Day 7 (Tuesday) – The Rangers (In Administration) Saga Continues – Conflicts of Interest and the Right Against Self-Incrimination

I have not had the chance to keep up with the administrators’ statements from Ibrox over the last couple of days, so this is my chance. As before, the original statements are in bold, with my comments below in plain text. This is Tuesday’s.

DUFF and Phelps, Administrators of Rangers Football Club, today (Tuesday 21st February) issued the following statement.

David Whitehouse, joint administrator, said: “Since being appointed administrators last week there has been widespread concern raised with us, not least by Rangers supporters and season ticket holders, about the agreement between the Club and Ticketus.

“Following information received, it is now apparent that the proceeds from the Ticketus arrangements amounted initially to a sum in the region of £20 million plus VAT. Subsequently, £18 million was transferred to the Lloyds Banking Group.

Was the information, as was suggested over the weekend, from Collyer Bristow? Or was it from Mr Whyte, who was described by the administrators as “co-operating” with them. Not so much as to tell them where the Ticketus money was, it would appear!

The apparent role of Collyer Bristow is worthy of attention, I feel. Before I start, I am sure that they have fulfilled all of their obligations and duties regarding client identification, checking of sources of funds and conflicts of interest, but there are some issues that, to a lay observer, might seem worthy of note.

The administrators had suggested they were getting information from “Rangers’ former lawyers”. Gary Withey, a partner in Collyer Bristow, is Company Secretary to Rangers Football Club PLC (in administration). He personally, and his firm, have been acting for Rangers, as I will refer to the PLC. For example, he was the person who, on Rangers’ behalf, sent a formal complaint about Messrs Levy & MacRae to the Scottish Legal Complaints Commission, alleging that L&M were themselves acting in a conflict situation. This complaint was made despite L&M having produced clear expert opinion that its behaviour was entirely appropriate, and that information not having been passed by Mr Withey to the SLCC.

In addition, it is understood that Mr Withey was responsible for the choice of Edinburgh lawyer for Rangers in the Martin Bain case, the original choice, as it turned out, not being up to the high-powered team assembled by Peter Watson of L&M for Mr Bain.

As well as acting for Rangers, Collyer Bristow act, as far as has been made known, for Rangers FC Group Ltd. That company, referred to as Group, has its Registered Office at Collyer Bristow’s address.

Collyer Bristow may act personally for Mr Whyte and for his Liberty Capital Ltd company.

As the suggestion re Ticketus is that season tickets belonging to Rangers were sold off by Mr Whyte, with the proceeds going to Group to settle the Lloyds Bank debt, does this not, I have been asked, present a potential conflict?

If one company on a group transfers assets to another, then the paper trail has to be transparent. It is not for directors to shift funds and assets around without good cause and proper records. After all, the directors run the company in the interests of the shareholders.

What legal advice did Mr Whyte, who assured us he had such “high-powered” assistance, receive regarding the Ticketus deal? Was this provided by Collyer Bristow, and if so, to whom?

Might they have advised Mr Whyte in each capacity?

If indeed Mr Whyte/Rangers/Group was advised by Collyer Bristow on this point, was that advice followed?

These matters might well be examined by the administrators as the insolvency proceeds.

Back though to the administrators – they conform that £18 million went from the Ticketus pot to Lloyds. This establishes conclusively, I think, that Mr Whyte did not get a discount on the debt deal, which for a company apparently facing bankruptcy seems rather odd. Distressed debt is discounted debt, at least in a normal situation.

How do Rangers books reflect this? We would seem to have a situation where (1) Rangers’ season tickets are sold off; (2) Ticketus makes the payment to Group, either directly or to its solicitors, Collyer Bristow; (3) Rangers sells season tickets to its fans, as agent for Ticketus and (5) remits what it has collected to Ticketus.

How can the books show Rangers paying Ticketus? Or has some creative accountancy been deployed to effect the transaction? Is this why Grant Thornton would not sign off on the audited accounts?

“The application of the remainder of these proceeds is subject to further examination.

Good.

“We are now investigating all the circumstances surrounding both the purchase of the majority shareholding in Rangers Football Club plc and the flow of funds which stemmed from the transaction and were intended to fulfil the purchasers’ obligations at the time of the sale.

A couple of points here – the first may be a trivial one, but the statement, copied verbatim above, refers to the “purchasers’ obligations”. Purchasers – plural. As far as we have always believed, the “purchaser” was Group – a single entity. I suspect that my observation is simply grammatical pedanticism.

As a second point however, an administrator would not normally be investigating the acquisition of a company. This is unusual, unless, as might be the case here, the concern is that the purchase is closely connected with what went wrong in the company.

“We cannot comment further on these matters while enquiries continue.”

And quite right too. If there is potential criminality, then the administrators need to be very careful about what they say. They will not want to prejudice any criminal investigation by making public statements regarding criminal allegations.

However, this could be a factor which allows the administration process to drag on and on. If there are concerns about possible criminality, then the party or parties suspected would be entitled to independent legal advice before being questioned. The advice might be that, in an effort to avoid prosecution, no answers should be given till any criminal case is closed.

There remains a right against self-incrimination (although there is European case law regarding the powers of government inspectors to demand answers in insolvency inquiries – that’s for another day!)

How easily will the administrators be able to lay their hands on information of the parties they would wish to question, being the present and former directors of Rangers and Group, for example, receive advice to say nothing?

We are a long way from any criminal proceedings, if they ever commence, and these comments should not be taken as an implication that there has been any criminality at Rangers but the UK does not have a good record on dealing with criminal matters in the context of corporate “dodgy dealing”.

Cases take an extraordinary length of time to reach court, and almost the same time again, it seems, for a trial to progress.

Whilst the American system is held up as an example of how quickly matters should go ahead, a la Enron, cases such as that of Conrad Black, and “Sir” Allen Stanford still take a long time. In Scotland too, where any case could take place, it is a common complaint of defence lawyers that the prosecution takes cases till the last minutes for proceeding with them.

In conclusion, this is an excellent report by the administrators, allaying fears that their “softly softly” approach is not in the interests of the creditors. It makes quite clear that, whether or not they are permitted to speak to Craig Whyte, for the reasons mentioned above, they would proceed without fear or favour in their task.

However, there followed the Wednesday statement, of which more later.

 

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9 Comments

Filed under Administration, Alternative Business Structures, Craig Whyte's Companies

9 responses to “Day 7 (Tuesday) – The Rangers (In Administration) Saga Continues – Conflicts of Interest and the Right Against Self-Incrimination

  1. From what you are suggesting here I doubt whether the judicial and criminal investigation now proceeding into this matter will be able to really point the finger in a conclusive mannor. Shame but as you say there is alot more to come out…….but how long for it all to actually appear?

    • TheBlackKnight

      Judging by the look on McCoist and King’s face, not long!

      Whyte as a sheet! (pun intended – variant {replace as with is} excluded for good taste!)

      😉

  2. HmmDuff

    With all this money go-round, there’s a lot for the administrators to think about. It seems clear, however, that Group (the parent) is no longer a creditor of RFC and the floating charge is therefore not relevant. Group took an RFC asset (the proceeds from Ticketus) and used it to discharge a Group debt (to Lloyds). This is therefore either a loan from RFC to Group or a payment in discharge of the assigned debt – it certainly can’t be a dividend. Group is therefore no longer a creditor of RFC so any thoughts that CW will continue to control RFC because of the floating charge can be put to the side. The admins might try to claw the £18m back from Group, although presumably, there’s nothing there to claw.

  3. ifa007

    I would like a very simple answer to a very simple question.

    What Anti Money Laundering Regulations did Lloyds apply when receiving the 18 million. “Normally” an audit trail is required to demonstrate where funds originate from.

    One would imagine the 18 million would have been transferred from Ticketus to Collyer Bristow’s client account then to Lloyds.. Did Lloyds receive a paper trail for these funds….or did they just say “At last, 18 million, thank you very much…adios amigos”

    We as ordinary citizens have to provide proof to solicitors/banks for transactions and I doubt if we deal in amounts resembling telephone numbers.

    For anyone who may be interested a little bit more on Anti-money laundering http://tinyurl.com/2x6m7g

  4. joemack

    Lloyds have “previous” with concerns to money laundering.
    http://news.bbc.co.uk/1/hi/world/americas/7821600.stm

    US prosecutors said that the bank’s misconduct took place between 1995 and 2007.

    “For more than 12 years, Lloyds facilitated the anonymous movement of hundreds of millions of dollars from US-sanctioned nations through our financial system,” Assistant Attorney General Matthew Friedrich said.

    According to court documents, Lloyds removed information such as customer names, bank names and addresses so that wire transfers would pass undetected through filters at US banks.

    This process – known as stripping – meant that more than $350m (£230m at current exchange rates) that might otherwise have been blocked was processed by US institutions.

    Lloyds TSB had agreed to forfeit half the money to the US and half to New York County.

  5. It Wasn't Worth a Pound

    Paul are you able to give an answer to this question?

    Can the floating charge holder (is is MBB) call in a Receiver while the Administrator is in place?

  6. renfrewdave

    paul
    have just caught up on all your recent posts, killing time in london.
    hats off to yourself and billybhoy.
    one can only wonder how much mr craig thomas whyte would have made if only he could employ people who could fill out forms correctly.

  7. Ken

    It now appears that the Stadium upgrades – also part of the ‘pledge’ associated with the acquisition was ALSO funded internally rather than by CW’s private funding.
    http://news.stv.tv/scotland/west-central/298783-craig-whyte-mortgaged-rangers-catering-income-to-upgrade-kitchens-at-ibrox/

    It will be extremely interesting how this, on top of the Ticketus disclosure plays against the ‘terms’ disclosed by Alastair Johnston – http://news.stv.tv/scotland/west-central/298744-former-rangers-chairman-asks-if-craig-whyte-has-met-obligations-as-club-owner/

    Quote: Wavetower’s (Craig Whyte’s) leverage during this process is a function of his purported position as the primary secured creditor by dint of the £18m loan which he claims he has provided to the club on an unencumbered basis.

    “If, however, this entitlement cannot be sustained based on any breach as referred to above thus precipitating the extinction of the loan in question, then the options for charting a course for reconstitution of Rangers Football Club will be much more readily identifiable

  8. Louise McDaid - Chair Farepak Victims Committee

    If Rangers fans were to put a large amount of money into their club whilst in Administration – would this be a good idea? Surely if club was then to go into Liquidation this would mean they would become Unsecured Creditors?

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