Rangers’ Expert Advice
04/04/2011 37 Comments
Anyone else notice the subtle difference in Rangers’ statements on Friday compared with earlier efforts to allay fears about the tax case? The club’s Chairman, Alastair Johnston’s prepared statement said: “We continue to vigorously contest HMRC’s challenge on the taxation treatment of the Trust and in doing so continue to receive reassuring opinion from tax, accounting and legal specialists.” Compare this to the previous mantra from the club: “On the basis of expert tax advice provided to Rangers, the club is robustly defending the matters raised.”
In any information vacuum, commentators tend to over analyse what information does exists, and I may be guilty of the same thing here. However, I detect a change in tone; a de-emphasis and lesser reliance on having followed “expert tax advice”. I think that many people would be interested in this aspect of the story, so we need to ask the question: “Who gave Rangers their tax advice?” The answer: Paul Baxendale-Walker.
Mr. Baxendale-Walker is a colourful character to put it mildly. Under the pseudonym of Paul Chaplin, he hosts a late-night TV show called “The Red Zone”. He also is the founder and owner of one of Britain’s largest pornography studios, Bluebird Productions Limited. However, he does have a basis to claim expertise in tax matters and is the author of a number of books on the subject, including one with Rangers’ own lawyer for the current EBT case, Andrew Thornhill QC.
Yet there have been clouds over his career and the restless Mr. Baxendale-Walker was arrested on 22 November 2000 and charged with conspiracy to commit fraud by the Serious Fraud Office over his role in the Balfron Group Ltd case. While one of the owners of Balfron Group was eventually convicted and jailed for raiding the company’s pension fund, Mr. Baxendale-Walker fought his charges and eventually won a stay of prosecution. However, the Law Society alleged that Baxendale-Walker had “given a false reference to a bank, which indicated that the person to whom he referred was a person of good standing when he had no basis for saying so”. He was suspended by the Law Society on 4 May, 2005 for three years for “serious professional misconduct”. However, a call to the Law Society to check on his current status revealed that he was ‘struck off’ on the 29 September 2006. This amounts to losing his “license” to practice law. He also became embroiled in a lawsuit with the accounting firm Deloitte claiming that one its employees, Aidan Langley, was telling potential clients that “Baxendale-Walker would advise clients to mislead HMRC“. Deloitte confirmed that the case did not go to trial, but would not elaborate on the nature of any settlement with Baxendale-Walker. While he personally cannot practice law in England and Wales, he is the owner of a law firm bearing his name that has qualified lawyers who can provide advice and execute his strategies.
It is with this background, we turn to his involvement with Rangers FC. A journalist contacted me through this blog this week to provide details of an interview he conducted with Mr. Baxendale-Walker in October last year. In the interview, he admitted that Rangers FC were a client and that he had finished another assignment with Rangers just a few weeks earlier. His discussions with Rangers started back in 1998, but the trusts did not get implemented until 2000. The timing coincides with Sir David Murray’s now legendary bombast during the Succulent Lamb interview with James Traynor which included statements like: “Bring on the next 10 years, there’s more to come for Rangers.” That Celtic had just stopped ‘ten in a row’ and had been taken off the financial life-support system under the leadership of Fergus McCann around the time that the discussions about ‘increased tax efficiency’ started cannot be ignored. That its actual implementation coincides with Martin O’Neil’s revitalisation of Celtic and the 6-2 victory over Rangers in August of 2000 also seems noteworthy.
While Baxendale-Walker defended the advice given to Rangers and expressed confidence in a Rangers victory, when challenged on the suitability of EBTs for distributing payments for contractual obligations, he admitted that: “the Rangers case is the test case“. That the man whose law firm developed Rangers’ EBT strategies is conceding that the club will be the guinea pigs for their own implementation of EBTs should be a cause for concern.
The journalist told me that he had a sense that Baxendale-Walker had delivered a ‘canned-product’ to Rangers and had not been deeply involved in the mechanics of its implementation. He felt that it was unlikely that Baxendale-Walker or any of the staff at his law firm would have been tracking which requests for loans from the EBT were for contractual obligations and which were not. So, it is quite possible that Baxendale-Walker gave perfectly good advice. The questions are over what Rangers did with it.
Aside from the doubts which their own tax advisor’s comments raise about Rangers’ use of the EBTs, one wonders about the quality of leadership at Rangers. Was this really the only lawyer from whom competent tax advice could be obtained? Back to the subtle change in wording in Rangers’ statements in their defence: do they betray a desire to lessen the focus on the original tax advice received? The reality is that Rangers took a legal tax strategy that was suitable for a narrow set of circumstances and forced it into a hole into which it was not designed to fit.