Rangers FC – Ready For A Fall?

By on Sep 15, 2011 in Finance, Latest, Scottish Football | 14 comments

The story of a £2.8m tax liability (over)due for payment by Rangers Football Club ought to be a straightforward one. Either the club owes the money or it doesn’t. And it says it does. However, if Rangers FC does owe the money, and publicly admits as much, yet still does not pay it, there must be a problem with their ability to do so. And if Rangers FC are struggling, at a time of year when football clubs are at their cash-richest, to pay it, there must be a general – and serious – financial problem at the club. Either that, or there is a complex conspiracy between the Scottish media, Her Majesty’s Revenue and Customs (HMRC), the Glasgow and Strathkelvin Sheriffs’ Office, Glasgow-based law firm Levy & McCrae, the Court of Session in Edinburgh and Celtic-supporting financial bloggers – possibly with the backing of disaffected former Rangers directors – to discredit the football club and, in particular, its owner of four months, Motherwell-born venture capitalist Craig Whyte. Or, maybe, just maybe, the story is a mixture of ‘all of the above,’ as real life so often is.

When Whyte embarked on an early round of in-depth interviews as Rangers owner, he was already disturbed by the “intensity” of what Scotland on Sunday newspaper interviewer Tom English called “the scrutiny of his every move.” Whyte himself said: “I’ve read things in the newspaper before even I knew they were happening.” And his solution was for Rangers “to have a much more co-ordinated media strategy.” Whatever you think of Rangers’ “media strategy” in the face of recent intense scrutiny, it has certainly been “co-ordinated.” The club has been publicly pursued for the afore-mentioned £2.8m tax debt, with newspaper photographers ‘mysteriously’ on-hand to picture Scottish legal officers entering Ibrox on 10th August to instigate action to recover it. And, ever since, Rangers spokesmen have been wheeled out to claim “that certain individuals at HMRC have an anti-Rangers agenda,” that the tax authorities were being “unduly aggressive” and that it was “unthinkable that this would happen to any other business.”

A similar scenario emerged over the non-payment of £35,000 to Levy and McRae, who had represented Rangers in their case with Uefa over fans’ allegedly ‘sectarian’ singing at a Europa League tie in Eindhoven, for which the club was fined forty thousand euros in March. The law firm instigated legal proceedings to get their money, during which they found time to air “a real concern” about Rangers’ “solvency.” In the immediate aftermath of the issue attracting media attention, Rangers paid the bill, with a club spokesman referencing “ludicrous coverage over the last couple of days regarding the payment of a minor sum of money to a lawyer.” And then, as if to prove that bad things come in threes, there was the leak of a 14-page document drafted by legal counsel for former Rangers chief executive Martin Bain, setting out Bain’s case against Rangers for breach of contract, around the time of Bain’s messy departure from Ibrox in June.

The drafters of this document, Edinburgh law firm Balfour and Manson, also found considerable time to question Rangers’ finances, and their potential inability to pay the financial compensation sought by the former Rangers director. So the ubiquitous spokesman was on his rounds again, claiming that an “illegal leak of court papers indicates a whispering campaign by people determined to damage the club.” All of this comes against a turbulent backdrop for the West Glasgow outfit. Rather more headline-grabbing legal proceedings are on-going over a second tax liability which could be anything up to £49m. And Rangers have just emerged from a messy takeover saga, with a personally bitter aftermath.

As a result of all of this, just about every protagonist stands open to accusations of having an agenda to pursue. Whyte bought the (vast) majority shareholding of former supremo Sir David Murray in May, against the advice and wishes of leading Rangers directors and executives, who expressed consistent and very public “concerns” over Whyte at the time, regarding “the future cash requirements of the club,” and how they “would be met.” A number of these vestiges of the old regime were excised by a vengeful Whyte, who was more determined to rid his club of those turbulent directors than to follow standard procedures for doing it. So they wouldn’t balk at the opportunity to say “I told you so,” if Whyte failed to meet those requirements. HMRC have been owed £2.8m, and believe they have been owed many multiples of that figure, for over a decade, as both tax liabilities come from Rangers’ high-spending era around the turn of the century. So HMRC are hardly well-disposed towards the club.

Former CEO Bain believes he was sacked and further believes that Rangers owe him £1.3m as a result, with Levy and McRae representing Bain and believing they have had to faff around inordinately for the relatively piffling £35,000 the club has owed them since before the takeover. So they are hardly well-disposed towards the club either. Two websites have taken a particular and detailed interest in Rangers’ tax case and general financial affairs; one the imaginatively-entitled ‘rangerstaxcase.com,’ run by a self-confessed Celtic fan and the other written by “freelance author and blogger” Phil Mac Giolla Bhain – not the sort of name you would advisedly write in the guest book at Rangers Supporters Club bars. Their vested interest in Rangers’ failure is as clear the Scottish Premier League flag flying over Ibrox. Meanwhile, Judge Lord Hodge of the Court of Session in Edinburgh is “satisfied that there is a real and substantial risk” of Rangers’ “insolvency, if they were to lose the £40m tax case. No evidence has yet emerged of a Celtic shirt under the judge’s court coat or of any other reason why Rangers’ financial meltdown would melt his heart. But it’s early days yet for the good lord.

However, as the club have correctly stressed, speculation has heavily outweighed demonstrable reality in media coverage of Rangers’ finances since Whyte’s takeover. The complexity of the major tax liability lends itself to under-informed speculation, to which I am not about to add. Companies House records don’t appear to tell the story of a billionaire and Whyte’s business biography in a June circular to shareholders was so vague it almost wasn’t there, adding fuel to the fire of those who dismiss him as a “thousandaire.” In April, Private Eye magazine detailed Whyte’s history of late filing of accounts and well-timed resignations from directorships of failed companies, describing him as “a man of mystery… to whom others seem keen to confer billionaire status.” And rangerstaxcase.com highlighted “Hay McKerron (Whyte’s PR firm)” as among those “others,” dismissing Whyte’s claims of “‘off the scale’ wealth” as “obvious fictions.”

Whyte has been as bullish as his indeterminate number of spokesmen in rubbishing all the speculation, calculating that “99%” of what rangerstaxcase.com “are saying is crap.” Yet the website considers this comment to be a source of pride, with the quote headlining its pages, and daring Whyte to “comment on the 1% truth and “pick examples” of the “99% crap” as it “should be easy.” Bloggers who go into the intense detail displayed on rangerstaxcase.com have a history of being rather more than 1% right, the best example of which being the blog written by “Fair Comment” during the summer of 2009 which second-guessed the actions of one-time Portsmouth owner Sulaiman Al-Fahim with un-nerving and damning accuracy. Of course, however well-informed the magazine and website speculation is, it remains speculation. And even the ‘leaked’ court papers, which contain plenty of their own intense detail of Rangers’ financial difficulties, are just a draft of a prosecution case and are, by very definition, just one side of the story.

However, the little indisputable information which exists about Rangers, in relation to tax debts and employment claims, fails to put the club in a good light. Whatever the bluster about underhand co-operation between tax authorities and the media, Rangers owe those authorities £2.8m, “which they are willing to pay” (BBC Football website, 10th August). The money “goes back 12 years,” according to a club spokesman, so it is evidently overdue. And despite a club spokesman claiming “we have reached an outline agreement with HMRC” (BBC Football…10th August, as above), the money remains largely unpaid. A Scottish Sun newspaper article – attached to, and forming the basis of certain claims within, the ‘leaked’ legal papers – suggests embarrassingly transparently that Bain was pushed out of his Rangers executive position before he could jump. “Martin Bain is currently suspended…and will NOT return to the club” reported the Scottish Sun on 18th June. “Martin Bain has resigned as a director and employee of the company with immediate effect,” Rangers told the London Stock Exchange, six days later.

Even if you subscribe to the club spokesman’s view that Levy and McRae’s use of the courts to get their “minor sum of money” was “extraordinary,” (and that media coverage was “ludicrous”), for the spokesman to label the action “un-necessary” seems demonstrably wrong. The money, due throughout Whyte’s Ibrox tenure, was only paid subsequent to that action. The dance goes on, as Judge Lord Hodge of the Edinburgh Court of Session ordered Rangers to set aside £480,000 to cover possible damages in the Bain case, as losing the major tax case would place the club at “real and substantial risk of insolvency,” thereby placing a ‘real and substantial risk’ that Bain wouldn’t get compensated even if he did win the case Rangers’ spokesman, in trademark outlandish phraseology, declared it “truly astonishing” that Bain should have “taken this action when he claims to have had Rangers’ best interests at heart.” Why Bain should still have “Rangers’ best interests at heart” when they are no longer paying him, and he thinks they are trying to diddle him out of one-and-a-third million quid, isn’t explained.

And it appears a little odd that Rangers are “vigorously appealing the decision,” when, in the same statement, their spokesman assured everyone that “all that has happened today is a sum of money has been set aside if the club were to lose the (Bain) case.” Whyte has also joined in the counter-attack, claiming that “the law courts have been used in recent days to suggest that the club is on the brink of insolvency, it is not” and declaring such actions “reprehensible.” This should mean that the tax office will soon get their £2.8m. After all, Rangers either owes the money, or it doesn’t…and it says it does. So if, as Whyte says, “the club is trading normally and has a strong balance sheet,” there seems no reason why Rangers don’t pay up. “At Ibrox, it is business as usual,” Whyte also declared this week. And, maybe, that’s the problem.

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    14 Comments

  1. “The story of a £2.8m tax liability (over)due for payment by Rangers Football Club ought to be a straightforward one. Either the club owes the money or it doesn’t. And it says it does. However, if Rangers FC does owe the money, and publicly admits as much, yet still does not pay it, there must be a problem with their ability to do so. And if Rangers FC are struggling, at a time of year when football clubs are at their cash-richest, to pay it, there must be a general – and serious – financial problem at the club. Either that, or there is a complex conspiracy between the Scottish media, Her Majesty’s Revenue and Customs (HMRC), the Glasgow and Strathkelvin Sheriffs’ Office, Glasgow-based law firm Levy & McCrae, the Court of Session in Edinburgh and Celtic-supporting financial bloggers – possibly with the backing of disaffected former Rangers directors – to discredit the football club and, in particular, its owner of four months, Motherwell-born venture capitalist Craig Whyte. Or, maybe, just maybe, the story is a mixture of ‘all of the above,’ as real life so often is.”

    I’d just like to sort this part out for you.

    The £2.8million tax bill for payments made 2001-2003 is not in dispute, CW is willing to pay. The dispute lies with the £1.4million charge that has been added to it. I’m not sure how if he is using the old “that bill is not in my name, therefore, I owe you nothing” route or just the plain old “half the bill in charges, are you mental?” one.

    This information is widely accessible & for this reason, I have to say your article appears ill-thought & not worth the read.

    William

    September 15, 2011

  2. I always love the selection and placement of adverbs before the phrase “appeal.” Because we all know that the strength of the appeal ultimately depends upon that adverb. Weak appeals will be summarily rejected.

    Elliott

    September 15, 2011

  3. What I don’t quite follow is why, regardless of the dispute over the £1.4m fine from HMRC (and I don’t think any of us are qualified to say whether they owe this or not, such are the complexities of tax law), he doesn’t then pay the £2.8m that the club doesn’t dispute owing.

    Ian

    September 15, 2011

  4. William,

    Just to set your mind at rest, the phrase “Rangers FC owes the money and publicly admits as much” actually MEANS the £2.8m is not in dispute. And I added: “Rangers either owes the money, or it doesn’t…and it says it does,” in the last para.
    Indeed, the focus of my thinking is on the £2.8m that Rangers don’t dispute owing but are taking so much time to pay.
    Apologies to you if my writing didn’t make that clear.

    Mark Murphy

    September 15, 2011

  5. Its not a case of giving the 2.8 million and disputing the 1.4 the Bill is for 4.2 million, if you have ever dealt with the tax office or customs there is no breaking up of the bill you either challenge it or you pay it. Rangers are challenging it.. Its pretty Simple, I am just out of school and I know how it works.

    Andrew Boyd

    September 16, 2011

  6. The point is though that the article doesn’t mention the £1.4m at all, and that’s the part being disputed!

    Its pretty standard not to pay the £2.8m because they are using that holdout as leverage in the discussion over the £1.4m.

    I.e. said ‘we have the £2.8m for you but you won’t get it until you waive the £1.4m penalty fees’. HMRC said ‘no, and see you in court’ so they are going to hold on to the £2.8m until the court decides whether they also owe £1.4m on top or not.

    Me personally, I’d offer the HMRC £3m in cash in full settlement as a final offer – they’d probably accept it, the only question is whether it would be easier or harder to settle after the big court case over the £50m. Imagine if HMRC lost that one, they’d probably be overjoyed to just receive the £2.8m!

    Matt

    September 16, 2011

  7. editing fail, 3rd para should be ‘they said…’

    Matt

    September 16, 2011

  8. maybe mr whyte is a clever man, buy an ailing club, sell some of the assets to pay a massive tax bill, sell whats left i.e. murray park e.t.c. and walk away with a pretty penny! or am i crazy?

    john

    September 16, 2011

  9. John: Craig Whyte is a venture capitalist, and that is what they do. They buy companies, fix them up and sell them on at a profit. If it requires asset-stripping to do so, then that would *normally* be a part of that process.

    Ian

    September 16, 2011

  10. I’m glad William’s first reply made the point I was going to. It’s not a case of them paying the £2.8m bill and then quibbling over the “added charges”. It’s an all or nothing thing at the moment and while disputing the fines, it’s “nothing” as far as Whyte sees it. If the opening paragraph of the article fails to address that, I take less interest in what the rest of it says.
    Until the (big) case is settled, all of this is speculation and conjecture.

    Ross

    September 16, 2011

  11. Ian,

    The bill they’ll have been presented with will be for £4.2m, not two seperate ones. From HMRC’s perspective that’s what is owed, not a lower amount, so they would have to reject any lesser amount – it’s not right, plus accepting it could be seen as legitimising Rangers’ stance.

    Sean

    September 16, 2011

  12. Obviously, I haven’t seen the citation – presuming that this is the stage that it is up to – but ordinarily in cases of this type, they can either defend in full or in part. If they are defending in full, why have effectively admitted to a part of of it and if they are part-admitting, then why has the remainder not been paid?

    I find this notion that HMRC is artbitrarily adding an amount of money to the amount that the club owns somewhat odd. Is it not common knowledge that they can add fines and interest on unpaid tax bills, and that these amounts can be swingeing?

    Ian

    September 16, 2011

  13. Mark,
    You point out that the 2 websites concerned have Celtic leanings, however, as a regular reader of rangerstaxcase.com (and the lengthy comment threads), RTC has pointed out on numerous occasions that the purpose of the site is ask the questions that the Scottish Media haven’t. That could also be a load of fluff but the fact remains that until Martin Bain had his £480k ring-fenced, the main stream media hasn’t wanted to know. In the absense of any tough questions, investigative journalism or any actual facts regarding Rangers or Whytes financial situation, we’re left with an open forum for Joe Public to speculate on the scraps of information available.

    And it is speculation with the possibility of it being 99% rubbish. However, there have been contributions from people with much of knowledge in company and insolvency laws that have highlighted ‘possible’ scenarios and outcomes should Rangers lose the Big Tax Case. But if you try and ask Jim Traynor, (Rangers newsletter) The Daily Record sports editor and BBC Scotland’s Your Call host, and the afore mentioned Tom English if there’s anything going on, you’ll be shot down in flames for even questioning Rangers or Whytes finances. What’s wrong with asking and discussing?

    I’m no Rangers fan but it would be a bitter blow for Scottish football if they do go to the wall.

    Neil

    September 16, 2011

  14. William says ‘ have to say your article appears ill-thought & not worth the read’. I have to say I found it illuminating, interesting and well wort the read.
    William (as in ‘Billy Boy’?) is doing an ostrich impression if he thinks all is well up in Govan and having seen my club go through three periods f administration in little more than a decade I can read the signs. If there is no doubt that Rangers owe the £2.8m then they’s be well advised to pay tout suite as every day they don’t divvy up the fines and interest continue to mount up; chances are that by the end of the month the penalties owed on the principal will be £1.5m.
    The Whyte Knight seems to be anything but and with the additional drip drip of factual information in the public domain about the growing drama – soon to be a crisis? – about Rangers’ debts William should be very very worried and his head in the sand act won’t prevent his club heading for the financial abyss that a win on Sunday against won’t even paper a small crack in the growing Ibrox fissure.
    Wake up William and realise what is going on; until you and the many other blue ostriches catch on and do something positive then it’s all going to go very wrong fro you and a ten point deduction will be the least of your problems.

    hattersfan

    September 16, 2011

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