Both sides of what could soon be a proper international border, it is tough being a “Bluenose” just now. The odds against Rangers seeking the financial sanctuary of administration, or the sale and leaseback of major assets, as solutions to their latest book-balancing difficulties get shorter each day. Meanwhile, the semi-mythical “Owners and Directors Test” in England’s Football League looks like being failed at last, although Birmingham City President and major shareholder Carson Yeung has had to spend years laundering money in Hong Kong to do so.
These are the bare facts of the Rangers’ situation. They have averaged 40,000-plus crowds since entering Scottish Football’s fourth tier in August 2012. Last season, their gate income dwarfed the rest of their division combined, as it has this season in the third tier. They received £22m from an initial public offering (IPO) of shares in in December 2012. But that money and all other income…has gone. So Rangers have had to borrow £1.5m from hedge fund managers Laxey Partners and club director Sandy Easdale for “general working capital purposes,” or they would be insolvent.
If income is as closely-linked to on-field success as the experts in such areas suggest, Rangers should have guaranteed annual promotion while making profits significant enough to allow them to challenge bitter rivals Celtic as soon as they reach the top-flight. The explanation for their failure to do so is straightforward. The consortium led by “outspoken” Yorkshireman Charles Green acquired Rangers as a short-term personal money-spinner. They created “penny shares” in parent company Rangers International (RIFC) for themselves. “Penny shares” are actually “small shares at a very low price…definitely not valued at a penny.” But these were. And although such shares are generally high-risk, these were not.
They then offered “ordinary” shares to the “public” – fans and “institutional” investors – (the IPO) at 70p, a price more in-keeping with Rangers “true value.” The consortium were “locked-in” to their shareholdings until December 2013, a year after the IPO. But the offer price was set to turn any initial investment above £14,300 into £1m +. And the continued on-field success guaranteed by Rangers’ huge income seemed guaranteed in turn to maintain or increase that price up. So the financial rewards available were worth the wait. Green put in an amount of work ahead of the IPO to gain the trust, and finance, of sceptical fans, playing to Rangers galleries worldwide with, as everyone soon discovered but few seemed prepared to note at the time, no expense spared.
But, like the Scrabble cheat in the Harry Hill joke (who secretly made his own tiles and was caught out when he claimed “MississippiRiverboatDisco” as a proper word), Green’s investors got greedy. Executives overpaid themselves, awarded themselves unearned, unfinanced bonuses and, ex-commercial director Imran Ahmad is currently claiming in court, unearned, unfinanced commissions on onerous commercial contracts. And they allowed the playing budget to exceed requirements by multiples, authorising top-flight salaries for third-tier football. So Rangers have cakewalked their division. But at ruinous cost. And while original investors still made huge profits when they sold their 1p shares, those profits were below original expectations. There was outrage at original investor Richard Hughes back-pocketing £500,000 in January. But had the share price stayed at its January 2013 peak, 90p, Hughes would have back-pocketed £1.9m.
Two solutions to Rangers’ crisis are now being presented. One, from Chief Executive Graham Wallace involves cutting costs so that Rangers “live within their means.” Wallace gave himself 120 days from the RIFC AGM, on December 19th, to review Rangers’ operations and make costs match expenditure. He has not yet been able to do so. Hence the £1.5m from Laxey’s and Easdale. What happens if that money runs out before any new money comes in is unclear. The second option hails from Glasgow-born, South African-based businessman Dave King, a club director when Rangers went bust in June 2012. He “invested” £20m in Rangers in 2000 and says he lost the lot. And he has been a popular figure with fans, who have been calling for his intervention and investment for years.
King, however, was fighting 322 charges of financial impropriety with South Africa’s Revenue Service. Last August King pleaded guilty to 41 contraventions of South Africa’s Income Tax Act and paid multi-million pound fines to avoid the two-year prison sentence attached to each contravention. But his popularity with Rangers fans remains. Some deny he is a convicted criminal. Others don’t care. And after years of talk, King has finally tangibly intervened – though not, yet, invested. He has asked fans to place season-ticket monies in a trust, handing it to Rangers only when the board meet conditions on financial transparency and fan representation. Fearful that cost-cutting will let Celtic win ten consecutive Scottish championships, breaking the nine-in-a-row record Celtic and Rangers currently hold, King wants Rangers to “spend beyond its means…to get back into the top-flight.” Otherwise they would “become a small club and live off…a dwindling revenue base.”
King is expected in Scotland soon to add legal and structural detail to his trust idea. And, while he’s here, the board want a word. Their options now include, but are not limited to, some form of insolvency event, despite their fervent denials, occasionally in capital letters, of detailed rumours that contingencies are being made for such an event. As regular readers will know, these bare facts come with more baggage than Heathrow Airport on a congested August afternoon. But those are the bare facts. And they are a shame.
Carson Yeung’s conviction on all five counts of money-laundering with which he was charged was no surprise to followers of the legal proceedings against him – followers who have been magnificently served by Daniel Ivery of the Often Partisan website. The burden of proof in his case lay with Yeung himself, who had to offer credible, alternative explanations for the considerable wealth into which he came as he rose from hairdresser to Premier League club benefactor during the last decade. The publicised snippets of Judge Douglas Yau’s 112-page verdict suggest Yeung’s offerings failed spectacularly. “I find the defendant not a witness of truth,” Judge Yau said, matter-of-factly. “I find that he is someone who is prepared to, and did try to, lie whenever he saw the need to,” he added dramatically.
The full verdict will be published soon and sounds worth visiting in detail. It is not clear, for example, whether any of the laundered money was “involved” in Yeung’s purchase of Blues in 2009. Unless or until that is clarified, the initial “business-as-usual” reaction to events by both the club and the Football League cannot be fully justified. Peter Pannu, still Blues’ “acting chairman”, even after all the recent club and company directorate upheavals, was quickest off the mark. He offered “to reassure” everyone that the “verdict will have no impact on the day-to-day operations.” This, of course, was no reassurance at all.
Pannu described Yeung as “our beloved club’s…former president and benefactor,” which, as Daniel Ivery noted in his verdict analysis on Often Partisan, “behooves” Pannu to “confirm” that none of this benefaction was laundered and/or, as stated in court, “from a payment made…by Cheung Chi Tai,” the alleged leader of Wo Hop To, a Triad gang surely more serious than they sound in English. Daniel meant “behoves Pannu,” but some Blues fans might have accepted the original, while pondering how closely the ex-policeman and trained barrister worked with the convicted money-launderer. Daniel’s reminder, however, that “it is libellous to infer any other criminal activity” bar Yeung’s is timely and accurate.
The league’s statement offered a timely reminder of the lightweight nature of its “Owners and Directors” test, a point made with some vigour by the Guardian newspaper’s David Conn. The League’s statement noted that its test “prohibits anyone that is convicted of offences involving dishonesty from owning more than 30% of a member club, or exercising control over a club.” It is remarkable that “more than 30%” is in that quote; that a convicted fraudster can own up to 30% of a football league club. And, as the regulations stand, Yeung can still own his current 16% share of BIH and the 28% he could own after any conversion into equity of his £15m loan to Blues. The league shows no sign of ruling that Yeung is still “exercising control” over Blues via the various relatives and relatives-to-be now on the football club’s board – Yeung’s 20-year-old son Ryan, his brother-in-law Shui Cheong Ma (whose appointment neatly coincided with Yeung’s resignation) and his hyphen-heavy brother-in-law-to-be Panos Pavlakis.
Families do fall out, of course. And relationship break-ups can put paid to brother-in-law status, with brother-in-law-to-be status particularly vulnerable. But, at the moment, it is difficult to reconcile the League’s belief that “Birmingham City complies with its requirements regarding ownership” with the make-up of the club’s board. Even Pannu only noted “the concerns…that Carson Yeung may still run the show from the prison by proxy via his relatives,” adding: “I can only say that this is speculation and conjecture,” without commenting on its veracity. The league’s satisfaction is based on “information provided” by the club – information provision not being Yeung and co’s strong point. It is almost as if the football authorities have viewed the less-than-straightforward boardroom structure at Birmingham City as “too much like hard work.”
The league also appear satisfied with City’s finances, as they do “not require any financial assurances” beyond the end of the season – i.e. two months’ time, given that Blues aren’t going to be making a late, late run for any play-offs. This seems a little near-sighted. And closer inspection of their statement might lead a cynic to think that it is something of a press release rehash, referencing, as it does, “the ongoing financial viability of the group,” having made no prior mention of any “group” whatsoever. You might normally assume that the conviction of the leading individual shareholder of a football club for “offences involving dishonesty” which could lead to a seven-year jail sentence would naturally trigger a change in ownership, in the cause of common decency if nothing else.
But normality remains beyond Blues. Conn seems right to portray BIH’s recent refinancing proposals as “Pannu’s efforts to retrench the club’s ownership in Hong Kong.” The required approval of Hong Kong’s judicial authorities for these efforts seems to be regarded as a formality. And the 12% stake in BIH bought by Beijing Liangzhu International Media Advertising Company, who intend to “market the club throughout the People’s Republic of China” seems to indicate that China is still a major target market for Blues, despite their relegation from the Premier League, the unlikelihood of a swift return to the Premier League, and the dismal failures to get any meaningful foothold in that market while Blues were still in the Premier League. Oh…and Beijing Liangzhu have already missed one deadline for payment for these shares. AND, as Often Partisan revealed, BIH have cited “confidentiality clauses” to avoid explaining why the company has no registered address, email address or contact telephone number. Still, apart from that…
Unsurprisingly, the Blues Trust is to “continue to campaign hard for…greater emphasis and focus on…supporter inclusion and involvement at Boardroom level.” They have tagged their campaign for “community share ownership – an initiative we are actively exploring” onto the latest situation. And wisely so. Meanwhile, the Birmingham Mail newspaper tore into “Yeung and his sidekicks” who “have proved nothing less than disastrous” for a club “drifting towards catastrophe.” “Soon, Carson Yeung,” the Mail concluded, “a prison door will slam shut behind you. Let us hope that the St Andrew’s boardroom door never opens again to welcome you or your cronies. We want you gone.” Blimey. No-one at Blues is under any illusion that Yeung’s conviction will, in itself, trigger meaningful change. But the full verdict looks likely to provide much ammunition for those, including the increasingly important DelayNoMore campaigners, pressing for that meaningful change. Pannu certainly won’t have to ask “what troubles?” again anytime soon.
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