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BDO suit against former Rangers’ administrators: What we’ve learnt?

At the start of May 2021, Rangers’ former liquidators BDO began a £56.8m suit against Paul Clark and David Whitehouse of Duff & Phelps - the former administrators of the football club.

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BDO said the administrators’ flawed cost-cutting strategy meant creditors lost millions from the handling of the club.


The pair were brought in during the administration when the reigning Scottish Premiership champions fell into insolvency in February 2012, leaving thousands of unsecured creditors out of pocket. This included more than 6,000 fans who bought £7.7m worth of debenture seats at the club’s home stadium of Ibrox.


In May 2021, The Herald revealed that sources close to the former administrators were “surprised and disappointed”, with Clark and Whitehouse defending the action in Scotland’s Court of Sessions claiming the liquidators expected a “bonkers” strategy of a fire sale, which would have “effectively shut the club down for good”.


In December 2020, Clark and Whitehouse settled out of court with the Crown Office after being wrongfully prosecuted during a fraud probe relating to the sale of Rangers. The pair were awarded £10.5m each in damages, paying the pair more than £3m in aggregate by way of expenses.


During the suit brought by BDO, the court has heard from a former player, football agents and the current chief executive (CEO) of the Scottish Professional Football League.

 


Brand valuation would have been a ‘waste of money’


In June 2012, Charles Green’s Sevco consortium bought Rangers’ assets - which included the club’s name, trademarks and logo - for £5.5m. However an independent fair value assessment to the company on the day of the purchase put the club’s value at £27.2m.


The administrators involved in the case admitted they failed to get a valuation before selling the football club, saying they wanted to present “a functioning working club” and to rescue it as a concern that it could be sold to prospective purchasers.


In a session towards the end of May 2021, Clark said he’d been involved in several hundred insolvencies during a 40-year career and could not recall engaging in one valuation of a brand.


According to the Glasgow Times, he explained: “For instance, I was not personally involved in it day to day, I haven’t checked this for certainty but we were involved in the administration of BHS and I am reasonably certain that we didn’t conduct a brand valuation there.


“In my view, and in my experience… when you get someone, a professional person to value the assets it is an indication, the market determines value. To my mind, the brand valuation, would have been in my view, a waste of money because it wouldn’t have actually told us anything. I say that accepting I am not a brand value expert.”

 


Administrators ‘missed out’ on £2m Steven Naismith sale


Soon after the football club fell into administration under the ownership of Craig Whyte in February 2012, then English Premier League side West Brom had sought dispensation to sign Scottish forward Steven Naismith.


At the time Naismith had a £2m release clause and was on around £20,000 a week, however along with other senior players took 75% pay cuts in February 2012.


Revealed in court documents during the case, an email sent by West Brom to the administrators in March 2012 would have meant Naismith would join the club the following summer transfer window.


West Brom’s then sporting and technical director Dan Ashworth told administrators in the email that his football club would “take on the player wage liability”, adding his club wanted to get things done “early” because they thought there would be interest from other clubs.


According to The Herald, Ashworth told the Court of Session: “As far as I was concerned, West Brom had the money and it would have been paid immediately. West Brom were an extremely well run club financially.


“We were always one of the lowest spenders in the English Premier League because he ran the club as a business to make money. Therefore, we would have had the cash.”


Speaking at a later session at the Court of Session, Naismith - who eventually moved on a free to fellow Premier League outfit Everton - said: “What I vaguely remember is that the then English Premier League team, West Bromwich Albion had made an approach to Rangers to sign me, and it had been rejected by the administrators. Hence, I had no decision to make.”

 


Cost-cutting was ‘different from usual practice’


Another high profile figure to give evidence to the Court of Session was Scottish Professional Football League CEO Neil Doncaster, who described the way administrators handled cutting costs as being “different from the usual practice”.


Doncaster told the court that during an early meeting with administrators there was an “unusual situation” as they didn’t intend to make any players redundant.


According to The Herald, he also expressed he was “surprised” the administrators did not sell Naismith, “especially because in the circumstances where a sale of the business and assets of the company was pursued, there was always a risk that [the player] would not generate any return at all because he would have been free to refuse a transfer of his employment contract”.


He added: “I accept, however, that it was open to Steven Naismith to refuse a transfer to another club, such as West Brom. But I would have been surprised had he not wanted to go to West Brom, a team that were playing in the English Premier League.”

 

 

Administrators ‘could have got £17.5m’ from the sale of the club’s most valuable players


Additionally, the Court of Session case found some of the club’s most valuable players at the time - including Allan McGregor, Steven Whittaker, Steven Naismith and Steven Davis - were collectively worth £17.5m on the market. All four, however, left the club for nothing.


At the time of the insolvency, goalkeeper McGregor was estimated to be worth about £6m. Emails revealed during proceedings between McGregor’s agent and the club’s head of football administration Andrew Dickson on 6 June 2012 - eight days before the club’s assets were bought by Sevco and Green for £5.5m - said then owner Whyte would turn down an offer of between £5m and £6m for him.


Alongside this, Rangers’ administrators rejected an offer for forward Naismith, defender Whittaker was valued at £2m, while club captain Davis was valued at £5m.


Despite these valuations, Rangers only made £800,000 - and this was through a special financial arrangement because Green challenged the legal right of some of the players not transferring their contracts to his newco club.


According to The Herald football agent William Pethybridge said selling two or three players would “save the club”.


He added: “But nobody put that into action. If you have a proactive agent using their connections, you may have been able to sell players. I think that summer, at least 11 clubs in the Premier League and [English] Championship paid a transfer fee for a goalkeeper. So there was definitely a market for the summer for goalkeepers.


“When you’re working on players, some clubs react, some need pushing, but until someone went out and really aggressively went to try and move those players on, you’re not going to know if you’re going to move them or not.”


Five or six of the players had buyout clauses inserted in March 2012, but with expectation of Naismith there were no approaches for any of them during Rangers’ four-month administration period.

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