FRAUD investigators are to launch a criminal inquiry into one of Britain’s most famous football clubs over multi-million-pound transfer deals involving England stars.

The Serious Fraud Office (SFO) and West Yorkshire police are to investigate the circumstances surrounding the financial collapse of Leeds United including the transfers of Rio Ferdinand and Robbie Fowler to rival clubs.

They will also examine the arrangements under which the Leeds United board, then under chairman Peter Ridsdale, paid an estimated £3m in legal fees for the defence of England internationals Jonathan Woodgate and Lee Bowyer during their trial on assault charges.

The move by the SFO follows a confidential inquiry by the Department of Trade and Industry (DTI) into the running of the club up to March 2003.

During the five years of Ridsdale’s chairmanship, Leeds was brought to the brink of bankruptcy and ran up debts of £79m. It gambled more than £100m on new players but failed to secure lucrative cup or Premiership success.

The DTI has spent six months studying a report by Brendan Guilfoyle, a top insolvency specialist, on the running of the club.

When he was appointed last March, Guilfoyle said his report marked the first time a Premiership club had been investigated with the full backing of the law. “I will look at the conduct of current and past directors to see if they are fit to be directors — the DTI will then decide what the next steps should be.”

The Sunday Times has learnt that last month Patricia Hewitt, the trade secretary, agreed to a request by her officials to refer the matter to the SFO and the police. Whitehall sources said the SFO had now approved a full-scale inquiry.

SFO lawyers are preparing to examine some of the transfer deals carried out by the club before Ridsdale’s departure in 2003. There is no suggestion of wrongdoing by Ridsdale.

One of the deals to be studied is the £18m purchase of Rio Ferdinand, the England centreback, from West Ham in 2000. The transfer was previously the subject of an internal inquiry by the club. Ridsdale was cleared of any wrongdoing when he authorised a £900,000 payment to Rune Hauge, the disgraced agent involved in the bung scandal that engulfed George Graham, the Arsenal manager. Ferdinand became the country’s most expensive player when he was sold to Manchester United for £30m two years later.

Another key deal was the £11m purchase of Fowler from Liverpool at a time when the club was heavily in debt. Fowler was later sold for £6m to Manchester City. However, under the terms of his contract, Leeds continued to pay his £500,000-a-year salary.

Other deals are also likely to be of interest to investigators. Documents seen by The Sunday Times show that in the summer of 2003, after Ridsdale stepped down, the club paid a £200,000 commission to agents involved in the loan signing of Roque Junior, a Brazilian international, from AC Milan.

Separate leaked documents raised questions about the payment of £308,000 a year to a firm set up in the offshore tax-haven of Jersey. The company was said to provide a “football information service” but was a tax-efficient way of paying Mark Viduka, one of its stars and an Australian international, through a company alleged to be linked to him. At the time the deal came to light, Ridsdale said: “It was all cleared by the Inland Revenue.”

One of the other areas likely to be targeted is the payment of an estimated £3m in legal fees for the defence of Bowyer and Woodgate at their assault trials.

In a case that brought disgrace to both players and the club, the pair were charged with assaulting an Asian student. Bowyer was acquitted but Woodgate was convicted of affray and sentenced to community service.

The club agreed to pay the players’ legal costs, apparently in the belief that the money would be repaid. However, it is understood the agreement became the subject of a dispute which has yet to be resolved. There is no suggestion that either player has acted improperly over the costs.

Yesterday Steve Barker, Bowyer’s lawyer, said that all negotiations with the club on the payment of legal fees have been transparent and open. Ridsdale has denied any impropriety. He was unavailable for comment yesterday.

Leeds was once one of Britain’s most successful football clubs. During its heyday in the 1960s and 1970s its star players included legends such as Billy Bremner, Jack Charlton and Norman Hunter.

However, the club’s fortunes took a disastrous turn in the last three years. It was rescued from administration last February but languishes in the bottom half of the Championship with debts of up to £17m.

Last month it was bought by Ken Bates, the former Chelsea chairman.

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