Tangled Up in Blue

by Stephen O'Donnell

  The Ibrox club was subsequently relegated to the Europa League, where they faced a play-off against Slovenian champions Maribor with the winner guaranteed a place in the secondary tournament’s group stages, a respectable consolation after missing out on the Champions League, while for the loser, in this case Rangers after a 3-2 aggregate defeat, there would be no further participation in European football at all that season. The club’s record in Europe since reaching the UEFA Cup Final in Manchester in 2008 now extended to just one win in 22 matches.

  Disaster had struck, but no sooner had McCoist’s side been eliminated from Europe than questions began to arise, almost exclusively among the online community, about whether Rangers should have been permitted to play in European competition at all that season. It turned out that HMRC were pursuing the Ibrox club over two separate tax issues; the first an assessment of £2.8m over payments to a small number of players, including Ronald de Boer and Tore André Flo, made through the Discounted Option Scheme (DOS) between 1999 and 2003, which became known as the ‘wee tax case’, and the second, far larger EBT bill through which numerous employees, including dozens of players, were being paid until 2010. Rangers were contesting in court HMRC’s £49m claim for the latter, the so-called ‘big tax case’, but the club had already admitted liability for the DOS bill of £2.8m, which was now outstanding and would ultimately remain unpaid. In order to gain a UEFA licence to participate in European competitions, rules state that an applicant club must not be owing to a tax authority by a deadline of 31 March before the season commences.

  Clearly Rangers, having admitted liability for the wee tax case, and with interest continuing to accrue, had failed to meet the required criteria by the stipulated date, yet the club’s application for a European licence was waved through by the SFA. On 1 April, the day after the deadline had passed, Rangers finally produced their delayed mid-term accounts and admitted openly for the first time that two separate tax cases were hanging over the club. When asked if Rangers could go bust as a result of HMRC’s claims against them, chairman Alastair Johnston appeared to agree but initially, rather than provide a verbal answer, he cleverly assented with a nod of the head, a reaction which provoked an unseemly row among rivals in the media as to how the gesture should be interpreted and reported, and whether the prospect of insolvency had actually been admitted by the chairman or not. It was all very unnecessary, with Johnston going on to concede, ‘The reality is there is a possibility that there could be a judgment that the club can’t pay… It’s like a gorilla in the room and you don’t know what its appetite is.’ On the wee tax case, Johnston acknowledged, ‘There are two HMRC situations. One has been ongoing and another one, which is noted in the accounts, has just arisen in the last couple of months. It’s £2.8m… It relates to no more than two or three players and an issue ten or 11 years ago.’

  Still the SFA refused to probe Rangers’ eligibility for a European licence, and it wasn’t until September 2017 that the governing body finally issued instructions to its compliance officer to investigate whether Rangers had lied over the club’s application to play in Europe in 2011. By then, former finance director Donald McIntyre had admitted in court, during the Craig Whyte fraud trial in April 2017, that Rangers had ‘no choice but to accept liability’ for the wee tax case, after HMRC produced copies of the side-letters which the club had been using to guarantee supposedly discretionary payments to players, evidence which had been gained from the raid on Ibrox in 2007 in connection with the Stevens inquiry. It seems that with European income considered vital to Rangers’ continuing existence, the club had tried to maintain during the licence application process that they were in discussions with HMRC about structuring the repayment, when in reality the revenue service had refused all offers to parley with the Ibrox club and were demanding repayment in full.

  Despite the trauma of their European misadventures, the domestic season began positively for McCoist and at one point, over the first weekend in November, Rangers were 15 points clear of Celtic after a laborious start to the campaign by Lennon’s side. The Parkhead men slowly reeled them in however, as Rangers began to drop points towards the end of the year, culminating in a 1-0 defeat at St Mirren on Christmas Eve, which reduced the gap at the top of the table to just a single point. Celtic then hit the front after a 1-0 win in the derby on 28 December and from there they never looked back, enjoying a run of 17 consecutive league victories to put themselves within touching distance of their first title since the dramatic Thursday-night finale at the end of the season in 2008.

  The only blip came after a 3-2 defeat at Ibrox in March on a day when the championship could have been clinched, but revenge came the following month for Celtic with a 3-0 home victory over a Rangers side making what turned out to be a valedictory appearance in the famous fixture.

  By then the Ibrox institution was heading for oblivion. Many experts feel that administration would have inevitably hit the club as early as October, but after McCoist’s failure in the European qualifiers had deprived Rangers of the elixir of Champions League revenue, owner Craig Whyte took to using money which should have been collected as tax, through PAYE and VAT, as working capital to fund the club’s day-to-day overheads. In the circumstances, such an egregious display of short-term thinking was always going to end in tears, as the club ran up yet another tax bill over the first half of the season, increasing the total liabilities to HMRC by a further £9m. Despite selling their best player, Nikica Jelavić, to Everton for £5m at the end of January, the striker whose goals had been instrumental in the club retaining the championship and who finished the year as the team’s top scorer even after his mid-season departure, Rangers entered administration just two weeks later on 14 February, 2012, 26 years to the day since David Holmes was named the club’s CEO, ushering in the Souness revolution and a new era of spending at Ibrox.

  Despite HMRC’s successful petition to trigger the insolvency event, Whyte managed to persuade the Court of Session in Edinburgh to allow him to appoint his preferred administrators, the London-based firm Duff and Phelps, who had advised and assisted the owner with his takeover less than a year earlier. A statement on the company’s website claimed that the financial services partnership were, ‘renowned for saving businesses, reputations and livelihoods, even in the most difficult of situations’.

  It sounded like exactly what the famous old institution in Govan needed, but anyone, seemingly, who had any connection with Rangers around this time was liable to have their reputation absolutely trashed through their association with the club and Duff and Phelps, or ‘Duff and Duffer’ as they became known during a chaotic period of trying to stave off liquidation, were no exception. Had HMRC been allowed to appoint their own firm, the administration of Rangers FC would in all likelihood have proceeded along very different lines, with the beleaguered Scottish game already well-acquainted with the normal practice of what happens during the bankruptcy process after similar events at clubs such as Dundee, Motherwell and Livingston. The customary procedure was for the insolvency practitioners to call a meeting with all employees, including the players, where the highest earners would invariably be informed of the unhappy news that their contracts were being ripped up in an effort to drastically reduce costs.

  Yet almost unfathomably, immediately after entering administration, Paul Clark and David Whitehouse, Duff and Phelps’s appointed joint administrators and the men who were supposedly now running the club, allowed Rangers to proceed with their attempt to bring in a new striker, the out-of-contract Gabon international Daniel Cousin, who had previously played at Ibrox under Walter Smith. Scottish football was almost as stunned by the attempted signing as it was by witnessing the country’s most successful football club suffering the indignity of having to appoint administrators in the first place. Quite properly, the SPL refused to sanction the recruitment of Cousin, with the League’s rules stating clearly that, barring exceptional circumstances, clubs in administration cannot sign players.


  It all smacked of a failure to appreciate the reality of what was happening, particularly on the part of the manager McCoist, who was heralded by supporters for his use of the trite maxim ‘We don’t do walking away’ to describe the reaction to the testing circumstances in which the club now found itself. Joint administrator Paul Clark was also sounding sanguine about the club’s immediate prospects when he announced, ‘We are wholly confident that Rangers will continue as a football club. We do not think that liquidation and the closure of the club is a likely outcome at all.’

  In addition, administration had triggered an automatic ten-point deduction by the SPL, but despite the gap to Celtic being extended from four to 14 points, McCoist still seemed bullish about his team’s prospects of making up the deficit and winning the league. Reality bit, however, after Rangers’ first game under the administrators’ regime, with a 1-0 home loss to Kilmarnock leaving them 17 points off the pace and all but out of contention. Finally, the focus at Ibrox shifted from the pursuit of Celtic to a new priority, namely seeing out the season. To this end, following exhaustive negotiations and with McCoist heavily influential behind the scenes, the Rangers players agreed to take a temporary, tiered wage cut of up to 75 per cent for the top earners, saving the club £1m per month, in the hope that further redundancies and failure to complete the season could be avoided. In exchange, the players insisted on minimum release clauses being inserted into their contracts, which would allow them to speak to other clubs and leave Rangers for discounted transfer fees, once they reverted to full salary at the end of May.

  With Craig Whyte having fled the scene after the Daily Record finally turned on the former billionaire and exposed his takeover arrangement with Ticketus, the administrators’ immediate priority was to try and find a new owner for the business, ideally in time to avert liquidation. Various consortia appeared and were named in the media, four of which were confirmed by Duff and Phelps, including the ‘Blue Knights’ group, a brazenly populist syndicate of ex-directors and prominent supporters whose credibility was hampered not only by their silly name, but also by their lack of funds.

  In the absence of any other viable contenders, the American Bill Miller, a truck and tow magnate from Tennessee who had dreams of owning a sports club, was given ‘preferred bidder’ status by Clark and Whitehouse in early May. But Miller’s plan involved the formation of a ‘Newco’, a new company which would allow Rangers to continue as a going concern but only after the existing institution, formed in 1872 and incorporated in 1899, had been set aside. Liquidation, and the subsequent loss of Rangers’ heritage and history, was the biggest fear of everyone associated with the club, so Miller came up with an intriguing plan to try and save the day, which he attempted to explain in a lengthy written statement.

  ‘In order to preserve the club’s history, records, championships and assets,’ Miller expounded, ‘I will put the “heart” of the club into an “incubator” company [his quotation marks] while Duff and Phelps works to make the “sick patient” healthy through a CVA process that effectively works to “radiate” the toxicity of past administrations’ sins out of the patient while the “healthy heart” is preserved and moves forward. Once the CVA process has been completed and the patient is on the mend, the administrators will return Rangers Football Club to me for a nominal sum. The healthy heart and the healthy patient (The Rangers Football Club plc) will then be reunited through merger. In this scenario, the club can continue with all of its business assets, including its history, protected from the present illness. Thus a new corporate entity will own the club’s assets during the incubation period including all of its history. Any suggestion that Rangers’ history is lost by such a process is preposterous.’

  Rangers fans were seemingly unimpressed with all of this jargon, when they held up placards at Ibrox advising Miller to ‘truck off’ and bombarded the businessman with scores of abusive e-mails. After a short delay during which he claimed to have taken another look at the books, and with his plans for the club producing so much invective, Miller decided to make a tactical retreat and withdrew his offer to buy the club, with his spokesman, Jon Pritchitt, explaining to viewers of Newsnight Scotland, ‘The hole is maybe a little deeper and the length of time is a little farther than originally expected.’

  With Duff and Phelps confirming in April that the club’s total liabilities could reach £134m, liquidation seemed unavoidable. The only alternative was a Company Voluntary Arrangement (CVA), referred to in Miller’s statement, which would allow the business to continue in its present guise if creditors agreed to receive a percentage of what they were owed through a ‘pence in the pound’ deal. For this to happen 75 per cent of the creditors, by value, had to agree to the proposal, which meant that even with the ‘big tax case’ still pending, HMRC could unilaterally pull the plug on the idea of a CVA and force the club into liquidation.

  Time was now the enemy for Rangers, with the club in danger of simply running out of cash, when Duff and Phelps announced on 13 May, the same day that the Ibrox men recorded a 4-0 victory over St Johnstone in the their final match of a troubled season, that a new, previously unrecognised consortium led by the Yorkshire businessman Charles Green had come forward and entered into a binding contract with the administrators to buy the club. It was already a done deal; Whyte had signed over his shares to Green’s consortium in a lawyer’s office in London for the sum of £1, prompting Green to announce at a Murray Park media conference that he had happily given Whyte another £1 from his own pocket, allowing the former owner to make a 100 per cent profit on his sale of the club. Green and Whyte had reached an agreement to save Rangers and it wasn’t just Celtic fans who picked up on the colour-coded irony involved in the transaction.

  Green, a former non-league footballer, had previously been chief executive of Sheffield United, the club he played for as a schoolboy, where he had been dogged by allegations of interference in team affairs. Always an unpopular figure with the club’s supporters, particularly after the acrimonious departure of long-serving manager Dave Bassett in December 1995, Green was eventually forced out in 1998 by demonstrating fans after selling the South Yorkshire club’s best players and provoking the resignation of boss Nigel Spackman.

  On his arrival in Glasgow, fans of the Blades bombarded Rangers message boards, urging them not to have anything to do with Green, with one contributor noting, ‘As if things couldn’t get any worse [at Rangers], up pops Charles Green.’ Not much else was known in Scotland about Green’s business history, although The Herald informed its readers, ‘Records held by Companies House reveal that nine of the companies Mr Green has been involved with in the past have been dissolved, while he has a track record of moving very quickly between posts, having resigned a total of 31 different appointments during his career.’

  Green’s bid vehicle for Rangers was the London-registered company Sevco 5088 Ltd, an operation which had only been formed at the end of March, with a search of business directories revealing only, ‘This company has not yet filed a description of their activities.’ Nevertheless, Green claimed to be the head of a ‘global consortium’ with the financial backing of up to 20 individuals and families from as far afield as Singapore and Mongolia, although he steadfastly refused to identify his partners until his CVA proposal was carried through.

  Meanwhile, as soon as administration was triggered, the SFA launched an independent inquiry into whether Craig Whyte had been a ‘fit and proper’ person to own and operate Rangers. The subsequent report found that SFA rules had been breached by Whyte, by now the undisputed villain of the piece, over his failure to disclose his previous disqualification as a director and his decision, while in charge of Rangers, to withhold over £9m which had been deducted as PAYE and VAT, and using the taxman’s money to cover the club’s overheads. The club itself was also charged with ‘bringing the game into disrepute’ for becoming insolvent, and faced sanctions over the failure to pay Dundee United their share of the gate receipts from a recent
cup tie at Ibrox, totalling £61,000.

  As the case went forward to an SFA judicial panel to determine punishment, joint administrator David Whitehouse urged the SFA not to confuse Rangers, the institution, with the actions of the renegade Whyte. ‘We look forward to stating the club’s case to the judicial panel,’ a statement from the administrators read. ‘We believe there are mitigating factors and we hope to demonstrate the distinction between the club and the actions of any individuals.’

  On 23 April, the SFA panel rejected this defence on the grounds of corporate liability and imposed a 12-month transfer embargo and fines totalling £160,000 on Rangers in relation to the club’s financial transgressions, including the appointment of Whyte as chairman, while the owner himself was banned for life from holding a position within Scottish football and fined a total of £200,000. Whyte, however, didn’t give the impression that he was about to pay up, telling the SFA, ‘Good luck collecting the money.’

  Branding the decision of the tribunal ‘a complete joke’, the Rangers owner claimed, ‘[Chief executive] Stewart Regan and [president] Campbell Ogilvie had dinner with me in November and they told me it wouldn’t be a problem. Now they’re just reacting to all the publicity since February… They are playing to the media.’ In the circumstances, it was perhaps unsurprising that Whyte had remained hopeful that there would be little, if any, interference from the SFA over his activities at Ibrox, as Campbell Ogilvie, now president of the governing body, was the same former Rangers director who had administered the EBT scheme at the club, and received a total of £95,000 from the Trust himself, although Regan defended his colleague’s integrity over the issue, despite the apparent conflict of interests.