A “What If …?” Scenario That Should Scare The SFA

1280px-HK010I’m going to tell you a story here, and please bear with me.

Before I do I want to thank two people; one directly, and one anonymously.

The direct thanks I send to the writer of the John James blog, whose recent works have been great reference points in helping me get to the bottom of a murky story I heard earlier this year and which another source all but confirmed over the weekend.

That source is the one I’d like to thank anonymously. He knows who he is and why it’s important that I don’t use his name.

What I am about to write for the next few paragraphs is all fact.

I’ll tell you when I start speculating, because it’s important to separate the two things.

On a day when The Guardian is publishing unsubstantiated crap in an effort to attack the Resolution 12 team, and maintaing that Scottish football governance issues are of concern only to Celtic and our fans I am not about to claim, for one second, that what you are about to read is all referenced and properly sourced and 100% accurate.

I’m not even going to tell you the specifics of what I’ve heard; I’ll give you the background and a hypothetical scenario based on some of it, and what I don’t write you can check out for yourself. Some of it is already online.

You can then decide what you think.

Nothing I’ve seen is actual evidence; I want to reiterate that now, although I’m equally certain neither John James nor my other sources are going on rumour alone. Under normal circumstances I wouldn’t write an article based on such rumours, but it is not how real or not these stories are that bothers me and made me decide it was a worthwhile piece.

I’m writing it because this isn’t impossible. It isn’t even implausible.

It’s all very … doable.

And that’s what worries me.

This story starts in South Africa in 2013, when the tax authorities there brought an end to their campaign of chasing the assets of, and threatening to jail, one David Cunningham King, now the chairman of Sevco, otherwise referred to on the various Celtic blogs as the “glib and shameless liar.”

One of the key provisos of the deal was that he “repatriate his overseas assets.”

In other words, they wanted his cash reserves and his future earnings right where they could see them, where they could keep a close watch on what he was up to.

One of those overseas assets was a company called NOVA.

He sold that company to another, MicroMega. The South African government got the proceeds of the sale.

NOVA had been a pretty important part of the King portfolio. It had subsidiary branches in China, Brazil and Peru.

But it was a strange deal, one that bore scrutiny. It was so strange that the South African government had to independently investigate it to make sure the shareholders at MicroMega got themselves enough bang for their bucks. Because, you see, MicroMega is partially owned, and chaired, by none other than David Cunningham King himself.

This isn’t uncommon in the business world, and here it was a perfectly logical step.

King still does a lot of business abroad and NOVA still has offices in various nations; what’s changed is simply that the company now has its headquarters in South Africa. Although MicroMega also has subsidiaries in various nations around the world, they are registered at home, whereas the registered offices for NOVA had been in Hong Kong.

At various times in the last two or three years I’ve looked into King for this and for the CelticBlog.

It wasn’t hard to discover that his reported wealth these days is mostly on paper, tied up in the share value of companies he is sitting on the boards of and has shares in.

It’s an established fact that all of his disposable assets were seized by the government; the cars, the houses, the wine cellars. His liquid assets were either turned into cash to pay the fines or likewise seized. The settlement didn’t wipe him out, and in comparison to the likes of us he’s still a wealthy man, but it didn’t leave him much to “invest” in Sevco either.

But he still works hard and he has a lot of shares, and based on the values of those he still appears to be quite well off.

But this has always been a fundamentally misleading indicator of actual wealth, because if, say, Mark Zuckerberg were to announce, tomorrow, that he was putting up the entirety of his Facebook shareholding as a public offering, the value of those shares would go through the floor as people wondered why he was bailing out.

King’s done that before, of course, which is what got him into trouble with SARS in the first place, and although it is possible for him to liquidate shareholdings in little chunks, this potentially has a negative impact on the value of the rest of his shares.

In June of last year, King sold 15 million shares in MicroMega for a value of £8.5 million.

I’ll get back to that number shortly.

South Africa is a country that takes a dim view of the things Dave King did in his tax avoiding years.

Other countries have a similarly dark attitude towards tax evasion, but South Africa take it more seriously than most, in particular because much of the cash they lose out on ends up overseas. Their government likes to keep their national wealth in-country, as it were, which is one of the reasons King was told to “repatriate” his assets back to where the tax man could get at them.

South Africa also has rather robust exchange control regulations, which heavily penalise high worth individuals who want to move cash out of the country. They’d prefer that cash was invested, and taxed, right there at home, for obvious reasons.

There’s a financial cost to transferring money out of South Africa.

There are also regulations in place which require disclosure on where the money is going and what it’s ultimately for.

These rules would be even more rigorously enforced with a man like Dave King.

Without prior approval from their government and Treasury, no resident can transfer cash out of the country in any significant sums. There’s simply no getting around that fact.

This site has long argued that the combination of Dave King’s tax settlement, the government’s insistence on the repatriation of assets and the harsh exchange controls which the South African government has in place, make it virtually impossible for him to “invest” in the club to the extent he and others seemed to suggest he would.

In short, even if he had that kind of wealth he’d never be allowed to spend it catering to the egos of Scotland’s most ungrateful and impatient football fans.

This site and others are on the record as having said that King has spent precisely nothing on NewCo Rangers up until now, save for the purchasing of some shares and giving a loan of £1.5 million in the name of New Oasis Asset Limited, which is referenced as a “King family trust” and, for all we know, doesn’t even have his name on it.

Any further “investments” should be very easy to demonstrate because something like that would leave a very long paper trail.

Or so I long suspected.

At the same time, this site and others have long argued that the present directors, none of whom are high worth individuals – save for Douglas Park, who has always shown great reluctance to pour it into the black hole of a football club – will be able, or are willing, to keep on funding the club from their own “soft loans.”

The only person in the history of Sevco who had the financial wherewithal to do that into perpetuity is the one King has worked so assiduously to push away; Mike Ashley, who’s Sports Direct billions could have kept the lights on indefinitely.

That means that without “outside investment” sooner or later it’s going to fall on King to keep his promises, or not.

King can buy shares in, and invest in, any company he likes, just so long as he does it through a South African registered “vehicle”, and the tax man knows how it’s been done. There are “foreign portfolio investment allowances” which have to be run through registered bodies, and individual allowances, which can be up to £400,000.

It is possible to get certain funds abroad for such purposes.

Buying shares in foreign registered companies comes under the exchange control laws and his initial share purchase, plus the £1.5 million in loans, probably doesn’t push him over the threshold depending on what’s in the “family trust.”

In the main, however, the more money he has to “invest” the more likely it is that the South African government will draw a big line and subject him to those more rigorous investigations and rules. South Africa’s government is not of a mind to let any high worth individual – far less one they had to chase for years – take significant sums out of their country.

And this is where our friend Keith Jackson comes in.

On 7 December 2015, Jackson wrote one of his best articles of last year, if not the very best. In it, he questioned King’s “investment” in the club and wondered where the £5 million which they had recently announced would pay off Sports Direct was going to come from. It was one of the first articles to actually ask hard questions about the Sevco board and their long term plans.

And a certain man in South Africa was spooked by that, because he has always been able to rely on a subservient media in order to get the things he wants. He had made promises and Jackson was asking he keep them, but the Record writer was also casting doubt over the veracity of a lot of King’s claims and that bothered him most of all.

Was Jackson reading up on South African exchange control laws?

No, he was simply wondering why, when it only takes 11 hours to fly here from Johannesburg, that King hadn’t already simply delivered the money and given it to the Newcastle owner.

For all it was a ridiculous notion, there was a core of truth in what Jackson actually said … and he was right to be asking the question. He should have asked more questions though, such as where King had allegedly found the two “investors” who were said to be putting up the bulk of the cash. Jackson had doubts about those guys, and those doubts were not without foundation.

Whether Jackson pushed King and his people into speeding things up or whether his intervention was shrugged off inside Ibrox and utterly ignored is something we’ll never know, but that money duly found its way to Ibrox shortly thereafter and the debt to Ashley was cleared. The Sevco board agreed another £1.5 million in loans, and they were able to get through the season.

Just a month after he had written that piece, with the money now in place and with Ashley paid off, Jackson was singing a very different song. Yet oddly he wasn’t giving the credit where it was supposed to be due.

In fact, he was telling everyone that King had actually invested “north of £7 million” in the club himself.

Myself and others mercilessly and brutally mocked him for that assertion.

Where did he get that number from?

Was it “direct knowledge”?

Was it a wee emailed memo, perchance?

Something thrown to him by a PR firm?

If it was then it was the daftest ever released in the history of public relations in Scotland, because it has been focussing minds ever since. As John James has already pointed out, the total “take” Sevco had brought in since King became chairman was not far from that sum and we know much of that had come from other members of the board.

But there was still that rather large chunk of money that came from elsewhere, from “Hong Kong-based fans” Barry Scott and Andy Ross.

Sadly, for Sevco, it quickly became apparent that Ross had some “background”.

In December 2014, he had been charged by the Securities Commission over there, and found guilty of numerous failures in relation to his handling of an audit involving a company that was being investigated for fraud. The charge was “improper personal conduct” and he was fined and banned from serving on an SEC-regulated company for a term of three years.

It’s not clear if he knows, or has done business with, George Latham, the other Hong Kong based Sevco investor, who is rumoured to be deeply unhappy with things at the club. Perhaps he’s aware of stuff that the average punter isn’t. I have heard that he was explicit in demanding that King finally show the others the colour of his money.

And this is where we head into speculative territory.

According to the people I’ve spoken to, and as  John James has suggested quite openly, neither Ross nor Scott has that kind of money. With Ross unable to sit on a board of directors, and with his net worth unknown, we can’t really say whether that’s true or not, but it can’t be easy to just find £2.5 million that’s going spare, even if, as some have suggested, there’s a Wonga rate of interest on it.

If these guys don’t have that kind of money, if John James and others are right, then they’re not the source of the £5 million which is attributed to them in the Sevco accounts and which so famously bought Ashley off and ended his hold over the club.

We know the money is real, but if it didn’t come from them then where did it come from?

Let’s start there. Let’s speculate a little.

Did that money originate elsewhere?

Say, in South Africa?

Was it funnelled through Hong Kong and into the accounts at Ibrox, with those two “investors” playing patsy, and either taking their cut of the interest or being looked after some other way?

In short, did that money come from Dave King himself?

First, with King’s financial situation being what it is, where would he get the cash?

Well, I suppose, if we’re speculating, that it’s possible the genesis of these funds was the £8.5 million in shares which he sold in MicroMega in June last year. This, after all, was the very company he used for the incestuous deal that let NOVA become a South African company, although it was based in Hong Kong. In fact, isn’t it also possible that the £5 million actually went through NOVA itself?

As I said, I’m not saying this is true.

This is all speculative, a “what if?” scenario.

But the way the game is run here in Scotland, it’s not impossible.

It’s not even improbable.

Because this isn’t even about King, not really. This is a scenario that could as easily have involved Craig Whyte or Charles Green or the Easdales or whoever else has sat on the Ibrox board over the last few years. The loopholes that allowed those guys to get their feet under the table are still wide open, and God alone knows what might happen in the future if they stay like that.

As to King himself, well what he does with his own money is his lookout. He’s already proven to be a little slippery, but also a little stupid. In the documented instance which he’s famous for he did, after all, get caught.

I expect someone who screws up that badly would be odds-on to do so again.

It’s not as if there aren’t people looking.

As simple as it would be for someone like him to move money around like that and find ways of doing it, he has to know he wouldn’t be operating in the dark. He’d be doing it surrounded by eager eyes.

I’m 100% certain that SARS keeps a close one on him and they aren’t the only ones. He has seriously pissed off an actual billionaire, a guy who knows his background and will be very aware of South African exchange controls and the corporate structures at NOVA and MicroMega, and will be understandably curious about what the source of the £5 million which paid him off is.

Is that a guy you’d want digging into you?

We already know King provokes him to a foolish, even dangerous, degree but could he really have been that stupid?

Ego does things to people. It doesn’t keep them smart.

But like I said, that’s his business.

If he’s done something daft then it’s on his head, and there’ll be no dodging the bullet this time.

The issue here, as ever, is football governance or what passes for it in Scotland, because I cannot imagine another association where a scenario like the one I just proposed is even remotely possible, in light of all the outside agencies supposed to be watching.

What troubles me is this; what does it mean to Scottish football?

Because we’d be talking about money laundering here, and that’s the best case scenario. That’s the long and short of it, and that goes well beyond the usual nonsense we often hear about. This would be the illegal transfer of funds from one country to another, evading financial controls and other laws, and probably screwing with the tax man into the bargain. Again.

It all comes down to how this kind of thing could easily happen with the people we have running the Scottish game. As John James has pointed out, if someone wanted to do this kind of thing he only has to look at the way the media ignores any issue it doesn’t want to deal with and the way in which the SFA turns a blind eye to all manner of things, no matter how dark.

None of this should be possible with the proper controls, but it is.

Good governance doesn’t even have to be that complicated, not in this case.

I cannot overstate enough times that Dave King is an open book. His history is not a secret and neither is the fact he needs to comply with South African laws involving investment and the transfer of funds. That’s a fact and whether he simply found two Hong Kong based mugs or whether he used them as conduits for a scam is beside the point.

To get where he is right now, he had to pass a “fit and proper person” exam.

We all know that. Ashley took the SFA to court to find out how they arrived at the decision, and he demanded they make their report on it public. He hinted at some deadly information in there. I think I know what that information is. It’s not what they asked King or what answers he gave. It’s what they didn’t bother to ask him at all. It’s the answers they didn’t even look for.

When he sat in front of the SFA for his fit and proper person examination, how much did they really want to know?

Did they quiz him on South African financial regulations?

How much clarity did they seek about how he was going to meet all of his stated commitments about investing tens of millions of “his children’s inheritance”?

We know it’s impossible.

But this guy was presenting himself as the saviour of the club, in the same manner Whyte did, with glib assurances painting over blatant bullshit. Remove Dave King and his grandiose and utterly ridiculous promises and isn’t Sevco a club in serious danger of collapse as a going concern already?

It’s his alleged wealth that underpins the “business plan”, the one on which the club getting a UEFA Level License to compete in the top flight next season legally depends … this is right there, in black and white, in the SFA and UEFA rule books.

Wasn’t it important to know where the cash was coming from?

Surely they didn’t just accept all that nonsense about how easy it would be to find “outside investment”?

Who better than Stewart Regan knows how hard that is?

This is a Scottish club that emerged from a liquidation, which is still haunted by a tax scam and wIth no record of posting profits. As Phil is fond of saying, “this is a loss making company with no credit line from a bank.”

Sevco’s short term business plan is wholly dependent on Dave King’s promised pot of gold, and as we’ve seen even if that exists he’s not going to be able to use it for that purpose, not legally, not by any means that would be palatable to his government or in line with the deal he’s made with them. So where’s the money actually coming from?

Some folk in a position to know assertain that everything about the Hong Kong deal is fishy. That nothing about it really fits. Where the Hell did King find these guys? Why didn’t they “invest” before? Their £5 million could have bought the assets of the club in 2012, so why now? Why have they only now popped up out of the woodwork?

They were initially touted as being “Rangers men.” But they were previously “investors” in Workington Reds, where they were similarly packaged as “fans” investing their cash in an act of love.

It’s not hard to come up with tenuous links between Ross and King, if we wanted to take speculation to absurd heights. Ross works for Baker Tily. They are one of the biggest accounting firms in the world, so it may just be a coincidence that they’ve worked with NOVA. That they’ve got offices in both Hong Kong and Johannesberg. That there are other subtle connections.

But they were also linked with Sevco itself.

In August 2015 they were being touted as the club’s official auditors, and in an odd turn of events Phil reported that a “senior client” of the company had strongly objected to that. He sent them a bunch of questions on the matter, alleging that they’d turned down the opportunity and that Campbell Dallas LLB had been approached instead. As it turned out, they were duly appointed a day or two later.

Although The Offshore Game and the Tax Justice Network guys have had all the ink recently, they’re not the only NGO to have looked into the dark corners of football. In 2009, The Financial Action Task Force, an intergovernmental agency, wrote a report called Money Laundering Through The Football Sector. It is a damning, shocking, and incredibly prescient piece of work.

Since then, of course, Scotland has seen a parade of less than savoury characters troop across the landscape singing The Billy Boys. As one guy on TSFM said recently (and thanks to him, REIVER, for posting a link to the FATF report, “organised crime has its grubby hands in sport all around the world why would Scotland be left out?”

Who says we’ve been left out?

Does any of this even remotely compute at the SFA? Do they give a damn? Can something as potentially damaging as this really happen right under their noses? Of course it could. Because it’s happened already.

I mean, don’t these people have a fiduciary responsibility to scrutinise the means by which a football club comes into millions of pounds?

My God, doesn’t that open the doors wide to corruption on a grand scale?

How do we know clubs aren’t being financed by the proceeds of crime right now?

That there isn’t at least one Scottish club paying its bills with drug money or loan sharking debts or worse? The Ashley loans were at least open and transparent, his company at least reputable if not entirely wholesome.

King couldn’t wait to get Sevco off the stock exchange. We’ve all wondered why. Is it because, as he puts it, that it’s expensive and wasteful of time and effort? Did he really ditch is so he wouldn’t have to fill in a few forms? It’s a lot of inconvienance, including not being able to start a share issue, just to save on the admin costs.

Or was there another reason? A darker one?

One more to do with transparency and openness?

These are just some of the reasons why a scenario like the one I’ve outlined is more than just a flight of fancy and the stuff of the internet Bampot. We have rules here so lax you could get around them in a hundred ways, and it wouldn’t take an international super villain out of a Bond movie to come up with a dozen strategies for pulling it off.

Doesn’t our football association need full transparency about these sort of things?

Isn’t it way past time for fit and proper person criteria to do what it says on the tin?

Isn’t it time for financial fair play to be introduced so stuff like this is impossible and not just unbelievable?

Because the only reason I’m not wholly convinced of this is that it just sounds so absolutely out there and unreal because of all the implications of it.

And that begs one last question; at what point does a failure in governance become complicity?

When does looking the other way graduate to something more serious?

Is wilfully ignoring a possible criminal act not, itself, a criminal offence?

The SFA is a public body. It has responsibilities beyond covering its own backside and that of a certain football chairman.

If the SFA has helped Dave King commit a crime here – either by accident or design – then not only should heads roll but people should be indicted alongside him as co-conspirators or accessories after the fact.

I can’t put it more bluntly.

This policy of “look the other way” when it comes to Ibrox has been disastrous for the club and for Scottish football but we’re on a whole new playing field if a scenario like the one I just proposed ever comes to pass and the authorities find out about it.

People will say this is a crazy suggestion, and at any other association it would be.

As those who’ve been following the Resolution 12 situation though, we know what these folk are capable of.

The SFA knew what Whyte was planning months before he pulled the plug, allowing Rangers to trade whilst insolvent and continuing to run up debts it had no intention of paying.

They allowed the assets of the liquidation to be bought by a company which wasn’t named on the original sales documents, and they gave that company a license.

They allowed Green to sell shares when it was apparent to many they might not be his to sell and they stood back whilst his board of directors investigated itself over links to Craig Whyte, links which had a direct bearing on that share issue.

I have long contended that this might have made them party to a fraud.

Does it still sound unlikely to you?

Americans have a law that I sometimes think would work very well over here; they call it RICO. The Racketeering Influenced Corrupt Organisation Act, which seeks to destroy entire groups involved in what the FBI refers to as a “continuing criminal conspiracy.”

Regan, Doncaster and others have gone out of their way to help first Rangers and then the NewCo avoid the scrutiny every other club would get, and through all of it their only defence is to accuse those of us who question it of bias and being motivated by hate.

What’s the line from The Godfather?

“It’s business, not personal.”

This wouldn’t be a shock if it turned out to be true, and people at Hampden who should have known better either averted their eyes or simply pretended it wasn’t happening at all. For people who understand the words “continuing criminal conspiracy” better than most, having assisted Craig Whyte in one, this wouldn’t be personal.

It would just be business as usual.

At a time when the mainstream media can’t even be trusted to cover the biggest sports story in the history of this island sites like this one are more important than ever. If you are able to, and you want to help real Scottish football journalism, and not the sort you get in the tabloids, you can make a donation by clicking the link below.

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James Forrest

James Forrest is a writer and blogger from Glasgow, and the author of two books, Fragments and Believers, which are available on Amazon.

One thought on “A “What If …?” Scenario That Should Scare The SFA

  • 2 August, 2016 at 4:51 pm
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    Always and forever will be about the Rangers why don’t you write about our own club ffs

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