amongst others.
The purchase of Chelsea FC was cleared in 2022, following Roman Abramovic being sanctioned relating to the Ukraine conflict and effectively forced into selling. A Report in ‘The Guardian’ newspaper suggests that Walter’s legal predicament accelerated the separation between him and Boehly from Clearlake and Chelsea FC, although there was already an appetite on both sides for it to happen eventually.
IFR Action?
At this stage, it is unlikely to force the IFR into action. As Clearlake is already in the boardroom at Chelsea and making minimal (if any) changes outside Boehly’s departure, the IFR does not seem to have anything to investigate – at least at present.
However, should any SEC/Federal investigation from the US into Walter cross the pond and find things of concern relating to Chelsea FC, that might necessitate IFR intervention. If Walter and/or his companies are found guilty of what has been alleged, it should disqualify him from future football club ownership in England.
The IFR may have additional questions for Chelsea FC when it comes to issuing the club with its operating licence as a consequence, although these issues primarily concern Walter, who is no longer in the picture.
It remains to be seen what happens with the class action suit filed against Walter and his insurance companies. It is unclear if the annuities’ funds are or were invested in Chelsea as an affiliated company. The investigations in the US may well answer this point in the future if it remains unaddressed by the ongoing legal action. Accessing the findings of any investigation may be something of interest to the IFR, albeit unlikely to be given freely.
Conclusions
This situation again raises problems with the previous self-governance structure of the English game.
Walter and his companies were subject to US Federal investigations before purchasing Chelsea FC, yet he was cleared to purchase a significant stake in a top English Premier League club.
Given Clearlake were involved in the purchase from Abramovic with Boehly and Walter, there is the possibility that the IFR may have questions for them.
The English Premier League may also face some questions from US Federal investigators, should they have reason to believe that Chelsea FC received funds from annuities in the US.
For Clearlake and Chelsea FC, the hope is now that Boehly and Walter are no longer involved, any investigations would be at an arm’s length and unlikely to lead to any sporting sanctions.
In the event of Walter being indicted by the SEC, issues or sales could be explored for the Dodgers and his other sporting ventures, including Cadillac’s F1 team and the Professional Women’s Hockey League.
The IFR may then act, disqualifying Walter from future ownership positions in the English game. He is selling assets rather than adding to his portfolio; this may end up being an inefficient use of the IFR time and resources.
The likely course of action: play on for Chelsea and Clearlake, pending an SEC/IFR check for a possible red card in the buildup by Walter.
Of all the investigations Walter is facing, the IFR would probably be the least of his worries!
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