His response, which was published on 14th March, fully explained the position of Harper Macleod with regard to side letters but the final para in the reply asked:
“Accordingly, I am not clear in what respects it is being suggested that the Commission was “misled” as regards any of the Specified Players in particular and/or in relation to the participation of Specified Players in EBT Payments and Arrangements in connection with the Rangers Employee Benefit Trust.
For the Commission to have been misled it would be necessary for it to have been induced into a false belief by the actions or inactions of a party and/or third party and for it to have relied on that false belief in coming to its various decisions.”
Since its publication on the previous blog there have been various comments by TSFM contributors that have looked at the full response as well as the final paragraph. Using those (and with the help of specialist input for which we are all grateful), our reply has been constructed and mailed to Mr McKenzie, and copied to the SPFL CEO and the members of the SPFL Board.
Whilst not the most entertaining prose ever to have appeared on TSFM, our reply is an exhaustive and comprehensive commentary of our views and conclusions, and takes the form of detailed responses highlighted in bold/italics to the issues mentioned in Mr McKenzie’s letter, together with a covering letter summarising those points and the conclusion they lead to.
What happens next is an opportunity for those in charge of Scottish Football’s to convince us that our game is indeed an honest one, honestly led. A game where honesty and integrity in all its forms take precedence over convenience, commercialism and dishonesty.
It represents a challenge not only to football authorities but to the silent Scottish main stream media to ask the questions that will set the record straight without fear or favour. Let’s have the truth and no more lies and concealment. Mistakes have been made, it is time they were admitted and explained. Maybe then, from a position of honesty, our game can move onwards and upwards, for it is our game, the supporters’ game.
The governors and media are but the custodians.
45 Gordon Street
Glasgow G1 3PE
29 March 2014
Dear Mr Mackenzie
The Lord Nimmo Smith Inquiry (“the Inquiry”)
I refer to your letter received on 14th March in response to my letter which was posted to you on February 19, 2014. I am very grateful to you and your client that you have been able to respond.
I enclose with this letter comments and observations highlighted in bold/italics on the points raised in your letter with our references to the Decision in grey. The purpose of this letter is to summarize those comments and their importance.
The key issues that require to be addressed coming out of the Inquiry are as follows:-
(a) the decision taken at some point between March 5, 2012 (when the Commission was announced) and August 2012 to restrict the scope of the Inquiry to matters arising only on or after November 23, 2000 and thus to exclude any matters in the period from July 1, 1998 to November 22, 2000 (“the Earlier Period”). I would understand the decision to restrict the scope of the Inquiry to have been taken as a result of the failure by the administrators of Oldco to provide necessary and key documentation relating to the Earlier Period.
(b) the decision to treat the MGMRT and the earlier REBT (“the Earlier Trust”) as one and the same. At para 35, the Decision states “we are not aware that they were different trusts”. Given that the Decision (in the immediately prior sentence) states that the MGMRT had been “preceded” by the Earlier Trust, It is not easy to understand how the authors of the Decision can then state that they are “unaware” that they were different trusts.
The decisions to (i) exclude the Earlier Period; and (ii) to treat both trusts as indivisible, had important consequences.
From the Decision (para 40), it would appear that the President of the SFA gave evidence only as to his knowledge of the MGMRT (not the Earlier Trust). The annexes provided with my original letter, clearly show that the President had knowledge of the Earlier Trust (and indeed was active in its setting up). I am obviously unaware of the extent to which the President was in fact examined on any issue relating to the Earlier Trust.
It is stated in the Decision (at para 104) that the Inquiry proceeded on the basis that the EBT arrangements (by which it meant the use of the MGMRT) were “lawful”. It could do so (at least partly) as a result of the outcome of the FTT decision which was announced in November 2012.
Because the Inquiry treated the MGMRT and the Earlier Trust as one and the same, this meant that the Inquiry failed to distinguish between the two trusts and necessarily treated the Earlier Trust as also being lawful (without however having properly investigated its operation). However, the MGMRT and the Earlier Trust were two separate trusts and there was no necessary reason to treat them as one and the same. Had evidence relating to the Earlier Period been produced and examined, the Inquiry could hardly have treated them as “the same trust”
By the time of the Inquiry, Oldco had already conceded liability in what has become known as “the Wee Tax Case” (which related to the Earlier Trust). Having regard to the wording at para 104 of the Decision (where it is said that to arrange financial affairs in a manner “within the law” is not a breach of the SFA/SPL Rules) the clear implication, must be that to arrange financial affairs in such a way that they are not lawful, is a breach of the rules.
Given the admission of liability in the Wee Tax Case, payments made in respect of the Earlier Trust were not “lawful” (to employ the language used in the Decision).
It will be obvious from the above that the importance of the Earlier Trust has been masked as a result of:-
(a) the failure by the administrators of Oldco to provide the documentation required of them;
(b) the decision to restrict the scope of the Inquiry; and
(c) the failure of the President of the SFA to provide to the Inquiry his own knowledge of, involvement in, and understanding of, the position relating to the Earlier Trust.
Had the Earlier Trust been the sole subject of the Inquiry (rather than in effect not being examined at all) the following must have been different:-
(i) the President could hardly have failed to give testimony of his knowledge and involvement;
(ii) the Inquiry could not have held that the use of the Earlier Trust was lawful;
(iii) given the clear history of deliberate non-disclosure by Oldco/its controllers, it is not easy to see how paragraph 107 (wherein it is stated that there is “no question of dishonesty”) can have remained;
(iv) given the use of payment arrangements to employees that were not “lawful”, no other member clubs could have used such arrangements. This raises the issue of a “sporting advantage” having been obtained.
In the circumstances, given the information now available to your clients, the Earlier Period cannot remain unexamined. There is no reason why such period should be excluded from any scrutiny.
The Decision requires to be revisited with the Earlier Period forming part of the Inquiry or alternatively, the Earlier Period should now be the subject of a separate inquiry.
This letter, a copy of which has also been sent by e-mail and comments will be published on our Scottish Football Monitor web site and a reply should be sent to our e mail address at (address supplied). Copies have been sent to the SPFL CEO and SPFL Board members by e mail and/or hard copy.
I confirm receipt of your undated letter, addressed to me and copied to Mr Doncaster which I have discussed with my client. I do not know your name or address or the position which you have with the TSFM and am unable to address you as other than ‘Sir’.
The SPL Commission Decision of 28 February 2013 (“the Decision”) deals, amongst other matters, with the failure by “Oldco” (as defined in the Decision) to provide relevant information at Issue 4 on page 33 of the Decision.
Whilst I was only able to secure and provide to the Commission copies of a number of the ‘side letters’ the list of those players who had received such letters was in the public domain and for the purposes of the ‘Issues’ before the Commission it was not suggested by Oldco or Newco that the fundamentals of the side letters were significantly different over the 10 years or so that Oldco had given such letters to each of the individual players involved.
Whilst the role of the side letters (or side agreements in HMRC terminology) per se might fundamentally have been the same in terms of the ebt arrangements, there were two types of ebt involved in the specified period from 1 July 1998. It would appear from para 35 of the Decision that no evidence was led to distinguish between the two trusts even although the President of the SFA (one of the witnesses) clearly had that knowledge, having established the Rangers Employee Benefit Trust (REBT) and later been a beneficiary of the Murray Group Management Remuneration Trust. (MGMRT). Equally Oldco had that knowledge.
The Commission was provided with evidence regarding the existence of both the Murray Group Management Remuneration Trust and the Rangers Employee Benefit Trust. This is referred to at paragraph 35 of the Decision. The Commission chose in its Decision to group these together as “MGMRT”.
Was the evidence provided the same as the evidence supplied with the TSFM letter of 19th February?
If it was the same evidence why was the fact that at least two players were involved in a type of scheme which was found by an FTT to be outside the rules (and so payments using it to be irregular and whose operation was described by HMRC as either fraudulent or negligent), not used to raise questions on which SPL rules were broken and why? At para 104 of the Decision it is stated that it is not
“ 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 payments to those two players were accepted by Oldco as having not been in conformity with the law. That would imply a very serious breach of Rules.
If the evidence provided on 19th February by TSFM was not supplied in March 2012, did the failure of Oldco or Newco to clarify at any time and especially when asked to provide documentation that would do so, not mislead the directions given to the SPL and so the terms of reference for the Independent Commission?
Both are referred to in the published accounts of Oldco and copies of those accounts were provided to the Commission.
Did the accounts provided to the Commission make a distinction between regular payments and irregular payments or give any indication that there was a difference between the schemes that would have led anyone to consider that they should not be treated as continuous?
“We note that the MGMRT was preceded by the Rangers Employee Benefit Trust, but we are not aware that they were different trusts. We shall treat them as a continuous trust, which we shall refer to throughout as the MGMRT.”
This seems a very odd decision. One trust is preceded by another trust and yet the Commission decided to treat them as one continuous trust.
If the documents accompanying the letter of 19th February, which were specifically requested in respect of ebts and any correspondence relating to them, had been provided to the SPL would Harper MacLeod still have advised the SPL in the way that they did, and would the terms of reference have remained as initially envisaged in the SPL announcement of 5th March 2012 i.e. starting from 1st July 1998?
I refer you to the Annex to the Decision which includes six lists of Specified Players, 1A, 1B, 2A, 2B, 3A and 3B. The numbering relates to 3 periods during which different regulatory regimes applied. The A reference is to players for whom we had a copy “side letter” and the B reference is to players for whom we did not have a copy of a side letter but in respect of whom there was other evidence that a side letter had been issued by Oldco. The Commission proceeded on the basis that with respect to the Issues the position of all of the Specified Players was the same except where specifically identified in the documents and other evidence.
The Commission was provided with copies of “side letters” relating to the players whose names appears in the A lists of Specified Players and whilst the Commission and I did not have copies of the side letters for those players whose names appear on the B lists, the evidence of side letters having been issued by Oldco to each of the players listed in the three groups of B Specified Players was also disclosed to the Commission.
At paragraph 36 of the Decision the Commission held that the same general arrangements applied in respect of all of the Specified Players whilst the details and precise form of the individual side letters varied over the years.
Since the involvement of Specified Players in EBT Payments and Arrangements with Oldco and the existence of side letters given to each of them was known to the Commission and included in the Decision it is not readily apparent what substantive new allegations with respect to the actions of Oldco in relation to EBT Payments and Arrangements under the earlier Rangers Employee Benefit Trust so far as relates to the Issues are now being made.
Your letter does not suggest that the scheme of the EBT Payments and Arrangements was different as between the first and second trusts and associated sub-trusts so far as concerns the player registration matters with which Issues 1, 2 & 3 were concerned. The Commission does not suggest in the Decision that it determined the Issues before it on the basis that any of the Specified Players had not been part of EBT Payments and Arrangements during the period of their employment by Oldco and/or that one or more of them had not received a side letter from Oldco.
Accordingly, I am not clear in what respects it is being suggested that the Commission was “misled” as regards any of the Specified Players in particular and/or in relation to the participation of Specified Players in EBT Payments and Arrangements in connection with the Rangers Employee Benefit Trust.
For the Commission to have been misled it would be necessary for it to have been induced into a false belief by the actions or inactions of a party and/or third party and for it to have relied on that false belief in coming to its various decisions.
It is accepted that for the reasons given the missing side letter of 30 August for R De Boer is not of itself significant in the findings of the Commission as it was commissioned and that had it been supplied originally and the scope of the Commission been set to begin from 30 August rather than 23rd November, the Decision would have been the same.
However the information provided on 19th February shows that the failure of Duff and Phelps (who were of course at that point, the sole controllers of Oldco) to provide all the documentation requested and the subsequent failure of the investigation process to make a distinction between the irregular nature of payments in the REBT and the payments into the MGMRT that have been considered “regular”, suggests that the investigating team responsible for the commissioning itself were misled.
When the investigation was announced in March 2012 the SPL said
“The SPL Board has instructed an investigation into the alleged non-disclosure of payments made by or on behalf of Rangers FC to player s from 1st July 1998.”
It is clear from the Commissioning papers that Duff and Phelps were asked to provide all documentation relating to ebts (no distinction between REBT and MGMRT being made or indeed possible at that point) including any documents from HMRC. The information supplied on 19th February by TSFM contains documents after 1st July 1998 and before 23 Nov 2000 that relate to ebts and side letters/agreements, one of which was supplied but not apparently the other, as well as
It will be obvious that Oldco’s involvements with EBTs has contained various episodes of non-disclosure of relevant facts to relevant authorities.
In the absence of any input to the contrary, the side letters and ebts were being treated as part of contracts for service which were not fully disclosed to the SPL/SFA. This meant that for registration purposes the ebts could be treated as the same or continuous. However the side letters/agreements are not the issue nor indeed the registration (or misregistration). The issue being raised is that two of the contracts for service, whilst involving misregistration, had an additional factor and that additional factor is that they were irregular in that they were not lawful.
The failure to provide the missing documents or any advice from those involved in the REBT/ DOS arrangement, caused the commissioning to focus on misregistration because the documents that would have altered that focus were not supplied by Duff and Phelps, whether by accident or design, when requested.
The significance and consequence of this can be found in The Decision when Lord Nimmo Smith himself said
4) The relevant SPL Rules were designed to promote sporting integrity, by mitigating the risk of irregular payments to players;
It follows therefore that if sporting integrity had been circumvented by an irregular means, then sporting advantage would accrue.
And then went on to conclude
(5) Although the payments in this case were not themselves irregular and were not in breach of SPL or SFA Rules, the scale and extent of the proven contraventions of the disclosure rules require a substantial penalty to be imposed;
The documentation supplied clearly shows that two players were paid by an irregular method for which Rangers accepted responsibility in March 2011, a full year before the investigation into side letters and player registration began.
The rules that were broken in respect of irregular payments, the penalty for doing so and what to do about the failure of Duff and Phelps that misled the investigators needs to be reconsidered. It may be prudent to wait for the results of HMRC’s appeal to the UTT concerning the regularity or otherwise of payments made under the MGMRT before embarking on any premature decision regarding the “lawful/regular” nature of the REBT payments. You may wish to refer Duff and Phelps apparent failing to BDO the liquidators of RFC.
You will note that the Commission determined at paragraph  (1) that there had been breaches by Oldco with respect to all of Issues 1, 2 and 4 and in respect of most of 3. The excerpted parts of 3 are stated in the paragraph. The finding of breach extends to the Registrations with the SPL, as it then was, of all of the Specified Players; i.e. all of those for whom we had copy side letters and for those for whom we did not but in relation to whom it was known that side letters had been given by Oldco and that whether in respect of the first and/or second trusts.
The breaches in Issues 1 to 3 relate to non-disclosure of side letters/agreements and misregistration which were the focus of the commission because of the limited material provided.
However issue 4 for which an admonishment was given refers to
“Failure to respond timeously to legitimate requests for the provision of information is a serious breach of the rules.”
However what has been demonstrated in the evidence supplied with the letter of 19th February is not a failure to respond timeously but a failure to respond FULLY and that failure or inaction, for whatever reason, has produced a judgement which appears seriously flawed and undermines the legitimacy The Decision by the Lord Nimmo Smith Commission might lay claim to.
TSFM 28 March 2014
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