Tangled Up in Blue

by Stephen O'Donnell

  However, with Smith doing his best to shield his squad from the financial bad news, and showing admirable defiance in the face of adversity, many players were reluctant to leave Rangers. Kris Boyd was linked heavily with Birmingham City, the Midlands club who were then managed by former Ibrox boss Alex McLeish, but the striker could not be persuaded to join the Championship side on the terms that were being offered, with the bulk of Birmingham’s financial package for the player dependent on promotion to the Premier League. Others who were brought to Ibrox by Smith were on inflated, Rangers-style wages, which buying clubs were generally unwilling to match, regardless of the football industry’s apparent immunity to the global economic crisis. In the end, despite all the hype about a potential fire-sale during the transfer window, only Jean-Claude Darcheville and Chris Burke were offloaded in January, with both fringe players leaving on free transfers. Lloyds had tried to impose austerity on the club, but with so few players leaving, very little seemed to have changed at Ibrox. There had been little or no impact on the club’s expensive lifestyle – the squad were still staying at the same hotels, there would be a pre-season trip to Australia the following summer – and as a result the business was continuing to haemorrhage cash at an alarming rate.

  On the field, Rangers lost the League Cup Final to Celtic in mid-March, going down 2-0 after extra time in what was, perhaps surprisingly, Smith’s first final as Rangers manager against their old adversaries. The Ibrox men made up for that defeat in early May, however, with a 1-0 home win over the Parkhead side sending them two points clear at top of the league with only three games of the season remaining. But with another tense end to the campaign looming, Rangers then stumbled, handing the advantage back to their title rivals by drawing their next game against Hibernian, a result which left Celtic ahead on goal difference. The Edinburgh club then claimed a noted double, however, when they held the Parkhead men to a draw the following week and Rangers made no mistake on the final day, winning 3-0 at Tannadice against Dundee United to claim their first title in four years. Smith’s men also added the Scottish Cup the following week with a fortunate 1-0 win over a brave Falkirk side; Rangers had been so thoroughly outplayed in the first half by John Hughes’s relegation-threatened team that Smith was forced into a substitution at half-time, bringing on Novo for the ineffective Boyd. The diminutive Spaniard made an immediate impact, lashing home a volley from the edge of the box with his first touch to score what proved to be the only goal of the game.

  One player who Rangers finally managed to get off their books at the end of the season was club captain Barry Ferguson, who departed Ibrox in disgrace over the summer. While on international duty in late March, Ferguson, along with team-mate Allan McGregor, had indulged in an all-night drinking session at Cameron House, the Scotland team hotel, after the squad flew back from a World Cup qualifier in the Netherlands, which the Scots lost 3-0. McGregor’s personal bender had apparently extended all the way through until the following morning when the goalkeeper should have been at training, and he was reportedly still in the bar as lunchtime approached, before eventually being carried to his room. The Rangers duo were subsequently dropped for Scotland’s next fixture a few days later against Iceland at Hampden, but while sitting on the bench, under the gaze of the photographers’ lenses, both players were seen to make sly V-signs at the cameras, giving them the Vickies as it were, surreptitiously placing two fingers between nose and ear in an unmistakable attempt to try and ruin the snappers’ pictures.

  The stunt inevitably backfired as the offending images appeared all over the tabloids the next day, and in the aftermath of what became known as ‘booze-gate’ or ‘bevvy-gate’, it was announced that both players would not be considered for selection for Scotland again, although McGregor was later reprieved. Having staged such a passable audition for Dumb and Dumber, Rangers also took action against the pair, suspending them for two weeks without pay after Smith had phoned the players once stories about the drinking session had become public and issued instructions not to attract any further attention. Both men looked set to be sold at the end of the season, although, again, McGregor was later accorded an amnesty and reinstated as the club’s first-choice goalkeeper; Ferguson, however, had transgressed once too often and he was eventually offloaded to McLeish’s Birmingham City.

  Rangers were also able to sell Charlie Adam to Blackpool during the close season and Pedro Mendes to Sporting Lisbon in January, although, with the purse strings now securely tightened, the only new face at Ibrox over the summer was winger Jérôme Rothen, who arrived on loan from PSG and made no impact at the club. A more significant departure at the same time was Sir David Murray, who stepped down as chairman in August and was succeeded by director Alastair Johnston. Denying that he was being ushered towards the exit door by the bank and claiming that it was his decision to leave, Murray, who remained the club’s owner and majority shareholder, stated that he felt it was ‘an appropriate time to go’, adding, ‘We are about to go into the draw for the Champions League, we won the league and the Scottish Cup, we’ve kept our best players and things are better than people would like to perceive.’

  His replacement, Johnston, an accountant by trade, had joined the Rangers board as a non-executive director in February 2004 having previously enjoyed a long association with IMG, the sports management company, where he had risen to become the firm’s vice-chairman. On succeeding to the role of Rangers chairman, Johnston confirmed that the days of showy expenditure at Ibrox were over, when he announced bluntly, ‘My mercurial friend and predecessor had a way of operating that was unique and it is not one I will be following.’

  Rangers fans seemed equivocal on Murray’s tenure, with one spokesman noting the divide between the early years of spending and success and the latter period, apparently marked by the arrival of Martin O’Neill at Celtic, which was more troubled both on and off the park. Nevertheless, it seemed that the great and the good, both from the world of Scottish football and beyond, were lining up to pay tribute to Murray, with First Minister Alex Salmond declaring, ‘David Murray has made an astonishing impact for the better at Rangers and introduced new attitudes and a new professionalism. He departs from his active role as a hugely respected figure in Scottish football.’

  Rangers’ title win in 2009 had kept the wolves from the door, albeit temporarily, allowing the club direct entry into the group stages of the Champions League and providing a much-needed financial boost. Having qualified for the lucrative competition, however, and banked the money, a clearly relieved Rangers almost seemed to forget about the football, with the team collecting only two points in a relatively easy section with Sevilla, Stuttgart and Unirea Urziceni, the unheralded Romanian champions, who went on to inflict a 4-1 defeat on Rangers at Ibrox. Coming so soon on the back of another 4-1 home loss to Sevilla, when the manager tried, unsuccessfully, to play a more expansive brand of football, many believed that Smith’s anti-football strategy of two years earlier had been belatedly vindicated, as the Ibrox men eventually finished bottom of the group.

  Fortunately, things appeared better for the club on the domestic scene, with Celtic, their only major rival, struggling under new manager Tony Mowbray. Rangers started the season slowly and found themselves four points behind the Parkhead men after going through the entire month of September without winning a game or even scoring a goal. But Mowbray’s Celtic, after a promising start, appeared to lose their way alarmingly quickly and it wasn’t long before the Parkhead manager was attracting scorn from the club’s fans for his repeated use of the post-match interview mantra, ‘We’ll take it on the chin and move on.’

  Sadly, there would be no moving on from a 4-0 defeat to St Mirren in March, as Mowbray was sacked in the aftermath and replaced, initially on an interim basis, by the former club captain Neil Lennon. The Northern Irishman, if he was auditioning for a permanent appointment to the role, impressed by winning all eight of Celtic’s remaining league fixtures, although he blotted his copybook in A
pril with an agonising defeat to First Division Ross County in the semi-final of the Scottish Cup, depriving his club of their last realistic chance of a trophy. By then Rangers were already within touching distance of the title, which was eventually secured after a 1-0 win at Easter Road at the end of the month, the Ibrox men’s only title triumph by more than a single point since the profligate days of Dick Advocaat in 1999/2000.

  Smith’s side had earlier regained the League Cup in an extraordinary final against St Mirren, during which Rangers were reduced to nine men. The Paisley side had looked the stronger team when both sides had a full complement of players, but seemed unable to handle the pressure once they were expected to win, after Rangers’ Thomson and Wilson were sent off by referee Craig Thomson, and the cup was settled late on by Kenny Miller’s counter-attacking strike.

  During the season, in October, banker Donald Muir, viewed as a ‘company doctor’ after a series of successful business turnarounds, was placed on the club’s board by Lloyds Bank, with instructions to keep a watchful eye on efforts to reduce the debt at Ibrox. The move prompted Smith, in the aftermath of his side’s 1-1 draw with Hibernian at the end of the month, to concede publicly, ‘As far as I am concerned, the bank is running Rangers.’ Clearly pining for the good old days of front-loaded Murray extravagance and indulgent corporate loans, Smith complained, ‘Sir David has stepped down now and a representative of the bank has been placed on the board. It’s not a situation anyone wants the club to be in… It was a bad thing when Sir David stepped down as chairman as he always tried to invest.’

  The manager’s assertion was in direct contradiction to his chairman Alastair Johnston, who had previously stressed that he, and not Lloyds, was in day to day charge of the Rangers operation and Smith’s claim also produced a swift statement of rebuttal from the bank itself, who insisted, ‘We do not run or manage the companies that we bank – that is, quite properly, the responsibility of the management. Given the recent press coverage, we would therefore like to be clear that Rangers FC is neither operated nor run by Lloyds Banking Group. We would also like to be clear that Sir David Murray’s decision to step down as chairman was a personal decision and not at the behest of Lloyds Banking Group.’

  David Murray Jnr, son of the owner and managing director of Murray Capital, the investment arm of MIH, also expressed his belief that ‘a little bit of frustration’ had got the better of Smith, and repeated the position that the club and the bank would continue to work together to reduce the debt until a buyer could be found. Smith’s statement was an expression of annoyance and disappointment brought about by the lack of new signings, which he felt was contributing to a ‘stagnation’ at the club, and perhaps by Lloyd’s refusal to offer him and his staff a renewal of their contracts, which were due to expire in January. The bank were unwilling to discourage any potential new owners, who might want to bring in their own coaching staff, with the unwelcome prospect of having to first pay off the incumbent management team, although Smith was at pains to point out that he appreciated this point and was comfortable with his contractual situation.

  Despite all the refutations about who was running the club, there was no doubt about where the fans’ loyalties lay, especially as they could see that the club wasn’t signing any players and that the team was struggling on the park, particularly in Europe. Smith, the popular manager, and chief executive Martin Bain were insisting that any new business model must leave Rangers capable of competing with Celtic for the SPL title, whereas the bank were more concerned with their twin objectives of recovering the £30m which they were owed and of finding a way forward which might save the business, ideally under new ownership.

  Smith’s expressions of unease about the bank provoked various fans’ groups to come together and issue a joint statement, which threatened an organised boycott of the Lloyds Group and its products and facilities, if the situation at the club should deteriorate further, and it wasn’t long before Muir, the bank’s man on the board, was being branded as ‘the enemy within’ by the Ibrox clientele. While Lloyds’s position seemed logical to many outside of the football community, it appeared that there was a general lack of appreciation among fans, the media and not least Smith himself about the nature of Rangers’ financial plight and of the self-inflicted mess in which the club now found itself. Another aspect which was regularly overlooked was that, despite the embargo on new signings, Smith’s current squad had still cost more to assemble than any other team in the league, and quite possibly more than all the club’s rivals put together, and that was without taking into consideration the continuing benefits to the club from its as yet unreported use of the EBT tax wheeze, which allowed Rangers to recruit and retain players who they would otherwise have been unable to afford.

  Tellingly, during this period, Smith was being continuously lauded by the mainstream media for apparently fending off the challenge of rival teams ‘on a shoestring budget’ and ‘with one hand tied behind his back’, a complete misrepresentation of the reality of the situation, but the press’s failure to fully appreciate the nature of what was happening behind the scenes at Ibrox and their inability to get to grips with the enormity of the whole unfolding crisis at Rangers would soon be brutally exposed.

  In April 2010, it finally emerged that Rangers were facing a colossal tax bill from HMRC over the club’s use of the controversial EBT and DOS tax avoidance schemes. The revenue and customs service were demanding an astonishing total of roughly £50m, broken down as £24m in unpaid taxes, known as the ‘core amount’, plus £12m in backdated interest, as well as non-payment fines, which were a negotiable sum but precedent suggested that penalties of 50 per cent to 75 per cent of the underpayment would also be applied. Rangers were disputing the assessment and the case was set to go to court, to the first tier tax tribunal in Edinburgh, starting in October 2010, but coming on top of all the other financial woes at Ibrox, including the £30m still owed to Lloyds Bank, this new liability was potentially a killer blow to the club.

  Things had started to unravel for Rangers behind the scenes when, in July 2007, the City of London Police, who operate in the UK capital’s ‘square mile’ financial district, raided Ibrox in connection with the former Metropolitan Police Commissioner Lord John Stevens’s inquiry into under-the-table transfer ‘bungs’ in football. The Stevens report ultimately found ‘unresolved issues’ in the case of the transfer from Rangers to Newcastle of Jean-Alain Boumsong in January 2005, although the matter, along with 16 other deals involving British clubs between 1 January 2004 and 31 January 2006 which Stevens had been unable to sign off in his report, was ultimately not pursued by either the FA or FIFA.

  However, Stevens’s team of forensic accountants uncovered evidence of the use of EBTs at Ibrox, and in particular the shoddy way in which the scheme was being administered through secretive side-letters, and passed on the information they had acquired to HMRC, an unfortunate consequence from Rangers’ point of view. The revenue service had been investigating Rangers since as far back as 2004, but had been blocked at every turn by the club’s denials, obfuscations and even the destruction of evidence, after CEO Martin Bain was found to have issued instructions that his own letter requesting a £100,000 tax-free bonus was to be shredded. Finally, it now seemed, HMRC had the smoking gun they needed to pursue their case against Rangers.

  Perhaps not unexpectedly, the media in Scotland were slow to pick up on HMRC’s investigation of Rangers, and even seemed to be ignoring the story altogether at times, until in May 2010, Phil Mac Giolla Bháin, a blogger and freelance journalist with unabashed Celtic sympathies, managed to get his scoop about the Ibrox tax case on to the cover of the News of the World’s Scotland edition. On the inside pages, Mac Giolla Bháin’s exclusive elaborated on the extent of HMRC’s claim against the Ibrox club. Under the headline ‘Simply the bust’ – not, as it may have appeared at first glance, a typical Sunday tabloid exposé, but a play on Ibrox stadium’s adopted signature tune, the Tina Turner classic ‘Si
mply the Best’ – Mac Giolla Bháin reported, ‘Officials are worried the hammer blow from Her Majesty’s Revenue and Customs could make the club UNSELLABLE – and could even push them towards ADMINISTRATION.’

  It was the first public reference to the possibility that Rangers’ financial difficulties might pose a potentially terminal threat to the club, and of course the full use of HMRC’s official, acronym-free title in the piece was no accident. Rangers were being investigated at the behest of Her Majesty, an ironic and uncomfortable position for a club with not one, but two portraits of the young Queen Elizabeth adorning the home dressing room. The article also claimed that a host of Rangers players were poised for imminent transfers, with members of the youth team squad at the club apparently being briefed to prepare for first team action the following season, and that the manager and his coaching team were also considering their positions. In the end though, Smith decided to tough it out for another season, and rather than sell a number of players over the summer to bring in some much-needed revenue, Rangers instead bought Nikica Jelavić from Rapid Vienna for £4m.

  Even after the News of the World revelations, there was disbelief. One Glasgow radio station claimed the next day that Rangers were consulting their lawyers over the Sunday tabloid’s allegations of a potentially ruinous tax bill at Ibrox, but Mac Giolla Bháin had done his homework and had an impeccable source for his story, none other than the club’s chief executive Martin Bain, who had admitted the details of the case to the journalist in a series of phone calls. Still there seemed to be a sanguine belief that all would be well in the end, with Graham Spiers, a much respected journalist for The Times, expressing his opinion that David Murray would be ‘morally compelled’ to pick up the tab from Hector the Taxman out of his own pocket.