What Now For Rangers?

The announcement that HMRC would oppose the CVA proposal for rescuing Rangers FC is just a few hours old, and I thought that a quick post was due. However, I do not have any new information. I just wanted to move this blog-page along.

As it starts to sink in that The Rangers Football Club plc is now destined to end in corporate failure and liquidation, the questions are coming thick and fast as to what happens next.

The simplest answer is that there are too many permutations to provide a certain path forward. HMRC had previously indicated that they would want Duff & Phelps replaced by BDO as liquidators. I expect that they will want ‘clean hands’ from this point on and that there will be fresh faces atop the marble staircase within a few days. However, it is possible that the liquidators will want to proceed with an asset sale to Green. Other bidders may emerge (or reemerge).

Given the tiny amounts that would be raised in a public fire-sale, it does appear that an asset sale to a newco is almost certain. So a new organisation purporting to represent the legacy of The Rangers Football Club plc will emerge.  However, if they are to be playing in any league next season the asset sale will have to be unopposed. If there are legal challenges to a sale, we could see at least one season without any Rangers-type team.

The focus will soon turn to the SFA and the SPL. The ruling bodies of professional football in Scotland have the responsibility to determine whether a newco attempting to transfer Rangers’ league ‘share’ and SFA membership will be allowed to join the top flight of the Scottish game- and if so- when. What must be clear is that any organisation that has bought another club’s share / membership must also face the punishments that awaited the old club. To allow a newco-Rangers to ditch its legacy responsibilities will be to set an expectation that others can do likewise. The battleground is now going to shift and we can expect a massive effort to convince us that an SPL without Rangers would be unbearable.

A Permanent Embarrassment And An Occasional Disgrace

The late, great Ian Archer wrote the famous words in the title above for an article in The Glasgow Herald in October 1976. Rangers supporters had just rioted in Birmingham following a friendly with Aston Villa. Back then, football clubs generally were shamed by the actions of fans. I doubt that Archer could ever have imagined the scale of boardroom malfeasance that now surrounds Rangers. The revelations of how the club funded its success in recent years make a mockery of our game as a fair sport. The damage done goes far beyond mere trophies. Almost every other club tried to keep pace with Rangers by throwing fortunes at often second-rate foreign players while ignoring the need to develop domestic talent.

When making claims about the damage created by Rangers previously, some accused me of exaggeration. Yet after yesterday’s events- including the court drama that overturned the club’s 12-month signing ban- few observers could avoid drawing the conclusion that Rangers are now simply a disaster for the Scottish game.

Sporting integrity has been shredded. Speaking of which- have Rangers complied with the SPL’s demands for access to the commercial documents regarding the ‘unofficial payments’ issue yet? If not- why not? There comes a point where you have to start wondering what documents were destroyed by those “Shred It” machines for which the club has not yet paid.

Scottish football creditors will get almost nothing in the proposed CVA. In the choice of paying football creditors to limit punishment from the SFA & SPL versus the certainty of HMRC refusing to sign off on the deal, Duff & Phelps have chosen to screw the clubs who sold players to Rangers the past year or so.  They will never get the money they were promised. (More on the HMRC’s conditions for a CVA later).

All manner of underhand methods appear to have been a routine part of putting in a shift at the top of the marble staircase for at least a decade.

And now, just when things seemed as if they could not get much worse, Rangers have invoked the threat of mutually assured destruction for the SFA & SPL. As has been well documented elsewhere, going to court to get the SFA’s 12-month registration ban thrown-out places all of Scottish football in jeopardy.  FIFA and UEFA will not take this lying down.

In all of this pandemonium, there has not been anything vaguely like an apology from the club or the individuals responsible for leading our game to the precipice. There has been nothing except snarling arrogance plus a stream of veiled threats and intimidation from people who should really know better.

Throughout this entire saga, I have not wanted Rangers expelled from Scottish football. I did not think that it was even remotely possible and I would have questioned whether it would have been in the best interests of the game. I did want an acknowledgement of what happened. I did want meaningful punishment. However, there comes a point where enough is enough.

Is the SPL such a roaring financial success that its current formula must be preserved at all costs? No. Is it possible that with the dead-weight of Rangers’ boots lifted from the Scottish game that attendances at many other clubs will rise along with their fans’ hopes of actually winning something? Absolutely.

Those who argue that Scottish football cannot succeed without Rangers have failed to quantify this fear-mongering. Yet posters on blogs like this one have demonstrated- in numerical detail- just how few additional home fans need to start attending at most clubs to wipe out the benefit of Rangers’ away support. The TV deal? It is not as if it delivers fabulous riches to any club as it stands.  Clubs can trim costs (as they should) and would survive fine in the short-term.  In the medium and long-run, there is every reason to believe that Scottish football would be revitalised. The last time Rangers were in “crisis”, Scottish football thrived- with Aberdeen and Dundee United regularly sharing the spoils, financial as well as sporting, with Celtic during the early and mid-1980s.

There comes a time when Scottish football must act to prevent further damage. In doing so, it has a chance of making the stain of embarrassment less permanent. Of the options available, a one year ban from all competitions would seem to be a starting point for considering apt punishment. The next penalty down the list of official sanctions- exclusion from the Scottish Cup- would be far too lenient for a club that appears to have completed the entire 2011/12 season without paying any PAYE or NIC. Other clubs had to cut costs and make tough decisions to get through the year. Other clubs had to take roughly half of their staff budget and hand it over to HMRC. Even in administration, Rangers got to avoid cutting their playing squad by screwing the British taxpayer over yet again. Allow them off with a wrist-slap and many fans will just see Scottish football as a form of professional wrestling with Rangers FC as the scripted winner.

Thank you- all of you!

If last night was presented in a script, I would have thrown it back at the writers as being too contrived and corny for words.  Just minutes before the BBC broadcast “Rangers- The Men Who Sold The Jerseys” the @rangerstaxcase twitter feed exploded with activity: this blog had won the 2012 Orwell Blog Prize.

I had been asked to prepare a statement in the event of winning and the following was read out by the writer Sean Dodson:

Winning the Orwell Blog Prize is both a tremendous surprise and a great honour. The quality of writing from the other short-listed candidates was just so high that I did not really think that my blog stood much of a chance.That rangerstaxcase would win a prize named for George Orwell is particularly apt. Orwell created the lexicon for fighting back against the interests of powerful individuals and a co-opted media. Over the last decade, prominence and wealth were able to silence the story of what was really happening within Rangers FC. The story of how a single businessman could bend the banking, football, and newspaper businesses in a small country to his will is a microcosm of the dangers lurking within all free societies.

The blog answered a need for the facts when it was obvious that the Scottish media had no interest in taking on the vested interests who wanted this story kept under wraps. I would like to thank all of those people who have contributed to the debates on the blog and I am especially grateful to those brave individuals who have made it possible for me to tell the truth about this story.

Tonight is important for the Rangers tax case in two major respects. In addition to the Orwell Blog Prize, BBC Scotland will broadcast a documentary tonight entitled: “Rangers- The Men Who Sold The Jerseys”.

 

A project that was born out of frustration at the Scottish media’s refusal to investigate this story comes to an end with the finest investigative journalist in the country, Mark Daly, laying out the facts on television for the whole country to see. To watch this project achieve its primary goal and to receive this award on the same night is truly something special.

Thank you to the judges, to the other entrants and shortlisters, to Alex Thompson at Channel 4 News, and to my long-suffering family who have provided tremendous support while working on this project.

 

Speak up: individuals can make a difference.

I want to start naming names and thanking the best contributors to this site. However, there are just too many of you and I dread the idea that I would leave someone out. As most of you write on here under pseudonyms anyway, it is best to avoid a long Oscar-style list of names. You all know who you are.  This blog would not have had any impact without the debates and discussion that you all contributed so much towards. Thank you.

Doncaster Dooms SPL

Neil Doncaster’s intelligence-insulting interview on SSN this week places another few pieces of the jigsaw together as to how plans are shaping up to deal with Rangers’ corporate failure. Other blogs have already dissected this interview very well, so I will not dwell on the details. Instead, we will look at what is shaping up as the plan “to fix” Scottish football.

As we have discussed for several weeks, Doncaster wants Rangers in the SPL regardless of how much they owe HMRC or other football clubs. He wants them in the SPL regardless of whether cheating on a massive scale has occurred or not. Doncaster’s attempt to bluster his way to getting acceptance for the idea that a CVA and a newco-Rangers are the same thing is just stunning in its gall.

Doncaster is a key player in this dance. Therefore, I assume that he has been made aware of the Duff & Phelps plan. His interview this week was simply a crude attempt to blunt the impact of any accusations that might be contained within the BBC Scotland documentary to be aired on Wednesday night at 8pm. Either through an incredible degree of cynicism or playing the role of useful idiot, Doncaster’s cheer leading is key to a plan that will do more to destroy the Scottish Premier League than any loss of income from the temporary absence of a Rangers-type club could ever do.

One must assume that Doncaster is actively delaying the report on the dual contracts. It would take less than twenty minutes for any lawyer to see that there is a prima facie case against Rangers FC. Demonstrating a prima facie does not require looking at every piece of evidence or even getting close to providing proof. It is literally a check that “on the face of it” there appears to be something behind the allegations. Doncaster denies that there is a “go slow” instruction on this investigation. In the fullness of time, it will become clear that something is amiss.

The law firm of Harper McLeod have been hired by the SPL to investigate if a prima facie case against Rangers on the dual contract issue exists. Let me help Harper McLeod out a little.

On 28 July 2001, Rangers played Aberdeen at Pittodrie. Rangers won the game 3-0. Making his league debut that day was a German who would later go on to become General Manager of Bayern Munich, Christian Nerlinger. He also scored one of the goals. That game against Aberdeen marked the first game where the EBT scheme that is the subject of the ‘Big Tax Case’ interfered with the Scottish Premier League.

Harper McLeod should take a look at Nerlinger’s contract filed with the SFA. Next they should obtain Nerlinger’s contract documents and payment history from Rangers FC (IA)’s administrators. Comparing the contract to the payment history alone will expose payments of well in excess of £1 million that are not listed on his SFA-registered contract. There is your prima facie case, Mr. Doncaster. There is no need to investigate any further to demonstrate that Rangers have a case to answer and that an independent inquiry is required.

It seems clear that Doncaster just does not care about the rules. He just wants a Rangers in the SPL next season. My thoughts on how this will most likely end are laid out below.

Talk of a CVA is just window dressing to appease the less realistic element of the Rangers support. Whyte can pledge his shares in the club for £2 safe in the knowledge that a CVA is not going to happen. (Strictly speaking, Whyte himself can always scupper a CVA).

We are heading for a newco of some description. The key point, Mr. Doncaster, is whether Craig Whyte’s floating charge is still meaningful. If it is (and people with more advanced legal training than me cannot find a consensus on whether it will be) Whyte will be content to let this drama unfold. His friends at Duff & Phelps will continue to potter about while reality continues to sink in with the wider Rangers support. In the end, Whyte will play his trump card and call in a receiver who will sell all of Rangers’ assets to a newco for a sum that will go entirely to Whyte- stuffing all of the other creditors. A plan to achieve this outcome would explain a lot of Duff & Phelps’ actions over the last few months.

If Whyte’s floating charge does not support a legitimate debt (and I expect some court drama over this point), then Rangers’ assets will be sold to a newco and the proceeds divided among the creditors. They will be lucky to receive 5p/£ even in this path, but they would not get more in a CVA anyway.

A newco of some form is inevitable. The liquidation of The Rangers Football Club plc is also inevitable. The debate is not over whether the newco will enter Scottish football, but over how. If Doncaster’s dream comes true, and newco-RFC just start playing in the SPL next season without any penalties, then Scottish football is dead.

There are many other possible formulae for a fair outcome. Many Rangers fans want the newco to start in SFL division 3 and play their way to their place in the SPL like anyone else. It is also possible to have the newco pay an “entry fee” over a number of years that would serve as a deterrent to others. It would also serve, to a degree, as compensation for the carnage wrought on the Scottish game by Rangers during the years of Murray’s excesses. There are lots of ways to arrive at a fair outcome. However, the money-men who might own newco-Rangers will not want that and Neil Doncaster has their interests at heart. Sport? Fans? Mere irritations.

Miller Industries

After the Scottish media’s highly successful enquiries into Craig Whyte last year thwarted a disaster for a Scottish institution, Bill Miller’s elevation to ‘preferred bidder’ in the two-horse race to become Rangers’ next owner merits a closer look. On the theory that companies reflect the personalities of their founders, I thought that a check on Miller Industries Inc. might be instructive. A quick analysis of their regulatory filings makes for dull reading. That lack of interesting material alone should be a cause for celebration within the blue sections of Glasgow. In the mundane and orderly details of an unexciting business like towing equipment, there could not be a more stark contrast between Miller and Whyte.

Only last night was I told that Miller only owns 3.35% of Miller Industries, Inc.’s outstanding stock- a stake worth US$5.8m. That is not a lot of money and it fueled my curiosity. However, after just a little digging, I found that in just in this calendar year so far, he has sold about US$1.4m is shares and since June 2011 he has liquidated US$6.8m of his holdings in the company that bears his name. There are many reasons why an executive insider might want to reduce his shareholding in a business he runs- many of them personal and nothing to do with fears for the future or anything negative. Miller’s stake in MLR has been diluting ever since he sold 40% of the company in an IPO in 1994- a move that cleared company debts and netted Miller about £5m.

When Craig Whyte swept on to the Scottish football stage, we were bombarded with ripping yarns about his “off the radar” wealth and billionaire status from the cream of Scotland’s sports journalists. Contrary to hack-mythology, Whyte’s background had not been expunged from google. In fact, just a few hours investigating Craig Whyte’s background were enough to get Celtic supporting observers into a frenzy of anticipation of what was to come. The Scottish sports media appear to not have learned much from this experience. A campaign to blindly back Bill Miller is gathering pace despite few knowing anything about the man or why anyone not imbued with a taste for Scottish football would seek to acquire one so late in life.

On Miller being designated ‘preferred bidder’ by Rangers’ adminstrators, it was clear that the task of establishing the facts would once again rest on a handful of “internet bampots”. So I took a first-pass at researching Miller Industries, Inc. (MLR: NYSE). In summary, those hoping for a repeat of last summer’s hilarity will be a bit disappointed. So far, it seems unlikely that we will find a string of empty shell companies and boiler-room operations. Miller Industries, Inc. appears to be a well run, normal business. In the last few years, on the back of the largesse of the US government, it has grown revenues and profits substantially. It endured the economic collapse of 2007/08 without reporting a loss (no mean feat for any metal bashing firm during that period). Crucially, Miller Industries slashed costs and overheads to meet adverse trading conditions early enough to avoid getting swept away in the financial crisis. Today, the company is debt-free.

This company survives in a tough market that is about to get a lot tougher.  According to the company’s 2011 annual report, they do not anticipate a continuation of the US government spending on all manner of towing equipment. Uncle Sam accounted for 27% of their business last year. The prospect of losing such a massive end customer explains why the company’s share price is so low (finance jargon warning: $15.75 per share, a trailing-year P/E of 7.5 which is about half the price of the US market as a whole just now). However, overhead appears to be under control and while profits will almost certainly take a dive in the coming couple of years, this looks like a business that is used to expanding and contracting to suit demand. It should weather any downturn.

If Miller does complete a purchase of the assets of Rangers FC (In Administration)- and this has more than a few obstacles to cross before it is a done deal- Scottish football could do worse than have rational and conservative manager at the helm of what will certainly grow to be one of the biggest, if not the biggest, clubs in the land. Scottish football needs a clean break from the varying degrees of irresponsibility that began with David Holmes’ “Souness revolution” in 1986. If Bill Miller is the man to bring détente to the financial arms race that has killed Scotland’s ability to develop its own talent, great. However, there is one blindingly obvious question not getting any air in the media: why on earth would he want to?

Running any Scottish football club conservatively will not be fun or glamourous. If you invest £11m, you will be very lucky to just get your money back. Most Rangers fans (Celtic fans too for that matter) care nothing for the virtues of financial restraint. Raised on Laudrup and Gascoigne, the crowds at Ibrox are unlikely to give much time to a management team that cannot beat “the other lot” year in, year out. If success is to be measured in terms of a solid balance sheet, owning Rangers will be a thankless task.

Motivations for wanting to join the Scottish circus will either be a life-long love of a particular team or it will be financial. Presumably Miller sees a money-making opportunity that few others see. In the absence of an asset bubble or finding a fool willing to part with a lot of money for your shares, profiting from such an investment will take the form of creating annual earnings that exceed your cost of capital. This will not be the stuff that fan dreams are made from. It will mean patient youth development and lots of failed efforts to blood young players. It will mean selling stars in their prime rather than re-signing them on lucrative contracts. Even then, it is hard to imagine that the profits taken home by any club owner will justify the financial risk and effort involved. There are much easier ways to make money than in the Glaswegian goldfish bowl.

Why are the media not grilling Miller on why he would want to be involved at all? How did he hear of the Rangers opportunity? What is his exit plan? (I mean no slight on the financial prospects for newco-Rangers in particular. Celtic are also an investment for the emotionally attached rather than a safe bet).

Miller is obviously not a poor man. Yet, he does not appear to have the f-you money required to casually drop £11m on a strange game in a small far off land.  One would imagine that someone would require 10-20 times this amount in net worth before you could consider risking £11m in cash in such a speculative venture. I have seen no evidence that Miller’s personal wealth comes close to £100m (but I have not finished looking). Rich? Yes. Gamble on a foreign sports club rich? I am not so sure.

In the absence of convincing answers to these questions, suspicions about the real motivations behind Miller’s move will continue unabated. Some think that this is an attempt to pressure Whyte to accept a nominal offer for his shares in a CVA before they become worthless. Other theories point to Miller being a front for someone else. As with Whyte a year ago, when the basic story just does not make sense people should keep asking questions.