Never A Penalty!

The Scotsman today is carrying a remarkable interview with former Rangers and Scotland coach Walter Smith. It is worth noting in a couple of respects.

This is the first interview (of which I am aware) that Walter Smith has given since withdrawing his short-lived bid to purchase Rangers. Since that time, Alex Thompson of Channel 4 News has been trying to get Smith to answer a few simple questions:

– Did you receive payment from any of the EBTs Rangers / Murray Group established to make tax-free payments to employees?

– If so, when did you receive these payments?

– If you received such payments, were they significantly after your employment with the club ended?

– If you received payments long after your employment ended, for what purpose were they made?

Of course, I have no way of knowing if the journalist, Alex Gordon, has ever heard of Alex Thompson or follows my twitter feed. Scottish journalist doing research? After recent reports that 83 Rangers employees had received tax-free payments through the EBT, it would be a fairly obvious line of questioning. That another former manager, Graeme Souness, received a series of payments through the EBT scheme ten years after he resigned also raises some awkward questions. If Mr. Smith did not receive any payments, or if such payments are easily explained, I am sure that he would have welcomed the opportunity to clear any misunderstandings. Oh well. back to you Mr. Thompson.

Walter Smith’s interview can be seen as part of the PR deluge of terrifying stories about the great disaster that will befall Scottish football if Sevco 5088 Ltd is not allowed to enter a team in the Scottish Football League system with instant promotion to the first rather than the third division. This past weekend has seen many such articles and we should get used to more shrieking hysterics as we approach some kind of decision point. (Such is the bureaucratic incompetence within the organisations that run Scottish football, no one is exactly sure when a final vote might take place).

Mr. Smith might be a genius at constructing anti-futbol defences (I do admire his pragmatic approach to coaching), but he is either being disingenuous in this article or is struggling to grasp the administrative details. Smith is reported as saying: “Ten years ago Motherwell went in to administration. Four years ago Gretna went defunct. So, surely the SFA should have put sanctions in place then? That’s why I am saying they have been negligent. Now we’ve got a free-for-all around Rangers and everyone is having a kick at them”

This is a great example of the type of factually incorrect statements that the Scottish media is fond of regurgitating. As the old cliche says- an untruth repeated often enough is eventually accepted as fact. So let us refresh Mr. Smith’s memory.

The SPL introduced the 10-point penalty for going into administration during a season, or being in administration at the start of season, for the beginning of the 2004/05 campaign. Motherwell (and Dundee) were already in administration when the new rule came into effect. Both clubs were able to conclude CVAs fast enough to avoid the 10-point penalties and  to continue the life of the existing legal entities. The same rules that were introduced then have been applied to Rangers. The SFA are a bumbling shambles, but let us assail them for their actual mistakes. It is not the SFA or SPL’s fault that HMRC want to pursue investigations of what happened at Ibrox in the last 11 years and would not agree to a CVA.

The case of Gretna is actually similar to what happened to Rangers FC. Gretna owed its creditors (including HMRC) more than it could pay and the club went into administration in 2008. Unable to fund a CVA that was acceptable, Gretna FC was liquidated. That was the end of the Gretna story. Supporters formed a new club, Gretna 2008 FC and were admitted to the East of Scotland Football League. (Those of us who would accept a Sevco 5088 Ltd team entering the third division are actually still offering this club a huge advantage over every other newly formed team). If only Gretna had Duff & Phelps on the case to promote fictions such as the one that says that a liquidated company lives on so long as its assets are sold as a job-lot rather than individually.

Mr. Smith appears to be deliberately trying to confuse us and drum up sympathy for the new club. The only punishment that has been administered in the Rangers saga was to the old Rangers FC for experiencing an insolvency event. The rule that applied this penalty has been on the SPL books for eight years! (The SFA does not need to have a separate punishment).

As yet, there have been no penalties applied for the oldco Rangers FC pocketing the millions of pounds that were deducted from players’ wages to be paid in tax while other clubs paid their dues.

As yet, there have been no penalties applied for oldco Rangers paying the majority of their players through a mechanism that is, at best, in violation of SFA and SPL rules. I expect that when the First Tier Tribunal (Tax) returns with its findings in Rangers’ appeal of the Big Tax Case, that use of an illegal tax strategy will be added to the list of offences. If found to be using the EBT scheme illegally, it will prove that Rangers obtained the benefit of paying its players with money it did not have. How can Smith complain about penalties that have not been levied yet?

We all know this stuff already, as I am sure, Mr. Smith does too. There is a studied ignorance that has become fashionable in certain circles of late. They pretend to not understand the facts. In this case, Smith is trying to drum up support for the notion that people have been “kicking Rangers while they are down” and “haven’t we been punished enough”?

Let us be fully aware of the truth: The Rangers Football Club plc has not yet been punished AT ALL for its actions of the last eleven years.

There is a simple way for Sevco 5088 Ltd to avoid all talk of sanctions and punishment. Apply for entry to the Scottish Football League third division without claiming that a transfer of the oldco’s SPL membership has taken place. By not forming any ties to the old club, Sevco 5088 Ltd can avoid any historical liabilities. My guess is that all concerned- the SFA, the SPL, and the clubs would breathe a sigh of relief and would be delighted to draw a line under this disaster. However, time is not on their side. If Sevco 5088 Ltd is to field a team of any description next season, an acceptable solution must be found quickly.