An agreement that saw an American company “loan” Swindon Town £100,000 was a “sham” and was actually a “deposit” to purchase the club, a court has heard.

Swindon Town FC is currently defending itself from a winding-up petition brought by AC Sports Wiltshire LLC, also known as Able.

It claims the club should have repaid the money, agreed by former chairman Lee Power in November 2019.

Mr Power had agreed the £100,000 loan to reimburse himself after he was forced to pay staff wages, Adam Deacock, on behalf of the petitioner, had said.

But in a virtual hearing at the Insolvency and Companies Court in London on July 7, representatives for the club hit back and claimed that the deal was a “sham” and actually a “non-refundable deposit” to place a bid to buy the club.

Deputy ICC Judge Stephen Baister will consider whether the matter is a “triable issue”, and hand down his ruling in the next ten to fourteen days.

Earlier, he had been told by Mr Deacock that the loan, signed off by former STFC chief executive Steve Anderson at Mr Power’s behest, was to pay staff salaries and other overhead costs, but must not be used to pay other creditors.

But in February the following year, when the loan was due for repayment, Mr Power called Bill Keravuori, Able’s boss, to say that the club’s financial position had worsened and that he couldn’t repay the money.

“It was agreed the money could be treated as a deposit against a purchase,” Mr Deacock told the court. “It was also agreed it wouldn’t be deemed repayable in the event [Able] pulled out, but it wasn’t agreed if the company couldn’t or wouldn’t sell, it could keep the money.”

Clem Morfuni was to later buy the club, despite Mr Power wanting to sell to Able, he added.

Representing the club in the four-hour hearing, David Eaton Turner said that the agreement wasn’t followed to the letter as the loan had been used to repay Mr Power for the payment of the ages, who would be considered a creditor.

He continued: “We are faced with the situation a loan supposedly made to the company was adopted by Mr Power for his own purposes. It came in and went straight out again for purposes we don’t know of.”

Mr Eaton Turner then moved onto a statement made by Mr Keravuori, in which he said “preliminary due diligence” began over purchasing the club in November 2019, and was agreed in early December. The club paid £100,000 to progress this.

“We aren’t talking about a different £100,000,” he said.

“This casts serious doubt about what is being said about the loan or the deposit. This is the clearest evidence of what the £100,000 went to.”

But he added that the court was “putting an impossibly high onus on the company” to provide documentation, considering Mr Morfuni and his team “found the cupboards bare” when they took over.

Judge Baister is not deciding on the petition at this stage, simply whether “sufficient doubts” have been raised by the club.

Mr Eaton Turner claimed in his submissions that a winding-up petition was not suitable for this dispute, adding there was improper motive and that the purpose of the petition was “to get control of the club”.

But Mr Deacock hit back: “This is the only way we’re ever going to be paid.

“[£890,000] has been pumped into the company to pay everyone bar us.

“The fact of the matter is they have picked and chosen who they wish to pay.

“We as creditors wish to secure our rights, because we have an undisputed debt.”