A recent audit of the Chattanooga Football Club shows unauthorized payments totaling more than $138,000 were made to former general manager Sean McDaniel, who resigned in July and joined a rival club.
The payments were $104,392 in 2017 and $34,041 in 2016, according to the report.
The report also says two loans totaling $64,284 with interest rates of more than 25 percent each were taken out with cloud-based lender Kabbage while McDaniel was with CFC. Neither was approved by the CFC board.
Sean McDaniel"The two notes payable to Kabbage were negotiated by a stockholder without approval of the board of directors," the audit from local accounting firm Henderson, Hutcherson & McCullough reported. "The loans were negotiated based on material misrepresentations by the stockholder and the funds were used for unauthorized purposes. As such, the company is disputing the validity of the notes payable."
In a statement to the Times Free Press on Friday, McDaniel disputed claims of wrongdoing and said the report doesn't tell the full story.
"Inaccurate information has been shared regarding my work with a previous employer," McDaniel said. "This matter will be resolved privately."
He also would not disclose why the extra money was taken out.
CFC officials said they are aware of the discrepancy.
"In August of 2018, we identified some financial issues and the board appointed Sheldon Grizzle as interim GM to help clean things up," CFC chairman and co-owner Tim Kelly said in a statement to the Times Free Press Friday.
It is unclear what action CFC might take against McDaniel now or in the future.
McDaniel is now president and general manager of the Chattanooga Red Wolves Soccer Club, a new professional soccer club that launched in 2018.
The Red Wolves are recognized as Division 3 of U.S. Soccer and have built an experience-filled team to compete in its inaugural season of USL League One. Since the club's arrival, the question of whether both clubs can survive in the local market has been debated.
The audit report was included in reports filed with the U.S. Security and Exchange Commission for CFC's sale of 800 shares to the public last Thursday. The SEC filings also show the club made a combined $27,530 in profit over 2015 and 2016 before suffering a loss of $132,161 in 2017.
In the eight days since CFC opened shares to the public, nearly 1,600 investors have raised $433,125. If CFC hits its target goal of $1 million, the proceeds will be distributed as follows: 50 percent player payroll, 20 percent marketing budget, 15 percent travel budget, 10 percent international friendlies (exhibition matches), and 5 percent Wefunder Intermediary fee for the stock issue.
"We closed 2018 in a strong financial position thanks to a few new local private investors," CFC chairman Tim Kelly said. "We also look forward to even stronger support with our many new public investors, who span across the world."
The audit did not report profits or gains from 2018 for CFC, whose board voted on Nov. 8 of last year to move all assets and liabilities from the company to Beautiful Game Inc.
As tensions continue to rise between the two soccer clubs in town, each remains driven to move their product forward in Chattanooga.
"At this time, our priority is building excitement for the Chattanooga Red Wolves' inaugural season and laying the foundation for a legacy that makes Chattanooga proud," McDaniel said. "I would also like to acknowledge the tremendous support from our loyal fans throughout the Southeast."
With rosters being finalized at the moment on each side in preparation for the season's start in February, no immediate action will be taken in regard to the financial report, according to the CFC.
"We are focused on our future, which looks increasingly bright," Kelly said. "Anything else we consider an unnecessary distraction at this point."
Contact staff writer Patrick MacCoon at pmaccoon@timesfreepress.com. Follow him on Twitter @PMacCoon.