Stigma in Scottish Football- Part 4: Motivations and Making Deals

The prior article in this series can be found here, while clicking here will take you to Part 1 and the start.

The Aftermath

The SFA have not-so-plausible deniability, a scapegoat to hand and the advantage of making up the rules on their side. Most of the guys who took Rangers to the brink had left Scottish football by then. Yes – you can argue about King and Johnstone etc but frankly they were bit part players, ineffectual in preventing the chaos wrought by Murray. Hugh Adam – much respected for heralding the warning signs on debt before it became irreversible – for example who’d spoken out about the impending disaster from borrowing levels and latterly the EBT regime had been unable to change the course while on the Board, though he did instead resign. Craig Whyte became the pantomime villain instead of the Whyte Knight hero that better luck might have made him.

As for Rangers, it had become a matter of time until the inevitable and frankly just seeing out the season was only possible somewhat ironically by failure to pay PAYE and NIC once again as it fell due. The SPFL would subsequently put in place token new procedures that involve notification when a club stops paying PAYE and NIC when due, which they proudly proclaim will stop this happening again as though this wasn’t just the death throes of the liquidity disaster built up on the SFA’s watch as opposed to the cause of the current crisis.

Ways needed to be found to plug the gaping hole in revenues that would otherwise see huge losses cut swathes through the leagues for season 2012/13. While factions manoeuvred for control of the remnants of Rangers, the SFA and league bodies campaigned to plug the hole in the finances. It is at this stage the Clubs enter the narrative as their interests cumulatively are now clearly under threat. At this time there were two League bodies representing the Clubs. The SPL and the SFL. They would of course later merge to become the SPFL. Its important to remember that the ‘Top Clubs’ had already broken away from the chaff intending a more elitist approach to looking after our major club sides and promises that the freedom to unshackle from the multitude would result in trickle down benefits for all. There ARE too many clubs in Scotlands national league structure. It was cumbersome and difficult to make even positive changes happen. The dynamic would be important to what happened though.

For the SFA and the league bodies representing the clubs, it has now become not just about (i) money and (ii) risk. Three new serious interests are at play: (iii) avoiding blame; (iv) not alienating fans; and (v) and least importantly, doing what is right. Things were much simpler when only two mattered.

Plan A

Plan A to get Rangers straight back into the top flight quite correctly saw long term favourite (i) ‘money’ take centre stage. It also had the advantage of reducing the effect of its long term partner (ii) ‘risk’ by putting Rangers back where they were without the burden of having to start again from the bottom with a big payroll and the top clubs not missing out on revenue spinning games and the new TV deal. The clubs would almost certainly have voted for this had it not been for the surprise intervention of (iv) ‘not alienating fans’ and their pet favourite (v) ‘doing what is right’. Obviously the clubs didn’t care about (v) but the fans do and must be indulged. Fans after all are customers and therefore should probably be considered a sub-category of (i) ‘money’.

Plan A even had the added bonus that in the admission agreement (what will become known as the Five Way) a bone can be thrown to (v) ‘doing what is right’ by giving the new Rangers company the right to “be Rangers” in exchange for punishing the ‘Rangers’ it hands over to them for gaining an unfair advantage through unlawful avoidance of PAYE and NIC. There’s no time to allow Rangers any sort of defence to such charges (and in any case what Rangers are is in our hands now), so they should be found ‘Guilty’ and process sorted out later. [I am being a bit flippant here – its quite likely this was only in the first drafts in order to be negotiated out as a ‘concession’ later in favour of a proper process/hearing]

The SFA is, after all, who really owns the rights to declare an entity “the Club”. Not the corporate who was it – or the other corporate who want to inherit it. Clubness is a privilege bestowed by the SFA – though it is probably better not to say this because it might affect (iv) ‘not alienating fans’ and (v) ‘doing what is right’ given that illiquid transfers of membership are only possible in extreme cases at the SFA discretion …. and the SFA don’t want it known that the reason discretion has been applied is because they almightily messed up on risk as much as the club did. In fact the whole thing is probably best kept secret. This makes it into the first couple of drafts. It’ll most likely be accepted too because Rangers new owners like (i) ‘money’ as well and it gets them back into money spinning business sooner. They aren’t Rangers men.

Fortunately the public would never get to see the LNS charade played out with the predictable ending that Rangers were guilty. The good news would be they’d get to enjoy the twists and turns of a ‘Not Guilty’ plot twist instead.

To keep interest (iii) ‘avoiding blame’ from interfering, the bus is thrown at Craig Whyte. He let (i) ‘money’ down with a bad roll. He knew the game he was playing. The only problem is the SFA passed him ‘fit and proper’ but that’s not insurmountable and in fact can be used against him. To paraphrase Regan and his views from Part 2:

“it’s not a real fit and proper anyway and we don’t actually check anything normally, just do what people tell us”.

With a good run of media controlled stories that keep the booing and hissing pointed at Whyte; the fact that the SFA and leagues allowed unnecessary risk taking and massive risk concentrations threaten the entire game will slip under the radar. Murray even gets a bizarre pass it is that successful, even though Rangers fans know he kind of was to blame at least a bit.

Our top clubs could not afford the princples fans wanted but they could certainly agree with them publicly.

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Plan B and C

Unfortunately Plan A was let down by fans that really don’t know what is best for them. Their misunderstanding of their role in the game is demonstrated by the fact that they threaten to withhold (i) ‘money’ without realising that’s the principle reason for doing it! But fans can’t be educated or reasoned with despite the best efforts of club Chairmen like Milne and Petrie, so instead Plan B is rolled out before Plan A is even voted on, since the clubs have made their intentions clear. The later vote is just a formality. If anyone is interested, Rangers Oldco (still at this point ‘Rangers’) votes for it, Kilmarnock abstain and all others vote against admission to the SPL. Celtic – the only club not to release its voting intention prior to the ballot, later release a statement that “the integrity of the game was of paramount importance”. Rumours that the first draft adding “once we knew that (i) ‘money’ is off the table through other clubs voting under threat of fan boycotts” are probably false.

Just in case Plan B doesn’t work, Plan C is drawn up as the backstop with no option. This time if the clubs won’t vote for Plan B, they get Plan C by default.

Plan B involves Rangers hopefully only spending one season outside the top flight before getting back down to revenue generating games against the bigger clubs and especially the Celtic games that can drive more international revenues. Stewart Regan explains the intended carve up after conceding SPL entry was out (before clubs have even voted on it) in his email of 23 June 2012 to Neil Doncaster, David Longmuir, Jim Ballantyne, Alan McRae, Rod Petrie and Ralph Topping.

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Plan C is that Rangers will automatically join the lowest division in the SFL. No vote on whether they should get this ahead of Spartans or others should be allowed as if Plan B fails, it’ll probably be due the same reasons Plan A failed and three strikes is too many.

Off the back of leaked plans to shoehorn Rangers into Division 1, clubs consult with their fans and issue statements of intents that they would oppose this in the cases of Falkirk, Dunfermline, Partick Thistle and most vocally Raith Rovers.

“Do you sell your position for 30 pieces of silver for some short-term advantage or take the moral high ground?”

Turnbull Hutton, Raith Rovers – who clearly doesn’t understand the value of (i) ‘money’ compared to (v) ‘what is right’

Undeterred, the SFL provides a presentation to their clubs titled “Your Game, Your Club, Your Future” which extols the virtue of (i) ‘money’. Rumours that the sub-title “Our Arses” was removed are probably false. A threat to form an SPL2 is hoped will convince the clubs. It’s worth reading this to really appreciate how little everything but money actually matters.

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In case the above is too subtle for you – its saying put Rangers into the second flight and we’ll throw you some bones including joining the league bodies back together, or don’t and we’ll stiff you on payments and look to create a second flight SPL that will relegate most of you to parochial league status and get nowt from us.

In the aftermath of his email becoming leaked, and pressure for him to be sacked – therefore undermining the success of (iii) ‘avoiding the blame’ – Stewart Regan doubles down on his faith in (i) ‘money’ as being all that matters and that Plan B was therefore the only viable choice in his infamous – but charmingly honest at least from the SFA perspective – “slow, lingering death” speech:

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It does kind of ignore the hardy resilience of most football clubs in times of crisis, that it was really more of an immediate cash crisis for the top clubs (over time cloth can be cut to size) but it really was all about the Benjamins. The SFA gamble to keep things going had failed and now the clubs needed to arrange the bail out.

Unfortunately for Mr Regan more clubs come out fighting the corner of (iv) ‘not alienating fans’ and (v) ‘doing what is right’ as Clyde and Queen of the South both issue statements breaking ranks. Clyde’s included such gems as:

“The overwhelming reality is that we are being asked to make one of the most important decisions for Scottish Football in a vacuum devoid of factual information, that vacuum having been filled with unhelpful rhetoric and scaremongering by the chief executives of the SFA and SPL”

“It was clear that the resolutions marked a clear departure from all previous process and custom and practice when considering admitting a team to the SFL, albeit operating within the rules of the SFL. It was in that context which we considered the resolutions. In reality, the customary principles of sport were not at the forefront of the resolutions”

“Neil Doncaster was unequivocal when he said that there would be no payment under the [Settlement] agreement [under which the SPL make payments to the SFL] and stressed that it was not the board of the SPL that made big decisions, it was the clubs themselves. We have concluded that it defies credibility that the SPL clubs would instruct the SPL to deliberately breach a legal agreement”

Queen of the South also weighed in with some home truths:

“It has failed as an organisation to attract the level of sponsorship, TV deals etc, that were the very reason for its creation. It has failed its clubs and Scottish Football as a whole, not least in its handling of this situation”

“The dialogue has been negative, focusing on and exaggerating the possible ‘Armageddon’ rather than rallying and actively trying to find solutions that all clubs and, more importantly, supporters would feel comfortable supporting. Instead we were presented with a set of proposals that no one was happy with. More importantly, the message from the governing bodies was that even with a ‘no’ vote they would continue to pursue the newco Rangers playing in one of the top two tiers next season”

Unfortunately Rangers new owners are a bit wary about (i) ‘money’ slipping away if this is unsuccessful and they end up in Division 3. They are less inclined to accept lost titles – especially as they know they bring (i) ‘money’ to the table. The only issue is the (i) ‘money’ they bring is predicated on getting into the leagues to generate it. It’s a stand-off with the SFA and league bodies. ‘We lose £5m’ on one side, versus ‘We were personally responsible for allowing Scottish Football to crash’ [SFA] and ‘We need your money to save our own clubs following’ [league bodies] on the other.

The SFA and league bodies hold firm for a bit, but the smell from their under-crackers is a big tell in this poker game. Everyone at the table knows (v) ‘doing what is right’ is the interest that is expendable when you’ve had a hand in causing what went wrong. Green isn’t going to be known as the guy who let a footballing institution fail and the rest of Scottish football collapse on the back of it – he’s just in the door.

On 13 July 2012, Charles Green speaks candidly to the club chairmen ahead of the vote on condition that they didn’t repeat what he said – so don’t tell anyone. Several, disappointed with the shabby deal, shared it anyway that Green had said Stewart Regan had told him there is no way Rangers will be in D3 next season.

The same day the SFL clubs vote 25-5 that Rangers would not be admitted to Division 1 and must take the Plan C option of going to Division 3.

Making It Go Away

The SFA, SPL and SFL are now faced with carrying through their threat against the clubs of restructure of the leagues or capitulating in negotiation with Rangers about the terms of admission. The season starts realistically too soon for any such threat to be in any way practical.  Plan C gets underway. Their negotiating position with Rangers has been compromised.

On 18 July 2012 law firm Harper McLeod on behalf of the SPL say Rangers have a ‘case to answer’ over player payments outside of contracts and the previous plan writing title stripping without a fair hearing into the Five Way is dropped and does not appear in later versions.

On 25 July 2012 Rangers are granted a ‘Conditional Membership’ of the SFA – a strange concept that has never previously existed in practice or the SFA Rules and the Final version of the Five Way agreement is signed by Rangers Oldco, Rangers Newco, the SFA, the SFL and the SPL. It allows Saturday’s Ramsdens Cup tie with Brechin City to go ahead in the nick of time. The bluffing game is at an end. There’s a couple of things still to iron out – most importantly media rights. That’s the big ‘gimme’ the leagues (to save their top clubs) and the SFA (to save their blushes) want for their ‘discretion’ to be applied.

A reputed side letter to the Five Way Agreement is later leaked also which appears to specifically prevent any retrospective disciplinary action as a result of the EBT Payments and Arrangements, despite their own law firm having just announced there is a case to answer. The SFA and league bodies ‘quid’ in the ‘pro-quo’ has already tanked and they need to sweeten the deal or risk having no Rangers. At Green’s end its all quite reasonable – I’m putting a team into your leagues (or maybe someone else’s – he threatened the English pyramid) and I want to cap my liabilities before I do, not write a blank cheque. At the other side its ticking down to a disaster.

Five days after the signing of the Five Way Agreement on 2 August 2012, notice of the LNS Commission would be served on Rangers Oldco and Newco. The Commission remit is restricted to only whether footballing rules were broken relating to declared contracts relating to only the EBT’s (‘Big Tax Case’ which was still ongoing)  and not in relation to the use of EBT’s themselves unfairly since it was not an avenue available to all clubs. In fact it specifically sets out that it is being conducted on the basis any club could do it, a premise that it would later become clear was totally flawed.

When the Commission eventually convenes curiously it specifically excludes the DOS liabilities already overdue and unchallenged by Rangers Oldco and on which a failure to pay PAYE and NIC had already been admitted and would have broken the same rules in the event of an adverse finding. These would also have been clearly a breach of law other clubs should not have been following so the same rationale wouldn’t fly. These had been within the initial remit, but were removed.

Later findings would show the EBT payments to also be illegal avoidance of PAYE and NIC and not available to all clubs but the actions taken conveniently at the very point in time when a hearing could take place with a scope designed to ensure the terms of that reputed side-letter happened to be complied with. The FTT unexpected temporary reversal of position had been manna from heaven for moving things onward.

No one really knows how any actual proper hearing on this might have played out and it’d be senseless now to try and guess given no fair hearing on the actual facts happened. The pendulum swung both ways in the course of the negotiations and if Rangers had come back under plan B maybe it would have been done with a straight bat. What seems beyond any serious doubt is that pretence at “customary principles of sport” as Clyde FC put it, were sacrificed at a highly mercantile altar. It was part of the quid pro quo to salvage the finances of the game and it swung with the bargaining power. The SPL Clubs hadn’t wanted to kick the deal out, but nobody else understood the monetary value as well as they did.

With that the deal is cut for the 2012/13 season and Rangers start ‘the journey’. Ultimately an agreement was negotiated for a media deal worth less than £10 million below the original £80m over five season number, but only after broadcasters were granted rights to show Rangers’ bottom-division games in addition to regular Scottish League games. The cost to the top flights in lost revenues from the Blue pound would have been higher, but the lower league teams did okay out of it. At the end of it all the fractured nature of self-interests and voting power amongst the league clubs only sold out football as a sporting contest and the chance to do things by the book for less than £10m of net revenue lost.

Lessons Learned

“Failure is only the opportunity to start again more intelligently” said Henry Ford. Was this to be the chance to learn from mistakes and ensure history doesn’t repeat?

The real problems were buried because it is better you don’t know. No one wants to admit that the Old Firm are plumb necessary for the business model Scottish football is following. That becoming ‘too big to fail’ in a micro-economy also encourages monumental risk taking without adequate protection. That Rangers were not the only club that had allowed finances to become perilous and their resistence to financial pressure to become eroded. That when the failure happened it threatened all major clubs and meant decisions now had to be made based on survival and not what is right. That for all the hatred Regan and Doncaster now receive for doing it, they really did do it to try and save the multitude and not ‘all in favour of one club’. That the top clubs themselves wanted that deal cut. That those same clubs own Boards were sailing too close to the wind to take a moral stance other than for appearances sake. The blame doesn’t all lie in one place.

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The real problems were not the desperate scrambling from the SFA and league bodies to salvage the Scottish game – it was its failure to protect us from the reckless financial practices that caused it. I don’t think anyone was satisfied with how it played out and there’s a lingering resentment that still festers. But it’s best to ignore that the need for all of this was built up largely by a failure to get a handle on risk and control in the past. It’s best to ignore that there’s nothing substantive changed to prevent it all happening again. Focus on the bread and circuses instead. Get behind your team, boo your rivals, let your Board worry about that kind of stuff. What’s the chances they’ll get it wrong twice?  Well, three times in the case of Livingston and Dundee. Controls and restrictions aren’t for clubs, they are for fans. Of course the clubs will vote against changing them – its the owners who determine how the clubs vote. There is no democracy within the process, just a layering of self-interests.

The insolvency track record has improved since Hearts and Dunfermline circled the drain. Conditions have as well too though – things have been stable as the economy recovered.

The clubs will back Neil Doncaster because they know. They know our game monetised hatred and turned a willing blind eye for a unique selling point. That what was done was done because they collectively want it. More than that Celtic and Rangers both know that their fans being at each others throats is financially good for both and its only good to interfere to keep things on the good side of UEFA (also for financial reasons). The SFA are already on board. For more on bigotry for sale, see this series. You only need to look at what’s happened to Celtic’s share price since Rangers have been back to see this. Trophies were being hoisted before. Now revenues are up, merchandising up – when derbies go daft and overboard it’s box office – but its the taboo that must be whispered. It helps to see Board members chiming in as long as its tasteful.

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Celtic PLC share price – of course the Celtic Board’s allegiance is with its shareholders

For all that fans of other clubs turn their noses up at the fierce and bitter rivalry between Celtic and Rangers (the bigot brothers, two cheeks or whatever analogy is the preferred) it is fundamentally the trickle down from that which brings scale to Scottish football operations. Without it the TV deals would be much lower. Failure to act on bigotry within the SFA and to take an entirely different line to UEFA (see here) isn’t accidental, it is quietly facilitated. There is a choice between principles and money and money always wins. That it was all done with the best of intentions for all clubs but failed anyway is just inconvenient. It’s the clubs that matter not the fans. And by clubs – that’s the owners, not the fans. How many clubs really stand up and say this isn’t acceptable? Be honest in your deceptions.

Over at Rangers they know all this too. Their shares are no longer exchange traded and the business is loss making, but its a piece of this pie that’s the end objective and if the Scottish co-efficient gets to 15 and another CL slot, then its game on even without profits, reserves of capital and ability to withstand another crisis. The jam tomorrow principle. We are where we’ve been before. It’s still the clubs bearing the risk of failure – no one is making those that run the clubs this way put their money in up front to stave off disaster. It’s all at owner whims and the risk of a change of those whims all with the clubs. As if the Murray’s, Romanov’s and Mileston’s never happened. Forgetting any or all reservations anyone has about whether spending money you don’t already have and relying on owner investment: why should it be the club and not the owner bearing the risk of failure for it to continue? It would entail no change in model to insist on the funding to be locked in for the club to prevent it immediately suffering if the worst happened. It only suits the owners.

We are presently staring into the face of Brexit. Independence and further turmoil in the marketplaces is a real possibility. We ought to have ‘raked over old coals’ to find out how and why it went bad and to prevent it happening again. To learn the lessons of our shared history. To protect our clubs against repeating past mistakes. To have those responsible for governance implement at least basic levels of control to protect our clubs from their own owners subverting what is fundamentally the fans game. We’ve written about forms this might take seperately. The stable times are coming to an end now and we’ve only set ourselves up for another fall. Inverness Caley Thistle ominously already this season talking about shortfalls.

But all of this is unpleasant business. Best you don’t think about it and focus on turning up week in and out instead. There’s a cup final to look forward to soon and battle lines to be drawn. The other side is the real enemy. But if you do tire of the bread and circuses and want real changes: Domestic Financial Fair Play, Fan Representation in ownership of our clubs and Fan Representation within the games governing body would be a great start to making the game about those who care about her again. It won’t necessarily improve the money flowing around the sport – but where does money really lie in the hierarchy of what matters in sport. Is its time as champion just beginning?

Football itself is breaking in two. In the elite game money is everything. It is moving ever further from the ordinary fan. Scottish football has soul-searching to do about what it is really all about. It has a smorgasbord of very big to very small teams in its ranks which range from ‘of international interest’ to ‘of very local community interest’. It needs people with big ideas and understandings to find its place in the new order that meets the needs of all who love our game. It has the wrong people with the wrong motives looking after its interests.

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