Look, you knew we’d have to do this. Today’s ruling of the commission investigating SFA/SPL rule breaches by Rangers is almost the closing act in the farcical saga that’s enveloped Scottish football for just over a year since the club went into administration on Valentine’s Day 2012, so we’re nearly finished now.
Nevertheless, Lord Nimmo-Smith’s judgement is so extraordinary and bizarre it simply can’t pass without comment. We gave a gut reaction to it this morning, but it’s in the detail that you really see the contortions into which the Commission was obliged to twist itself in order to let the club off scot-free.
(To keep the piece a manageable size we’ve cut out the legal boilerplate and background explanation to focus on the actual judgement, but none of the passages below have been edited in any way. The entire original document can be read here.)
“The Issues may be divided into four main chapters, the first three of which relate respectively to the periods:
23 November 2000 to 21 May 2002 (period 1)
22 May 2002 to 22 May 2005 (period 2)
23 May 2005 to 3 May 2011 (period 3)
The division into those three chapters within that period 2000-2011 reflects changes in the Rules of the SPL and the SFA in force from time to time, as set out below. Broadly speaking, the Issues in the first three chapters allege that Oldco and Rangers FC breached the relevant Rules of the SPL, and also those of the SFA (breach of which constitutes a breach of Rules of the SPL), by failing to record “EBT Payments and Arrangements”, as defined below, in the contracts of service of the Specified Players and/or other Players and by failing to notify them to the SPL and the SFA.
We also note one Issue in the third chapter (Issue 3(c) in the Notice of Commission, read together with the concluding words of Issue 3(b)), directed only against Rangers FC, alleging that the club was in breach of the Rules by playing ineligible players.
The fourth chapter alleges that during the period 15 March 2012 to 1 August 2012 (period 4) Oldco (then in administration) and Rangers FC, in breach of the relevant Rules of the SPL, failed to assist the SPL and to respond to requests for documents in relation to payments by Oldco to Rangers players.”
Clear enough. The first three “chapters” of the ruling relate to Rangers’ failure to declare EBT payments to the Scottish football authorities, and the fourth relates to the club’s lack of co-operation with the investigation into same.
“As we have already explained, in our view the purpose of the Rules applicable to Issues 1 to 3 is to promote the sporting integrity of the game. These rules are not designed as any form of financial regulation of football, analogous to the UEFA Financial Fair Play Regulations. Thus it is not the purpose of the Rules to regulate how one football club may seek to gain financial and sporting advantage over others.
Obviously, a successful club is able to generate more income from gate money, sponsorship, advertising, sale of branded goods and so on, and is consequently able to offer greater financial rewards to its manager and players, in the hope of even more success.
Nor is it a breach of SPL or SFA Rules for a club to arrange its affairs – within the law – so as to minimise its tax liabilities. The Tax Tribunal has held (subject to appeal) that Oldco was acting within the law in setting up and operating the EBT scheme.
The SPL presented no argument to challenge the decision of the majority of the Tax Tribunal and Mr McKenzie stated expressly that for all purposes of this Commission’s Inquiry and Determination the SPL accepted that decision as it stood, without regard to any possible appeal by HMRC. Accordingly we proceed on the basis that the EBT arrangements were lawful.”
It was no part of the Commission’s job to consider the legality outside football of the EBT arrangements, so it’s slightly interesting that it feels the need to make this point.
“What we are concerned with is the fact that the side-letters issued to the Specified Players, in the course of the operation of the EBT scheme, were not disclosed to the SPL and the SFA as required by their respective Rules.
It seems appropriate in the first place to consider whether such breach by non-disclosure conferred any competitive advantage on Rangers FC. Given that we have held that Rangers FC did not breach Rule D1.11 by playing ineligible players, it did not secure any direct competitive advantage in that respect. If the breach of the rules by non-disclosure of the side-letters conferred any competitive advantage, that could only have been an indirect one”
We’ve cut out a huge section referring to the eligibility rules, because they can be summed up very briefly: the SFA’s understanding of the SPL’s rules was that a player registered incorrectly was automatically ineligible to play. The Commission found that even if a registration was improper, it nevertheless remained in force unless and until it was explicitly revoked.
This interpretation is the core of the Commission’s decision to, in effect, not punish Rangers at all. What it says is that although Rangers were registering players illegally, because they didn’t get caught at the time it didn’t count, and any game in which they played must be allowed to stand.
This appears to contradict every existing precedent under the auspices of the SFA, but there are no SPL-specific cases to compare.
“Although it is clear to us from Mr Odam’s evidence that Oldco’s failure to disclose the side-letters to the SPL and the SFA was at least partly motivated by a wish not to risk prejudicing the tax advantages of the EBT scheme, we are unable to reach the conclusion that this led to any competitive advantage.
There was no evidence before us as to whether any other members of the SPL used similar EBT schemes, or the effect of their doing so.”
This is a very strange section. It translates as “We can’t say that Rangers gained a competitive advantage by playing improperly-registered players, because for all we know every other club was doing it as well.” Or simplified further: they were cheating, but maybe everyone else was too, which would cancel it out.
“Moreover, we have received no evidence from which we could possibly say that Oldco could not or would not have entered into the EBT arrangements with players if it had been required to comply with the requirement to disclose the arrangements as part of the players’ full financial entitlement or as giving rise to payment to players.”
We’ll see later that this seems to conflict with some of the Commission’s other findings, where they say that players may NOT have signed without the EBTs.
“It is entirely possible that the EBT arrangements could have been disclosed to the SPL and SFA without prejudicing the argument – accepted by the majority of the Tax Tribunal at paragraph 232 of their decision – that such arrangements, resulting in loans made to the players, did not give rise to payments absolutely or unreservedly held for or to the order of the individual players. On that basis, the EBT arrangements could have been disclosed as contractual arrangements giving rise to a facility for the player to receive loans, and there would have been no breach of the disclosure rules.”
We’ve read this one a dozen times and we still have no idea what point it’s making. It SEEMS to simply say “If Rangers hadn’t broken the rules, there would have been no rule-breaking”.
“We therefore proceed on the basis that the breach of the rules relating to disclosure did not give rise to any sporting advantage, direct or indirect. We do not therefore propose to consider those sanctions which are of a sporting nature.”
This appears to be an unwarranted conclusion. It asserts that there MIGHT not have been a sporting advantage, and therefore there definitely WASN’T one.
“We nevertheless take a serious view of a breach of rules intended to promote sporting integrity. Greater financial transparency serves to prevent financial irregularities. There is insufficient evidence before us to enable us to draw any conclusion as to exactly how the senior management of Oldco came to the conclusion that the EBT arrangements did not require to be disclosed to the SPL or the SFA. In our view, the apparent assumption both that the side-letter arrangements were entirely discretionary, and that they did not form part of any player’s contractual entitlement, was seriously misconceived.
Over the years, the EBT payments disclosed in Oldco’s accounts were very substantial; at their height, during the year to 30 June 2006, they amounted to more than £9 million, against £16.7 million being that year’s figure for wages and salaries. There is no evidence that the Board of Directors of Oldco took any steps to obtain proper external legal or accountancy advice to the Board as to the risks inherent in agreeing to pay players through the EBT arrangements without disclosure to the football authorities. The directors of Oldco must bear a heavy responsibility for this.”
What’s clear here is that whether EBTs as used by Rangers were dodgy or not, Rangers’ directors certainly THOUGHT they were. Otherwise they’d have disclosed them, because it’s absolutely clear in SFA/SPL rules that you have to disclose all payments to players, and if they’re above board there can be no reason to hide them.
“While there is no question of dishonesty, individual or corporate, we nevertheless take the view that the non-disclosure must be regarded as deliberate, in the sense that a decision was taken that the side-letters need not be or should not be disclosed. No steps were taken to check, even on a hypothetical basis, the validity of that assumption with the SPL or the SFA.”
The conclusion that “there is no question of dishonesty” is a baffling one, given that the Commission concludes there was a breach of rules and it was deliberate. In normal law ignorance is not a defence, so the fact that Rangers didn’t try to find out if their actions might be against the rules is not – or shouldn’t be – mitigation for unlawful acts.
“The evidence of Mr Odam (cited at paragraph  above) clearly indicates a view amongst the management of Oldco that it might have been detrimental to the desired tax treatment of the payments being made by Oldco to have disclosed the existence of the side-letters to the football authorities.
Given the seriousness, extent and duration of the non-disclosure, we have concluded that nothing less than a substantial financial penalty on Oldco will suffice. Although we are well aware that, as Oldco is in liquidation with an apparently massive deficiency for creditors (even leaving aside a possible reversal of the Tax Tribunal decision on appeal), in practice any fine is likely to be substantially irrecoverable and to the extent that it is recovered the cost will be borne by the creditors of Oldco, we nevertheless think it essential to mark the seriousness of the contraventions with a large financial penalty.”
This is the most astonishing passage of the document. It notes explicitly that imposing a financial penalty is completely pointless and will hurt only innocent parties, but then imposes one anyway. The unfortunate face-painters, taxi companies and newsagents owed money in the liquidation of Rangers, already looking at a return of perhaps 1p or 2p in the pound on their debts, will be made to suffer even more for the club’s misdeeds.
Rangers’ actions are so serious, says the Commission, that a completely different group of people who’ve done absolutely nothing wrong and have already been severely damaged by the club’s actions will have to be punished for them. The parallels with the banking crash are striking.
“Since Issues 1 to 3 relate to a single course of conduct, a single overall fine is appropriate. Taking into account these considerations, we have decided to impose a fine of £250,000 on Oldco.”
Or put another way, £0.00.
“It is the board of directors of Oldco as a company, as distinct from the football management or players of Rangers FC as a club, which appears to us to bear the responsibility for the breaches of the relevant rules. All the breaches which we have found were therefore clearly committed by Oldco.
We see no room or need for separate findings of breaches by Rangers FC, which was not a separate legal entity and was then part (although clearly in football and financial terms the key part) of the undertaking of Oldco. Rangers FC is of course now owned and operated by Newco, which bears no responsibility for the matters with which we are concerned.
For the reasons already given, we have decided against the imposition of a sporting sanction. In these circumstances the financial penalty lies only upon Oldco and does not affect Rangers FC as a football club under its new ownership.”
Hang on. What about “Rangers Then, Rangers Now, Rangers Forever”? It’s extremely difficult to see how the club can simultaneously be the same club (laying claim to the titles won under Oldco, using the same name) and a completely different club (not responsible for anything that happened during that period). But that appears to be what we’re asked to accept.
Failure to respond timeously to legitimate requests for the provision of information is a serious breach of the rules. If the football authorities are to perform their functions effectively, such requests by them must be met. In the present case, at the time that the initial request was made, and throughout the subsequent period, Oldco was in administration and the administrators were acting as its agents.
The administrators had the responsibility of discharging Oldco’s obligations, including those to the football authorities. They did not do so, and thus caused Oldco to be in breach of the Rules. We have decided, however, without wishing to detract from the gravity of the breach, that no separate financial penalty should be imposed on Oldco in this regard. Instead, we shall impose an admonition.”
“There has been a second ‘serious breach of the rules’, this time in the obstruction of inquiries into the other ones. Therefore we’re going to do absolutely nothing about it, other than stand over a dead body currently awaiting burial and tell it that it’s been a very naughty corpse.”
And that’s the end of that. The Commission has found Rangers guilty on all charges – that it deliberately failed to disclose things it was obliged to disclose, that it did so to seek financial advantage, and (crucially) that the players it lured by breaching the rules would not have agreed to play for the club otherwise:
“It is clear to us that the reason why side-letters were issued to players, in addition to their contracts of employment, was that they were employed by Oldco to play football… It is also clear to us that the undertaking contained in a side-letter was regarded as a very significant part of the player’s total remuneration package… If it had not been intended that the player would directly benefit from the EBT arrangements then there is no reason to believe that the player would have agreed to accept the overall financial package offered by Oldco.” (paragraphs 50, 51 and 75)
The Commission has also found that Rangers broke the rules again by obstructing its investigation into these breaches. And yet it has declined to issue any sporting penalty, on the grounds that it can’t be certain the rule breaches gave the club a sporting advantage.
We must admit that we’re unable to explain why luring players to play for you, via a scheme expressly prohibited under the rules of the sport in order “to promote sporting integrity, by mitigating the risk of irregular payments to players” (paragraph 4), doesn’t constitute a sporting advantage. After all, if you’re not hiring these players to give you an on-field advantage, what the heck are you paying them for?
The actions of Rangers Football Club for almost the entire 21st century to date represent the most sustained campaign of deliberate, systematic cheating in the history of Scottish football. Rangers improperly registered dozens of players, wholly on purpose, with the goal of avoiding tax and thereby fielding a team comprising footballers of a quality it could otherwise not have afforded to sign.
Other clubs who improperly registered a single player entirely by accident and in the most trivial of ways – appending only one copy of someone’s signature to a document instead of two – forfeited the game that player played in. But somehow a situation has been contrived such that when Rangers did the same thing knowingly and on a vastly greater scale it brought it no advantage, and that the current club (which both is and isn’t the same one, in a sort of Schrodinger’s Football Club scenario) should be allowed to keep all the gains which resulted.
It’s the greatest legal escape since that of Ernest Saunders, the only man on the face of the planet to ever recover from Alzheimer’s Disease. Everyone who ever paid for entry to a Scottish football match in the last decade has just been made a mug of.