Additional reporting: Sean Delaney

Former Gillingham FC chairman Paul Scally is being sued in the High Court over the £7 million takeover of the club by its American owners.

Brad Galinson and the club are taking legal action, alleging a whole host of financial wrongdoing concerning the League 2 side’s affairs.

The Florida-based property magnate handed over nearly £7 million for a 70% majority shareholding in the Priestfield outfit in December 2022.

While Mr Scally, 69, remained a non-executive director following the takeover, he announced he was stepping back from the day-to-day running of the club.

However, last October, after 29 years’ involvement and despite still retaining a 30% stake in the club, he was voted off the board by shareholders amid a dispute with the new owners.

All links were severed with immediate effect, with the club claiming a “number of matters in respect of Mr Scally’s conduct came to light which gave rise to concerns”.

This included his alleged conduct as a senior member of management of the club, his treatment of staff, and his handling of the Gills’ resources and assets.

Now, more off-pitch drama involving the former chairman is set to unfold in the High Court as both Mr Scally and his UAE-based Paul Scally Management Consultancy (PSMC) firm face further allegations related to the sale of the club and his conduct.

According to documents submitted before the Commercial Court division, Mr Galinson claims the business was not as it had been represented in the sale agreement.

During 2024, his company - Up The Gills (UTG) - is said to have uncovered issues allegedly concealed or “misrepresented” during the sale and investment transactions.

In simple terms - the true nature of the club’s financial affairs had not been disclosed.

In particular it’s claimed Mr Scally breached assurances given in the Share Purchase Agreement (SPA) - a legally binding contract that governs the sale and transfer of shares in a company - and flouted his director duties for “personal gain”.

According to documents submitted to the High Court, money intended for the club is alleged to have gone on personal travel expenses, benefits for the Scally family and associates, and payments to companies linked to Mr Scally.

An undisclosed sum of cash from the 2020 government Covid furlough scheme is also being questioned as part of a probe at the club.

It’s alleged players “continued practising and training” between September 2020 and May 2021 and played a full schedule of football matches in the EFL League Two, in breach of a declaration to HMRC that such employees were furloughed.

Mr Scally stands accused of directing around 20 backroom staff, including the club secretary, press officer, and stadium manager, to “not stop working” despite being furloughed.

It’s also alleged some staff were “encouraged or required to work for the club on the pretence that they were volunteering for the club”.

Also under scrutiny is Mr Scally’s dealings with Michael Anderson, the former vice club chairman who was removed from the board of directors in August 2019.

The businessman is accused of defrauding the US military healthcare system of nearly $6 million, leading to unsuccessful attempts to extradite him across the Atlantic.

It is claimed in court papers that the full value of outstanding loans owed by Mr Scally to Mr Anderson were not disclosed under the SPA.

It’s understood these date back to a 2017 claim taken in the High Court by Mr Anderson against Mr Scally and the club for three undisclosed loans.

This is said to include a £50,000 loan to be paid back for midfielder Bradley Dack in the event he was sold.

He was transferred to Blackburn Rovers in 2017 after five years at the Kent club.

The midfielder, who is married to reality TV star Olivia Attwood, returned to the Gills in August last year.

It is also alleged certain employees were not properly enrolled in a pension scheme to make the required contributions, therefore creating liabilities for the club.

The court documents also highlight allegations around Mr Scally’s personal conduct, including claims of harassment, victimisation and discrimination.

Correspondence between the club and accountants and tax advisors between January 1, 2016 and June 21, 2024, have been requested.

Mr Scally and PSMC deny any wrongdoing, including claims they breached warranties in the sale agreement and made fraudulent representations.

The former chairman’s defence denies he breached his director duties or that he acted improperly.

It argues any claimed losses are a matter for expert evidence and denies the new owners relied on fraudulent statements when they invested.

If Mr Scally is found liable, he could face paying substantial damages, or even charges of fraud to be heard in a criminal court.

Upon reviewing the case file, Justice Andrew Henshaw, sitting in the Commercial Court, indicated he was minded to transfer the case to the London Circuit Commercial Court (LCCC), pending representations from all parties.

The LCCC typically looks at claims above £1 million but below £7 million.

The next hearing is listed for January 22.

Mr Scally and Mr Galinson did not respond to requests for comment.