City made a bid for Gago last week and the midfielder looked set to join the Premier League side.
But instead City boss Roberto Mancini tried to sign Parma ace McDonald Mariga, but he was refused a work permit.
Just hours before the transfer window closed on Monday, they tried to salvage a deal for Gago.
“They had nothing prepared, not even one document signed,” Valdano told El Pais.
“They had not reached an agreement with the player and they would have had to have done everything in 40 minutes.”
