Dundee Count The Cost Of Failure (Part 2)

By on Sep 28, 2010 in Finance, Latest, Scottish Football | 3 comments

Since I wrote my previous article on the problems at Dundee during the summer there have been quite a few developments, and over the last week or so events have unravelled at some pace, leaving the club in more serious trouble more quickly than most of us imagined.

Last season’s big money push for the First Division title was based on the largesse of Aberdeen businessman Calum Melville, who had answered a newspaper ad placed by Dundee in their search for investors. The exact amount of money Melville has ploughed into the club over the last eighteen months seems to increase every time someone mentions it, but by most accounts it’s something between a one and one and a half million – a huge amount at this level. Despite the spending, the title challenge failed, and Dundee were beaten to the only promotion spot by Terry Butcher’s Inverness, leaving them with financial commitments they could only continue to fund for as long as Melville was funding them. And the unease which many people had about them being in such a position so soon after casting off the debts of their previous administration in 2003 has intensified given recent developments.

Melville is still around, but his own circumstances have changed and his willingness – and indeed ability – to continue the investment is now up in the air. Earlier this month both Calum and his brother Stuart were suspended from their jobs at Cosalt Offshore, the company to whom they had sold their own firm three years ealier, as part of an investigation into working practices. Melville strongly denies any wrongdoing and resigned his directorship with the company while he attempts to clear his name. He, and Dundee, assured us at the time that both his position at the football club was unaffected.

By last week, that position had become very much affected. It started last Monday morning, when Melville was due to appear as a witness at the Employment Tribunal hearing for Jocky Scott and Ray Farningham – the manager and assistant who were sacked by Dundee in March when they were top of the table but stuttering. There were rumours beforehand that Melville would come in for some personal criticism for interfering in team affairs, but we didn’t get to find out if those rumours were true as he didn’t show. Dundee’s solicitor pleaded that he was “not physically and mentally capable” of attending and requested an adjournment. This was not contested and the case is now expected to be heard in January.

On the same morning, Melville tendered his resignation as a director of Dundee, saying he could not commit the time to it. The resignation had not yet been accepted however, and he has said he will stay on, at least nominally, if they want him to do so. But the important matter to Dundee is not whether he can commit the time but whether he can commit the money. Or, more money – as mentioned above, he’s already put in a seven figure sum. Here’s a rough and non-exhaustive guide on how the money has (and hasn’t) been used so far:

Some things on which the money has been spent:
- Six figure transfer fees;
- A wage bill substantially higher than the teams around them;
- Such pay-off as has already been made to sack Jocky Scott;
- Compensation to Queen of the South for new manager Gordon Chisholm

Some of the things on which the money has NOT been spent:
- Buying Dens Park back from John Bennett, despite Melville’s initial promise to do so;
- The £200K loan to Bennett which falls due in October;
- Keeping up-to-date with Her Majesty’s Revenue & Customs

The last one is the killer. Bennett, despite being a former director of the other Dundee club, says he’s not going to press for prompt repayment of his loan, and he’s also being kind enough not to charge them rent on the ground, which he acquired somewhere along the line in the horse-trading following the previous administration. Presuming on Bennett’s generosity is one thing, presuming on the taxman’s is quite another. Dundee have been proudly trumpeting for a while now that they’d cleared themselves of any bank debt, and the news that they’d instead got themselves in hoc with tax slipped out this weekend in an interview the (otherwise incommunicado) Melville gave to one of the Sunday redtops in which he mentioned that they’d been in arrears with HMRC for over a year and were now being pursued for a full and immediate payment of around £250K. He whinged that the Revenue were being so unreasonable about it then mentioned the possibility that it could put the club into administration.

This site has long been critical of football’s attitude and behaviour towards tax (and, conversely, supportive of HMRC’s hardline stance against football) so you can guess where my sympathies lie. The use of the tax system as a bank with which to run up debts is something the sport needs to do much more to stamp out – but it is at least understandable in the case of clubs who simply don’t have the money. For Dundee, who have had the cash and made a seemingly calculated decision to gamble it elsewhere, it’s absolutely indefensible.

The figure of £250K comes from that interview only. Other sources are putting the debt at around £365K, and it’s this situation that has sent the board into a tailspin in the last week. They’ve spent it in a series of emergency meetings, trips to Aberdeen to talk to Melville, refusing to comment to the media, and generally doing nothing to dispel the impression of a club in chaos. Yesterday (Monday) both Sky and the BBC were reporting potential administration proceedings as soon as Wednesday – all the club could say was no comment, but bear with us. They’ve promised a fuller statement within “24 to 48 hours”.

While I appreciate that wealth does not equate to ready cash, if Melville is really worth the £130 million he claims (and if his heart is still in it) it’s difficult to believe he can’t find some way of raising the required sum now rather than at the end of the season when he says he has offered to pay it. But his words are becoming less and less reliable (and his statement in the same newspaper interview that he was unable to attend Scott’s tribunal simply because of other commitments rather contradicted what was said by lawyers on the day).

My own impression is that, whether with his money or by some other means, Dundee will find some fudge that gets them through the immediate crisis, but the future is murky either way. If the worst comes to it and they were to go into a second administration, it would be interesting to see the reaction of the SFL, who – unlike the English leagues and the SPL – have no set rules on dealing with such issues; and even more interesting to see the response of the fans, who rallied round and dug so deeply into their pockets to bail the club out just a few years ago. (I’ll ignore, for now, the theoretical responsibility borne by the Trust by virtue of the 26% shareholding it now has in the club. By and large I don’t think it’s fair to blame the fans for this.)

Even if they stay clear of it, the current owners have forfeited any right to confidence in taking the club forward. The more that’s come out in recent days, the more it’s become clear that they’re not the responsible custodians of a club that’s learned its lesson, but just the latest in an unedifying line of chancers to have blighted Dundee over the past couple of decades. Yet what other options are there? The only other likely alternative on the horizon seems to be former Chairman Peter Marr – the man who ran the club into insolvency with an even more reckless bout of rainbow-chasing last time round. (Even worse, though fortunately far less likely, Giovanni di Stefano has expressed his interest – another man who was involved just before the last crisis in 2003. He’s usually referred to as “controversial Italian lawyer Giovanni di Stefano” in the press, though I’m not too keen on the word lawyer since he has consistently failed to provide evidence of his legal qualifications. Personally, I prefer the phrase “convicted fraudster Giovanni di Stefano”.) Either way, they’re still looking for a Chairman to replace the outgoing Bob Brannan.

Meanwhile the team is struggling, they have only one away win in 2010, and they sit in the lower half of the table having been knocked out of two cups by lower league sides. Their apparent belief that they can’t prosper in this division without external investment must look all the more hollow as they look up the table at sides with far lower wage budgets – not least part-time Cowdenbeath, who beat them on Saturday.

It’s all rather messy, and I’m sure there’s more to come. Watch this space.

GS, 28th Sept 2010

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    3 Comments

  1. Hi Herb. Just to let you know that we don’t tolerate abusive messages on here.

    Herb Jenkins

    September 28, 2010

  2. Boards are forever telling us that you cant run a football club like a normal business and that may be the case as you as you can only compete in your own country and you cant open a new branch where it s suitable etc. But why cant they at least run a club like you would your own household? you pay your rent/mortgage, your tax and other bills and then whats left over you use on players? The amount of clubs that think they can spend without any comeback is crazy. In Dundee’s case I note that the board are looking for the fans yet again to bail them out of a mess that they themselves have created but they will keep fans in the dark over whats happening at the club when it suits them. Ridiculous situation.

    bill

    September 29, 2010

  3. a fine article. Yes this club has had many chancers in the boardroom who have promised the earth and delivered misery to the supporters. There was Angus Cook in the 80′s who launched a ridiculous takeover bid for Dundee Utd that nobody wanted and then a couple of seasons later the club was relegated through in part, a lack of investment. Then there was ice hockey loving Canadian Ron Dixon who knew nothing about football and used to refer to the goalkeeper as the goaltender! He promised big name players and a new stadium but delivered neither. He lost interest when he realised that you couldnt really make much money out of football and was never seen except for the occasional visit to pick up any money he could get. Then there were the Marr brothers who signed loads of great but expensive footballers but forgot to put in a manager that could mould them into a team as well as forgeting to sell them on and eventual administration with £20m debts. Now there is this lot who were continually telling everyone how they were debt free but cant pay the tax bills. These people wouldnt run their own personal businesses like this so why do they think ts ok for a football club?

    dan

    September 29, 2010

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