Category Archives: Alternative Business Structures

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? Continue reading



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

The Coming Bonfire – Lessons from Guy Fawkes for the Scottish Legal Profession?



Austin Lafferty, Vice President of the Law Society of Scotland, and Walter Semple, Law Society Council member, last week used the electronic pages of The Firm to discuss the coming “ABS tsunami”.

The highly esteemed gentlemen fail to see eye to eye on the role of the Society in how the profession got to this point, but each acknowledges the struggles which lie ahead, with Mr Lafferty bluntly saying “the core workstreams of many firms will be decimated, with obvious consequences.

Conveniently for the days after 5th November, the blogger Guido Fawkes, normally one for hot-off-the-press political gossip, has written a piece about the role of the investment banks in the global financial crash, prompted by his having read the excellent and chilling “The Big Short” by Michael Lewis. Anyone wanting to understand the limitless greed and stupidity which brought the financial world to a halt should read Mr Lewis’ book.

Dealing with investment bankers, Guido, as a former investment banker himself, points out when the rot set in at the major institutions. He describes one of the problems as the fact “that investment banks were no longer partnerships; they were publicly listed companies, with shareholders who were not involved in day-to-day management. This has proved to be a disastrous form of capitalism, with owners who don’t know what the managers of their money are doing.

Investment banking, till the early 1980’s, was carried out by partnerships made up of investment bankers. The capital in the firms, and the risks, were both the responsibility of the partners. As Guido says “the oldest and most experienced partners tended to have the most capital in the firm. This had a risk management effect greater than any Nobel Prize winning computer-calculated risk model, the old guy with the grey hair stood to lose everything when some testosterone charged 27 year-old trader bet the firm’s capital … The bosses’ desire to keep their retirement pots concentrated their minds”.

Stock market listing, and external ownership, such as that brought in by the Big Bang during the Thatcher years lead to a situation where the providers of the capital, and therefore those bearing the risk, were no longer in any control of that risk. Is it a coincidence that Collateralised Debt Obligations and the rest of the alphabet soup which made up the speculative “investments” at the root of the crash were financial instruments dreamed up by the corporate whizz kids on massive salaries, but who stood only to lose their jobs if they got it wrong, rather than everything they owned?

As Guido says “There is nothing moral in asymmetric markets where the risks are borne by others than those taking the risks.

The Scottish legal profession faces an imminent and huge upheaval. As Mr Lafferty says, “The threat…is that the high street legal market will get hoovered up like the high street optical market has been, in which 80 per cent of the trade is owned by a tiny number of brand names.” As a profession, solicitors “need to be sales-savvy, market-alert, entrepreneurial” to avoid “having to watch as companies with increasingly bizarre names and brands try to elbow their less-qualified way into the market place.

Mr Semple, expressing a concern going further than merely commercial and marketing matters, warns that “(The Law Society has) been presiding over a potential catastrophe for many solicitors in Scotland which was entirely avoidable. … The changes in the Legal Services legislation now require solicitors to act independently (rather than be independent)…This change will compromise the independence of solicitors who offer services to the public. External owners of legal service providers will not be directly bound by solicitors’ ethics. They will be motivated only by commercial interests.” (Emphasis added.)

I have no doubt that investment bankers, in the old days, were as a rule, as professional and ethical as solicitors. However, the passage of time, and the loosening of the direct connection between capital and risk, allowed corners to be cut, and edges to be shaved, all in the interest of profit. The creators of the wacky financial “instruments” described by Mr Lewis were not unethical either. But, as I mentioned above, is it coincidental that they were only created once the capital/risk link was broken, or at best severely stretched? Financial backers will want a dividend on their money – we are in a capitalist society after all, and pressures will inevitably increase on legal businesses under ABS to provide a good return on their investors’ capital. Over time, as with the investment banks, things are likely to slip.

Even although the ABS model to be applied here is not (yet) full flotation, the twin risks identified by Messrs Semple and Fawkes place the profession at great risk. The “liberalisation” of the financial markets too was intended to allow greater competition, and permit the investment banks to act outwith the hidebound old rules, whilst of course remaining true to their ethics, thus allowing them to increase their profitability, both for the banks themselves and their investors and backers. We can see, laid out in Mr Lewis’ book, and indeed on the news daily, where that led to.

Self-interest is a necessary human trait, and who could fault a partner at a big practice who sees the possibility of their business floating, with a huge windfall for the people lucky enough to be owners when the music stops? It seems inevitable that, as time progresses, the restrictions in place in the imminent ABS structure will fall away, as they are seen as being “anti-competitive” or still as leaving legal businesses at a “financial disadvantage” in raising capital, as compared with other professions. Full flotation will come in due time, even though there are probably only a handful of firms where, in reality, this will have any substantial direct effect. It is unlikely that, for example, even the best High Street one-man criminal practice will be able to have an IPO!

Mr Lafferty refers to the “ABS tsunami”. As we have tragically seen in real life, if a tsunami is already on its way towards you, then there is nothing which will stop it.



Filed under Alternative Business Structures, The Law Society of Scotland, The Legal Profession