The Sevco Shuffle

In a previous blog I touched on the complexities of the case against the indicted six and Imran Ahmad in absentia. I provided some indicative figures on Green’s litigation and I confirmed my assertion that Green is covered by RIFC for a period of seven years from his date of resignation. Any attempt at defending his petition to the Court of Session is throwing good money after bad. However, as our criminal chairman has demonstrated over a period of thirteen years, he is prepared to fritter away more than half of his ill-gotten gains in court. He and his shyster board have already been taken to court by Sports Direct. His exercise in corporate malfeasance cost the club £400,000. He is now intent on wasting another £50,000 in defending Green’s iron clad severance provisions.

I chose not to comment on the perverting the course of justice charges as I take the view that any deleting of an incriminating e-mail or any shredding of an evidential hard copy document, are the least of the defendants concerns.

Unravelling Green & Whyte’s Sevco manoeuvres will be an expensive enterprise.

Sevco 5088, an off-the-shelf company formed by Field Fisher Waterhouse (via 7Side Secretarial Ltd)  was created for the express purpose of acquiring Rangers.

Green stated: “The company that was originally formed wasn’t required and was handed back to Craig Whyte. That company was never used for anything and it became a dormant company and was subsequently struck-off.”

In The Rangers AIM prospectus for the December 2012 IPO, Green states that he was the sole Sevco 5088 shareholder. Green failed to state that he was a director in the company nor that it was a subsidiary of RIFC Plc.

On the official Rangers website of 5 April 2013 Green stated: “I had signed a resignation letter and a stock transfer form because it was decided that a Scottish company should buy a Scottish institution. Sevco 5088 wasn’t required.”

One week later on 12 April 2013 the official website stated: “Mr Green was the sole director of Sevco 5088 until he resigned and became the founder director of Sevco Scotland.”

However Green didn’t advise Companies House of his resignation from Sevco 5088 at any time even though he wrote a resignation letter and signed a stock transfer form transferring stock from Sevco 5088 to Sevco Scotland.

At this point we arrive at one of the Green indictments, apropos, whether he was authorized to effect this transaction and whether it was legitimate.

According to Companies House there is only a £1 share in Sevco 5088 which is not held by Green. So was the stock transferred the millions of share options held by a consortium who had invested the money to secure and purchase the Rangers assets from Duff & Phelps through Sevco 5088? .

On 27 December 2012, Green signed a request for the voluntary striking-off of Sevco 5088 which was sent to Companies House by Field Fisher Waterhouse( FFW). This document arrived on 7 January 2013 with the requisite notice posted in the London Gazette one week later.

Green stated on the form that he was the sole director which clearly contradicted what he had stated on the official Rangers website which confirmed that he had ceased to be a director of Sevco 5088 at least 6 months earlier.

On 12 April 2013, Companies House received notification that Craig Whyte and Aidan Earley had been appointed directors of Sevco 5088 on 9 May 2012 and their appointment forms had been countersigned by Green.

It was evident that Green was a co-director with Whyte in a company that had the exclusive rights to purchase Rangers.The minutes of the TRFCL Board meeting on 31 October 2012 unequivocally state that Sevco 5088 paid a £200k exclusivity fee to D&P to be the sole acquiring party for the assets and business of Rangers.

Green resigned as CEO of RIFC within one week of the Companies House revelations. On 22 April 2013, RIFC announced via a Regulatory News Statement (RNS) on LSE AIM that Sevco 5088 was a subsidiary of RIFC on 7 December 2012 when the company’s AIM admission document was presented. It was also announced that their departed CEO had failed to disclose his directorship of Sevco 5088 to LSE AIM.

Whyte and Earley contested their removal from office and following an investigation were reinstated as directors of Sevco 5088 and the director termination forms, signed by Green, were ordered to be removed from the Public Register of Companies House. So as far as Companies House is concerned Whyte & Earley are directors of Sevco 5088 and have been since 9 May 2012.

Sevco 5088 received substantial investment funds. Share placing letters were issued predicated on Sevco 5088 being the acquiring company of Rangers. The written permission of co-directors Whyte & Earley was required to transfer these to Sevco Scotland.

There is a growing consensus of opinion that the £2m required to purchase the trading assets of Rangers was effected by Sevco 5088 prior to the asset transfer to Sevco Scotland.

It would appear that this transfer was effected to deceive the Rangers fans and the SFA into believing that Craig Whyte played no part in the trading assets acquisition. In my considered opinion, the Sevco shuffle was a conspiracy between Green & Whyte. It’s important to note that Aidan Earley has not been indicted.

The Cash Crisis

Seven months have now elapsed since the underfunded board was appointed. In this period they have achieved nothing save for an emergency loan from former director Douglas Park, George Taylor and George Letham, whom collectively own 19.53% of all equity. With King’s 14.57%, bought by one or more of Taylor, Park or Letham, they have 34.1% of all equity. This breach of the 30% rule that compels directors to make an offer for the other 65.9% equity, was quickly swept under the carpet. The coup d’etat was achieved by illegal means, aided and abetted by the ambitions of senior figures at the RST and RF to join the board. These blazer-tailored sops to the so-called fan groups, who are nothing more than a King proxy, have allowed the corporate indolence and inertia to go unchecked. King’s toxicity led to no NOMAD being prepared to work with the new board. The shares were de-listed. The new board then came up with a back-room approach to gaining an ISDX listing. They appointed JP Jenkins to offer a matched bargain service, in the hope that this business might persuade their parent group, Peterhouse, to provide the listing they desperately required to raise funding. This approach failed. Attempts to raise soft loans at NARSA failed. Attempts to raise the second tranche of £5m from Sports Direct failed. It has been one failure after another from Murray, Gilligan and Robertson. They know that King was wiped out in South Africa and they have done their best to disguise this simple fact as they need to keep the fans groups’ 11% proxy on-side.

Twenty-one thousand of this season’s cards were renewed prior to the cut-off in June, which yielded £3.77m ( inclusive of v.a.t.). The most popular payment method is in four monthly tranches. Zebra finance act as factors for those who choose to pay over 10 months. The club receives this cash in four monthly payments.

June, July, August and September’s tranches of £943,740 have now been banked and spent. Those who bought season cards after the cut-off, 11,500, initiated their four monthly payments in July, which after v.a.t is circa £517,000 per month

The game against Falkirk attracted 12,000 pay at the gate customers. If we assume an average of £20 per seat, there is another £192,000 after v.a.t to add to the last tranche of ST income. The international break has come at a bad time for the underfunded board, as they have to wait until the 17th for their next tranche of pay at the gate revenue of, let’s assume  £192,000,  with the only other October income from the Petrofac Training Cup QF against Livingston on Tuesday 20th. I would anticipate no more than a gate of 15,000 for this game and a best case scenario income after v.a.t. of less than £200,000.

Best case scenario income for October is £1.1m. I anticipate at least half of this sum will be required to pay the cumulative deficit, with circa £455,000 to pay player’s salaries. When you add employers NI contributions for the players, all income is gone.

Should the club access their vat escrow account, they should have enough to pay our management team, MD, Auchenhowie Academy director, club doctor, our inordinately well paid youth coach Ian Durrant and other staff.  But the other overheads to run Auchenhowie will not be forthcoming. So they will need a loan this month to continue.

Green’s litigation fees payments will initiate this month. His severance agreement is iron clad. Contesting it at The Court of Session this week is an exercise in creating a pretext for administration.

King’s lies about investment will be found out this month. Only the deep pockets of Taylor, Park or Letham can save RIFC from administration.There will be no more season card income in November. TPL will know that each month from November until May, will require a minimum of £1.5m just to break even. The last home gate of the season is on 23rd April. In May there will be no income other than early renewals. Do they have £9m to complete the season? There will be no investment in the current squad. More out of contract signings and loan deals will be required.

TPL planned to balance the books until ISDX funding kicked in. They envisaged November. The question they now face is do they have £9m and are they willing to part with it to save RIFC?

Defending Green’s petition is a sham.Administration will be spun as doing the right thing to stop Green taking a penny from the club. King’s inability to offer any loans will escape scrutiny. Level 5 will be fully deployed to control the SMSM narrative.

The Court Case

“The Crown can confirm that an indictment has today been served on Craig Thomas Whyte, Gary Martyn Withey, David Henry Grier, David John Whitehouse, Paul John Clark, Charles Alexander Green and  Imran Ahmad. The indictment libels charges of fraud, conspiracy to defraud, attempt to pervert the course of justice and statutory offences under the Companies Act 2006 and the Criminal Justice and Licencing (Scotland) Act 2010.The case is scheduled to be heard at the High Court in Glasgow on October 16 in respect of a preliminary hearing.”

Many more established bloggers have hidden behind the cloak of reporting restrictions. I posit that they don’t understand the charges and find it difficult to articulate the implications of Section 28 of the Criminal Justice and Licencing (Scotland) Act 2010. For clarity I will set out three scenarios.

Craig Whyte’s bankruptcy petition was a direct result of the judgment that was obtained previously by Ticketus in relation to the misrepresentation that was made by Whyte during a ticket purchase agreement relating to Rangers Football Club, for which £17.7m plus interest and costs were awarded to Ticketus. This misrepresentation, proven in a High Courts of Justice Chancery Court, is now being pursued by Police Scotland as a criminal offence

Former Collyer Bristow corporate finance partner, Gary Martyn Withey acted for Whyte when he bought the club in 2011. BDO, the liquidators of Rangers, launched a professional negligence claim against  Withey & Collyer Bristow, which resulted in a £24m out of court settlement. Professional negligence was not established in court. It most certainly will be tested in The Police Scotland prosecution. If it can be proven that Withey worked in concert with Whyte to defraud Ticketus to gain a pecuniary advantage, vis-a-vis  fees earned by Collyer Bristow and the funds raised by Whyte, then Section 28 will apply to both protagonists.

Should Charles Green be convicted, the tariff for his offences could be significantly more severe than those of Whyte.The first consideration is why did Grier, Whitehouse & Clark, who accepted Sevco 5088 as the preferred bidder, sell to Sevco Scotland? Was there any pecuniary advantage earned by Messrs Grier, Whitehouse & Clark apropos to this switch? Did they collectively or individually conspire with Green to defraud the directors of Sevco 5088? Did they conspire with Green to award him the assets despite the fact that Sevco Scotland was not the preferred vendor?

Then there is Green’s sale of these assets to RIFC in exchange for equity, and his subsequent pecuniary advantage when he sold the equity. Last but not least is the IPO which was predicated on these assets. What benefit, if any, did Green directly derive from the £22m raised? Were all IPO investors defrauded by Green? Was the prospectus issued by Green an accurate reflection of the true state of the company and its assets?

The third scenario will establish at what point did Green liaise with Whyte. If this was prior to his acquisition in 2011, and Green provided some seed capital via Imran Ahmad at Zeus, then all three are guilty of the Ticketus and assets conspiracies. If Green and Ahmad liaised with Whyte in the acquisition of the assets, to their subsequent pecuniary advantage, via the equity sale at RIFC and the IPO, then all three will be subject to the sentence tariffs reserved for organised crime.

Green, Ahmad in absentia and Whyte face the possibility of a twenty to thirty years sentence.

Green will not stint on expenses should his severance clause be upheld in The Court of Session this week. The cost to RIFC who are currently facing a liquidity crisis with no possibility of an ISDX listing, might hole this corporate vessel under the water line.

£10m Deficit – Incontrovertible Facts

The salient facts from the last full year accounts were as follows:

1 Total Revenue was £25.2m, which included £7.6m from Rangers Retail
2 Gate receipts and hospitality were £12.4m
3. Sponsorship & advertising £1.5m
4.Season ticket sales 36,039 which provided £7.7m
5. Average home league attendance 41,444
6. Hosting Scottish Cup Semi Finals £2.1m
7. Staff Costs £14.7m
8. Other operating charges £16.4m
9. Share capital sale raised £3.1m
10. Ashley loan £3m
These are the hard facts. If you add staff costs of £14.7m to other operating charges of £16.4m (which includes costs for retail and catering) you arrive at £31.1m Which was my ball park £2.5m per month to put a team on the park. I accept that this year there is a net reduction in player’s salaries of £2.8m, so we can reduce this figure to £28.3m.

However, in 2015, income is reduced by the £2.1m for SC semi finals, £3.1m in equity, the £3m Ashley Loan and a decrease in Season Tickets sales of £400,000.

Should 8,000 more attend every home game, paying £20 at turnstile, you can deduct circa £2.43m (after VAT) from these losses; but you must factor in £665,000 in acquisitions.

So the losses this year, assuming full houses at every home league game and a run to the Scottish Cup Semi-final, and a minimum of QF in the training Cup, will be just under £10m (9.935m)

Are the new board running on fumes?

I’ve followed this saga for a while so I’m disinclined to wait with bated breath for apocalyptic moments.”

The aforementioned comment, in response to one of my blogs, is an apposite counterpoint to Phil Mac Giolla Bhain’s assertion that a decision to mothball the Auchenhowie Sports Academy will be made prior to October 20. I question how Mr Giolla Bhain could have come to this conclusion? Are there leaks in the IT system? Is there an expert in Cloud technology collating e-mails and passing them to his desk in Donegal? Mr Mac Giolla Bhain invites the shyster board to refute his claims, but he knows that if they chose to do so they would add legitimacy to his oeuvre and confer legitimacy to his office.He would also follow up with a series of more searching questions.

Graham Wallace chose to challenge him via the Rangers-facing medium of Radio Clyde, but this turned out badly for Mr Wallace as he was compelled to arrange an emergency loan in a matter of weeks.

I posit that Mr Mac Giolla Bhain chose October 20 as it is the cut-off date for the October payroll run. Could this payroll run be in jeopardy? The £7.3m raised from ST sales is supplemented by ‘pay at the gate’ income and a proportion of the £400,000 paid by the BBC to televise the Scottish League Cup Tie against St. Johnstone. The attendance on that evening was circa 24,000. If we assume that the £4.5m loan only covered the overheads to fiscal end on June 30, the season card income would be totally expended  if it costs  £2.5m per month to put a team on the park. Others have calculated a lower figure, but a quick look at last year’s operational expenditure, minus the reductions in payroll (12 players now off the books) still results in a figure north of £30m.

Expenditure to date is £10m, which represents a deficit of £2.7m. All home games, with the exception of the league cup tie, have generated an additional £250.000 to £330,000. If we factor in £330,000 for four home games, a similar amount for the cup tie and the pre-season game against Burnley, a best case scenario of £1.98m  could have been realized.

Match day spend revenue last season was circa £10m, which included 3 home play-off games,Scottish Cup,League Cup, and Training cup income. This is circa £400,000 per home game. If we assume £800,000 for the four league games and £400,000 for the league cup tie, the revenue will be £3.6m, with a profit margin of no more than 20%, which when added to the enhanced gate figures results in a cash position of zero. Income and expenditure are perfectly balanced.

However when we factor in VAT for the enhanced gates and match day spend, the bill on gates is £396,000 and on spend is £720,000. So any profit on F&B, which is outsourced, will on the reduced figure, after VAT,be £144,000 less than my equilibrium calculations.

So going in to October, the deficit, based on best case scenario projections, is £540,000. If we assume two home games we will generate £528,000 (after VAT) at the gate and £256,000 (after VAT) on F&B. If we deduct the deficit we arrive at an income of only £244,000  which results in the board having to find £2,256,000 to break even by month’s end.

If soft loans are not provided now, there is an obvious danger to the October payroll. Should Green prevail at The Court of Session, an onerous contract of more than £250,000 per month is not sustainable.

I welcome challenges to my calculations.

Shakespeare in the park

Today’s article in The Daily Record relates  how Imran Ahmad compared Malcolm Murray to Brutus, and by implication cast himself as Julius Caesar, in a Blue Room dystopia. Mr Malcolm Murray had been filmed leaving a car in a ‘tired and emotional’ departure from his usual disposition of probity, by the then financial director, Brian Stockbridge. Mr Ahmad was ostensibly the group corporate financial director and the place man of Zeus Capital. The latter were prepared to loan Green £7.8m to engage in a CVA, but only had to pony up £2m when it failed. It’s evident that Imran Ahmad was instrumental in raising the seed capital.

Mr Ahmad will be tried in absentia. Keith Jackson’s rehash of an old narrative leads to questions as to the remit of Ahmad. Of more interest is the fact that the conversation between Ahmad & Malcolm Murray was recorded. Mr Ahmad was accused of leaking some of these taped conversations on social media so as to embarrass the board to pay him commission for his commercial enterprise. His solicitors raised the matter in The Court of Session as he sought to ring-fence what he was owed and his costs. He agreed to an out-of-court settlement of his contract dispute.

It is known that Whyte taped conversations, as did Ahmad and there can be little doubt that Green either recorded, or participated in calls, that were recorded. The transcripts of Whyte’s recordings run to 100,000 pages. The absence of Ahmad’s taped conversations, which he had hoped to trade for ‘safe passage’ will undermine the prosecution’s case. Mr Ahmad’s current locus at an undisclosed address in Pakistan is of benefit to Green and of even greater benefit to vice-chairman Paul Murray, as Ahmad would be eligible to have his litigation costs met by RIFC.

In Keith Jackson’s piece, Ahmad censures Malcolm Murray for his conversations with Paul Murray.I posit that Paul Murray’s naked ambition to rejoin the board was the rationale for his constant badgering of Malcolm Murray. He evidently hoped that his namesake could persuade Ahmad and Green to appoint him on their board. Paul Murray was so desperate to join the board that he would have hitched his wagon to any passing caravan of corporate carpetbaggers. Even a convicted criminal was good enough for Murray if it gave him a seat in the Blue Room..

Keith Jackson’s piece is not the only Rangers reportage today. Derek Johnstone has stepped forward with a piece on complacency being the biggest concern of Mr Warburton. I can assure Mr Johnstone that this will be the least of Mr Warburton’s concerns. Even a complacent Rangers side will gain promotion against the mediocrity of the opposition in this year’s championship. What is of much greater concern is the financial crisis that would be inordinately exacerbated should RIFC, as I expect, be compelled to pay Mr Green’s legal fees.

If this comes to pass, the tragedy off the park will be truly Shakespearean.

The obsession with Rangers

I am assured there is a game in the East end of Glasgow this evening. Apparently Fenerbahce are playing a tie in the Europa Cup. No-one in the SMSM seems to be interested in this game. They are too busy writing about ‘Waggy’ Waghorn’s prowess at penalty kicks, and captain Lee Wallace’s assertion that the reverse against St Johnstone was a ‘freak’ result. No detail is too small to warrant column inches. No minutiae is overlooked. It’s analagous to North Korea, with James Traynor playing the role of Kim Jon- il.

As much as I enjoy Rangers being in the limelight, I am fully aware that Traynor and Kerr are being paid a Dave King’s ransom, at our expense, for reportage that would be less than well-received in a Rangers fanzine with a member of The Boys Brigade as its editor.

Mr Warburton remains convinced that we will win promotion this year, triumph in the Scottish Premiership next season and enter the first round of Champions League qualification in June 2017. He has signed 7 players with the lure of CL football in their third season. If this team is as good as the SMSM would have us believe, should we assume a Scottish Cup win and hope that we won’t suffer another ‘freak’ result? Mr Warburton also opined on Rangers joining CFC in a British League. This despite the fact that a British League is a non-starter, Rangers are currently in the second tier, and that if any other club was invited to join CFC in a British League it would be Aberdeen.

This overkill by Level 5 should be tempered with a more level-headed approach. We have a criminal chairman who does not have any money and is precluded from raising it on any exchange as no NOMAD was prepared to work with him. Does Mr Warburton believe that his current squad, four of whom are out of contract in January, will be replaced by superior players that he can source elsewhere? Does he actually believe the lies of King? Allow me to spell it out to you Mr Warburton. Your player budget is going to be cut considerably in the close season and there is a significant risk of an onerous contract, the litigation expenses of Green, taking north of £3m every year for the next seven seasons or for a longer period. Even with the improved income of playing in the top tier, there will be no investment in the team as costs will be pared to the bone to meet Green’s legal fees.

Then there is Mr Warburton’s demands for respect for prevailing against 11 second tier teams. Mr Warburton, this is not Brentford. At Rangers you earn respect by winning trophies. The Scottish League Cup would have been as good a place to start as any. Had you won this trophy, and not failed to reach the last eight with all the advantages of a home tie, you would have earned our respect.

Mr Warburton, you are being badly let down by an incompetent, underfunded board. Those excellent facilities at Auchenhowie cost £1.5m per month to run. As a former city trader,I’m sure you can do the ‘math’ to calculate how many months £7.3m raised in ST buys? Three months have now elapsed, and by the end of October, there won’t be enough to keep Auchenhowie open.

Your predictions of back to back league title wins have a hollow ring to them. I can wait for CL football if it means avoiding administration this season, and the commensurate twenty-five point penalty.