Dundee Given 25 Point Penalty

By on Nov 2, 2010 in Finance, Latest, Scottish Football | 6 comments

The Scottish Football League yesterday flexed its muscles and hit Dundee with a 25 point penalty for going into administration last month. As noted in previous articles, the SFL does not have set penalties for such offences, instead retaining complete discretion to deal with each situation as it sees fit. And in Dundee’s case they saw fit to be severe, imposing not just the points deduction but a transfer embargo and a promise to give the situation further consideration should they still be in administration by March 31st.

I’ll come to the whys and wherefores of this in a moment, but firstly it’s worth reading the SFL’s statement on it and the reasoning for it.

WE ARE OF THE OPINION THAT LESSONS ARE NOT BEING LEARNED. FOR EXAMPLE, CLUBS HAVE TO REALISE THAT, GOING FORWARD, THEY CANNOT TREAT THEIR HMRC OBLIGATIONS AS SOMETHING AKIN TO A CREDIT CARD.

Notwithstanding the abuse of the Caps Lock key, this is terrific stuff. It’s the kind of thing you might have read many times on twohundredpercent, but to read it coming from football administrators is tremendous, and shows at least some sign of them starting to tackle issues that have been ignored for too long. Because it’s not just talk, they’ve started the process of taking positive action too:

FOLLOWING A RECENT MANDATE FROM OUR CLUBS, THE SFL WILL NOW PREPARE THE INTRODUCTION OF AN EARLY WARNING SYSTEM, DESIGNED TO ALLOW US TO INTERVENE AT ANY STAGE, IF ADVISED BY HMRC THAT CLUBS ARE DEFAULTING ON THEIR OBLIGATIONS.

Really excellent news – it’s exactly what this blog (and many other places, naturally) had been calling for. It’s very far from foolproof of course, and is not in itself going to prevent clubs getting into difficulty, but it goes some way – tax arrears are a reasonably good early indicator of problems, and the Dundee situation would not have happened like this had such a rule been in force last year.

So whatever the specific merits or demerits of the sanctions imposed on Dundee, I’m heartened that it’s been done for the right reasons and with a real sense of purpose. In the long run that’s the most important part of today’s statement. HMRC themselves have already given it their backing, and if they see that the football authorities are playing their part then we might even find them being a bit more helpful and cooperative in future.

And so to Dundee. 25 points is stiff. I’m a little bit torn because I do have genuine affection for the club, and while I still think and hope they’ll be saved they’re not safe yet and there is a danger that this could tip the balance against them.

But I also know that that isn’t and can’t be a prime consideration. It’s nobody’s fault but Dundee’s that they’re in such peril and the SFL can’t be swayed against taking the necessary action as a result. And though the punishment is severe there were particular reasons why such severity was warranted in this instance – and why, I think, the SFL are right to have flexible rules rather than a fixed penalty. These reasons have been covered in more detail in earlier articles, but in brief:

  • It’s a second administration in eight years, and to my mind it makes no odds that the previous one occurred under SPL, rather than SFL, auspices.
  • As administrations go this has been a particularly negligent one, as Dundee have been splashing the cash and comfortably outspending the teams around them while failing to pay the tax bill.
  • Livingston’s double demotion last season wasn’t a direct precedent as it happened during the close season but it did strengthen the feeling that consistency required something similarly harsh.
  • Finally, with money so short, the decision to retain a number of the better-paid players when making redundancies the other week looked like a further gamble, of a sort that I think the SFL would be right to discourage.

This last point is a very dodgy one and I‘d be interested to know whether it formed part of their thinking or not. If Jackson was indeed taking a gamble here in the hope of staying up and / or attracting an outside investor then it has now probably backfired on both counts. That may partly explain his belligerent reaction to the news, and Harry MacLean’s (the Chief Executive). But I’ve no doubt they are also quite genuine in thinking that the punishment is simply too strong, and they are certain to appeal it, though I don’t expect anything to come of the talk of legal challenges.

Jackson was at pains to play up the danger in which this leaves the club. He might be right, but of course it’s his job to exaggerate the worst case scenarios if it’ll help him argue a better deal for Dundee. Like his comment of having only four weeks to survive when he took over, I’m taking his worst comments with a pinch of salt. We already had some evidence, however, from the Livingston situation last summer, that the SFL would not be browbeaten into imposing lower sanctions because of threats of doom, and once again they’ve stuck to their guns.

We’ll just have to wait and see what effect it has on the club’s future. It more or less guarantees relegation to Division Two (barring any league reconstructions, which is not entirely impossible) and it may indeed mean that any outsiders who might have been thinking of getting involved are less likely to do so. I’m hoping, when we look back in a couple of years time, that they’ll have been able to turn it to positive account. Such evidence as I’ve seen so far from Dundee fans suggest they’ve reacted with considerable anger, and just maybe a backs-to-the-wall mentality will help people to rally to the cause. The Trust has so far raised around £90K – impressive but well short of the estimated half million that will be needed to keep the club going to the end of the season. Another chunk of that may come from the sale of Leigh Griffiths in January, but I suspect they’ll also need to get local businesses on board, and may end up combining forces with former owner Peter Marr – despite his part in the club’s first administration in 2003.

The other name still hovering around is Gio di Stefano, the “lawyer” and convicted fraudster who was also involved in the club in 2003. If yesterday’s sanctions serve to discourage his involvement then again, it may not turn out to have been a bad thing.

All of that is ifs and buts. I’m looking on the bright side but obviously it can’t be denied that this punishment leaves Dundee in serious difficulties. It’s harsh, but on balance I think fair.

Update: The Supporters Trust, Dee4Life, have released their response. Unfortunately, it’s awful and blames everyone but themselves. Opening sentence – “Dundee fans are furious at today’s attempted murder of our football club by the Scottish Football League.”
http://www.dee4life.com/homepage/2010/11/1/dundee-fans-dee-fiant.html

Updated again: I was almost too stunned when I added that last link this morning to register just how appalled I am with that Dee4Life statement. It contains this sentence. which I had to read through two or three times to be sure that I’d understood it right:

And why do they address borrowing from HMRC, but not borrowing from banks or directors?

I’m at a loss to know what to say to that, they really do seem to be equating borrowing from people who do actually lend money sometimes to “borrowing” by failing to pay tax bills on time. If they’re trying to prove The SFL’s point for them in the first quote at the top of the article then they’re going the right way about it. I still hope the Trust will ultimately take over the club, but it’s to be hoped they have people ready to take the helm who have a better grasp of the issues than whoever is responsible for that statement last night.

Share Button

    6 Comments

  1. It is right that Dundee should be hit hard for this but 25 points seems too extreme. Having lived in the local area for a number of years I do have some sympathy. It will mean yet more cutbacks and job losses or ultimately closure. As for keeping the one or two better paid players on the books this will simply be to have them sold on in January. Any administrator worth his large fee would do exectly that. Surely it makes sense to pay a player £30k over 3 months and sell them on for say £100k at the end of this period rather than let them go for nothing? The players that were let go either had their contract finishing at the end of the season or had no real sell on value.As for precedents there are actually some direct ones in the SFL from just a few years ago. Firstly Morton in 2002. points deduction? 0. Clydebank(now Airdrie Utd). points deduction? 0. These were mid season and not like Gretna and Livingston in the close season. I certainly dont think they should not get punished but 15 or even possibly 20 points would have been sufficient and given the club an uphill struggle but at least something to play for and fight for. 25 points is certain relegation and a team with nothing to play for and supporters with no reason other than blind loyalty or the fact that they already have a season ticket to go to a home game. The occasional fans who pick and chooses their games for varying reasons(mostly cost) or the neutral who fancies watching a high stakes game? its unlikely they will be there.
    Who is going to invest in a team with no hope? If the supporters take the administrators comments with ‘a pinch of salt’ then the club is certainly doomed. There is also a real danger for the other clubs revenue streams. there is likely to be a travelling support of around 100 to games at clubs such as Dunfermline, Raith Rovers, Falkirk and Stirling, where there was 1000 until now. In the current climate can any of these clubs do without the £15k-£20k this would generate? It seems the SFL have thought about the punishment but not fully thought about the wider consequences. While the Dee for Life organisation certainly has serious questions to answer due to having someone on the board and staying quiet about the situation, it is once again the supporters and the ordinary employees who are punished. The directors responsible walk away and there is no sanction against these people who are the ones solely responsible. The least that should happen is that these directors should be banned for life from even entering a football ground, though many would prefer some form of capital punishment! The early warning system is also intersting and is also a noble idea but how will this be managed? Is it just the HMRC debt? what about other debts that are unpaid such as local businesses and creditors other than the bank? Are they not important too if they remain unpaid or paid a lot later than promised? If not then why not? If the league goes down this route almost all the clubs in the SFL will be having warnings or points deductions.No doubt other supporters of other clubs will say the punishment is not hard enough but what they should be thinking is ‘there but for the grace of god goes my club’. There are many teetering on the brink. As I said at the start it is right that this club is punished hard but at least leave them with some air to breath and a chance to.

    dan

    November 2, 2010

  2. dan – several fair points and questions though although I think there are answers to them.
    a) Not all the higher earners retained have any transfer value. Rab Douglas is an obvious case in point. If the adminstrator’s overriding priority were (as it should be) to cut costs to what the club can afford it’s hard to see any justification for retaining Douglas while paying off Scott Fox.

    b) I don’t agree that Morton and Clydebank represent much of a precednt – that was before the SFL’s current rules and before the SPL or other leagues had their own penalties for administration. The culture has changed since then – and rightly so.

    c) I’ve no doubt Dundee’s away support will drop off and of course that’s going to disappoint other clubs (it’s one of the reasons why other first division reps weren’t allowed a vote yesterday). But it can’t be a consideration – if Dundee’s gamble had worked last year and they’d won the league, would they have agreed to stay down anyway because they would bring other first division teams bigger crowds than Inverness? You have to take the rough with the smooth with away supports – and it’s possible that other teams who are now doing better will bring bigger crowds instead.

    d) You’re quite right, tax debts aren’t the only ones that matter and it’s not a perfect solution. But to take all debt into consideration could only be done with heavy and regular auditing of every club’s boosk, which the SFL doesn’t have the resources for and it’s not clear anyway exactly how you’d define the criteria. Tax debts are usually a pretty good early indicator of problems though, and it can be done quite simply. Not only would it have nipped the Dundee situation in the bud but it would have allowed them to intervene at Livingston much earlier – which was one of the problems thrown up by that scenario.

    Overall I’m not sure if 25 points is right or not – it’s better if they have something to play for but I can’t help thinking that if they were still in the first next season then the punishment would have failed. Ultimately I think they’re right to err on the side of harshness. Livingston also threatened last season that the sanctions would put them out of business – it didn’t, and I still think it’s unlikely for Dundee as well.

    Gavin

    November 2, 2010

  3. I was also absolutely gobsmacked by the trust’s statement:
    “And why do they address borrowing from HMRC, but not borrowing from banks or directors?”
    The whole statement comes across as a rant rather than a considered statement and just serves to illustrate the SFA’s point.

    Marke

    November 2, 2010

  4. 25 points in not enough. Any club entering administration should automatically be relegated that season. If I had my way they would get chucked out of the league, or at best the lowest “league” division, ie 3 in Scotland and League 2 in England.

    10 points is such a rubbish deterrent it isn’t a deterrent.

    jertzee

    November 2, 2010

  5. The whining that folk associated with Dundee FC are doing just now is unbelievable, as is all the talk of appeals to ever higher authorities – legal challenges and everything. Going into Division Two is apparently now inevitable, and will apparently be catastrophic. I wonder how they think the ten teams currently in that division – not to mention the ten in the division below – manage to survive. Last season, 37 points saw Morton survive in Division One, though 34 would have been enough for them not to need goal difference; and with 33 points, Airdrie could have survived if they’d won the playoffs, and since Ayr were relegated with 31, 32 would have seen Airdrie into the same position. Dundee currently have minus eleven points, with 11 games played, and thus 25 games to play. That means they have 75 points to play for, and could finish the season with 64 points, which would be three more than they themselves got last season in finishing second. More realistically, to finish up with the total that was good enough to get to a playoff last season, they need 11 + 33 = 44: they need 14 wins and 2 draws from their 25 games. I’d say that rather than being inevitably doomed, they have a fighting chance, and some might say that’s more than they deserve after their fraudulent conduct brought them into this situation for the second time in seven years.

    John H

    November 2, 2010

  6. The reference to borrowing from HMRC in the DFCSS (not Dee4Life) statement was a daft and embarrassing knee-jerk reaction. It showed a lack of understanding of what the issue is with HMRC.

    However, the SFL statement was clearly not thought through carefully. The problem they’re objecting to is being in arrears, and paying that off in installments, (i.e. like paying off your credit card). It’s not just being forced into admin because you can’t clear the debt immediately.

    Dundee were working to an agreed repayment schedule to clear their arrears until HMRC demanded that the whole lot be repaid in one go when it became clear that Melville was pulling out. That doesn’t excuse Dundee’s negligence in getting into arrears in the first place, but it puts a different slant on HMRC’s involvement and raises the question of what the position of other clubs might be.

    The so called early warning system seems dependent on HMRC tipping off the SFL that clubs are “defaulting on their obligations”.

    It looks like HMRC weren’t consulted. http://sport.stv.tv/football/scottish-first/dundee/206097-we-wont-divulge-clubs-debts-without-permission-hmrc-tell-sfl/

    The “credit card” comment looks like posturing with little significance at all.

    If the SFL are serious about clamping down on late payment to HMRC, and they should be, then that would require the SFL to inspect clubs’ current books to find out if they were in arrears.

    They wouldn’t have the staff to do this as a matter of routine, but they do already have the right to inspect a club’s books. A system of periodic declarations and spot checks looks a better route than trying to involve HMRC.

    DFCSS should emphatically not have linked HMRC arrears to straightforward debts, but there is a valid point to be made about the level of debt and risk that clubs are prepared to take on, and which the SFL (and the other football authorities) don’t seem ready to address yet. Dundee FC aren’t in a good position to make that point, but it needs attention.

    Unfortunately the current system provides no effective deterrent to reckless gambling because there is no comeback unless it all blows up. As you say, it would be difficult to define what is acceptable, and exactly how an effective system of governance should operate. Difficult, but I don’t think it would be impossible. I’m not confident the authorities are really up to it.

    As for Rab Douglas, I believe he took a pay cut when Dundee went into administration. I’d be reluctant to criticise the decision to keep him on without knowing his wages in comparison to other players. I don’t think it’s safe just to assume automatically he’s one of the highest earners.

    James Christie

    November 11, 2010

Post a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>