Scottish Football… “Corruption” – Resolution 12

by | Apr 7, 2016

Strong, occasionally irrefutable, evidence has existed for years of Scotland’s football authorities’ dishonesty in dealings with certain member clubs. Football journalists elsewhere in Britain would pursue such stories. Scotland’s football press seem to care more for covering them up. For example, “Resolution 12,” which, almost inevitably, involves Rangers avoiding sanction for clear breaches of financial regulations. On 30th June 2011, Rangers owed £2.8m in tax and interest linked to a “Discount Options Scheme” (DOS) which operated from 1999 to 2003. The details of the scheme remain migraine-inducing. However, Rangers had accepted the £2.8m liability, which rendered them ineligible for a licence to play in 2011/12 European club competition. Yet the Scottish FA (SFA) issued said licence.

Rangers’ financial collapse took attention elsewhere until shareholders tabled a resolution to Celtic PLC’s November 2013 AGM (Rangers had occupied Scotland’s 2011/12 Champions League slot instead of Celtic, potentially costing Celtic considerable revenue). ‘Resolution 12’ on the agenda asked Uefa to “review and investigate the SFA’s implementation of UEFA & SFA license compliance requirements, with regard to qualification, administration and granting of licenses to compete in football competitions under both SFA and UEFA jurisdiction, since the implementation of the Club Licensing and Financial Fair Play Regulations of 2010.”

A supporting statement referenced other disputed SFA governance. However, the resolution’s “main thrust” was “the granting by the SFA of a license…to a club who prime facie did not qualify specifically under the non-payment of social tax requirements…a decision that had a direct impact on CFC PLC’s financial well-being.” And the shareholders added: “If the Board cannot support this resolution, we require a response in writing before the AGM (and) a statement addressing this issue at the AGM…as to why it is believed the SFA’s actions…have not had a detrimental financial impact on our club, also justifying why there were no license administration irregularities if that is the Board’s contention.”

Celtic did initially deem the resolution “unnecessary,” informing shareholders that “The Company received assurances from the SFA regarding the Club Licensing process for Season 2011/12 at the time” and “took appropriate steps” to protect its interests. After “constructive meetings (with) the concerned shareholders,” Celtic traded their opposition for an adjournment, to allow consideration of a strategy to meet its terms.  However, cynicism persists as this “consideration” continues, two-and-a-half years later. The £2.8m debt was first publicised on April 1st 2011, when Rangers interim accounts for July to December 2010 included an “exceptional” £1.87m “provision for a potential tax liability in relation to a (DOS)…between 2000 and 2003,” and “a provision for interest of £0.9m…” Rangers chairman Alastair Johnston reported: “Discussions are continuing with HMRC to establish a resolution to the assessments raised.”

Five days later, the Rangers Tax Case (RTC) blog claimed “staff at Rangers” knew about the issue “for at least two years” and that “contrary to speculation” it “was not discovered” late in then-potential owner Craig Whyte’s due diligence, “or anyone else’s.”  Rangers had “been corresponding with HMRC” throughout and “HMRC sent an assessment in recent weeks.” This was supported by correspondence between HMRC and Mike McGill, the finance director at Rangers’ parent company Murray International Holdings. HMRC made an offer to settle the case on 26th November 2010 and were promised “a decision by the end of February 2011 as to whether (Rangers) wanted to accept.”

On March 3rd, Andrew Thornhill QC “strongly” recommended settlement. And the resultant proposed settlement, “presented by Mike McGill to HMRC on 21st March 2011” and “accepted in principle by HMRC,” was £2,827,201. Whyte bought Rangers on May 6th. On May 20th, HMRC sent Rangers a formal determination of the £2,827,201 (documentation produced in court on 26th August). On 2nd June HMRC had a demand served on Rangers by Sheriff Officers. The next day, Whyte’s “summary of the material terms of (his) acquisition” to club shareholders included a commitment “to meet a liability owed by the Club to HMRC in relation to a discounted option tax scheme.” And ten days later, according to the 5th April 2012 report to creditors by Rangers’ then-administrators Duff & Phelps, Rangers told HMRC they could not “trade in the medium term without…third party funds or shareholder support.” “Given the situation,” they offered “immediate payment…of £200,000…to HMRC” and requested time “to assess possible new sources of income” to deal with “the balance of the Company’s Small Tax Case liability.” Yet, on August 9th, Daily Telegraph sports writer Roddy Forsyth, in a story headlined Rangers in discussions with HMRC over £2.8m tax liability, said the “charge…was…originally declared to be non-negotiable” but a “Rangers source” claimed “We are planning to appeal.”

“Speculation that HMRC was set to enforce its claim” explained the story’s timing (Sheriff’s Officers visited Ibrox again on August 10th). Forsyth claimed “negotiations between the club and tax authorities will take place this week.” But these were not about the £2.8m. Indeed, subsequent reports confirmed what had, and crucially what had not, been in dispute. The Herald newspaper’s Gerry Braiden said Rangers “had started to pay off (the) £2.8m but was disputing a £1.4m penalty for late payment.” The BBC’s Matt Slater said: “The sum Rangers owe, and they have agreed this much, is £2.8m in back taxes and interest.” And Slater, reporting on HMRC’s attempts to recover the £2.8m, added: “The undisputed amount is due now. In fact, it’s overdue again.” However, neither reporter addressed any Uefa club licence issue.

In 2013, the “Charlotte Fakes” (CF) twitter account revealed “data which should offer comfort to those who questioned if a licence was applicable,” including the afore-mentioned correspondence involving McGill, HMRC and Thornhill.  (NB: The CF material’s veracity remains debatable to the extent to which people want it to be true. However, in February 2014, CF material was ruled admissible in court proceedings against Whyte). Notes of a March 21st 2011 meeting, attended by current Rangers vice-chairman Paul Murray, referenced a “PAYE liability to be paid to HMRC prior to 31st March.” On May 11th, HMRC said they would “not allow the position of the £2.8m to drift” and that “a payment…will be taken into consideration in assessing the level of penalty.”

And at no time between March 21st and Rangers’ first Champions League match on 26th July was there any suggestion, indication of, or reference to any appeal against the £2.8m assessment. And the dates matter. Under Uefa Club Licensing regulations (mirrored in Article 8.2.20 of SFA regulations) Rangers and the SFA had specific deadlined responsibilities. Under Article 50, Rangers had to “prove that as at 31 March preceding the licence season it has no overdue payables…towards…social and tax authorities…that arose prior to the previous 31 December.” And under Article 66, Rangers had to “prove that as at 30 June of the year in which the UEFA club competitions commence it has no overdue payables…that arose prior to 30 June.” “Payables” were “overdue if they are not paid according to…agreed terms.” They were not overdue if Rangers could “prove by 31 March” and/or “by 30 June” that they had “paid the relevant amount in full”, agreed “to extend the deadline for payment” or “brought a legal claim” against them. But if that legal action was “simply “in order to buy time” the payable would be “overdue.”

In December 2011, SFA Chief Executive Stewart Regan tweeted that while he could not comment on specific cases, “the licence was granted in line with SFA and Uefa guidelines. The tax matters had not crystallised at the point it was granted.” This was disingenuous. Regan’s reference to tax “matters” (plural) appeared to conflate the two, entirely separate, tax cases. Tax bills “crystallize” when the amount owed is agreed or HMRC wins a Tribunal case. In March, neither “matter” had definitely “crystallised.” By June, the DOS “matter” definitely had. The SFA might have been unaware of the £2.8m on 31st March, when they “granted” the licence. They had to be aware of it by 30th June, when they allowed Rangers to retain it.

Considering what was then public, or could have been established by required SFA investigation, Rangers could not have “proved” they had no “overdue payables.” The undisputed liability had not been paid and Rangers were only disputing the penalties for late payment (thereby making the liability “overdue” by definition). Ergo, they were ineligible for the licence. As a contributor to the Kerrydale Street fans’ forum suggested: “If the penalty was disputed and the actual tax liability admitted then it’s an open and shut case.” Rangers disputed the liability…in December 2011, though at that time, in the Telegraph, Forsyth had a strangely-unheralded exclusive, as “a source close to” Whyte said an appeal had been lodged several months ago.”

Basic journalistic instinct would have begged the questions “Why did Rangers not say this before?” “Why were they now relying instead on ‘a source close to’ Whyte?” and “This is horseshit, isn’t it?” Forsyth’s instinct deserted him, as the instincts of so many journalists had before, have since and surely will again, when it comes to Rangers’ finances. And, as ever, social media had to take up the slack. On August 18th 2013, controversial but often fully-informed blogger Phil Mac Giolla Bhain questioned the SFA in terrifying detail on “the circumstances surrounding the SFA decision,” especially Regan’s claims to have followed “guidance.” And he could not “fathom why Celtic are utterly silent on an apparent failure of football governance that cost them millions.” Celtic’s “business model…is based on European income. If Champions League football is not available the club has to sell a major asset to cover costs…or be forced to borrow substantial sums.”

Two months later, “Resolution 12” was tabled. It got a mixed reaction from Celtic fans, ranging from support, via world-weary “it won’t change anything” cynicism, to criticism of references to other governance issues (“the decision to lump one issue in with the other was pants”, noted another Kerrydale Street contributor, eruditely). The latter concerns were pertinent. The resolution alerted Scotland’s mainstream media to the story. But the Daily Record’s Keith Jackson, who was “all over the Rangers story from day one,” wrote a piece so bad that it would have automatically failed the most basic newspaper journalism exams.

Celtic urge fans not to back calls for a UEFA investigation into SFA’s handling of Rangers crisis claimed that “a group of investors insist (Rangers) received special treatment from Scotland’s football chiefs after…Whyte tipped the club over a financial cliff.” Jackson continued: “The resolution says…” before quoting…the supporting statement instead. Meanwhile, the Scottish Daily Express’s Dean Herbert lived down to his name, referencing a mythical “formal complaint with UEFA over Rangers’ readmittance to the Scottish Football League.” Opposing the resolution, Celtic’s reputedly all-powerful CEO Peter Lawwell said “the right representations were made at the time and we got the appropriate answers.” Nonetheless, the resolution became the first from the floor of a Celtic AGM NOT to be opposed by the board.

Early in 2014, requisitioners were shown “the correspondence thus far exchanged with the SFA.” “Key issues” were “identified and discussed…with further clarification being sought from the football authorities if necessary.” And in May, Celtic reportedly asked “for clarification of the process conducted by the SFA and Uefa” while “following up correspondence with the SFA.” “Resolution 12” was adjourned at 2014’s AGM because, according to blogger “Brogan, Rogan, Trevino and Hogan” (BRTH), “there was more information available and further matters to consider about how (to) proceed.” In April 2015, Mac Giolla Bhain was “informed by sources very close to Celtic that they have contacted Uefa,” that “a very senior Uefa official…was amazed at the import of the proposed missive” and that Celtic had “sent a very detailed letter to the SFA asking very precise questions.” However, this remained a “proposed” missive. BRTH said there had been “no letter to UEFA” or the SFA.”

“There have been some recent developments which have been a long time in the planning,” BRTH added. “These have now been implemented in part, but only after months of preparation, & detailed investigation into a whole raft of things behind the scenes.” The Celtic Supporters Trust reported from the 2015 AGM that “Resolution 12 was raised and the original proposer…declared that he and his fellow proposers were satisfied with the progress being made.” However, the situation this year tilted towards farce. The SFA told the requisitioners’ solicitors they would only discuss the issues with Celtic. The requisitioners said “that any reference to UEFA should come from the club.” But while “both parties have stated they want the matter placed before the appropriate UEFA committee, the club would prefer the shareholders to refer the matter to UEFA in line with the previous enquiries made to the SFA.”

On March 16th, Regan re-entered the fray. John Clark, a regular TSFM contributor, buttonholed him during and after his talk at Edinburgh University on “International Football Governance.” During formal discussions, Regan called the matter “complex” and dismissively noted “that the West of Scotland threw up particular problems.” Afterwards, Regan told Clark “the SFA had met the requirements of Article 66” and “the club had been ‘in negotiation’ with HMRC.” And when Clark asked what Regan would do “if I were to provide incontrovertible evidence” of Rangers’ tax liability on 30th June 2011, his appalling reply was “Nothing.”

Regan dismissed resolution supporters as “people who don’t use their real names” and concluded “if you’ve made your mind up, and that’s your opinion, there’s no way I’m going to convince you.” Clark “said it was not a matter of opinion but of fact, and it won’t go away.” Amid the nonsense, Regan referenced Article 66 for the first time. This, remember, required proof that Rangers had no “overdue payables” on 30th June 2011. If the SFA published that proof, they could kill the story. Instead they have obfuscated, stonewalled and questioned the integrity of resolution supporters. You have to wonder why.

Elsewhere in Britain, the football press would have pursued this story vigorously, with its strong, occasionally irrefutable, evidence of football authorities’ dishonesty in their dealings. Scotland’s football press seem to care more for covering it up. After all, they have only to pursue two questions. When did the £2.8m tax bill crystallise? And what proof, as required by Uefa regulations, did Rangers supply that they had “no overdue payables” on 30th June 2011? Yet they show no willingness to do so. Jackson, “all over the Rangers story from day one,” hasn’t been “anywhere near” this aspect of it, even when it was obvious background material to his story about Rangers’ problems meeting licensing criteria for the very next season. And the BBC’s Tom English was properly ridiculed for accusing football of “burying its head in the sand” over the recent Sunday Times doping story, while he dives into the beach when Resolution 12 looms. They are but two examples of Scottish football journalism’s shameful attitude to this story. The corruption Resolution 12 addresses is blatant. The research is done. Yet their silence remains deafening. Again, you have to wonder why.

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