Amongst the many debates and discussions that are being had in Celtic cyberspace about the potential for Sevco to rise again, one has the power to chill the blood of the Ibrox supporters like no other.
It’s the debate over just how much money King has, and is able to invest in the club.
This is a discussion and a debate the media would rather not have.
There’s a good reason for that, as you’ll see.
Some of what I’m about to write is conjecture, but it is conjecture based on hard evidence.
Not all of this is my own work. There are guys on the Scottish Football Monitor site and elsewhere – with a special mention to BarcaBhoy, whose piece on this is what got me interested – who have been beavering away on this subject for many months.
I thought it was about time that it was all dissected and presented in a single article.
Before I start, let me tell you that the news for Sevco fans isn’t all bad. Because this website has accused King of being self-centred and greedy, determined to hold on to his gains (ill-gotten or otherwise) come what may.
We would like to apologise to him for that.
The truth is he might not actually have the money we all thought he did, and even if he has there are significant obstacles to Sevco ever seeing any of it.
Let’s start at the beginning shall we?
Dave King is a guy I’ve been interested in for years, since the moment when he “gifted” £20 million to David Murray’s Rangers.
He had the kind of “rags to riches” tale that kids starting out in business can only dream of, moving from Castlemilk to Johannesburg and amassing a fortune.
What kind of fortune? That’s the question a lot of people want answers to.
Before even that, on the very night he gave Rangers the money, I was curious as to how he had done this.
This was a country which, at the time, half the world was imposing crippling sanctions on.
It was run by a racist government and a highly bigoted class of people.
If you were a white South African, especially a European, you were in good shape.
If you weren’t, you had problems.
It almost seems inconceivable that a man could have gone over there and made such vast sums of money as the Scottish media likes to tell, and done so in a way that was wholly legitimate.
King, as we know, was actually engaged in all manner of activities.
These allegedly include (but are not limited to) money laundering, currency fraud, running a Wolf of Wall Street style “pump and dump” of company shares … the list went on and on.
King’s battle with the South African tax authorities began with a company called Ben Nevis, which King controlled and which his government said owed them a fortune.
Here’s where things get technical, but I’ll try and keep it as straightforward as I can.
That fortune has been estimated to be in the region of £200 million.
The Scottish media loves to hold that number up, not as proof that King was a crook on a massive scale – which is what that number actually reflects – but as proof that he was unbelievably wealthy.
But was he? The short answer is “yes he was.”
Relatively speaking. And by that I mean relative to people like us.
What does that figure actually represent though?
Well before Ben Nevis came Specialised Outsourcing, the company King founded and who’s shares he traded in, to enable him to set up Ben Nevis in the first place. How much did he get for those share?
Somewhere in the region of £90 million.
So already you see, we can already pin his wealth down to roughly half of the reported tax demand.
Which will come as a surprise to those who hear “£200 million in back taxes” and assume a personal fortune twice or three times that high.
Not in this case.
And why not? Well, it gets better.
Let’s look at the tax demand itself.
When you strip it down, it isn’t all that it looks.
For a start, it’s less than has been reported; some £142 million when you factor in the exchange rate.
Regardless, this wasn’t a fine designed to grab some of King’s personal wealth.
It was a fine designed to wipe him out, to far exceed the actual amount the South African government estimated that he’d tried to conceal.
This is far from being unusual in tax cases where they are not alleging late payment or a series of mistakes; this was a fraud case and they acted accordingly.
Their total includes a demand for back taxes, yes.
It also includes a whopping (but not extraordinary) 200% penalty.
Plus late payment interest. Plus fines.
This reflected both the tax crimes and breaking the country’s strict exchange controls, which I’ll get to shortly.
What else do we know, for sure, about the value of King’s own holdings in Ben Nevis?
Well, the company itself pled “no contest” to its share of fines and debts, and settled with SARS for an unknown sum.
But King, knowing that was coming, and knowing he couldn’t hold them off (and he was right; when they were on to Nevis he had no choice) wanted to make sure he had his own wee nest egg squirreled away.
He had to pay lawyers’ fees, bank charges and then there were the various hits he had to take during the period when he started liquidating his assets to transfer them elsewhere.
(Liquidating assets always means getting less for them than they are worth … ask HMRC).
He enlisted the help of a number of top bankers, in the hope that he could hide the cash where SARS would be unable to find it. Unfortunately, he left a paper trail which SARS followed all the way to the banks themselves.
And lo and behold, the crooked bankers helping him had painstakingly minuted the meetings.
Those minutes laid bare exactly how much he was putting out of reach from those chasing him.
It bears scrutiny, and will surprise many.
The following comes from email exchanges between executives at the now defunct Bank of Bermuda, who had ties to HSBC.
“What we are doing is selling all his investments in the name of Ben Nevis,” one reads. “That is, a £10-million portfolio with Barclays Private Bank, and two Royal Skandia portfolios (managed by [Cape Town hedge fund firm] Alpha) amounting to approx. £3-million.
“There is already some £50-million on depo with Barclays Private Bank (he has a long-standing relationship with Sir Anthony Richardson).”
Roughly another £4 million was added to that with the sale of other portfolios.
In addition to that were the transfer of assets including his shares in what was then Rangers.
See, like most people of vast wealth, King liked to spend.
His personal assets at the time were worth a fortune, including private jets, vineyards, property and paintings.
In fact, it was one of those paintings which got him into trouble. He bought a piece by a famous South African artist at an auction, courting, and loving, all the media attention that went with that.
This media coverage surprised a senior SARS investigator called Charlie Cripps, who read of King’s purchase at breakfast one day.
He was intrigued, and asked for the King file when he got to his office.
Cripps found that the Castlemilk born businessman had declared an annual income which was a mere fraction of the total cost of that painting, and from then on he started to dig. He found King’s other purchases in due course.
The media likes to paint King as some kind of whizzkid.
Well, this kind of stupidity was not what you’d have expected from Gordon Gekko or Keyser Soze.
We know that prior to the the final settlement with the South African government they had already seized many of these assets, worth somewhere in the region of £30 million.
As BarcaBhoy has pointed out in his excellent analysis, this would not have reflected the value King paid for these assets; he would have taken a loss, maybe even a big loss, on nearly everything.
Indeed, we know the £20 million that he “invested” in the David Murray adventure was gone.
One thing comes out in his benefit, and not a lot of people realise it.
This £30 million in asset sales forms part of the “final settlement” figure.
Taking this into consideration, this would have left King with a fortune of around £40 million … still very substantial by anybody’s standards, and you can throw on a few million more in bank interest if you feel generous.
But then you must subtract the cash value of his final settlement with SARS – a further £16 million plus – along with the fines he paid on each separate charge, and you hit a mark which puts him somewhere in the £20 – £25 million region.
A lot of money.
But not “off the scale” wealth.
To put it in some kind of perspective, Fergus McCann had a personal fortune of nearly £20 million when he took over at Celtic.
To go even further, and take a local example, our own Willie Haughey has a net worth of over £140 million.
Now, at this juncture, let me tell you that King has not been idle during all this time.
He has other investments, other companies, but we can infer from his declared tax returns (and these, you would think, will be legitimate this time) that his annual earnings aren’t massive; a couple of million per annum.
We know this because when his assets were frozen he petitioned a Guernsey court to award him a stipend for “living expenses”, which BarcaBhoy estimates could have given him an income of about £1.6 million a year … these expenses are normal in legal cases where assets have been been frozen, and usually reflect median annual earnings.
Yet, according to reports in South Africa he has largely recouped the money SARS took from him.
As before, however, the bulk of this personal wealth is tied up in the share price of his companies, and this time the government is watching every move he makes. Another Specialised Outsourcing type scandal is impossible.
There is a difference, you see, between “paper money” i.e. what someone is “worth” in terms of the value of their holdings and shares and actual money sitting in the bank.
His current business venture is, ostensibly, worth another £50 million plus when you look at its share price.
His daughter, who he recently appointed to the board, is said to have a “net worth” of £50 million, due to the “Family Trust”, which is simply a collection of share portfolios and other such “assets” whose value can fluctuate radically.
“Realising” that number would mean selling off shares, and the minute the King family started to bail the share price itself would tank, and the value would fall rapidly enough as to greatly reduce their overall take.
Added to that, the tax man would want his cut.
It’s possible too that King himself may have salted away cash elsewhere, cash that even the South African government doesn’t know about.
The trouble with that money is that it’s largely out of reach in terms of re-investing.
It’s been siphoned off to avoid prying eyes, as a personal fortune, the kind that will see you and yours into perpetuity.
To start investing it in something as high profile as a football club – where everyone knows you have interests – draws attention to it.
That brings the investigators buzzing around like flies.
King has already had significant problems with SARS; he doesn’t want to invite any others.
So how much “actual cash” does King have to hand?
From the above numbers, somewhere in the region of £20 – £30 million.
Yet let’s give him the benefit of the doubt here, because he’s a smart guy, and a slippery SOB, and say he could raise as much as £100 million if he really had to.
If he could liquidate his share portfolio without taking a hit, without legal consequences, without drawing attention, let’s say he could do that.
It’s probably fanciful, but let’s speculate for a moment.
Now for openers, it falls way short of what the media estimates his “net worth” to be.
It’s a half what the more “conservative” estimates suggest and a quarter of what the more star-struck appear to believe.
Wikipedia, without sources of any kind for the number, estimates it at over £600 million … which would put him into Sunday Times Rich List territory, easily, yet he’s woefully absent from it’s South African top 25. The very fact that it’s his daughter – not King himself – who makes it into the top 100 with her £50 million tells you how difficult things are for him to even appear to have that kind of cash.
Yet it’s still a colossal fortune, the kind of money we’ll never see in our lifetimes.
So let’s be generous. Very generous. Assume he can raise £100 million.
Running a football club is an expensive pursuit.
If you consider that even maintaining Sevco at their current rate of losses – somewhere in the region of £7.7 million (pre-tax) last year – would start to eat away at that money in a way you couldn’t sustain … well you can see why he might not feel good about it.
We already know that this is a club needing more than just a little TLC.
Stadium renovations alone are a £10 million plus bill in the waiting.
Assembling a scouting network, rebuilding the backroom team, spending on first team players, constructing the basic infrastructure of a modern football club which has been cut to the bone over the past two years … another £10 million at a minimum.
Add what it costs to run that rebuilt organisation to the present annual outgoings … and they only increase by 50% if you’re lucky.
How long will even a £100 million fortune last in the face of this?
Which brings me to my final point; the impossibility of King being able to do even a fraction of this anyway.
Dave King’s deal with the taxman contained one provision that is never actually reported, and would probably not be terribly well understood if it was.
He was told to transfer the assets he had left to South African banks.
There’s a good reason why.
King’s wealth and that of his family comes from his businesses in that country.
He has no real, substantial, business interests outside of there.
Part of his legal troubles arose because he had stashed money offshore, in an effort to hide his total earnings.
South Africa takes that stuff seriously.
They are one of the few countries on Earth which believes that money which is made there should stay there and who have, as a consequence, enacted what are known as “exchange controls”.
The purpose of exchange controls is simple enough; to disincentivise the movement of money out of the country.
They take that particularly seriously if the cash is to be “invested” somewhere else.
When the entrepreneur Mark Shuttleworth decided to move nearly $300 million out of South Africa he was told approval for this would only be granted if he paid a $30 million “levy” for the privilege.
Furthermore, Shuttleworth was a guy with an unimpeachable reputation.
Please note; the South African government did not have to grant Shuttleworth approval to transfer his money, which, rightly or wrongly, they see, in some ways, as their county’s money. This is totally at their discretion.
That they only did so when he agreed to pay a 10% charge against it is telling.
King’s assets were consolidated in South Africa under a court order, because he had already broken exchange control regulations.
Can you imagine the South African government’s response if he decided to liquidate his assets there so he could pour it down the Ibrox plughole?
If King still has money offshore, that cash is lost to Sevco because the second he starts to spend substantial amounts the South African government will be asking – rightly – why it wasn’t transferred back to their control, and what tax he paid on it.
Because of his 13 year legal fight with SARS, and the list of charges against him, as well as the settlement offer, the money he does hold in the country is largely stuck there.
Oh he can operate for a while behind the “Family Trust” argument, but that runs into the same problems eventually, as the King family itself is largely confined to South Africa and to operating there.
If those trusts are offshore and they contain wealth enough to start this job it’ll have to be a lot of wealth … because he can’t get more money into them without running afoul of the rules.
I suspect he’ll be wary of doing that.
13 years in the courts makes you leery of opening that can of worms again.
SARS does allow a small amount of money to be invested every single year without being subject to these regulations.
It’s probably this money which enabled King to buy his shareholding in the first place, after, of course, he and his people had driven the share price low enough that he could afford to do it.
None of this is to say that King can’t invest in Sevco.
It’s possible that the South African government would grant him leave to do so.
It’s not to say he doesn’t have the money to invest, because he clearly does have wealth enough to make a dent in their problems.
But King, the saviour, who is going to pour money in and plug every hole and rebuild the club into what David Murray once had at Rangers … well that is simply not going to happen at all.
When we look at King’s behaviour thus far, we see a man who’s not yet spent a dime of his own cash on the Ibrox operation.
Some have said it’s because he won’t.
Maybe it’s simpler than that.
Perhaps he can’t.
The Scottish press appears not to care about this issue, but others have already raised it, giving the media their cue should they choose to look.
Former chief executive Derek Llambias taunted the hack pack with the question “Where’s the money, Dave?” in his last days in the job and Mike Ashley has long suspected that King doesn’t have the funds.
He tested the waters recently, when he called King’s bluff with the recent demand for the £5 million in Sports Direct loans to be repaid.
The media never bothered to speculate on how Ashley knew this gamble wouldn’t end with Dave King writing him a cheque.
Instead they took King’s refusal as a sign he wasn’t backing down, but that point is a nonsense when you really look at the issue and what the benefits would be to the club of having this monkey off their back.
Llambias and Ashley are smart guys.
They know everything I’ve written here and probably a lot more besides.
We’ve seen our media talk up the wealth of David Murray, back when a lot of people already knew he was floating on an ocean of soft loans at ridiculously generous rates. BarcaBhoy has cited other examples of where the media has reported personal wealth based on overblown share prices and “assets” which turned out to be largely worthless.
To give you but one example; for years the media calculated Murray International Metals net worth based on steel reserves, which were sitting in warehouse, and which he couldn’t find buyers for.
We saw Craig Whyte labelled a billionaire by folk who could have sussed him with five minutes internet research without even using Lexus Nexus.
For years now they’ve been talking up the Wealth of King based on no information other than a demand for repayment of back taxes and fines, but without the most basic comprehension of what those numbers represented.
They sift through court judgements for the bits that sound the most newsworthy – “Oh Dave King had a plane, and the South African government seized it ..” – without actually considering the significance of the overall.
As per usual, it’s left to guys like BarcaBhoy, on his own time, to go where they won’t, and to find what they won’t look for.
I don’t expect that you’ll see any of this in the media, not until the wheels come off anyway.
I don’t expect that the Sevco fan sites will take this stuff well.
But if, for once, they would just temper their expectations it might do them good in the long run.
If recent leaked season ticket numbers are to be believed – less than 20,000 sold the last I heard – a lot of them aren’t convinced either.
The rest don’t want to hear it, any more than the press wants to say it.
Which leaves it up to us, I guess, to be the bearers of the bad news.
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